Deceptive Trade Practices

Courts are confirming the fact that consumers rely on misrepresentations!  On Aug. 12, the United States Court of Appeals for the Second Circuit held that the Federal Trade Commission (FTC) is entitled to a presumption of consumer reliance on a defendant’s omissions and misrepresentations.  The court thus vacated a judgment ignoring the presumption and rejecting the FTC’s damages calculations (FTC v. BlueHippo Funding, LLC, 2014 BL 223142, 2d Cir., No. 11-374-cv, 8/12/14).  This ruling means that the Second Circuit is joining the Eighth, Ninth, Tenth and Eleventh Circuits in adopting the presumption of consumer reliance in FTC contempt actions.  As U.S. Law Week reported:

“The FTC is entitled to such a presumption, the U.S. Court of Appeals for the Second Circuit held, if it can show that: “(1) the defendant made material misrepresentations or omissions that ‘were of a kind usually relied upon by reasonable prudent persons’; (2) the misrepresentations or omissions were widely disseminated; and (3) consumers actually purchased the defendants’ products.”  Upon making such a showing, Judge Hall said, the district court must then calculate damages beginning with the defendants’ gross receipts as a baseline, which the defendants may then rebut with evidence “showing that certain amounts should offset the sanctions assessed against them.”

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