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WILLARD K. TOM

General Counsel

GREGORY J. MADDEN

gmadden@ftc.gov

KIMBERLY L. NELSON (VA Bar No. 47224)

knelson@ftc.gov

Federal Trade Commission

600 Pennsylvania Avenue, NW, Rm. M-8102B

Washington, DC 20580

(202) 326-2426 (tel.) (Madden)

(202) 326-3304 (tel.) (Nelson)

(202) 326-2558 (fax)

STACY PROCTER, Bar No. 221078

sprocter@ftc.gov

Federal Trade Commission

10877 Wilshire Boulevard, Suite 700

Los Angeles, CA 90024

(310) 824-4366 (tel.)

(310) 824-4380 (fax)

ATTORNEYS FOR PLAINTIFF

FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

FEDERAL TRADE

COMMISSION,

Plaintiff,

v.

LIGHTS OF AMERICA, INC., ET

AL., 

Defendants.

Case No. SACV10-01333 JVS

(MLGx)

PLAINTIFF’S OPPOSITION TO

DEFENDANTS’ MOTION TO

DISMISS AMENDED

COMPLAINT; SUPPORTING

MEMORANDUM AND

AUTHORITIES

Hearing Date: March 21, 2011

Time: 1:30 p.m.

Judge: Hon. James V. Selna

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ii

TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................ 1

II. LEGAL STANDARD .................................................................................. 2

A. Allegations Regarding Authority to Control and Knowledge Are

Governed By Rule 8(a). ..................................................................... 3

B. The Legal Standard For a Motion To Dismiss. ..................................4

III. ARGUMENT ................................................................................................5

A. The Vakils Are Individually Liabile for Injunctive Relief ................ 5

B. The Vakils Are Liabile Under the FTC Act for Equitable Monetary

Relief..................................................................................................10

1. The Vakils Knew About The Misrepresentations. .................11

2. At A Minimum, The Vakils Were Recklessly Indifferent. .... 13

3. The Vakils Concede Knowledge As of July 2009. ................ 14

C. The FTC Has Alleged Sufficient, Particularized Facts To Plausibly

Assert A Claim Against LOA And The Vakils After

 August 2009. ....................................................................................15

IV. CONCLUSION ...........................................................................................18

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iii

TABLE OF AUTHORITIES

CASES

al-Kidd v. Ashcroft, 580 F.3d 949, 977 (9th Cir. 2009) ................................4, 6, 14

Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) ........ 3, 4

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955,

 167 L. Ed. 2d 929 (2007)..................................................................... 4, 5, 14, 16

Broam v. Bogan, 320 F.3d 1023 (9th Cir. 2003) ...................................................17

FTC v. American Standard Credit Sys., Inc., 874 F. Supp. 1080

 (C.D. Cal. 1994) .................................................................................................10

FTC v. Amy Travel Service, 875 F.2d 564 (7th Cir. 1989) ......................................6

FTC v. Benning, Case No. C 09-03814 RS, 2010 WL 2605178

 (N.D. Cal. June 28, 2010).................................................................................3, 6

FTC v. Dinamica Financiera, LLC, No. CV-09-03554, 2010 U.S. Dist. 

 LEXIS 88000 (C.D. Cal. Aug. 19, 2010) ....................................................... 6, 7

FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994) ...........................................2

FTC v. Publishing Clearing House, 104 F.3d 1168 (9th Cir. 1997) ............ 6, 7, 10

FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009) ................................................... 5

Moore v. Kayport Package Exp., Inc., 885 F.2d 531(9th Cir. 1989) ......................3

Neubronner v. Milliken, 6 F. 3d 666 (9th Cir. 1993) .............................................15

Starr v. Baca, __ F.3d __, 2011 WL 477094 (9th Cir. Feb. 11, 2011).......... passim

TYR Sport Inc. v. Warnaco Swimwear Inc., 679 F. Supp. 2d 1120 

 (C.D. Cal. 2009) ...................................................................................4, 8, 12, 15

Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9th Cir. 2009) .................4

FEDERAL RULES OF CIVIL PROCEDURE

FED. R. CIV. P. 8(a)..............................................................................................3, 4

FED. R. CIV. P. 9(b) .......................................................................................2, 3, 13

FED. R. CIV. P. 12(b)(6) .........................................................................................15

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1

I. INTRODUCTION

Defendants Usman Vakil’s and Farooq Vakil’s (collectively, the “Vakils”)

contention that this Court should dismiss the Federal Trade Commission’s

(“FTC”) complaint against them for deceptive practices is without legal or factual

merit. The Motion to Dismiss Amended Complaint (“Motion”) is simply an

attempt to force the FTC to prove its case in the process of defending against the

Motion. Accordingly, this Court should deny the Motion. 

