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UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

COMMISSIONERS: Lina M. Khan, Chair

Noah Joshua Phillips

Rebecca Kelly Slaughter

Christine S. Wilson 

Alvaro M. Bedoya 

In the matter of: 

Intuit Inc., Docket No. 9408 

a corporation, 

Respondent. 

REPLY IN SUPPORT OF COMPLAINT COUNSEL’S 

MOTION FOR SUMMARY DECISION 
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TABLE OF CONTENTS 

I. Introduction ...................................................................................................................... 1 

II. Legal Standard.................................................................................................................. 2 

III. Argument .......................................................................................................................... 3 

A. There Are No Genuine Issues of Material Fact on the Complaint’s 

Claim.......................................................................................................................3 

1. Intuit Made “Free” Claims Conveying to Consumers that 

TurboTax is Free for Them; That Representation Is Likely to 

Mislead Reasonable Consumers .............................................................3 

2. Intuit’s “Free” Representation Is Likely to Mislead 

Consumers ...............................................................................................10 

3. Intuit’s Free Claims are Material ..........................................................11 

B. Entry of a Cease and Desist Order is Appropriate.........................................12 

C. Intuit’s Defenses Are Meritless and Do Not Preclude Summary 

Decision ................................................................................................................12 

IV. Conclusion ...................................................................................................................... 16 

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TABLE OF AUTHORITIES 

FTC Adjudicative Matters Page(s) 

In re Benrus Watch Co. v. FTC, 64 F.T.C. 1018 (1964)...............................................................10 

In re Bristol-Myers Co., 85 F.T.C. 688 (1975)..............................................................................10 

In re Book-of-the-Month Club, 48 F.T.C. 1297 (1952) .................................................................11 

In re Consumers Products of America, Inc., 72 F.T.C. 533 (1967) ................................................5 

In re Daniel Chapter One, 2009 FTC LEXIS 86 (F.T.C. April 20, 2009) (GX-365) ....................8 

In re ECM Biofilms, Inc., 160 F.T.C. 652 (2015) ...........................................................................7 

In re Homeadvisor, Inc., No. 9407, 2022 WL 3500430 (F.T.C. Aug. 2, 2022) (GX-361)............4 

In re Natural Organics, Inc., No. 9294, 2001 WL 1478367 (F.T.C. Jan. 30, 2001) 

(GX-360)..............................................................................................................................4 

In re Pom Wonderful LLC, 155 F.T.C. 1 (2013)......................................................... 1, 3, 5, 10-11 

In re Rentacolor, Inc., 103 F.T.C. 400 (1984) ...............................................................................13 

In re Telebrands Corp., 140 F.T.C. 278 (2005) .............................................................................10 

Federal Court Cases Page(s) 

AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).............................................................15 

British Airways Board v. Boeing Co., 585 F.2d 946 (9th Cir. 1978).............................................4 

Brownson v. SEC, 66 F. App’x 687 (9th Cir. 2003)....................................................................15 

Cinderella Career & Finishing Schools, Inc. v. FTC, 425 F.3d 583 (D.C. Cir. 1970) .................14 

Collins v. Yellen, 141 S. Ct. 1761 (2021)......................................................................................15 

Dunning v. Quander, 508 F.3d 8 (D.C. Cir. 2007) ................................................................... 2-3 

Ebner v. Fresh, Inc., 838 F.3d 958 (9th Cir. 2016) ........................................................................9 

Estrella-Rosales v. Taco Bell Corp., 2020 WL 1685617 (D.N.J. Apr. 7, 2020) (GX-363) ........ 5-6 

Exposition Press, Inc. v. FTC, 295 F.2d 869 (2d Cir. 1961)..........................................................6 

Fanning v. FTC, 821 F.3d 164 (1st Cir. 2016) ............................................................................10 

Firestone Tire & Rubber Co. v. FTC, 481 F.2d 246 (6th Cir. 1973)............................................10 

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First Specialty Insurance Corp. v. GRS Management Assocs., No. 08-cv-81356, 

2009 U.S. Dist. LEXIS 72708 (S.D. Fla. Aug. 17, 2009) (GX-362) .................................5 

FTC v. Cyberspace.com LLC, 453 F.3d 1196 (9th Cir. 2006)......................................................10 

FTC v. DirecTV, No. 15-cv-01129, 2018 WL 3911196 (N.D. Cal. Aug. 16, 2018) 

(GX-364).......................................................................................................................... 8-9 

FTC v. E.M.A. Nationwide, Inc., 767 F.3d 611 (6th Cir. 2014) ...............................................4, 9 

FTC v. Fleetcor Techs., Inc., No. 1:19-CV-5727, 2022 WL 3273286 

(N.D. Ga. Aug. 9, 2022) (GX-359)............................................................................4, 7, 9 

FTC v. OMICS Grp. Inc., 374 F. Supp. 3d 994 (D. Nev. 2019) ..................................................9 

FTC v. Wilcox, 926 F. Supp. 1091 (S.D. Fla. 1995)..................................................................5, 8 

Gibson v. FTC, 682 F.2d 554 (5th Cir. 1982) ..............................................................................14 

Gibson v. SEC, 561 F.3d 548 (6th Cir. 2009) ..............................................................................15 

Goodman v. FTC, 244 F.2d 584 (9th Cir. 1957) ............................................................................7 

Gundy v. United States, 139 S. Ct. 2116 (2019) ..........................................................................14 

Heckler v. Chaney, 470 U.S. 821 (1985) ................................................................................. 14-15 

Heckler v. Community Health Services of Crawford County, 467 U.S. 51 (1984).............................13 

Hill v. SEC, 114 F. Supp. 3d 1297 (N.D. Ga. 2015)...................................................................15 

Humphrey’s Executor v. United States, 295 U.S. 602 (1935)......................................................15 

Kornman v. SEC, 592 F.3d 173 (D.C. Cir. 2010)........................................................................15 

Kraft, Inc. v. FTC, 970 F.2d 311 (7th Cir. 1992) .......................................................................1, 4 

McCollough v. Johnson, Rodenberg & Lauinger, 587 F. Supp. 2d 1170 (D. Mont. 2008) ........13 

NR Grp. 3 Contractors, Inc. v. Grp. 3 Contractors, LLC, No. 17-cv-21945, 

2017 WL 7792718 (S.D. Fla. Sept. 26, 2017) (GX-366) .................................................13 

Pahuta v. Massey-Ferguson, Inc., 170 F.3d 125 (2d Cir. 1999)....................................................2 

Schweiker v. McClure, 456 U.S. 188 (1982).................................................................................14 

SEC v. Bankatlantic Bancorp, Inc., 661 F. App’x 629 (11th Cir. 2016).......................................2 

SEC v. Murphy, 626 F.2d 633 (9th Cir. 1980) ............................................................................12 

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Seila Law LLC v. CFPB, 140 S. Ct. 2183 (2020) ..........................................................................15 

Serdarevic v. Advanced Medical Optics, Inc., 532 F.3d 1352 (Fed. Cir. 2008) ........................ 2-3 

Stearns Airport Equipment Co. v. FMC Corp., 170 F.3d 518 (5th Cir. 1999).......................... 2-3 

Tinoqui-Chalola Council v. Dep’t of Energy, 232 F.3d 1300 (9th Cir. 2000) .............................13 

United States v. Nixon, 418 U.S. 683 (1974) ......................................................................... 14-15 

United States v. Summerlin, 310 U.S. 414 (1940)...............................................................................13 

United States v. W. T. Grant Co., 345 U.S. 629 (1953) ...............................................................12 

Withrow v. Larkin, 421 U.S. 35 (1975).........................................................................................14 

Statutes and Rules Page(s) 

5 U.S.C. § 556 ......................................................................................................................... 15-16 

15 U.S.C. § 57b .............................................................................................................................13 

Rule 3.24, 16 C.F.R. § 3.24 ............................................................................................. 2, 5, 15-16 

Rule 4.17, 16 C.F.R. § 4.17 ...........................................................................................................14 

Guide Concerning Use of the Word “Free” and Similar Representations, 

16 C.F.R. § 251.1 ...............................................................................................................12 

Other Page(s) 

.com Disclosures: How to Make Effective Disclosures in Digital Advertising 

(Mar. 2013) .........................................................................................................................6 

ACUS Model Adjudication Rules, Rule 250............................................................................16 

FTC Statement on Deception, 103 F.T.C. 174 (1984) (appended to 

In re Cliffdale Assocs., Inc., 103 F.T.C. 110 (1984))............................................. 4, 6-7, 10 

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Abbreviation 

Mot. 

CCSFGXOpp. 

ISFRXTABLE OF ABBREVIATIONS 

Refers To 

Complaint Counsel's Motion for Summary Decision, filed 

August 22, 2022 

Complaint Counsel's Statement of Material Facts as to Which 

There Is No Genuine Issue for Trial, filed August 22, 2022 

(citations followed by fact number) 

Complaint Counsel's Exhibits (citations followed by exhibit 

number) 

Respondent Intuit Inc.' s Opposition to Complaint Counsel's 

Motion for Summaiy Decision, filed August 30, 2022 

Respondent Intuit Inc.' s Statement of Material Facts as to Which 

There Exists a Genuine Issue For T1ial, Part II: Statement of 

Material Facts as to Which There Exists a Genuine Issue For 

T1ial (citations followed by fact number) 

Respondent Intuit Inc.'s Exhibits (citations followed by exhibit 

number) 

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STATEMENT REGARDING ORAL ARGUMENT 

Respondent Intuit Inc. has requested that the Commission hear oral argument 

before issuing a ruling on Complaint Counsel’s Motion for Summary Decision. Opp. at 

vii. Complaint Counsel does not oppose this request. Complaint Counsel and 

Respondent have conferred and respectfully jointly request that, if the Commission 

holds oral argument on the Motion, that it do so in person. 

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REPLY IN SUPPORT OF SUMMARY DECISION 

I. Introduction 

To further distract from this straightforward deceptive advertising case, Intuit's 

Opposition to the Motion for Summary Decision bmies the principle that " [t]he primary 

evidence of the representations that an advertisement conveys to reasonable consumers 

is the advertisement itself." In re Pam Wonderful LLC, 155 F.T.C. 1, 12 (2013). Intuit's 

arguments should not lead the Commission to miss the forest for the trees. The inquiry 

in this matter must begin- and can end - with the Commission's review of Intuit's 

advertising in light of its own "common sense and administrative experience." Kraft, 

Inc. v. FTC, 970 F.2d 311, 319 (7th Cir. 1992). 

Take this TV ad: 

LAWYER: Free free free, free free free freefreefree.... 

LAWYER: Free free free, Free free freefreefreefree. Free free 

freefreefreefreefreefree. . .. 

LAYWER: Free free, free free! Free! Free ... 

JUROR: Free .... 

JUDGE: Free free free free! 

VO: That's right, TurboTax Free is free. Free, free free free. 

RX-29; GX-300. For the last four seconds of this 30-second ad, the center of the screen 

shows a large logo proclaimin-," while small p1int on the bottom of 

." RX-29; GX-300 (pictured below). In light of 

common sense and administrative experience, what representation does this ad convey 

to a reasonable consumer? Simple: TurboTax is free for me. 

Intuit argues that, "on their face, Intuit's ads conveyed that the Free Edition 

product is free and that it serves the needs of consumers with 'simple returns' only." 

Opp. at 5. This is too clever by half. After saying 11 free" aloud 43 times, Intuit argues 

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that its 4-second fine print disclosure made clear to consumers that ads like this only 

pertain to one “Edition” of TurboTax, which was limited to consumers with “‘simple 

returns’ only.” Putting aside the abysmal failure of such a purported disclaimer to beg 

clearness and conspicuousness, as was true of legions of its ad campaigns, Intuit’s 

arguments fail as a matter of law. 

