Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_09-cv-03814/USCOURTS-cand-5_09-cv-03814-4/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:0053 Federal Trade Commission Act

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER ON STATEMENT OF RECENT DECISION - C09-03814 RS

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

San Jose Division

FEDERAL TRADE COMMISSION, 

 

 Plaintiff, 

 

 v. 

 

SWISH MARKETING, INC., a

corporation,

MARK BENNING, individually and as an

officer of SWISH MARKETING, INC.,

MATTHEW PATTERSON, individually

and as an officer of SWISH

MARKETING, INC., and

JASON STROBER, individually and as

an officer of SWISH MARKETING,

INC.,

 Defendants.

Case No. C09-03814 RS

[PROPOSED] STIPULATED

ORDER FILING STATEMENT

OF RECENT DECISION

Plaintiff Federal Trade Commission (“FTC” or “Commission”) has moved this

Court to file a Statement of Recent Decision after the date of the hearing. Defendant

Benning stipulates to and does not oppose the relief requested. The FTC respectfully

requests the Court to order that:

*E-Filed 02/16/2010*

Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDER ON STATEMENT OF RECENT DECISION - C09-03814 RS Page 2 of 2

1. The FTC’s motion is GRANTED;

2. The Statement of Recent Decision is hereby FILED: The FTC brings to the

Court’s attention the Central District of California’s recent decision in FTC

v. Commerce Planet, Inc., Case No. SACV 09-01324 CJC (RNBx) (C.D.

Cal. Feb. 12, 2010) (Order denying Defendant’s motion to dismiss) (Dkt.

#19). A copy of that opinion is attached hereto as Exhibit A.

 Respectfully submitted,

DATED: February 16, 2010 /s/ Lisa D. Rosenthal ________________________________

LISA D. ROSENTHAL

KERRY O'BRIEN

EVAN ROSE

Attorneys for Plaintiff

FEDERAL TRADE COMMISSION

(The filer attests that concurrence in the filing of this document has been obtained

from the other signatory.)

DATED: February 16, 2010 /s/ Donald G. Gagliardi ________________________________

DANIEL J. BERGESON

DONALD P. GAGLIARDI

ELIZABETH D. LEAR

BERGESON, LLP

Attorneys for Defendant

MARK BENNING

PURSUANT TO STIPULATION, IT IS SO ORDERED:

Dated: ___________________________________

RICHARD SEEBORG

UNITED STATES DISTRICT JUDGE

02/16/2010

Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 2 of 7
Exhibit A

Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 3 of 7
UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

CIVIL MINUTES – GENERAL 

Case No. SACV 09-01324CJC(RNBx) Date: February 12, 2010 

Title: FEDERAL TRADE COMMISSION V. COMMERCE PLANET, INC., ET AL. 

PRESENT: 

HONORABLE CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE

 Michelle Urie N/A 

 Deputy Clerk Court Reporter 

ATTORNEYS PRESENT FOR PLAINTIFF: ATTORNEYS PRESENT FOR DEFENDANT: 

None Present None Present 

PROCEEDINGS: (IN CHAMBERS) ORDER DENYING DEFENDANT’S 

MOTION TO DISMISS [filed 1/19/10] 

Having read and considered the papers presented by the parties, the Court finds 

this matter appropriate for disposition without a hearing. See FED. R. CIV. P. 78; LOCAL 

RULE 7-15. Accordingly, the hearing set for February 22, 2010, at 1:30 p.m. is hereby 

vacated and off calendar. 

Plaintiff The Federal Trade Commission (the “FTC”) brought this action for false 

representation and unfair practices against Defendants Commerce Planet, Inc., and 

Michael Hill, Charles Gugliuzza, and Aaron Gravitz, individually and as officers of 

Commerce Planet (collectively “Defendants”). The FTC alleges that Defendants 

operated a website that deceived consumers into signing up for a $60-a-month service by 

advertising a free seven-day trial. Mr. Gugliuzza now moves to dismiss the FTC’s 

complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 

12(b)(6). For the following reasons, Mr. Gugliuzza’s motion to dismiss is DENIED. 