The claims against the Vakils are not complex. They are liable for both

injunctive and monetary relief based on their false or unsubstantiated claims about

two central characteristics of their company’s LED lamps – how bright they burn

(light output) and how long they last (lifetime). The sole issue before the Court is

whether the FTC stated a claim for relief against the Vakils. The FTC’s Amended

Complaint does so. 

In their Motion, the Vakils’ argument as to why the FTC has not stated a

plausible claim for relief is segregated based upon two different periods of time: 

claims related to conduct prior to July 2009 and after. For the time period prior to

July 2009, the Vakils have not contended that the FTC failed to allege sufficient

facts to state a claim against LOA for its deceptive acts and practices in promoting

its LED lamps. Therefore, the question presented by their Motion for that time

period is whether the FTC has alleged sufficient facts to plausibly state claims that

the Vakils: (1) are liable for injunctive relief because they had the authority to

control LOA’s activities; and (2) are liable for restitution because they knew or

should have known of LOA’s deceptive practices. 

After July 2009, the Vakils contest whether the FTC has adequately stated

its case with regard to LED lamp sales. But they do not dispute that as of July

2009, the Vakils had both authority to control and knowledge. The FTC has

alleged sufficient facts, stated with particularity and viewed in the light most 

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1

 The FTC argued that a Section 5 claim is not a fraud claim, does not sound

in fraud, and requiring Rule 9(b) pleading would rewrite Section 5 and undermine

its statutory purpose.

2

 An act or practice is deceptive under Section 5 if: (a) there is a

representation, omission or practice; (b) which is likely to mislead consumers

acting reasonably under the circumstances; and (c) is material to the consumer. 

FTC v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir. 1994).

3

 The Vakils appear to argue, however, that the FTC has not alleged

sufficient facts that LOA sold LED lamps after the end of July 2009. The FTC

disagrees with this assertion for the reasons stated infra pp. 15-17.

2

favorable to the FTC, evidencing LOA’s deceptive practices continued after July

2009.

Ultimately, the FTC’s allegations in the Amended Complaint both give the

Vakils fair notice of the Commission’s claims against them, and are sufficiently

plausible to give rise to an entitlement to relief. Therefore, the Vakils motion

should be denied.

II. LEGAL STANDARD

This Court previously held that the FTC’s claims “sound in fraud,” and

therefore, the FTC’s complaint must be plead with particularity under Rule 9(b). 

FED. R. CIV. P. 9(b). Although the FTC continues to contend that Rule 9(b) does

not apply to cases brought under Section 5 of the FTC Act,1

 the Amended

Complaint meets Rule 9(b).2

 That is, the FTC has specifically alleged the

circumstances constituting the fraud: the who (LOA and the Vakils), what

(misrepresentations regarding watt equivalency, lumen output, and lifetime on

products sold to consumers), where and when (on product packaging and

brochures sold from February 2008 on), and why (no substantiation for its claims

about two central characteristics of their product). Indeed, the Vakils have not

contended that the FTC failed to allege sufficient facts, stated with particularity, to

state a claim against LOA for promoting its LED lamps before July 2009.3

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4

 Even if Rule 9 applied to allegations relating to authority to control, the

FTC’s Amended Complaint meets that standard.

5

 The Court’s evaluation of whether the facts in Iqbal supported a claim for

individual liability differs from this case because the issue there was not whether

the individuals had knowledge of the discriminatory policy but whether they acted

3

Having pled its case against LOA with ample particularity to state a claim for

corporate liability, the Vakils now challenge whether the FTC adequately pled its

claims against them for individual liability. In particular, the Vakils argue that the

FTC has not alleged sufficient facts to demonstrate they had the authority to

control the corporation and knew or should have known about its deceptive

practices.

A. Allegations Regarding Authority to Control and Knowledge Are

Governed By Rule 8(a).

Rule 9(b) applies only to the FTC’s allegations regarding the circumstances

constituting the fraud. Allegations related to an individual’s ability to control the

corporation’s misrepresentations do not fall under Rule 9(b), but rather, Rule 8(a). 