No genuine issue as to any material fact is presented; only illusory issues on a 

myriad of immaterial matters. The Commission should grant summary decision. 

II. Legal Standard 

The purpose of summary judgment is to prevent unnecessary trials. Pahuta v. 

Massey-Ferguson, Inc., 170 F.3d 125, 130 (2d Cir. 1999). If the Commission finds that 

“there is no genuine issue as to any material fact regarding liability or relief,” it may 

enter summary decision. Rule 3.24(a)(2).1 Requests by the nonmoving party for 

additional discovery before summary decision “must demonstrate 1) why the movant 

needs additional discovery and 2) how the additional discovery will likely create a 

genuine issue of material fact.” Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 535 

1 If the Commission finds that there is no genuine issue regarding some, but not all, of

the issues, it may enter partial summary decision, which “serves as a useful tool to 

streamline litigation by establishing certain issues before trial where there is no genuine

issue of material fact.” SEC v. Bankatlantic Bancorp, Inc., 661 F. App’x 629, 630 n.1 (11th 

Cir. 2016). 

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(5th Cir. 1999); see also Dunning v. Quander, 508 F.3d 8, 10 (D.C. Cir. 2007) (desire to test 

veracity of defendants’ affiants’ testimony was insufficient without some reason to 

question their veracity); Serdarevic v. Advanced Med. Optics, Inc., 532 F.3d 1352, 1364 (Fed. 

Cir. 2008). 

III. Argument 

A. There Are No Genuine Issues of Material Fact on the Complaint’s Claim 

Intuit claims “overwhelming evidence that refutes Complaint Counsel’s 

assertions,” and “creates disputed issues of fact.” Opp. at 12. However, at best, Intuit 

has provided irrelevant extrinsic evidence, and in many instances, evidence that wholly 

supports Complaint Counsel’s factual assertions. 

1. Intuit Made “Free” Claims Conveying to Consumers that

TurboTax is Free for Them; That Representation Is Likely to 

Mislead Reasonable Consumers 

The Commission’s first task is to determine “whether Respondents disseminated 

advertisements conveying the claims alleged in the Complaint.” Pom Wonderful, 155 

F.T.C. at 11. “The Commission will deem an advertisement to convey a claim if 

consumers, acting reasonably under the circumstances, would interpret the 

advertisement to contain that message.” Id. The Complaint alleges that Intuit 

“represents, directly or indirectly, expressly or by implication, that consumers can file 

their taxes for free using TurboTax.” Compl. ¶ 119. The Complaint does not, as Intuit 

seems to believe, allege that Intuit represented that TurboTax was free for everyone. 

Much of Intuit’s Opposition engages in a straw man fallacy, arguing against an 

imagined version of the Complaint premised upon this non-existent allegation. The 

Motion and the evidence accompanying it establish what the Complaint alleges: That 

Intuit’s ads conveyed the message to reasonable consumers that TurboTax was free for 

them. See Mot. 7–21. Intuit’s Opposition does not seriously controvert such a finding. 

Questions of Fact. Intuit argues that the meaning of an advertisement cannot be 

decided on summary decision because it is a question of fact, and that Complaint 

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Counsel is merely asking the Commission to draw “inferences” on the relevant facts. 

Opp. at 5–7. All this boils down to is a restatement of the legal standard on summary 

decision. Intuit acknowledges that, in some cases, summary decision on the meaning of 

ads has been deemed appropriate. Opp. at 6–7. Intuit casts these cases as “inapposite” 

because, in Intuit’s estimation, the FTC’s case was stronger and/or the defense case was 

weaker than what the parties present here. But that is for the Commission to decide.2 

As the Motion makes clear, Intuit has expressly claimed to consumers that 

TurboTax is free for them. Mot. at 17–18. No “inferences” are needed to interpret such 

an express claim. Deception Policy Statement, at 176. Intuit’s Opposition does not 

address its express claims at all. And even if Intuit’s claims are implied claims requiring 

an examination of their “net impression,” the Commission can determine their meaning 

through “common sense and administrative experience,” Kraft, 970 F.2d at 319—even 

on summary decision, FTC v. E.M.A. Nationwide, Inc., 767 F.3d 611, 632 (6th Cir. 2014).3 

Further, “[w]hen a seller’s representation conveys more than one meaning to reasonable 

consumers, one of which is false, the seller is liable for the misleading interpretation.” 

Deception Policy Statement, at 178. 

Though Intuit claims that it disputes the majority of Complaint Counsel’s facts, a 

reading of its Response to the CCSF (see Table of Abbreviations) shows that Intuit does 

so mostly based on irrelevant extrinsic evidence and sweeping, unsupported 

2 Intuit’s examples of summary decision denials—In re Natural Organics, Inc., No. 9294, 

2001 WL 1478367 (F.T.C. Jan. 30, 2001) and In re Homeadvisor, Inc., No. 9407, 2022 WL 

3500430 (F.T.C. Aug. 2, 2022)—offer far less commentary and reasoning than Complaint Counsel’s cases in which summary decision/judgment were granted. E.g., FTC v. 

Fleetcor Techs., Inc., No. 1:19-cv-5727, 2022 WL 3273286 (N.D. Ga. Aug. 9, 2022). 

3 Intuit’s citation to comments by Judge Breyer at the hearing in the accompanying 

TRO case are neither evidence nor precedential. Brit. Airways Bd. v. Boeing Co., 585 F.2d 

946, 952 (9th Cir. 1978) (“oral argument [is] not evidence, and [cannot itself] create a

factual dispute sufficient to defeat a summary judgment motion”). The Court’s actual 

order denying the request for a TRO made no findings on the merits; it was based on

mootness and the existence of this proceeding. RX-74. Far from res judicata, Judge Breyer recognized the independence of the administrative process. 

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statements, creating no genuine issue of material fact.4 Intuit also protests that it needs 

discovery, but it does not invoke Rule 3.24(a)(4) to seek a continuance to take that 

discovery. Moreover, litigants cannot rely on lack of discovery to delay summary 

judgment when the evidence necessary to respond is within their possession, custody or 

control. First Specialty Ins. Corp. v. GRS Mgmt. Assocs., No. 08-cv-81356, 2009 U.S. Dist. 

LEXIS 72708, at *15 (S.D. Fla. Aug. 17, 2009). Here, the relevant information relating to 

the allegations in the Complaint is within the control of Intuit. This case is about Intuit’s 

advertising, and Intuit demonstrates through the attachments to its Opposition that it 

should have all the information it needs to mount a defense. 

Extrinsic Evidence. Intuit claims that Complaint Counsel has not put forth 

reliable extrinsic evidence, specifically criticizing Complaint Counsel’s expert, Prof. 

Novemsky, and consumer complaint evidence. Opp. at 7–11. But extrinsic evidence is 

not required here. See Pom Wonderful, 155 F.T.C. at 13 (“Extrinsic evidence is 

unnecessary to establish the impression that consumers would take away from an ad if 

the claims are reasonably clear from the face of the advertisement.”); Mot. at 18 (citing 

cases).5 

Disclaimers. Intuit argues that its advertising disclaimers create a genuine issue 

of material fact over the claim conveyed to reasonable consumers in its advertising. 

Opp. 11–18. Here, again, Intuit brushes aside cases that have entered summary 

decision/judgment against advertisers, even when they used arguable disclaimers. See 

supra pg. 3-4. Cases cited by Intuit articulate that courts can determine the sufficiency of 

4 For example, in its Response to the CCSF, Intuit repeatedly claims that an issue of material fact relates to captures and screenshots taken by Investigator Diana Shiller.

ISFR at 3-7. However, Intuit does not put forth any facts or evidence to show that Ms.

Shiller’s captures are unreliable; nor does it explain what facts it could discover from

Ms. Shiller that could create a genuine dispute. See supra Part II. 

5 Regardless, Professor Novemsky’s survey evidence is reliable. See GX-313 (Professor 

Novemsky’s declaration explaining and defending his survey methodology). And the 

number of consumer complaints does not establish that representations were not 

deceptive. See In re Consumers Products of America, Inc., 72 F.T.C. 533, 557 n.13 (1967); see 

also FTC v. Wilcox, 926 F. Supp. 1091, 1099 (S.D. Fla. 1995). 

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disclosures on the face an advertisement. See, e.g., Estrella-Rosales v. Taco Bell Corp., 2020 

WL 1685617 (D.N.J. Apr. 7, 2020) (deciding the sufficiency of disclosures on the 

pleadings). Intuit also focuses on “net impression,” Opp. at 11, a doctrine related to 

implied claims, without addressing its express claims, see Mot. at 17–18. Those issues 

aside, Intuit quips that Complaint Counsel has only put forward its own “ipse dixit” on 

the insufficiency of its disclaimers, Opp. at 11, overlooking the Commission’s 

pronouncements on the subject in policy statements, business guidance, and caselaw, 

see Mot. 27–33 (citing authority). Intuit also advances its own assertions that its 

disclosures were sufficiently prominent. Here too, the Commission can reach its 

decision by looking express meaning and net impression of the at the ads themselves. 

E.g., supra, pg. 2. Intuit argues that its disclosures follow the pattern of other 

comparable companies, but this is no defense in determining whether Intuit violated the 

law. See, e.g., Exposition Press, Inc. v. FTC, 295 F.2d 869, 873 (2d Cir. 1961) (similar 

practices by others “would not excuse Exposition’s unfair deception”). 

It is black letter law that disclaimers are not always effective and are not a 

defense where, as here, the ad is still misleading. First—and again assuming a 

disclosure were present and readable—no disclosure can cure a false claim; it “can only 

qualify or limit a claim to avoid a misleading impression.” .com Disclosures: How to 

Make Effective Disclosures in Digital Advertising (Mar. 2013),6 at 5; see also Deception 

Policy Statement, at 180-81. If a disclosure “contradicts a material claim, the disclosure 

will not be sufficient,” rather, “the claim itself must be modified.” Id. at 5. 

The cases Intuit cites as support that its ads contain sufficient disclosures are 

readily distinguishable, primarily because most do not involve Section 5 of the FTC Act. 

Intuit’s argument that additional disclosures in its video advertising “would be 

unhelpful to consumers,” see Opp. at 14–15, is unpersuasive. A misleading claim is not 

6 ftc.gov/business-guidance/resources/com-disclosures-how-make-effectivedisclosures-digital-advertising 

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vindicated if disclaiming it would require so much additional information as to confuse 

consumers. 

Website Disclosures. Intuit argues that, regardless of what advertising 

consumers may see, they have to use the TurboTax website or app to make a purchase, 

and that better disclosures are available there. Opp. at 16–18. Intuit does not address the 

“well-established” principle “that an advertiser cannot ‘cure the deception’ in one 

advertisement with different statements in another.” In re ECM Biofilms, Inc., 160 F.T.C. 

652, 734 n.75 (2015); see also Deception Policy Statement, at 180 & n.37; Fleetcor, 2022 WL 

3273286, at *12 (“post-hoc disclosures cannot cure earlier misleading representations”) 

(citing cases). Further, the Commission can determine, with common sense and 

experience, whether Intuit’s website creates a misleading net impression given its use of 

hyperlinks for integral information, among other issues. See Mot. at 30–33. 

Survey and Satisfaction Evidence. Intuit argues that its survey and customer 

satisfaction evidence create genuine disputes of material fact regarding the message that 

its ads convey. Opp. at 19–20. That is not the case. 

• Prof. Hauser conducted a survey and opined that consumers do not rely 

on Intuit’s advertising alone; they research tax preparation providers and 

readily switch between providers. These conclusions, even if true, are 

irrelevant. Even if some consumers take actions to dispel Intuit’s 

deceptive claims, Intuit nonetheless makes the deceptive claims. See 

Goodman v. FTC, 244 F.2d 584, 603 (9th Cir. 1957) (“There is no duty resting 

upon a citizen to suspect the honesty of those with whom he transacts 

business. Laws are made to protect the trusting as well as the 

suspicious.”). 