Background 

The FTC alleges that Defendants operated a website that marketed and sold an 

“Online Auction Starter Kit” providing consumers with information about how to make 

money selling products on eBay and other online auction sites. (Compl. ¶ 14.) 

Defendants advertised a “Free 7-Day Trial” of their product, under which consumers 

Case 8:09-cv-01324-CJC-RNB Document 19 Filed 02/12/2010 Page 1 of 4 Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 4 of 7
UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

CIVIL MINUTES – GENERAL 

Case No. SACV 09-01324-CJC(RNBx) Date: February 12, 2010 

 Page 2 

would only have to pay shipping for the kit. (Compl. ¶ 15.) According to the FTC, 

Defendants’ website was set up so that consumers would be unlikely to read disclosures 

regarding the “free trial.” Specifically, the language informing the consumers that they 

would be signing up for monthly charges of $59.95 unless they called to cancel their 

membership was either too far below the “Ship my Kit!” button or was only displayed if 

customers clicked a “Terms of Membership” link. (Compl. ¶¶ 16-18.) Consequently, 

many customers unintentionally signed up for the monthly service and failed to cancel 

before their credit cards were charged. (Compl. ¶ 19.) 

The FTC alleges that Defendants’ practices were deceptive or unfair, in violation 

Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a). Mr. Gugliuzza, the 

president of Commerce Planet, now moves to dismiss the claims against him for failure 

to state a claim pursuant to Rule 12(b)(6). 

Standard of Review 

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal 

sufficiency of the claims asserted in the complaint. The issue on a motion to dismiss for 

failure to state a claim is not whether the claimant will ultimately prevail, but whether the 

claimant is entitled to offer evidence to support the claims asserted. Gilligan v. Jamco 

Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997). When evaluating a Rule 12(b)(6) motion, 

the district court must accept all material allegations in the complaint as true and construe 

them in the light most favorable to the non-moving party. Mayo v. Gomez, 32 F.3d 1382, 

1384 (9th Cir. 1994). Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires 

only a short and plain statement of the claim showing that the pleader is entitled to relief. 

FED. R. CIV. P. 8(a)(2). Dismissal of a complaint for failure to state a claim is not proper 

where a plaintiff has alleged “enough facts to state a claim to relief that is plausible on its 

face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 

Analysis 

In Section 5 of the Federal Trade Commission Act (the “FTC Act”), Congress 

banned “unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45. 

An individual may be subject to injunctive relief for violations of the FTC Act if the FTC 

proves that the individual “participated directly in” the acts or practices in question or 

“had the authority to control them.” FTC v. Garvey, 383 F.3d 891, 900 (9th Cir. 2004). 

Case 8:09-cv-01324-CJC-RNB Document 19 Filed 02/12/2010 Page 2 of 4 Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 5 of 7
UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

CIVIL MINUTES – GENERAL 

Case No. SACV 09-01324-CJC(RNBx) Date: February 12, 2010 

 Page 3 

To hold an individual liable for restitution, “the FTC must also show that the individual 

had actual knowledge of the material misrepresentations, was recklessly indifferent to the 

truth or falsity of a misrepresentation, or had an awareness of a high probability of fraud 

along with an intentional avoidance of the truth.” Id. 

 Here, the FTC alleges that Mr. Gugliuzza “was a president and director of 

Commerce Planet,” and that as president, he had “authority to control the acts and 

practices of Commerce Planet.” (Compl. ¶ 12.) The FTC also alleges that he “knew or 

should have known” that the acts and practices described in the complaint were unfair or 

deceptive. (Compl. ¶ 12.) Mr. Gugliuzza argues that the FTC’s complaint fails to 

sufficiently allege a claim against him in his individual capacity because it states only 

legal conclusions. The FTC’s complaint states more than just legal conclusions; it is 

replete with facts about the company’s allegedly deceptive website. It also states the 

most important fact for individual liability under Section 5 of the FTC Act—that Mr. 