FTC v. Benning, Case No. C 09-03814 RS, 2010 WL 2605178, at *4 (N.D. Cal.

June 28, 2010) (ruling in accord with Moore that “‘[a]uthority to control’ does not

necessarily contemplate participation in the underlying fraud and the notice

pleading requirements of Rule 8(a)(2) adequately govern this element.”); see also

Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989).4

Moreover, Rule 9(b) specifically states that “[m]alice, intent, knowledge, and

other conditions of a person’s mind may be alleged generally.” FED. R. CIV. P.

9(b). Therefore, the FTC’s allegations related to the Vakils’ knowledge of LOA’s

misrepresentations also do not fall under Rule 9’s heightened pleading standards. 

Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937, 1954, 173 L. Ed. 2d 868 (2009)

(Rule 9 permits allegations relating to knowledge to be pled generally under Rule

8);5 Benning, 2010 WL 2605178, at *4.

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because of a constitutionally protected characteristic. 129 S. Ct. 1948-49. Here,

the FTC alleges facts in support of the correct legal standard under the FTC Act.

6

 When the Twombly Court examined plaintiff’s factual allegations regarding

whether the parties formed an agreement, it stated that the analysis “simply calls

for enough fact to raise a reasonable expectation that discovery will reveal

evidence of illegal agreement.” 550 U.S. at 556. 

4

B. The Legal Standard For a Motion To Dismiss.

The legal analysis under Rule 8(a) is well established and requires a two

step inquiry. First, courts must accept all well-pleaded factual allegations as true. 

Iqbal, 129 S. Ct. at 1949. Courts must also construe those factual allegations in

the light most favorable to the plaintiff. Zucco Partners, LLC v. Digimarc Corp.,

552 F.3d 981, 989 (9th Cir. 2009); TYR Sport Inc. v. Warnaco Swimwear Inc., 679

F. Supp. 2d 1120, 1128 (C.D. Cal. 2009). Second, courts must determine whether

the factual allegations “plausibly give rise to an entitlement of relief.” Iqbal, 129

S. Ct. at 1949-50. A claim “has facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id. at 1949. 

In conducting this two-step analysis, courts should consider the context of

the case and draw upon their judicial experience and common sense. Id. at 1950. 

However, courts should not examine the probability of success of the claim as part

of its analysis.6

 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct.

1955, 167 L. Ed. 2d 929 (2007); Starr v. Baca, __ F.3d __, 2011 WL 477094, at

*14 (9th Cir. Feb. 11, 2011) (noting the “question is not truth or even probability”

of proof by the evidence later discovered); see also al-Kidd v. Ashcroft, 580 F.3d

949, 977 (9th Cir. 2009), cert. granted in part, __ U.S. __, 131 S. Ct. 415, 178 L.

Ed. 2d 321 (2010) (“Twombly and Iqbal do not require that the complaint include

all facts necessary to carry the plaintiff’s burden.”). 

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7

 The critical difference between the cases cited herein for the governing

liability standards and the posture of this case is the parties in those cases engaged

in discovery. Whereas, here, significantly more information likely exists in LOA’s

files than what it produced in response to the CID, not to mention the information

the FTC may obtain through depositions of key employees.

5

As explained in Starr, the purpose of these pleading standards is twofold. 

Complaints must be “sufficiently detailed to give fair notice to the opposing party

of the nature of the claim so that the party may effectively defend against it.” 

Starr, 2011 WL 477094, at *14; Twombly, 550 U.S. at 555 n.3. Additionally, “the

allegations must be sufficiently plausible that it is not unfair to require the

opposing party to be subjected to the expense of discovery.” Starr, 2011 WL

477094, at *14. Thus, the FTC must allege facts that, taken as true and with all

reasonable inferences in the FTC’s favor, plausibly show, but need not prove, that

the FTC may be entitled to relief against the Vakils for injunctive relief and

restitution such that further discovery is warranted. The FTC’s allegations in the

Amended Complaint more than achieve both purposes.

III. ARGUMENT

The Amended Complaint contains abundant factual allegations to allow the

Court to draw the reasonable inference that the Vakils are individually liable for

the corporation’s deceptive practices. Under the FTC Act, once the Court finds a

corporation made false or unsubstantiated claims, certain individuals may then be

held liable for both injunctive relief and restitution, and each has its own separate

legal standard.7

 The Vakils conflate these two standards, misstate the elements

needed to meet each of them, and then incorrectly claim that the FTC’s complaint

fails to allege sufficient facts to support those claims. 