• Ms. Kirk Fair conducted a survey and opined that consumers do not feel 

locked in to TurboTax, knowing they have other options. Again, these 

findings are not relevant. Consumers preparing their taxes in TurboTax 

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likely have already been exposed to Intuit's deceptive marketing. What 

consumers do after they realize that they have been deceived, or 

awareness of other tax filing options, is immaterial to the net impression 

of Intuit's ads. 7 Moreover, Ms. Kirk Fair's survey provides evidence that 

consumers are not skeptical of Intuit's "free" claims. 8 Indeed, Intuit 

changed it advertising explicitly to address any such possible skepticism. 

See Mot. at 8 n.15. 

• Intuit touts high "net promotor scores" and customer retention as 

evidence that consumers were not deceived. Opp. at 20. Intuit relies on 

FTC v . DirecTV, No. 15-cv-01129, 2018 WL 3911196 (N.D. Cal. Aug. 16, 

2018) to support its claim that customer satisfaction shows a lack of 

deception. However, " [e]vidence of customer satisfaction is not relevant to 

determining whether the claims made are deceptive." In re Daniel Chapter 

One, 2009 FTC LEXIS 86, at *7 (F.T.C. April 20, 2009); see also Wilcox, 926 F. 

Supp. at 1099. 

Consumer Understanding. Intuit argues that reasonable consumers understand 

that there is some limitation to its free service because other companies use similar 

models and because consumers are skeptical of " free" claims. Opp. at 20-22. Intuit's 

extrinsic evidence shows that while some consumers are skeptical of the free offer, a 

significant minority are not, and are in fact "confident" that Intuit has a free option. 9 

7 The Commission does not have to reach any conclusions about the reliability of 

Intuit's expert materials to find them inelevant. But Complaint Counsel also notes that 

much of Intuit' s expert testimony is unreliable. 

8 28% of consumers continued to think they could use Free Edition even when told 

they did not qualify for it. Kirk Fair Dec. Ex. 4a. 

9 ISF-93, n.534 (" 0 

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Complaint Counsel does not have to prove that all consumers are misled by Intuit' s free 

claims, merely a significant minority. See infra n.12 and accompanying text.10 

Price Disclosures. Intuit claims consumers were not deceived because they were 

made aware of the costs of its products before paying for them. Opp. at 22. But 

companies may not induce a first contact through deception, even if they subsequently 

cure the deception. FTC v . OMICS Grp. Inc., 374 F. Supp. 3d 994, 1010 (D. Nev. 2019), 

affd 827 F. App' x 653 (9th Cir. 2020); see also Fleetcor, 2022 WL 3273286, a t *12. Intuit's 

reliance on DirecTV is misplaced. In DirecTV, the court found that reasonable 

consumers would understand that a flyer could not contain all relevant information 

"for a complex product like subscription satellite television services." DirecTV, 2018 WL 

3911196, at *15. In contrast, while tax preparation itself is complicated, the TurboTax 

offerings are not. TurboTax offers four options a t different price points, including a free 

version. See, e.g. RX-8. Intuit attempts to distinguish its conduct from w ell-established 

case law on deceptive door openers by relying on the fact that in many cases, in contrast 

with Intuit's conduct, "a literal door had to be opened." Opp. at 23. However, 

prohibited deceptive door openers can occur with telephone or internet transactions. 

See, e.g., E.M.A. Nationwide, 767 F.3d a t 632. 11 

None of the extrinsic, irrelevant evidence discussed in Intuit's Opposition creates 

a genuine dispu te as to the claim its ads conveyed to reasonable consumers - that 

TurboTax was free for them. 

10 Intuit relies heavily on Ebner v. Fresh, Inc., 838 F.3d 958 (9th Cir. 2016)-a case about 

whether consumers understood how a tube of lip balm worked-for the proposition 

that consumers are unlikely to be misled because of their expe1ience with and 

understanding of the tax preparation industry. But tax preparation is more complicated 

than figu1ing out how much lip balm is in a tube. 

11 Intuit itself refers to parts of its website as ' 

FFA-FTC-000485984, 89, and wanted to ' 

. ," RX-49 at INTUIT-FFA-FTC-0000 

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2. Intuit's "Free" Representation Is Likely to Mislead Consumers 

After establishing that a claim has been made in the eyes of a reasonable 

consumer, the Commission must next determine "whether those claims were false or 

misleading." Pom Wonderful, 155 F.T.C. at 11. The Motion explains that Intuit's claimTurboTax is free for the reasonable consumer viewing Intuit's advertising -is false and 

misleading because TurboTax is not free for most consumers (about two-thirds in recent 

tax years). Mot. at 20; see also ISF-13. Intuit argues that its marketing is not deceptive 

because many taxpayers do use TurboTax for free. But " [a] material practice that 

misleads a significant minority of reasonable consumers is deceptive." Deception Policy 

Statement, at 177 n.20; see also Fanning v . FTC, 821 F.3d 164, 170-171 (1st Cir. 2016); FTC 

v . Cyberspace.com, LLC, 453 F.3d 1196, 1200 (9th Cir. 2006). 12 Intuit's Opposition does not 

address "significant minority" caselaw at all. Indeed, Intuit provides facts showing that 

at least a significant minority of consumers who start their taxes in Free Edition do not 

file in Free Edition. See, e.g., Opp. at 24 & ISF-62 

Moreover, Intuit completely ignores 

consumers who are lured to turbotax.com by 

the free claims, realize that it is not free for 

them at that point, and then abandon 

TurboTax before they start their tax retu1n 

(Intuit acknowledges that consumers come to 

its website and abandon before starting in 

statistics like those depicted in the "TurboTax 

Online Funnel," right, RX-52, at 4). Thus, the 

12 See, e.g., In re Telebrands Corp., 140 F.T.C. 278, 325 (10.5% is substantial); Firestone Tire 

& Rubber Co. v. FTC, 481 F.2d 246, 249 (6th Cir. 1973) (10-15% is substantial); In re BristolMyers Co., 85 F.T.C. 688,744 (1975) (14-33% is substantial, but 2-4% is not); In re Benrus 

Watch Co. v. FTC, 64 F.T.C. 1018, 1032, 1045 (1964), aff'd, 352 F.2d 313, 319-20 (8th Cir. 

1965) (14% is substantial). 

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percentage of consumers affected by the free claims is likely much higher. 

Nothing in Intuit’s Opposition creates a genuine dispute as to likelihood to 

mislead. 

3. Intuit’s Free Claims are Material 

Finally, the Commission must determine whether Intuit’s “claims are material to 

prospective consumers.” Pom Wonderful, 155 F.T.C. at 11. The Motion provides ample 

support for the fact that a free claim—a claim about cost—is material. Mot. at 22–25. 

Intuit attempts to distinguish the cases establishing materiality by arguing that a 

version of TurboTax “actually is free.“ Opp. at 24. But this argument assumes that the 

message its advertising conveys to consumers is TurboTax “Free Edition” alone is free— 

which the Commission can determine through common sense and experience is not the 

message that the ads convey. If the Commission finds that Intuit’s ads conveyed a 

message to reasonable consumers that TurboTax would be free for them, the claim is 

material, as the Commission has long recognized. E.g., In re Book-of-the-Month Club, 48 

F.T.C. 1297, 1312 (1952). Intuit also ignores that express claims and intended implied 

claims are material. See Mot. at 24–25. 

Intuit seeks to rebut the presumption of materiality by arguing, based on a 

survey by Ms. Kirk Fair, that “most users who began using Free Edition also finished in 

Free Edition.” Opp. at 24. Based on this factoid, Intuit expects the Commission to 

somehow infer that Intuit’s free claims “did not affect consumer conduct.” Id. Intuit 

never cogently explains how this inference could be drawn from the Kirk Fair survey. 

In fact, another expert retained by Intuit, Dr. Hauser, submitted research proving that 

price is material to consumers. Hauser Decl. Ex. 6b, 8a, respectively (showing that over 

70% of consumers indicated that price was “an important factor ... when choosing a tax 

preparation method / provider”); see also ISF-102. 

None of the evidence identified in Intuit’s Opposition creates a genuine dispute 

as to materiality. 

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B. Entry of a Cease and Desist Order is Appropriate 

Intuit argues there is no “cognizable danger of recurrent violation,” United States 

v. W. T. Grant Co., 345 U.S. 629, 633 (1953), because its marketing practices have 

improved and will improve further after Intuit’s multistate settlement. E.g., Opp. at 25. 

But Intuit does not address the applicable legal test that examines scienter, history of 

infraction, contrition, and sincerity of assurances against future violations—bearing in 

mind that “[t]he existence of past violations may give rise to an inference that there will 

be future violations; and the fact that the defendant is currently complying with the ... 

laws does not preclude an injunction.” SEC v. Murphy, 626 F.2d 633, 655 (9th Cir. 1980). 

Evidence shows that Intuit intended the message its ads conveyed to consumers. See 

Mot. at 21. Its deceptive advertising ran for years, only improving under substantial 

scrutiny. See W. T. Grant, 345 U.S. 629, 632 n.5 (“beware of efforts to defeat injunctive 

relief by protestations of repentance and reform, especially when abandonment seems 

timed to anticipate suit, and there is probability of resumption”). Indeed, Intuit chose to 

begin pulling its arguably most egregious commercials only after meeting with the FTC 

Chair. GX-352. As Intuit’s Opposition shows, it has no contrition. Intuit’s sincerity is 

questionable considering years of only incremental change. Intuit will continue to 

making “free” claims and the state settlement is not sufficient to prevent future 

deception. See Mot. at 35–36. Intuit also argues that the proposed order is vague and 

overbroad, Opp. at 27, but the Order proposed by Complaint Counsel merely tracks the 

Guide Concerning Use of the Word “Free” and Similar Representations 16 C.F.R. 

251.1(c). The Commission should enter it.13 

C. Intuit’s Defenses Are Meritless and Do Not Preclude Summary 

Decision 

Intuit is mistaken when it argues that its defenses and the APA preclude 

summary decision. Opp. at 28. Where, as here, the respondent has the burden of proof 

13 If the Commission disagrees with Complaint Counsel’s order it can, of course, enter

a different cease and desist order without precluding summary decision. 

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on its defenses, the respondent must come forward with actual evidence in support of 

its affirmative defenses in opposing summary decision. See e.g., McCollough v. Johnson, 

Rodenberg & Lauinger, 587 F. Supp. 2d 1170, 1176 (D. Mont. 2008). Here, Intuit has failed 

to come forward with actual evidence in support of any of its affirmative defenses. 

1. Mootness. “The party asserting mootness has the heavy burden of establishing 

that there is no effective relief remaining for a court to provide.” Tinoqui-Chalola Council 

v. Dep’t of Energy, 232 F.3d 1300, 1303 (9th Cir. 2000). Intuit has not done so. See supra 

Part III.B. 

2. Overbroad and Vague Relief. This is not an affirmative defense. See NR Grp. 3 

Contractors, Inc. v. Grp. 3 Contractors, LLC, No. 17-cv-21945, 2017 WL 7792718, at *4 (S.D. 

Fla. Sept. 26, 2017). The allegation that Complaint Counsel has not met its burden in 

seeking the proposed order is addressed supra Part III.B. 

3. Commission Did Not Vote for the Complaint. Contrary to Intuit’s assertion, 

the Commission voted 3-1 in favor of the final Complaint. See ftc.gov/newsevents/news/press-releases/2022/03/ftc-sues-intuit-its-deceptive-turbotax-free-filingcampaign. 