Gugliuzza was the president and director of the company that owned and operated the 

allegedly deceptive website. Based on judicial experience and common sense, it is 

certainly plausible for a president of a company to know about and have authority to 

control a deceptive public website that brings in $60 a month per customer. The FTC has 

therefore “nudged [its] claims across the line from conceivable to plausible.” Twombly, 

550 U.S. at 570. 

 Mr. Gugliuzza also asserts that even if the FTC has alleged individual liability, it 

has not sufficiently alleged violations of Section 5 of the FTC Act. Under Section 5, an 

act or practice is deceptive or misleading if 1) there is a representation, omission, or 

practice, 2) that is likely to mislead consumers acting reasonably under the 

circumstances, and 3) the representation, omission, or practice is material. FTC v. 

Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir. 1994). While Mr. Gugliuzza attempts to 

point out many flaws in the FTC’s complaint, the common thread of his arguments is that 

he did not engage in deceptive acts because consumers were informed of the terms of the 

continuing membership. The FTC’s contention, however, is not that the consumers were 

never told about the continuing membership, but that the manner in which consumers 

were told was deceptive or misleading. Mr. Gugliuzza also argues that other companies 

use “Terms and Conditions” links below charge buttons. However, those companies also 

may be engaged in deceptive practices.1

 Whether Mr. Gugliuzza’s practices were 

 

1

 In any case, the comparison to Amazon, Borders, and eBay websites seems particularly inapt as Mr. Gugliuzza 

does not state that those companies’ terms and conditions subject consumers to a recurring $60-a-month charge. 

Case 8:09-cv-01324-CJC-RNB Document 19 Filed 02/12/2010 Page 3 of 4 Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 6 of 7
UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

CIVIL MINUTES – GENERAL 

Case No. SACV 09-01324-CJC(RNBx) Date: February 12, 2010 

 Page 4 

deceptive is a question that must be decided on the facts, not in a motion to dismiss for 

failure to state a claim. 

 Mr. Gugliuzza also claims that his practices were not unfair under the FTC Act. 

To be unfair, the FTC must show that the injury caused by the practice is 1) substantial, 

2) not outweighed by countervailing benefits to consumers or competition; and 3) one 

that consumers themselves could not reasonably have avoided. FTC v. J.K. Publications, 

Inc., 99 F.Supp.2d 1176, 1201 (C.D. Cal. 2000) (citing Orkin Exterminating Co., Inc. v. 

FTC, 849 F.2d 1354, 1363-66 (11th Cir.1988)). Mr. Gugliuzza argues that his practices 

were not unfair because customers were informed of terms of the continuing 

membership. As with the question of deceptiveness, whether these practices are unfair is 

a matter that cannot be determined on the basis of the allegations in the FTC’s complaint. 

The FTC’s complaint sufficiently puts Mr. Gugliuzza on notice of the claims against him. 

Lastly, Mr. Gugliuzza argues that injunctive relief is unnecessary because he is no 

longer associated with Commerce Planet. As with Mr. Gugliuzza’s other arguments, this 

argument goes to the facts. At this point it is unclear whether Mr. Gugliuzza will 

continue to engage in allegedly unfair or deceptive practices, so the Court cannot decide 

that injunctive relief is inappropriate at this stage. 

Conclusion 

For the foregoing reasons, Mr. Gugliuzza’s motion to dismiss for failure to state a 

claim is DENIED. 

jhp 

MINUTES FORM 11 

CIVIL-GEN Initials of Deputy Clerk MU

Case 8:09-cv-01324-CJC-RNB Document 19 Filed 02/12/2010 Page 4 of 4 Case 5:09-cv-03814-RS Document 59 Filed 02/16/10 Page 7 of 7