A. The Vakils Are Individually Liabile for Injunctive Relief.

To establish individual liability for injunctive relief, the individual must

have either had the authority to control the activities at issue or participated

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8

 Defendants erroneously state that the FTC must allege that the Vakils

“actively participated in or knew and controlled” the deceptive acts and practices

of LOA. Motion, at 1.

9

 Thus, the Vakils’ claims that the FTC failed to allege that they created,

reviewed, or approved the LED product materials at issue are irrelevant.

10 Notably, these opinions were decisions on the merits and were reached

after the parties had conducted discovery. The FTC does not need to prove its

allegations in the complaint, but only allege facts that plausibly establish the

Vakils’ liability. See generally al-Kidd, 580 F.3d at 977.

6

directly in the acts or practices. FTC v. Stefanchik, 559 F.3d 924, 931 (9th Cir.

2009); FTC v. Publishing Clearing House, 104 F.3d 1168, 1170 (9th Cir. 1997);

FTC v. Dinamica Financiera, LLC, No. CV-09-03554, 2010 U.S. Dist. LEXIS

88000, at *40 (C.D. Cal. Aug. 19, 2010).8

 Pleading “authority to control” does

not require the FTC to allege participation in the fraud.9

 Benning, 2010 U.S. Dist.

LEXIS 64030, at *15.

Authority to control the company can be demonstrated by “active

involvement in business affairs and the making of corporate policy, including

assuming the duties of a corporate officer.” Publishing Clearing House, 104 F.3d

at 1170; Dinamica Financiera, 2010 U.S. Dist. LEXIS 88000, at *40 (“An

individual’s status as a corporate officer and/or the authority of that individual to

sign documents on behalf of a corporate defendant is sufficient to show the

requisite control”); FTC v. Amy Travel Serv., 875 F.2d 564, 573-74 (7th Cir.

1989).10 The internal communications cited in the Amended Complaint show the

Vakils were engaged corporate officers who were aware of their company’s LED

activities and were accessible to LOA’s employees. Using these communications

and other information, the FTC alleges sufficient facts to show not only is it

“plausible” that the Vakils had the authority to control LOA, but that they actually

exercised that authority.

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11 Although the Vakils motion argues that the email did not describe a

planned distribution, LOA’s Answer to the Amended Complaint admits this

allegation. LOA Answer ¶ 70.

7

The Vakils are the sole owners of LOA, high ranking corporate officers,

and senior management executives – thereby holding all the corporate levers for

asserting control over a company. Amended Complaint (hereinafter “Amd.

Cplt.”) ¶¶ 8-9, 54, & 69. Specifically, the FTC has pled that Usman Vakil

founded the company in 1978, has been a senior executive since that time, is

currently LOA’s President and Chairman of the Board, and owns 51% of the

company. Id. ¶ 8. Farooq Vakil has been a Senior Executive with LOA since at

least 1993, is currently LOA’s Executive Vice President and Secretary, and owns

49% of LOA. Id. ¶ 9. In addition, Usman Vakil has signed documents on behalf

of LOA, as evidenced by the September 2008 letter he sent to DOE on LOA’s

behalf regarding testing performed on LOA’s bulbs. Id. ¶ 57. Like Usman Vakil,

Farooq Vakil communicated with DOE on LOA’s behalf. Id. ¶¶ 72 & 81. These

allegations alone are sufficient to establish the Vakils “plausibly” had authority to

control. Publishing Clearing House, 104 F.3d at 1170; Dinamica, 2010 U.S. Dist.

LEXIS 88000, at *40. 

The Amended Complaint, however, includes additional factual allegations

that, viewed in the light most favorably to the FTC, more than plausibly show the

Vakils’ authority to control LOA’s practices. The Vakils were not disconnected

owners or Board members, but individuals actively involved in LOA’s activities. 

For example, the FTC alleged that in April of 2008, 

 Amd. Cplt. ¶

70.11 In addition, Farooq Vakil 

 Id. ¶¶ 72 &

74. Farooq Vakil also communicated 

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12 This Court may consider this in ruling on the Motion because its

authenticity is not contested by the parties. See, e.g., TYR Sport, 679 F. Supp. 2d at

1128 (noting the Court may consider material beyond the pleadings when ruling on

a motion to dismiss if the material is either attached to the complaint or material

upon which the complaint relies, so long as its authenticity is not contested).