4. Laches/Estoppel. The government is not subject to these defenses. See Heckler v. 

Community Health Servs. of Crawford County, 467 U.S. 51, 60-61 (1984); see also United States v. 

Summerlin, 310 U.S. 414, 416 (1940); In re Rentacolor, Inc., 103 F.T.C. 400, 418 (1984) 

(“[N]either equitable estoppel nor laches is a defense to an action brought by the 

government in the public interest.”). 

5. Statute of Limitations. No statute of limitations applies in Part 3 litigation. See, 

e.g., 15 U.S.C. § 57b(d) (three-year statute of limitations for claims under Section 19(a), 

not Section 5 actions). 

6–10. Constitutional Defenses. These affirmative defenses can be disposed of as 

a matter of law even if the Commission assumes that the factual averments they are 

based on are true. 

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• Prejudgment. Congress specifically vested the FTC “both with the ‘power 

to act in an accusatory capacity’ and with the ‘responsibility of ultimately 

determining the merits of the charges so presented.’” Cinderella Career & 

Finishing Schools, Inc. v. FTC, 425 F.3d 583, 590 (D.C. Cir. 1970). The 

Commission may not judge a case in advance of hearing it; but voting to 

issue a complaint isn’t prejudgment. Id. Similarly, the Commission has the 

authority, in the public interest, to alert the public to its actions by, for 

example, issuing press releases. Id. Adjudicators are presumed to be 

unbiased unless the challenger produces evidence to overcome that 

presumption. Schweiker v. McClure, 456 U.S. 188, 195 (1982). Objectors like 

Intuit must produce at least some evidence showing that they are being 

deprived of a fair adjudication. It is not enough that the adjudicators also 

issued a complaint.14 

• Dual functions. The Supreme Court has rejected the idea that the 

combination of investigative/prosecutorial and adjudicative functions 

“necessarily creates an unconstitutional risk of bias in administrative 

adjudication” that offends due process. Withrow v. Larkin, 421 U.S. 35, 47, 

56 (1975). Courts have recognized this binding decision’s application to 

the FTC. Gibson v. FTC, 682 F.2d 554, 560 (5th Cir. 1982). 

• Nondelegation. Under the nondelegation doctrine, Congress may not 

delegate “powers which are strictly and exclusively legislative.” Gundy v. 

United States, 139 S. Ct. 2116, 2123 (2019) (plurality). By contrast, the 

government’s decision to enforce the laws is a matter over which the 

“Executive Branch has exclusive authority and absolute discretion.” 

14 If Intuit is serious about its accusation that Chair Lina Khan prejudged this matter

because of a retweet of a press release and a mention in a symposium, it has the option

of seeking disqualification. See 16 CFR § 4.17 (such motion “shall be filed at the earliest 

practicable time”). Denial of a meritorious motion for summary decision is not the 

correct remedy. 

14 
 

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United States v. Nixon, 418 U.S. 683, 693 (1974); accord Heckler v. Chaney, 470 

U.S. 821, 835 (1985). A Commission decision whether to pursue an 

enforcement action in federal court or in Part 3 constitutes a “forum 

choice” that is a classic exercise of prosecutorial discretion, which is an 

executive function. See Hill v. SEC, 114 F. Supp. 3d 1297, 1313 (N.D. Ga. 

2015), vacated on other grounds, 825 F.3d 1236 (11th Cir. 2016). Far from 

forum shopping, the FTC is adhering to the existing statutory scheme to 

ensure Intuit’s compliance with the FTC Act while preserving the 

possibility of consumer redress available under Section 19—precisely 

what the Court recently described as a “coherent enforcement scheme.” 

AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1349 (2021). 

• Separation-of-Powers. The Supreme Court upheld the constitutionality of 

the FTC’s removal protections over 85 years ago and has declined 

multiple times since to alter that binding holding. Humphrey’s Executor v. 

United States, 295 U.S. 602, 625 (1935). Moreover, whatever the 

constitutionality of those removal protections may be, that issue has no 

bearing on the validity of any cease-and-desist order issued in connection 

with these proceedings. Each participating Commissioner has been 

“properly appointed.” Collins v. Yellen, 141 S. Ct. 1761, 1787–28 & n.23 

(2021) (even unconstitutional removal restrictions do not “strip [an officer] 

of the power to undertake the other responsibilities of his office”) (citing 

Seila Law LLC v. CFPB, 140 S. Ct. 2183, 2207–11 (2020)). 

• APA. Summary decision is consistent with the APA. In fact, courts have 

repeatedly upheld the use of summary decision in administrative 

proceedings. See Kornman v. SEC, 592 F.3d 173, 182 (D.C. Cir. 2010); Gibson 

v. SEC, 561 F.3d 548, 555 (6th Cir. 2009); Brownson v. SEC, 66 F. App’x 687, 

688 (9th Cir. 2003). The FTC Part 3 Rules (including Rule 3.24 on summary 

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decision) are entirely consistent with 5 U.S.C. § 556(d). When read in 

context, it is clear that the last sentence in § 556(d) providing for 

submission of evidence in “written form” relaxes the rules so that in some 

instances matters can be conducted based on written evidence. This 

language in no way prohibits summary decision where a finding has been 

made that there are no genuine issues of material fact obviating a need for 

trial. Cf. ACUS Model Adjudication Rules, Rule 250, available at 

https://www.acus.gov/sites/default/files/documents/Model%20Adjud 

ication%20Rules%209.13.18%20ACUS_0.pdf. 

IV. Conclusion 

Pending before the Commission is a discrete false advertising case, the contours 

and meaning of which present no genuine issues of material fact. The Commission 

should enter summary decision. 

Respectfully submitted, 

Dated: September 8, 2022 /s/ James Evans 

Roberto Anguizola, IL Bar No. 6270874 

Rebecca Plett, VA Bar No. 90988 

James Evans, VA Bar No. 83866 

Federal Trade Commission 

600 Pennsylvania Ave., NW, CC-6316 

Washington, DC 20580 

(202) 326-3284 / ranguizola@ftc.gov 

(202) 326-3664 / rplett@ftc.gov 

(202) 326-2026 / james.evans@ftc.gov 

Counsel Supporting the Complaint

Federal Trade Commission 

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UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

PUBLIC

COMMISSIONERS: Lina M. Khan, Chair

Noah Joshua Phillips

Rebecca Kelly Slaughter

Christine S. Wilson 

Alvaro M. Bedoya 

In the matter of: 

Intuit Inc., Docket No. 9408 a corporation, 

Respondent. 

COMPLAINT COUNSEL’S RESPONSES AND OBJECTIONS TO INTUIT 

INC.’S STATEMENT OF MATERIAL FACTS AS TO WHICH THERE EXISTS 

A GENUINE ISSUE FOR TRIAL 

Pursuant to Rule 3.24 of the Commission’s Rules of Practice, Complaint Counsel 

submits, in support of its Motion for Summary Decision, responses to Intuit Inc.’s 

Statement of Material Facts as to Which There Exists a Genuine Issue for Trial (Part II). 

I. General Responses and Objections 

1. Complaint Counsel’s responses and objections herein shall not waive or 

prejudice any further objections it may later assert. The failure to make a particular 

objection in a given response should not be construed as a waiver of that objection. 

Complaint Counsel reserves the right to supplement, amend, or qualify these responses 

and objections. 

2. Complaint Counsel reserves the right to introduce evidence and testimony 

at any hearing or trial to controvert each fact set forth herein even if Complaint Counsel 

does not contest that fact for the purposes of Complaint Counsel’s Motion for Summary 

Decision. 
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II. Specific Responses and Objections 

1. TurboTax Free Edition is a completely free tax preparation and filing 

software.414 

Response: Complaint Counsel admits the asserted fact. 

2. Free Edition is made available by Intuit to the approximately 58 million 

American tax filers each year that file a “simple tax return.”415 

Response: Complaint Counsel admits the asserted fact. 

3. Consumers that file a Federal IRS Form 1040 without any attached 

schedules (or, before 2019, by using IRS Form 1040EZ)—i.e., a “simple tax return”—can 

file for their federal tax return for free using TurboTax Free Edition.416 

Response: Complaint Counsel admits the asserted fact. 

4. For consumers with more complex tax returns, Intuit offers paid TurboTax 

products. For instance, consumers with mortgage and property deductions, charitable 

donations over $300, itemized deductions, unemployment income, and education 

expenses can file their taxes using TurboTax Deluxe.417 Consumers with investment 

income and rental property income and refinancing deductions can file using TurboTax 

Premium.418 And consumers with expenses from self-owned businesses can file their 

taxes using TurboTax Self-Employed, the most comprehensive TurboTax product.419 

Response: Complaint Counsel admits the asserted fact. 

414 Ryan Decl. ¶ 5. 

415 Ryan Decl. ¶ 6; see also RX 95 (showing that of the approximately 148 million electronic returns filed with the IRS in 2020, 57,671,912 returns included only Form 1040 

with no Schedules 1-6 or Schedule A attached). 

416 RX 63. 

417 RX 9. 

418 Id. 

419 Id. 
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5. Intuit’s advertisements disclose, clearly and conspicuously, Free Edition’s 

qualifications, using the disclosure “simple tax returns,” or similar language in its 

advertising and marketing for Free Edition.420 

Response: Complaint Counsel admits that Intuit’s advertisements use the 

disclosure “simple tax returns,” or similar language in its advertising and marketing for 

Free Edition. Complaint Counsel objects to the remainder of the asserted fact based on 

an absence of evidentiary support and because it includes improper legal argument 

about the clarity and conspicuousness of Intuit’s disclosures. 

6. In Tax Year 2016 (i.e., calendar year 2017), 14,255,506 taxpayers filed their 

federal tax returns for free using Free Edition.421 

Response: Complaint Counsel admits the asserted fact. 

7. In Tax Year 2017, 14,815,137 taxpayers filed their federal tax returns for 

free using Free Edition.422 

Response: Complaint Counsel admits the asserted fact. 

8. In Tax Year 2018, 12,704,231 taxpayers filed their federal tax returns for 

free using Free Edition.423 

Response: Complaint Counsel admits the asserted fact. 

9. In Tax Year 2019, 14,105,532 taxpayers filed their federal tax returns for 

free using Free Edition.424 

Response: Complaint Counsel admits the asserted fact. 

420 See, e.g., RX 15; RX 16; RX 17; RX 18; GX 324-25, GX 328-31, GX 334, GX 345-51; see 

also GX 152 at 48:22-49:5; GX 156 at 135:4-10; GX 155 at 52:3-53:14. 

421 RX 106. 

422 Id. 

423 Id. 

424 Id. 
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10. In Tax Year 2020, 13,853,576 taxpayers filed their federal tax returns for 

free using Free Edition.425 

Response: Complaint Counsel admits the asserted fact. 

11. During Tax Years 2016 through 2020, approximately one in five taxpayers 

who filed using any online service (not just TurboTax) filed their federal taxes for free 

with Free Edition.426 

Response: Complaint Counsel admits the asserted fact. 

12. In Tax Years 2016-2020, 41.88% of all TurboTax customers filed their 

federal tax return completely for free with Free Edition.427 

Response: Complaint Counsel admits the asserted fact. 

13. In Tax Year 2019 (calendar year 2020), approximately 39% of taxpayers 

that electronically filed a Form 1040 with no Schedules 1-6 or Schedule A attached were 

eligible to file their taxes for free using Free Edition.428 Specifically, of the 148,496,552 

electronic returns filed with the IRS in 2020, 57,671,912 returns included only Form 1040 

with no Schedules 1-6 or Schedule A attached.429 

Response: Complaint Counsel admits the asserted fact. 

14. More taxpayers use Free Edition than any single TurboTax paid 

product.430 

Response: Complaint Counsel admits the asserted fact. 