8

 Id. ¶ 79. Further, Farooq Vakil emailed

 Id. ¶73. Viewing these

facts in the light most favorable to the FTC, the only reasonable inference is that

the show the Vakils’ authority to control the business. Moreover, the

Vakils’ own argument – that they did in fact take control upon learning of DOE’s

concerns with their labeling claims – demonstrates their authority to control the

business. Motion, at 20.

To illustrate Farooq Vakil’s authority to control, the FTC references an

. Amd. Cplt. ¶ 72. The Vakils have

attached this as an exhibit to their Motion and argue the FTC has

misconstrued its content and meaning.12 Yet, this 

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13 SSL is an acronym for Solid State Lighting - the category of light

products that LOA’s LEDs fall under.

9

Motion, Ex. D (emphasis in original).13 Significantly, Farooq Vakil states 

 Motion, Ex. D (emphasis in original). 

 Id. 

 Motion, at 5. The factual allegations in the Amended Complaint,

therefore, demonstrate that it is not only plausible that Farooq Vakil had the

authority to control LOA’s practices, but a near certainty.

Likewise, viewing the FTC’s allegations in the light most favorable to it,

Usman Vakil both had the authority to control and exercised control over LOA’s

LED practices. As discussed above, the FTC alleged that LOA’s response to a

September 2008 letter from DOE regarding testing performed on the company’s

LED lamps came from Usman Vakil. Amd. Cplt. ¶ 57. Prior to that, in April

2008, 

 Id. ¶ 55. In addition, 

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10

Id. ¶ 59. 

Id. ¶ 61. 

Motion, Ex. J.

Thus, the FTC’s allegations, taken as true and with all reasonable inferences

in its favor, plausibly show that both Vakils not only had the authority to control

LOA, but exercised it.

B. The Vakils Are Liabile Under the FTC Act for Equitable Monetary

Relief.

The FTC also has alleged sufficient facts to more than plausibly assert a

claim against the Vakils for restitution. To hold an individual liable for

restitution, the Commission must meet the injunctive relief standard discussed

above and also show that the individual “‘had knowledge that the corporation or

one of its agents engaged in dishonest or fraudulent conduct.’” Publishing

Clearing House, 104 F.3d at 1171 (quoting FTC v. American Standard Credit

Sys., Inc., 874 F. Supp. 1080, 1089 (C.D. Cal. 1994)). Knowledge can be shown

by: (1) actual knowledge of material misrepresentations, (2) reckless indifference

to the truth or falsity of a misrepresentation, or (3) awareness of a high probability

of fraud along with an intentional avoidance of the truth. Publishing Clearing

House, 104 F.3d at 1171. The FTC need not allege the Vakils actually intended to

defraud consumers. Id. Nor must the FTC prove its case through allegations in

the Amended Complaint to survive a motion to dismiss. Starr, 2011 WL 477094,

at *14. Rather, the facts alleged in the Amended Complaint must, and in fact do,

assert a plausible claim that the Vakils had actual knowledge of the

misrepresentations or were at least recklessly indifferent to their truth or falsity.

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14 This is unsurprising given that LED lamps were LOA’s new product line,

generated sales in excess of in a year and a half, Amd. Cplt. ¶ 13, and

were being sold to large, national retailers (e.g., Costco and Walmart), Amd. Cplt.

¶ 11.

15 Although the lawsuit was brought by LOA, it would defy logic for the

company to have sued the publisher of a major national consumer magazine

without the knowledge and approval of the Vakils – its two owners and senior

officers, one of whom is also Chairman of the Board. 

11

1. The Vakils Knew About The Misrepresentations.

The factual allegations in the Amended Complaint allow the Court to draw

the “reasonable inference” that the Vakils had actual knowledge of the company’s

practices. In particular, the FTC alleges that Usman Vakil founded the company

in 1978 and served as a high ranking executive since that time, and that Farooq

Vakil served as a senior executive since 1993. Amd. Cplt. ¶¶ 8, 9, 54 & 69. The

Vakils are LOA’s sole owners. Id. ¶¶ 8-9. The internal communications 

involving the Vakils show they were active managers.14 Id. ¶¶ 59, 61, 66, 70-77,

79, & 81.

As owners and active managers of a lighting company for well over fifteen

years, every reasonable inference, not to mention common sense, leads to the

conclusion that the Vakils were abundantly aware that light output and lifetime are

two of the central characteristics that are used to market LOA’s products,

including LED lamps. Indeed, these characteristics were so important that in

2000, LOA sued Consumers Union after its Consumer Reports magazine stated

that LOA’s compact fluorescent lightbulbs (its then-new technology) did not

“‘provide as much light, nor do they last as long as the package claims.’”15 Amd.

Cplt. ¶ 87 (quoting LOA’s complaint against Consumers Union). It, therefore, is

more than reasonable to infer the Vakils were aware of the claims for its most

recent new technology, LED lamps.

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16 The Court may review those documents to determine if that is the case. 

See, e.g., TYR Sport, 679 F. Supp. 2d at 1128. 

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These facts alone are enough to infer knowledge. Nevertheless, the FTC

alleges even more facts to corroborate this inference. In particular, in September

2008, Usman Vakil received the results of tests that the DOE conducted on LOA’s

LED lamps, and those results “showed that the watt equivalency representations

that appeared on the lamps’ packaging and in the product brochures were false or

unsubstantiated.” Amd. Cplt. ¶ 56. The FTC’s presumptively true allegations

show that as of September 2008, Usman Vakil had actual knowledge of the fact

that the watt equivalency claims for these LED lamps were false or

unsubstantiated. The FTC further alleges that the Defendants continued to make

these false and unsubstantiated claims after receiving the DOE tests results. Id. ¶¶

30 & 58. 

Relying on documents attached to its Motion, the Vakils again claim that

the FTC’s allegations mischaracterize the substance of the document. In

particular, they argue the test reports did not to put the Vakils on notice of LOA’s

claims. However, once again, the documents themselves demonstrate the FTC’s

allegations are correct:16

• The DOE test results include pictures of the LED bulb packaging and

identify the watt equivalency claims made on those packages for the

models tested (e.g., “Replaces 45 Watts”). See Motion, Ex. C,

FTC01090-1, FTC01105-6, FTC01129-30; Amd. Cplt. ¶ 16;

• The report includes lumen output results for each of the tested

models. Motion, Ex. C (FTC01094, FTC01110, FTC01134); Amd.

Cplt. ¶ 25.a-c. 

• Looking at the report, the disparity between the claim on the package

and the tested lumen output is dramatic (e.g., tested lumen output less

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17 The FTC has not alleged voluminous facts concerning what the Vakils

knew of LOA’s LED business because that kind of “knowledge” is held by the

individuals and is the very reason Rule 9(b) permits parties to aver knowledge

generally. 

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than one-half of the claimed output in all instances). Amd. Cplt. ¶

25.a.c. 

If notice of the results compared to LOA’s claims were not enough, the FTC

alleges that DOE invited Usman Vakil to comment on the results. Amd. Cplt. ¶

24. In his response, Usman Vakil did not contest the test results. Id. ¶ 57. All of

this was evident to Farooq Vakil as well because he received a copy of LOA’s

response to this report and also received notice that DOE tested the company’s

products. Id. ¶ 71. Thus, the allegations in the Amended Complaint plausibly

show the Vakils were actually aware of LOA’s misrepresentations. 

2. At A Minimum, The Vakils Were Recklessly Indifferent.

Even assuming, arguendo, the Vakils did not have actual knowledge of the

misrepresentations on LOA’s LED packaging, the FTC has alleged ample facts to

plausibly show that the Vakils were recklessly indifferent to the truth or falsity of

the representations.17 From the FTC’s factual allegations, the Court can draw the

reasonable inference that as the CEO and Executive Vice President of the

company, Usman and Farooq Vakil acted with reckless indifference if they failed

to read DOE’s report on tests conducted of their company’s products. They were

aware that the DOE planned to publish the test results, Amd. Cplt. ¶ 24; Motion,

at 5. Given their prior lawsuit with Consumers Union over its negative test

reports about compact fluorescent light output and lifetime, Amd. Cplt. ¶¶ 85-88,

it is inconceivable that the Vakils would have turned a blind eye to a test report

from the federal agency tasked with regulating this technology.

The LED issue is even worse because, as the FTC alleges, the Defendants

had no tests for many if not all of its models until as late as December 2008 –

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18 The FTC is not required to allege every possible fact in support of a

particular claim in order to defeat a motion to dismiss. al-Kidd, 580 F.3d at 977. 

To do so would eviscerate the purpose of notice pleading, which is to provide the

defendant with sufficient notice of the claim so that he is able to adequately defend

against it. Starr, 2011 WL 477094, at *14. 