425 Id. 

426 Supra Intuit SOF ¶¶ 6-10 (reflecting that over 69 million taxpayers filed their federal 

tax returns for free using Free Edition between Tax Years 2016-2020); see also RX 84 at 2,

tbl. 4 (showing that over 151.1 million individual returns were filed electronically using 

any online service in 2021). 

427 RX 106. 

428 RX 95. 

429 Id. 

430 RX 106. 
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15. Intuit’s free offering is intended to, and does, build goodwill with 

consumers.431 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiary support and because it is irrelevant and immaterial. 

16. Consistent with its objective to build goodwill with consumers, Intuit 

advertise its free product.432 

Response: Complaint Counsel admits that Intuit advertises its free product. 

Complaint Counsel objects to the remainder of the asserted fact because it is irrelevant 

and immaterial. 

17. Intuit’s Free Edition advertisements do not state that all consumers can 

file their taxes for free with TurboTax.433 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiary support. Intuit’s asserted fact partially relies on improper opinion by 

Professor Peter Golder, a purported expert, who is unqualified to opine on the fact at 

issue. Professor Golder’s testimony on the facts at issue is not based on sufficient facts 

or data and is not based on reliable principles and methods. The best evidence of what 

Intuit’s advertisements convey are the ads themselves. The ads cited by Intuit (RX 15; 

RX 16; RX 17; RX 18; GX 324-25, GX 328-31, GX 345-51) do not support the asserted fact. 

While Intuit’s Free Edition advertisements do not expressly contain the phrase “all 

consumers can file their taxes for free with TurboTax,” the net impression of the ads 

convey consumers can file their taxes for free using TurboTax. 

431 See GX 152 at 122:18-123:8, 124:17-23. 

432 See, e.g., GX 324-325, GX 328-331, GX 334, GX 345-351; Compl. Counsel’s Statement

of Material Facts As To Which There Is No Genuine Issue for Trial (“Compl. Counsel 

SMF”) ¶¶ 25- 44, 48-60, 100-102, 105-108, 111-112, 114-117. 

433 See supra note 420; Golder Decl. ¶ 56; GX 152 at 48:22-49:5; GX 156 at 134:25-135:10; 

GX 155 at 52:3-53:14. 
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18. Intuit advertises that it has a free product-TurboTax Free Edition-that is 

available for consumers who qualify.434 Intuit's ads thus "communicate that the 

TurboTax FreeEdition is free."435 

Response: Complaint Counsel admits that Intuit advertises that it has a free 

product-TurboTax Free Edition. Complaint Counsel further admits that TurboTax 

Free Edition is available for consumers who qualify. Complaint Counsel further admits 

that Intuit's ads communicate that the TurboTax Free Edition is free. Complaint 

Counsel objects to the remainder of the asserted fact based on an absence of evidentiary 

support. 

19. Intuit conveys the message that TurboTax Free Edition is free with 

disclosures 

Response: Complaint Counsel admits that Intuit conveys the message that 

TurboTax Free Edition is free 

. Complaint Counsel objects to the remainder of the asserted fact based on 

an absence of evidentiary support. 

20. Intuit's video advertising for TurboTax Free Edition clearly and 

conspicuously discloses that Free Edition is available for consumers with ''simple tax 

returns only" (or similar disclosure language).437 

Response: Complaint Counsel admits that in many instances, Intuit' s video 

advertising for TurboTax Free Edition included a written disclosure stating, "simple tax 

emp 

435 GX 156 at 130:18-19; see also id. at 110:16-20. 

436 GX 156 at 130:25-131:1, 133:13-134:3. 

437 RX 15; RX 16; RX 17; RX 18; GX 324-325; GX 328-331; GX 334; GX 345-351; Ryan 

Deel. ,r,r 18-19; Golder Deel. ,r 56; GX 156 at 133:13-134:3 (explaining that the "Free Free 

Free" campaign ads con tained a disclosure stating that Free Edition was for simple 

returns). 
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returns only” (or similar disclosure language). Complaint Counsel objects to the 

remainder of the asserted fact based on an absence of evidentiary support. Intuit’s 

asserted fact partially relies on improper opinion by Professor Peter Golder, a 

purported expert, who is unqualified to opine on the fact at issue. Professor Golder’s 

testimony on the facts at issue is not based on sufficient facts or data and is not based on 

reliable principles and methods. The best evidence of whether Intuit’s disclosures in 

video advertising are clear and conspicuous are the ads themselves. The ads cited by 

Intuit (RX 15; RX 16; RX 17; RX 18; GX 324-325; GX 328-331; GX 345-351) do not support 

the asserted fact that the disclosures in the video advertisements were clear and 

conspicuous. 

21. Each TurboTax “free” advertisement stated that the product being 

advertised was TurboTax Free Edition.438 

Response: Complaint Counsel disputes the asserted fact. Intuit offered and 

advertised other TurboTax products and services for free. For example, Intuit offered 

and advertised TurboTax Live for free in Tax Year 2021. See e.g., GX 307-310. In those 

ads, Intuit did not state that the product being advertised was TurboTax Free Edition. 

22. In Tax Year 2021, Intuit’s television ads for Free Edition included a text 

disclosure stating that “TurboTax Free Edition is for simple U.S. returns only” and 

inviting consumers to “See if you qualify at turbotax.com.”439 The disclosures in the Tax 

Year 2021 television ads for Free Edition were set out in white font on a dark blue 

background without accompanying images that might distract the viewer.440 

Response: Complaint Counsel admits that in Tax Year 2021, Intuit’s television 

ads for Free Edition included a text disclosure stating that “TurboTax Free Edition is for 

simple U.S. returns only” and inviting consumers to “See if you qualify at 

438 See, e.g., GX 324-325; GX 328-331; GX 334; GX 345-351. 

439 Ryan Decl. ¶ 19. 

440 Id. 
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turbotax.com." The disclosures in the Tax Year 2021 television ads for Free Edition w ere 

set out in white font on a blue background. Complaint Counsel objects to the remainder 

of the asserted fact based on an absence of evidentiaiy support. 

23. Intuit's Tax Year 2021 television ads also included a voiceover that stating 

that"TurboTax Free Edition is free."441 

Response: Complaint Counsel admits the asserted fact. 

24. The voiceover in Intuit's Tax Year 2021 television ads also encouraged 

consumers to "see details at turbotax.com."442 

Response: Complaint Counsel admits that the voiceover in Intuit' s Tax Year 2021 

television ads also stated, "see details a t turbotax.com." Complaint Counsel objects to 

the remainder of the asserted fact based on an absence of evidentiaiy support. 

25. In p1ior years, Intuit' s television ads also contained the "simple returns" 

or similar disclosure language and directed consumers to the TurboTax.com w ebsite for 

more details.443 

Response: Complaint Counsel admits the asserted fact. 

26. For example, each television advertisement for TurboTax Free Edition that 

ran during Tax Years 2019 and 2020 included a disclosure stating that "TurboTax Free 

Edition is for simple U.S. returns only" and asked consumers to " [s]ee if [they] qualify 

at turbotax.com."444 

Response: Complaint Counsel admits the asserted fact. 

27. In Tax Years 2017 and 2018, each television advertisement included a 

disclosure that stated that the offer was for the "Free Edition product only" or for 

441 Jd. 

442 Jd. 

443 See supra note 72. [in Respondent's original filing] 

444 RX 15: RX 16: see also GX 156 at 1'.lS:8-14 
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“AbsoluteZero.” All of the disclosures stated that the offer was for “[f]or simple U.S. 

returns” and encouraged consumers to “See details at turbotax.com.”445 

Response: Complaint Counsel admits that in Tax Years 2017 and 2018, each 

television advertisement included a disclosure that stated that the offer was for the 

“Free Edition product only” or for “AbsoluteZero.” Complaint Counsel also admits that 

all of the disclosures stated that the offer was for “[f]or simple U.S. returns” and stated, 

“See details at turbotax.com.” Complaint Counsel objects to the remainder of the 

asserted fact based on an absence of evidentiary support. 

28. Prior to Tax Year 2017, the disclosure stated, “TurboTax Federal Free 

Edition is for simple U.S. returns only.”446 

Response: Complaint Counsel admits the asserted fact. 

29. As reflected above, Intuit updated its television advertisement disclosures 

in Tax Year 2019 to convey Free Edition’s qualifications more prominently to 

consumers.447 Beyond changes to the disclosure language itself, the disclosure’s color 

and font were also changed to make the language more prominent and easier to read.448 

And the primary text at the end of the advertisement was updated to refer to “TurboTax 

Free Edition.”449 

Response: Complaint Counsel admits that Intuit updated its television 

advertisement disclosures in Tax Year 2019. Complaint Counsel also admits that Intuit 

changed the disclosure language itself, and the disclosure’s color and font. Complaint 

Counsel also admits that the primary text at the end of the advertisement was updated 

to refer to “TurboTax Free Edition.” Complaint Counsel objects to the remainder of the 

asserted fact based on an absence of evidentiary support. 

445 Id. 

446 See, e.g., RX 17; RX 18. 

447 See supra Intuit SOF ¶¶ 26-27. 

448 Compare GX 328, with RX 15. 

449 Id. 
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30. In Tax Years 2020 and 2021, paid search advertisements for TurboTax Free 

Edition on Google contained the language "Free for Simple Returns Only'' immediately 

under the link itself.450 

Response: Complaint Counsel admits the asserted facts. 

31. In Tax Year 2021, paid search advertisements for Free Edition placed on 

Bing likewise contained the language "Free for Simple Returns Only" immediately 

under the link itself.451 

Response: Complaint Counsel admits the asserted facts. 

32. Consumers must visit the TurboTax website or app in order to use 

TurboTax FreeEdition.452 

Response: Complaint Counsel admits the asserted facts. 

33. Intuit clearly, conspicuously, and repeatedly disclosed Free Edition's 

eligibility limitations thi·oughout the TurboTax website and mobile application, 

including before consumers enter any personal information.453 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. 

Response: Complaint Counsel objects the asserted fact based on an absence of 

evidentiaiy support. The best evidence of whether Intuit's website disclosures were 

clear and conspicuous are the websites themselves as they appeared as part of Intuit's 

450 Ryan Deel. ,r 24. 

451 Ryan Deel. ,r 25. 

452 Id. if 28. 

453 See infra Intuit SOF ,r,r 34-59. 

454 RX 62 at INTUIT-FFA-FTC-000490076-77; see also id. at -0081. 
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TurboTax free campaigns (see, e.g., RX 19, RX 2, GX 240, GX 342 (Shiller Dec.) ,r,r 94-97, 

124-127. 

Response: Complaint Counsel objects the asserted fact based on an absence of 

evidentiaiy support. The best evidence of whether Intuit's website disclosures, 

, were clear and conspicuous are the websites themselves as 

they appeared as part of Intuit's TurboTax free campaigns (see, e.g., RX 19, RX 2, GX 

240, GX 342 (Shiller Dec.) ,r,r 94-97, 124-127. 

36. Intuit's Free Edition offer on its website included a disclosure that the 

offer was for "Simple tax returns only." The "Simple tax retmns only" disclosure was in 

close proximity to the Free Edition offer, with font color-contrasted to the smrounding 

text, and acted as a hyperlink consumers could click on to leain more about Free 

Edition's eligibility limitations.

456 

Response: Complaint Counsel admits that Intuit's Free Edition offer on its 

website included a disclosure that the offer was for "Simple tax returns only." 

Complaint Counsel admits that the "Simple tax retu1ns only" disclosure was in colorcontrasted font and acted as a hyperlink consumers could click on to learn more about 

Free Edition's eligibility limitations. Complaint Counsel objects to the remainder of the 

asserted fact based on an absence of evidentiaiy support. 