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several months after disseminating the product claims. Amd. Cplt. ¶ 21. Thus,

LOA did not even bother to begin testing in an attempt to support its claims until

after their LED lamps were being sold across the country. The failure to conduct

any testing is particularly problematic given LOA’s earlier lawsuit regarding light

output and lifetime claims on its packaging. In sum, given the Vakils’ lighting

industry experience, the prior CFL litigation, and the DOE test results, it is more

than plausible that the failure to have any substantiation of the claims, or failure to

review DOE’s testing results, was recklessly indifferent. 

Based on all of the factual allegations discussed above, taken together and

viewed in the light most favorable to the FTC, the Amended Complaint contains

more than adequate factual support to sufficiently “nudge” its claims for

individual liability “across the line from conceivable to plausible.” Twombly, 550

U.S. at 570.18

3. The Vakils Concede Knowledge As of July 2009.

Finally, the Vakils do not contest whether the FTC’s allegations in the

Amended Complaint adequately state a claim against the Vakils after July 2009. 

In fact, the Vakils apparently concede that they had actual knowledge of LOA’s

misrepresentations by July 2009 since they have not argued their “lack of

knowledge” continued after that time. Specifically, the Vakils claim the July 2009

communications cited in the Amended Complaint “reflect the efforts on the part of

the Individual Defendants to assure that accurate LED lifetime data was obtained

in connection with any further marketing of the company’s LED products.” 

Motion, at 20. In other words, the Vakils could not have been more involved and

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19 As this Court previously ruled, the FTC must allege the circumstances

constituting the fraud with particularity. The purpose of this standard is to give a

party “notice of particular misconduct . . . so that they can defend against the

charge and not just deny that they have done anything wrong.” Neubronner v.

Milliken, 6 F. 3d 666, 672 (9th Cir. 1993).

20 If the FTC finds no evidence that LOA promoted LED lamps with

unsubstantiated claims after July 2009, it is a defense to liability – not a basis for

relief on a motion to dismiss. See, TYR Sport, 679 F. Supp. 2d at 1128 (“factual

challenges have no bearing under Rule 12(b)(6)”); Starr, 2011 WL 477094, at *14

(“question is not truth or even probability” of proof by evidence later discovered). 

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aware at that time. This admission alone supports the FTC’s allegations and is a

basis to deny the Vakils’ Motion – it concedes the Vakils had the ability to control

LOA’s product packaging (their positions as executives of the company had not

changed in more than fifteen years) and shows they were recklessly indifferent

about what those labels said up until the time a government regulator inquired

about those claims.

C. The FTC Has Alleged Sufficient, Particularized Facts To Plausibly

Assert A Claim Against LOA And The Vakils After August 2009.

In the Vakils’ final argument, they have, once again, attempted to convince

this Court that the FTC must prove its facts as part of defending against the

Motion. The Vakils claim that the FTC has not alleged with particularity that

LOA sold its LED lamps with false or unsubstantiated claims after July 2009. 

The Vakils, simply put, are wrong. The FTC alleged ample particularized facts

demonstrating the plausibility of LED lamp sales by LOA after July 2009.19 The

Vakils’ assertion that the FTC failed to allege facts “to establish that LOA sold

any LED products with false or unsubstantiated labels or brochures after July

2009” is premature – the FTC need only allege facts, not establish and prove

them.20 TYR Sport, 679 F. Supp. 2d at 1128; Motion, at 24 (emphasis added).

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21 Notably, the Vakils ignore the Amended Complaint allegations that LOA

sales took place during August 2009 with false or unsubstantiated claims. 

See, e.g., Amd. Cplt. ¶¶ 12-13, 32, & 38.

22 Moreover, the FTC provided detailed allegations as to why the claims

were false or unsubstantiated. Amd. Cplt. ¶¶ 22-23, 25, 28, 35-36, 41, & 43-48.

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The FTC has plausibly stated its claim providing more than “enough facts

to raise a reasonable expectation that discovery will reveal evidence” supporting

its allegations regarding LOA’s marketing and sales activities of LED lamps after

August 2009. Starr, 2011 WL 477094, at *14 (quoting Twombly, 550 U.S. at

556). 