37. Users that clicked the hyperlinked "simple tax retu1ns" in Tax Years 2019 

to 2021(until August 1, 2022) saw a pop-up screen stating, " A simple tax retu1n is Form 

1040 only."457 The screen also lists the situations covered by TurboTax Free Edition, 

including "W-2 income, Limited interest and dividend income reported on a 1099-INT 

455 RX 62 at INTUIT-FFA-FTC-000490070. 

456 Ryan Deel. ,r 30. 

457 RX 3. 
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or 10999-DIV, Claiming the standard deduction, Earned Income Tax Credit (EIC), Child 

tax credits, and Student Loan Interest deduction.”458 

Response: Complaint Counsel admits the asserted fact. 

38. Likewise, during Tax Years 2019 and 2020, TurboTax’s homepage 

included a color-contrasted, hyperlinked disclosure stating that TurboTax Free Edition 

is for “simple tax returns.”459 After clicking on that hyperlinked disclosure, consumers 

were again provided with a pop-up screen informing them in detail the tax situations 

covered by Free Edition.460 

Response: Complaint Counsel admits that during Tax Years 2019 and 2020, 

TurboTax’s homepage included a color-contrasted, hyperlinked disclosure stating that 

TurboTax Free Edition is for “simple tax returns.” Complaint Counsel also admits that 

if the hyperlink was clicked, a pop-up screen appeared with details about the tax 

situations covered by Free Edition. Complaint Counsel objects to the remainder of the 

asserted fact based on an absence of evidentiary support. 

39. Before Tax Year 2018, Intuit stated that its free product applied to filers 

with “Forms 1040EZ/1040A.”461 

Response: Complaint Counsel admits the asserted fact. 

40. In Tax Years 2016 through 2018, the home page invited consumers to click 

a separate hyperlink to either “See why it’s free” or “No catch, here’s why.”462 Again, 

458 Id. Consumers saw a substantially similar pop-up screen in earlier years. See, e.g., 

RX 25. 

459 Ryan Decl. ¶ 56; RX 19. 

460 RX 20; RX 21. 

461 See, e.g., RX 23. 

462 In Tax Years 2017 and 2018, the hyperlink stated, “See why it’s free.” See, e.g., RX 23 

(Tax Year 2017); RX 22. In Tax Year 2016, the hyperlink stated, “No catch, here’s why.” 

See, e.g., RX 24. 
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these hyperlinks directed consumers to a pop-up screen with detailed information 

about the tax situations covered by Free Edition.463 

Response: Complaint Counsel admits that in Tax Years 2016 through 2018, the 

Intuit homepage included a hyperlink stating either "See why it's free" or "No catch, 

here's why." Complaint Counsel also admits clicking these hyperlinks directed 

consumers to a pop-up screen with detailed info1n1ation about the tax situations 

covered by Free Edition. Complaint Counsel objects to the remainder of the asserted 

fact based on an absence of evidentiary support. 

41. The next page consumers see on the TurboTax website when they click to 

start filing their taxes is the Products & Pricing page.464 That webpage allows 

consumers to view the fttll suite of commercial TurboTax products, including their 

p1ices, and select which product theywish to use.465 

Response: Complaint Counsel admits the asserted fact. 

Response: Complaint Counsel admits the asserted fact assuming that the term 

" refers to an individual who creates a new Intuit account and that 

the term as used in the asserted fact is not intended to cover all visitors to the TurboTax 

website. 

463 See, e.g., RX 23. 

464 Ryan Deel. ,r 42. 

465 RX 9. 

466 RX 52 at 36; Golder Deel. ,r 120. 
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Response: Complaint Counsel admits the asserted fact . 

. Complaint Counsel objects to the remainder of the asserted 

fact based on an absence of evidentiary support. Intuit's asserted fact partially relies on 

improper opinion by Professor Peter Golder, a purported expert, who is unqualified to 

opine on the fact at issue. Professor Golder' s testimony on the facts at issue is not based 

on sufficient facts or data and is not based on reliable principles and methods. 

45. The baseline version of the Products & P1icing page included multiple 

additional hyperlinked disclosures of Free Edition's eligibility limitations that provided 

access to the samedetailed desc1iption of Free Edition's qualification.470 

Response: Complaint Counsel admits the asserted fact. 

46. The current Products & Pricing page discloses qualifications for Free 

Edition in at least four prominent locations and asks consumers to II see if you qualify" 

with contrasted, hyperlinked text.471 

467 RX 52 at 36; Golder Deel. ,r 120. 

468 RX 53 at 73, 75; Golder Deel. ,r 121. 

469 RX 53 at 73, 75; Golder Deel. ,r 121. 

470 RX 9. 

471 See RX 9; see also GX 155 at 211:17-20. 
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Response: Complaint Counsel admits that the current Products & Pricing page 

includes hyperlinked disclosures for qualifications for Free Edition in at least four 

locations that state, “see if you qualify” with contrasted, hyperlinked text. Complaint 

Counsel objects to the remainder of the asserted fact based on an absence of evidentiary 

support. 

47. Prior to Tax Year 2021, Intuit made changes to its website to improve 

consumers’ experiences. For example, the TurboTax website no longer referenced “Free 

Guaranteed” or makes any other free guarantee and references to “free” were followed 

by “simple returns only” in close proximity and in larger, contrasting font.472 

Response: Complaint Counsel admits that prior to Tax Year 2021, Intuit made 

changes to its website. Complaint Counsel admits that the TurboTax website no longer 

referenced “Free Guaranteed” or makes any other free guarantee and references to 

“free” were followed by “simple returns only” in close proximity and in larger font than 

in prior years, in contrasting font. Complaint Counsel objects to the remainder of the 

asserted fact based on an absence of evidentiary support. 

48. On August 1, 2022, Intuit again updated the TurboTax website.473 The Free 

Edition landing page, for instance, now includes disclosures in multiple locations 

stating that Free Edition is “For simple tax returns only,” with hyperlinked text asking 

consumers to “See if you qualify.” Clicking on the “See if you qualify” hyperlink reveals 

a pop-up screen with detailed information about the tax situations covered by Free 

Edition.474 The Free Edition webpage also discloses that “Not all taxpayers qualify” to 

use Free Edition.475 

472 Compare RX 19 with RX 7. 

473 See, e.g., RX 5; RX 9. 

474 RX 5. 

475 Id. 
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Response: Complaint Counsel admits that on August 1, 2022, Intuit again 

updated the TurboTax website. The Free Edition landing page, for instance, now 

includes disclosures in multiple locations stating that Free Edition is “For simple tax 

returns only,” with hyperlinked text stating, “See if you qualify.” Clicking on the “See if 

you qualify” hyperlink reveals a pop-up screen with detailed information about the tax 

situations covered by Free Edition. The Free Edition webpage also states that “Not all 

taxpayers qualify” to use Free Edition. Complaint Counsel objects to the remainder of 

the asserted fact based on an absence of evidentiary support. 

49. The Free Edition webpage also now includes the question, “Why use 

TurboTax Free Edition?” Under that text, the webpage explains, “If you have a simple 

tax return, you can file your taxes online for free with TurboTax Free Edition.” The 

“simple tax return” in that sentence is a hyperlink that again leads to a pop-up screen 

with detailed information about the tax situations covered by Free Edition.476 

Response: Complaint Counsel admits the asserted fact. 

50. The Products & Pricing page was also updated to include additional 

disclosures. Directly under “Free Edition,” the page discloses that the product is for 

“Simple tax returns only,” and provides a link to “See if you qualify.”477 At three other 

prominent locations, the webpage states that Free Edition is for “simple tax return[s] 

only,” with links to additional information about Free Edition’s qualifications.478 The 

webpage further discloses that “Not all taxpayers qualify.”479 

Response: Complaint Counsel admits that the Products & Pricing page was also 

updated to include additional disclosures. Complaint Counsel also admits that directly 

under “Free Edition,” the page states, “Simple tax returns only,” and provides a link to 

476 Id. 

477 RX 9. 

478 Id. 

479 Id. 
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“See if you qualify.” Complaint Counsel also admits that at three other locations, the 

webpage states that Free Edition is for “simple tax return[s] only,” with links to 

additional information about Free Edition’s qualifications. The webpage further states 

“Not all taxpayers qualify.” Counsel objects to the remainder of the asserted fact based 

on an absence of evidentiary support. 

51. Moreover, in the top panel of the Products & Pricing page, there is an 

initial set of screening questions about taxpayers’ income and expenses. As was the case 

in earlier tax years, the screening questions allow the TurboTax software to determine 

which TurboTax product fits the potential customer’s needs, recommending Free 

Edition if the customer qualifies.480 

Response: Complaint Counsel admits that in the top panel of the Products & 

Pricing page, there is an initial set of screening questions about taxpayers’ income and 

expenses. Complaint Counsel also admits that the screening questions allow the 

TurboTax software to determine which TurboTax product fits the potential customer’s 

needs. Complaint Counsel objects to the remainder of the asserted fact based on an 

absence of evidentiary support. 

52. Users that click the hyperlinked “simple tax return” or “See if you 

qualify” text on TurboTax webpages see a pop-up screen asking, “What qualifies as a 

simple tax return?”481 The pop-up then explains, “If you have a simple tax return, you 

can file with TurboTax Free Edition .... A simple tax return is one that's filed using IRS 

Form 1040 only, without having to attach any forms or schedules. Only certain 

taxpayers are eligible.”482 The screen also lists the situations covered by TurboTax Free 

Edition, including “W-2 income, Limited interest and dividend income reported on a 

1099-INT or 10999-DIV, IRS standard deduction, Earned Income Tax Credit (EIC), Child 

480 See, e.g., RX 10; RX 11; RX 12; see also RX 8, 13; Golder Decl. ¶ 118 & Fig. 13. 

481 RX 4. 

482 Id. 
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tax credits, and Student loan interest deduction,” as well as situations that are not 

covered.483 

Response: Complaint Counsel admits the asserted fact. 

53. The updated TurboTax website also includes a webpage displaying all 

material limitations for Free Edition.484 That page provides that “[a] simple return is one 

that's filed using IRS Form 1040 only, without attaching any schedules,” and includes a 

button with the text “See if you qualify” that directs consumers to detailed information 

about the tax situations covered by Free Edition further down that same webpage.485 

Response: Complaint Counsel admits that the updated TurboTax webpage states 

that “[a] simple return is one that's filed using IRS Form 1040 only, without attaching 

any schedules,” and includes a button with the text “See if you qualify” that directs 

consumers to detailed information about the tax situations covered by Free Edition 

further down that same webpage. Complaint Counsel objects to the remainder of the 

assertion based on an absence of evidentiary support, and because it contains an 

improper legal argument. 

54. The information included on the Free Edition disclosure webpage explains 

at length the “Situations covered” by Free Edition, as well as the “Situations not 

covered.”486 

Response: Complaint Counsel admits that the information included on the Free 

Edition disclosure webpage includes “Situations covered” by Free Edition, as well as 

the “Situations not covered.” Complaint Counsel objects to the remainder of the 

assertion based on an absence of evidentiary support. 

483 Id. 

484 RX 6. 

485 Id. 

486 Id. 
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55. Every other webpage on the TurboTax website, including the homepage 

was also updated to include “Important Details about Free Filing for Simple Tax 

Returns” without having to click a link. That disclosure provides, “If you have a simple 

tax return, you can file with TurboTax Free Edition, TurboTax Live Basic, or TurboTax 

Live Full Service Basic. A simple tax return is one that's filed using IRS Form 1040 only, 

without having to attach any forms or schedules. Only certain taxpayers are eligible.” It 

then details the tax situations covered by Free Edition.487 

Response: Complaint Counsel admits that the TurboTax homepage was updated 

to include “Important Details about Free Filing for Simple Tax Returns” without having 

to click a link. Complaint Counsel also admits that the disclosure provides: “If you have 

a simple tax return, you can file with TurboTax Free Edition, TurboTax Live Basic, or 

TurboTax Live Full Service Basic. A simple tax return is one that's filed using IRS Form 

1040 only, without having to attach any forms or schedules. Only certain taxpayers are 

eligible.” Complaint Counsel also admits that the webpage also states the tax situations 

covered by Free Edition. Complaint Counsel objects to the remainder of the assertion 

based on an absence of evidentiary support. 

56. Prior versions of the “Important Details” disclosures found on every page 

of the TurboTax website included hyperlinked text stating, “Important offer details and 

disclosures.” When users click that link, they access a dropdown field including another 

disclosure that Free Edition is available for simple tax returns only.488 

Response: Complaint Counsel admits the asserted fact. 

57. In addition, the TurboTax website includes multiple TurboTax Blog posts 

and Support FAQs describing Free Edition’s qualifications. For instance, in a Support 

FAQ entitled “Is TurboTax Free Edition right for me?,” Intuit explained that “Free 

Edition is an online-only product that supports simple tax returns that can be filed on 

487 RX 5; RX 7; RX 9. 

488 Ryan Decl. ¶ 41; see, e.g., RX 8. 
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Form1040 without any attached schedules," and went on to explain the specific tax 

situations covered by Free Edition.489 

Response: Complaint Counsel admits the asserted fact. 

58. Intuit's website contains blog posts and articles regarding Free Edition 

that" [s]pecify that this offer is for people with 'simple tax retu1ns,' and link to the 

approp1iate Simple tax returns tool tip."490 

Response: Complaint Counsel admits the asserted fact. 

59. Thus, before even registering a use1name or inputting any info1n1ation, 

consumers are presented with multiple webpages with repeated, clear disclosures about 

Free Edition's limitations.491 

Response: Complaint Counsel admits that before registering a use1name or 

inputting any information, consumers are presented with multiple webpages. 

Complaint Counsel objects to the remainder of the assertion based on an absence of 

evidentiaiy support. 

489 RX 63. 

490 RX 64. 

491 See supra Intuit SOF ,r,r 32-58; see also Golder Deel. ,r 120. 

492 RX 51 at 13 (showing that in Tax Year 2019, only 20% of TurboTax customers 

encountered arequired upgrade screen); Golder Deel. ,r 124. 
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. Complaint Counsel also admits 

. Complaint Counsel 

objects to the remainder of the assertion based on an absence of evidentiary support. 

Intuit' s asserted fact partially relies on improper opinion by Professor Peter Golder, a 

purported expert, who is unqualified to opine on the fact at issue. Professor Golder' s 

testimony on the facts at issue is not based on sufficient facts or data and is not based on 

reliable principles and methods. 

Response: Complaint Counsel admits the asserted fact. 

493 RX 48 at 100; see also RX 37 at INTUIT-FF A-FTC-000316307 (noting that inTax Year 

2016, by the week ending in Ap1il 22, only 16%of users encountered an upgrade screen); 

see also Golder Deel. ,r 123. 

494 See, e.g., GX 155 at 213:7-15; GX 152 at 129:4-13. 

495 RX 54 at 30; Golder Deel. ,r 122. 

496 See RX 65: GX 295 at INTUIT-FFA-FTC-000003255863 
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Response: Complaint Counsel admits the asserted fact. 

63. Consumers may begin using Free Edition even if they understand they 

likely do not qualify.497 Indeed, some third-party reviewers like the New York Times' 

Wirecutter expressly recommend that consumers start their tax retmns using Free 

Edition, regardless of theirtax situation.498 

Response: Complaint Counsel admits that consumers may begin using Free 

Edition even if they understand they likely do not qualify. Complaint Counsel also 

admits that the New York Times' Wirecutter expressly recommended that consumers 

start their tax retu1ns using Free Edition, regardless of their tax situation. Complaint 

Counsel objects to the remainder of the asserted fact based on an absence of evidentiary 

support. 

497 RX 80. 

498 Jd. 

499 GX 155 at 40:15-25; GX 152 at 129:25-130:10; see also RX 55 at l; see also Golder Deel. 

,r 128. 

500 See RX 55 at 1; see also Golder Deel. ,r 134. 

501 RX 55 at 1; see also Golder Deel. ,r 131. 
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. Complaint 

. Complaint Counsel objects to the remainder 

of the asserted fact based on an absence of evidentiaiy support 

65. Intuit's website design "makes price points transparent, limits distracting 

factors in the disclosure, and repeats the relevant disclosure."502 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. Intuit's asserted fact relies on improper opinion by Professor Peter 

Golder, a purported expert, who is unqualified to opine on the fact at issue. Professor 

Golder' s testimony on the facts at issue is not based on sufficient facts or data and is not 

based on reliable principles and methods. 

66. The FTC's " .com Disclosure" guidelines recommend keeping a disclosure 

short and prominently displayed because it increases the likelihood that consumers 

notice the disclosure and are able to understand and recall this information.503 

Response: Complaint Counsel admits the asserted fact. 

67. Intuit maintains a customer-retention rate of approximately 80%.

504 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

502 Golder Deel. ,r 114. 

503 Golder Deel. if 72; RX 96. 

504 RX 50 at INTUIT-FFA-FTC-000526548; GX 150 at 131:10-13; RX 58 at 81; Golder 

Deel. ,r 173. 

505 Jd. 
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69. Intuit's " retention rates for customers in [its] paid products are actually 

higher than those in [its] free products."506 

- 507 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

70. Intuit maintains its industry-leading customer-retention rate despite low 

switching costs for consumers and aggressive competition from competitors~ 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. Complaint Counsel also objects to the asserted fact that Intuit has " low 

switching costs" based on an absence of evidentiaiy support. Intuit's asserted fact relies 

on improper opinion by Professor Peter Golder, a purported expert, who is unqualified 

to opine on the fact at issue. Professor Golder' s testimony on the facts at issue is not 

based on sufficient facts or data and is not based on reliable p1inciples and methods. 

71. Intuit also maintains high Net Promotor Scores ("NPS"), a standard metric 

ofcustomer satisfaction.510 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

506 GX 152 at 133:4-6; see also GX 155 at 213:19-22; RX 59 at 3; Golder Deel. ,r 173. 

507 RX S9 at 1: GolciP.r DK.1. 1171: see alsn RX 16 at TNTI JTT-FFA-FTC:-0004772S8 

.. ~ ... :4.

• I I 

508 RX 53 at 271; RX 60 at 21; Golder Deel. ,r 156. 

509 RX 53 at 271; Golder Deel. ,r 156. 

510 See GX 156 90:19-23. 
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Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

74. Intuit has received hundreds of thousands of positive reviews on its own 

website and on third-party websites, further evidencing consumer satisfaction with its 

products and services.513 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. Complaint Counsel also objects to the assertion that positive reviews 

evidence consumer satisfaction with Intuit's products and services based on an absence 

of evidentiaiy support. Intuit's asserted fact relies on improper opinion by Professor 

Peter Golder, a purported expert, who is unqualified to opine on the fact at issue. 

Professor Golder's testimony on the facts a t issue is not based on sufficient facts or data 

and is not based on reliable p1inciples and methods. 

75. Between November 7, 2021 to August 18, 2022, 68,836 customer reviews of 

TurboTax Free Edition generated an average 4.9-star rating out of 5 stars. There were 

also 63,252 customer reviews of TurboTax Deluxe Edition, generating a 4.5-star average 

rating; 16,466 customer reviews of TurboTax Premier, generating a 4.4-star average 

511 RX 38 at INTUIT-FFA-FTC-000435838. 

513 Golder Deel. ,r 170. 
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rating; and 18,488 customer reviews of TurboTax Self Employed, generating a 4.7-star 

average rating.514 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

76. On the customer review platform Influenster, TurboTax has the highest 

rating for any tax preparation brand with 4.5 out of 5 stars based on over 47,000 

reviews, followed by TaxAct with 4.4 stars, TaxSlayer with 4.4 stars, and H&R Block 

with 4.1 stars.515 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

77. Intuit’s industry-leading customer satisfaction scores and retention 

statistics illustrate that Intuit’s customers are satisfied with their decision to use 

TurboTax—whether they file for free or not—and that paying consumers do not feel 

deceived.516 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiary support. Intuit’s asserted fact relies on improper opinion by Professor Peter 

Golder, a purported expert, who is unqualified to opine on the fact at issue. Professor 

Golder’s testimony on the facts at issue is not based on sufficient facts or data and is not 

based on reliable principles and methods. 

78. “Most customers feel that the service they receive from TurboTax’s 

products matches or exceeds their expectations.”517 

514 See RX 9. 

515 RX 88; Golder Decl. ¶ 172. 

516 Golder Decl. ¶ 35 (“[Intuit’s] high satisfaction, high retention, and a low number of 

complaints indicate that most customers feel that the service they receive from TurboTax 

products matches or exceeds their expectations.”). 

517 Id. 
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Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. Intuit's asserted fact relies on improper opinion by Professor Peter 

Golder, a purported expert, who is unqualified to opine on the fact at issue. Professor 

Golder' s testimony on the facts at issue is not based on sufficient facts or data and is not 

based on reliable principles and methods. 

79. Intuit uses the phrase "simple tax returns" 

Response: Complaint Counsel admits that Intuit's reason for using the phrase 

"simple tax returns" is 

Complaint Counsel objects to the 

remainder of the asserted fact based on an absence of evidentiary support. 

80. The phrase "simple tax returns" is a standard te1n1 in the w orld of tax 

preparation, commonly used by public and private entities alike.519 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. 

81. The IRS catego1izes tax returns based on their complexity and the 

"accompanying schedules or additional forms associated with specific tax credits."520 It 

defines " [s]imple returns" as those "without any schedules."521 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

51s GX 155 at 55:16-20. 

519 See infra Intuit SOF 1]1]81-84. 

520 RX 78 at 14. 

521 RX 78 at 14. 
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82. Since at least 2008, the IRS has defined "simple returns" as those filed 

using the most basic form (either Form1040A, Form 1040EZ, or Form1040) "without 

any schedules."522 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

83. The State of California Franchise Tax Board stated that its ReadyReturn 

pre-filled tax forms would be available to " taxpayers who file simple retmns," 

explaining that the program (before it was discontinued) would be extended to 

individuals with " [i]ncome only from wages," " [n]o more than five dependents," ''[n]o 

credits other than the renter's credit," and taking the" [s]tandard deduction" -i.e., a tax 

return without any schedules.

523 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

84. Other tax preparation service providers including H&R Block and 

TaxSlayer likewise use the te1n1 "simple retmns," and tie eligibility for free tax filing to 

the complexity of one's returns.524 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

consumers "are skeptical that 'free' products are actually free," 

522 RX 77 at 106 n.2, 111 n.3. 

523 RX 79 at 1, 2. 

524 See RX 97 (stating, under the header "Free Online," that the product is available for 

"Simple retmns" ); RX 98 (proclaiming that people can " file a simple retu1n for free," 

and that a simple retu1n is"a basic 1040 tax return" ). 

525 GX 295 at INTUIT-FF A-FTC-000006255866. 
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Response: Complaint Counsel admits that some consumers are skeptical that 

free products are actually free. Complaint Counsel also admits that 

Complaint counsel objects to the 

remainder of the asserted fact based on an absence of evidentiary support. 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. 

87. Using the phrase"simple tax returns" is more effective at conveying Free 

Edition's qualifications than potential alternatives. 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. 

because is irrelevant and immaterial. 