The FTC alleged LOA sold LED lamps through August 2009 and that

Defendants continued their sales with false or unsubstantiated representations

after that date.21 Amd. Cplt. ¶¶ 12-13, 31, 39, 60, 63, & 80. Specifically, the FTC

alleged that: (a) certain LED lamp models; (b) were sold by LOA to retailers; (c)

these lamp models were being sold on the Internet; (d) more than a year after July

2009; (e) through multiple retailer websites; (f) that were making the same claims;

(g) regarding incandescent watt bulb equivalency and lamp lifetime; (h) that LOA

had on packaging and product brochures; (i) that were distributed to retailers

throughout the United States. Id. ¶¶ 12-13, 16-17, 31, 39, 60, 63, & 80.22

Significantly, the FTC alleged that each of the five LED models identified on

retailers’ websites had earned LOA at least in sales from

February 2008 through August 2009. Id. ¶¶ 32 & 51. Given their appearance on

retailer websites over a year after August 2009, the Court may infer that LOA

continued sales of these models after that time. Similarly, since retailer websites

made the same claims after August 2009 that LOA made prior to that date, the

Court may infer that retailers relied on claims supplied by LOA. Moreover, it is

reasonable to expect that discovery will bolster these facts by revealing evidence

that the marketing and sale of LOA’s top selling LED lamp models did not cease

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23 LOA’s response to the FTC’s CID was dated September 22, 2009, and

includes correspondence through approximately September 17, 2009. Thus, the

information the FTC obtained from LOA from the CID is limited in time.

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after August 2009 and that the claims made on retailer websites after July 2009

were the result of LOA’s false or unsubstantiated watt equivalency and lifetime

claims.23 Accordingly, viewing these facts as true and with all reasonable

inferences in the FTC’s favor, the FTC has stated a plausible claim for relief

against LOA for its deceptive marketing and sale of LED lamps after August

2009.

If the Court concludes further facts are needed regarding LED lamp sales

after July 2009, the FTC respectfully requests leave to amend to add facts

regarding the LOA LED lamps the FTC purchased from online retailers in August,

2010. See, Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003) (“Facts

raised for the first time in plaintiff’s opposition papers should be considered by

the court in determining whether to grant leave to amend or dismiss the complaint

with or without prejudice.”). The packaging on these LED lamps, which

Defendants disseminated into the stream of commerce, bear the same false or

unsubstantiated lifetime claims for two LOA LED lamp models as alleged in the

Amended Complaint. 

Once this Court determines that the FTC has stated a plausible claim against

LOA for its unsubstantiated claims in the marketing, promotion, or sale of LED

lamps after July 2009, the rest of the inquiry is simple because the Vakils have

conceded both authority to control LOA’s marketing and sale of the LED lamps

and knowledge of the misrepresentations. Motion, at 20. Unlike the remaining

claims at issue in the Motion, here the Vakils contest only whether the FTC has

stated a plausible claim that LOA sold LED lamps after July 2009 that contained

false or unsubstantiated claims. Having shown the Court that it has alleged

sufficient facts to plausibly assert this claim, the Vakils’ Motion should be denied.

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1 IV. CONCLUSION 

2 For all the foregoing reasons, the FTC respectfully requests that this Court 

3 deny the Vakils' Motion. 

4 Respectfully submitted, 

5 

6 Date: March 7,2011 

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~bub~ GREGORY f MADDEN 

KIMBERLY L. NELSON 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Room M-81 02B 

Washington, DC 20580 

202~ 326-2426 ~tel.~ (Madden) 202 326-3304 tel. (Nelson) 202 326-2558 fax 

gmadden@ftc.gov, knelson@ftc.gov 

STACY PROCTER (Local Counsel) Federal Trade CommIssion 

10877 Wilshire Boulevard, Suite 700 

Los Angele~ CA 90024 

(310) 824-4j43 (tel.) 

(310) 824-4380 (fax) 

sprocter@ftc.gov 

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CERTIFICATE OF SERVICE 

I hereby certify that on March 7,2011, the foregoing document titled 

Paintiffs Opposition to Defendants' Motion to Dismiss Amended Complaint was 

served upon counsel for defendants by electronic mail at the addresses designated 

below: 

Dated: 

Michael Mallow mmallow~loeb.com 

Michael urman mthurman~oeb.com 

LOEB & L EB LLP 

10100 Santa Monica Boulevard, Suite 2200 

Los Angeles, California 90067-4120. 

March 7, 2011 ~kI(t,:) f??:--

Kllnberly L. Nelson 

Federal Trade Commission 

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