526 Jd. 

527 GX 155 58:5-11; RX 44 at INTUIT-FFA-FTC-000117680. 
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88. Including more detailed disclosures early in the buying process could be 

confusing for some consumers, generate less attention and interest, and ultimately 

result in fewer people filing for free.528 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

90. Reasonable consumers do not understand Intuit' s Free Edition 

advertisements to convey that TurboTax is free for all consumers or that all consumers 

will qualify to use Free Edition.531 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. Intuit's asserted fact partially relies on improper opinion by 

Professor Peter Golder, a purported expert, who is unqualified to opine on the fact at 

issue. Professor Golder' s testimony on the facts at issue is not based on sufficient facts 

or data and is not based on reliable principles and methods. 

91. To the contraiy, reasonable consumers understand from Intuit's ads that 

Free Edition is TurboTax's free tax-preparation product, that some consumers will not 

528 See Golder Deel. ,r 73; GX 155 at 209:7-210:7. 

529 GX 155 at 209:11-16. 

530 GX 155 at 209:23-210:7. 

531 See infra Intuit SOF ,r,r 91-107; Golder Deel. ,r 56 ("[I]n my opinion, Intuit's 

advertisementsdid not communicate that TurboTax was free for everyone or all tax 

situations."). 
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qualify to u se that product, and that Intuit has other products that consumers can pay to 

use.532 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. 

92. Consumers are familiar with business models like Intuit's, where a free 

product is offered along with priced offe1ings and understand that for-profit companies 

do not offer all goods and service at no cost.533 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. Intuit's asserted fact relies on improper opinion by Professor Peter 

Golder, a purported expert, who is unqualified to opine on the fact at issue. Professor 

Golder' s testimony on the facts at issue is not based on sufficient facts or data and is not 

based on reliable p1inciples and methods. 

93. Consumers are inherently skeptical of " free" claims, appreciating that a 

corporation's goal is to turn a profit.534 

. Complaint Counsel 

532 See infra Intuit SOF ,r,r 92-107. 

533 See Golder Deel. ,r 65. 

534 RX 33 at INTUIT-FFA-FTC-000139032; RX 34 at INTUIT-FFA-FTC-000549950; RX 

56 at (only 22% of consumers were confident that Free Edition was truly free); Golder 

Deel. ,r 65. 

535 RX 34 at INTUIT-FF A-FTC-000549950. 

536 RX 33 at INTUIT-FF A-FTC-000139032. 
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objects to the remainder of the asserted fact based on an absence of evidentiary support. 

Intuit’s asserted fact partially relies on improper opinion by Professor Peter Golder, a 

purported expert, who is unqualified to opine on the fact at issue. Professor Golder’s 

testimony on the facts at issue is not based on sufficient facts or data and is not based on 

reliable principles and methods. 

94. Moreover, consumers understand that companies like Intuit cannot and 

do not provide free products to all consumers.537 Indeed, consumers understand that 

for-profit companies need to make money, and thus consumers are likely to conduct 

research before committing to using products advertised as free.538 And consumers are 

familiar with tiered pricing or “freemium” models, both in the tax preparation industry 

and in other industries.539 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiary support. Intuit’s asserted fact relies on improper opinion by Professor Peter 

Golder, a purported expert, who is unqualified to opine on the fact at issue. Professor 

Golder’s testimony on the facts at issue is not based on sufficient facts or data and is not 

based on reliable principles and methods. 

95. The major players in the online-tax-preparation industry employ a 

business model that mirrors Intuit’s.540 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

537 See Golder Decl. ¶¶ 64-68. 

538 Golder Decl. ¶¶ 64-65. 

539 Golder Decl. ¶ 66-69. 

540 Golder Decl. ¶ 68. 
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Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. The asserted fact selectively quotes investigational hearing 

testimony of (GX 152), in a 

manner that distorts the testimony. During the portion of the investigational hearing 

quoted in the asserted fact, 

541 RX 45 at 17; see RX 46 at INTUIT-FFA-FTC-000486016 (noting that Credit Karma 

Tax expe1ienced "another week of declining login share," with a total login-share of less 

than 6% in Tax Year 2018). 

542 RX 45 at 18. 

543 See GX 152 at 144:11-145:1. 
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98. Moreover, consumers do not rely on advertisements and the Intuit 

website alone when selecting a tax preparation product.

544 

Response:Complaint Counsel admits that some consumers do not rely on 

advertisements and the Intuit website alone when selecting a tax preparation product. 

Complaint Counsel objects to the remainder of the asserted fact based on an absence of 

evidentiaiy support. 

99. " [T]axpayers are likely to be highly motivated, highly involved, and risk 

averse in their Consumer Buying Process for tax preparation services. They are 

therefore likely to commit meaningful time and energy to the information-search and 

evaluation-of-alte1natives stages of the Consumer Buying Process."545 In other words, 

consumers conduct extensive research before filing their taxes, and evaluate their tax 

filing options based on a vaiiety of factors they consider important.546 

Response:Complaint Counsel admits that some taxpayers are highly motivated, 

highly involved, and risk averse in their Consumer Buying Process for tax preparation 

services. Complaint Counsel also admits that some consumers commit meaningful time 

and energy to the info1n1ation-search and evaluation-of-alternatives stages of the 

Consumer Buying Process. Complaint Counsel also admits that some consumers 

544 Hauser Deel. ,r 76. 

545 Golder Deel. ,r 64. 

546 Golder Deel. ,r,r 37, 64; Hauser Deel. ,r,r 20, 71-72, 74, 76-77. 
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conduct extensive research before filing their taxes and evaluate their tax filing options 

based on a variety of factors they consider important. Complaint Counsel objects to the 

remainder of the asserted fact based on an absence of evidentiary support. Intuit’s 

asserted fact relies on improper opinion by Professors Peter Golder and John Hauser, 

purported experts, who are unqualified to opine on the fact at issues. Golder and 

Hauser’s testimony on the facts at issue is not based on sufficient facts or data and is not 

based on reliable principles and methods. 

100. Consumers explore tax preparation websites, read reviews or testimonials, 

and speak with friends and family, all as part of the process of researching tax 

preparation methods.547 

Response: Complaint Counsel admits that some consumers explore tax 

preparation websites, read reviews or testimonials, and speak with friends and family, 

all as part of the process of researching tax preparation methods. Complaint Counsel 

objects to the remainder of the asserted fact based on an absence of evidentiary support. 

Intuit’s asserted fact relies on improper opinion by Professor John Hauser, purported 

expert, who is unqualified to opine on the fact at issues. Hauser’s testimony on the facts 

at issue is not based on sufficient facts or data and is not based on reliable principles 

and methods. 

101. Numerous third-party websites provide comparisons of offers from Intuit 

and its competitors that set forth the qualifications for Free Edition.548 

Response: Complaint Counsel admits the asserted fact. 

102. Consumers also consider many factors when filing their taxes, including 

tradeoffs between quality and price, and do not strictly prefer the cheapest or free 

option.549 While price is one important factor, it is by no means the only one considered 

547 Hauser Decl. ¶ 72; RX 72 at 57:9-58:16; RX 70 at 50:22-51:2. 

548 See RX 90, RX 91, RX 99. 

549 Hauser Decl. ¶¶ 21, 71, 78-83. 
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by consumers; in fact, non-p1ice factors such as ease of use, confidence in the accuracy 

and reliability of the results, and data secmity are also important factors in the choice of 

tax preparation method or provider.550 

Response: Complaint Counsel admits the asserted fact. 

103. In response to news articles claiming that Intuit deceived consumers by 

steering them away from its commercial free product, enterprising lawyers filed 

arbitration claims on behalf of individuals seeking money from Intuit. 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

104. One arbitrator found that ' 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

105. Another arbitrator concluded that ' 

" and that 

550 Id. 

551Declaration ofDavidGringer inSupport of Intuit's Opposition to Complaint 

Counsel's Motionfor Summaiy Decision (" Gringer Deel." ) ,r 15. 

552RX 67 at 12; see also RX 68 at 12. 

553 RX 69 at 4. 
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Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

106. Depositions of consumer declarants from other related proceedings also 

indicate that consumers were not misled by Intuit's advertisements.555 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. It is impossible to determine whether consumers were misled by 

Intuit's advertisement based on three deposition transc1ipts submitted in support of this 

assertion. 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immate1ial. 

554 Jd. 

555 See RX 72 at 161:20-22; RX 70 at 74:6-77:9; RX 71 at 43:8-15; 60:5-9. 

556 RX 72 at 161:20-22. 

557 RX 70 at 74:6-77:9. 

55s RX 71 at 43:8-15; 60:5-9. 
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108. Consumers do not feel " locked in" to a tax preparation provider after 

providing personal or financial info1n1ation.559 Instead, consumers change tax 

preparation methods or providers year to year and are comfortable conducting research 

even after they have started preparing their tax retmn online.560 

Response: Complaint Counsel admits that some consumers do not feel locked in 

to a tax preparation provider after providing personal or financial information. 

Complaint Counsel also admits that some consumers change tax preparation methods 

or providers year to year and are comfortable conducting research even after they have 

started prepaiing their tax return online. Complaint Counsel objects to the remainder of 

the asserted fact based on an absence of evidentiary support. Intuit's asserted fact relies 

on improper opinion by Professor John Hauser, purported expert, who is unqualified to 

opine on the fact at issues. Hauser's testimony on the facts at issue is not based on 

sufficient facts or data and is not based on reliable p1inciples and methods. 

Response: Complaint Counsel admits the asserted fact. 

Response: Complaint Counsel admits the asserted fact. 

111. Consumers routinely try out online tax preparation products without 

filing using those products. 

559 Hauser Deel. ,r,r 22, 71, 85-89; see also GX 150 at 241:20-242:3; GX 152 at 129:20- 130:15, 132:7-17; RX 35 at INTUIT-FFA-FTC-000166060. 

560 Hauser Deel. ,r,r 85-86, 89. 

561 RX 52 at 4; Golder Deel. Fig. 24. 

562 RX 52 at 4; Golder Deel. ,r 153 & Fig. 24. 
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.

563 Other survey data indicates that 21.6% of 

respondents tried out one or more onlinetax websites without using that website to file 

their tax returns.564 

Response: Complaint Counsel admits that 

Complaint Counsel also admits that other 

survey data indicates that 21.6% of respondents tried out one or more online tax 

websites without using that website to file their tax retmns. Complaint Counsel objects 

to the remainder of the asserted fact based on an absence of evidentiaiy support. 

112. There is no evidence that taxpayers who upgrade to one of TurboTax's 

paid products are misled into believing that they are required to pay using TurboTax or 

are otherwise misled about the cost of TurboTax's products.565 

Response: Complaint Counsel objects to the asserted fact based on an absence of 

evidentiaiy support. Intuit's asserted fact partially relies on improper opinion by 

Professor John Hauser, purported expert, who is unqualified to opine on the fact at 

issues. Hauser's testimony on the facts at issue is not based on sufficient facts or data 

and is not based on reliable principles and methods. 

113. In response to the question of what they would do next upon seeing the 

upgrade screen,566 nearly 40% of respondents indicated that upon viewing an upgrade 

screen, they would seek out alte1native filing options or conduct additional research.567 

For example, after viewingthe upgrade screen, respondents indicated they would: 

563 RX 57 at 25; Golder Deel. ,r,r 58, 150. 

564 Hauser Deel. ,r 85. 

565 Hauser Deel. ,r 95; see also GX 150 at 271:25-272:4. 

566 Kirk Fair Deel. ,r 29 and Exhibit 2.B. 

567 Id. ,r 29 n.32. 
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 “Look into other options where I wouldn’t have to pay $60. Maybe H&R 

Block. I’d ask friends how they filed.”568 

 “As I’m no longer able to file with the free edition, I would search the 

internet and compare the Turbo Tax pay for edition with other tax 

platforms with comparable features.”569 

 “I would then go to reviews of each of the paid for services. This would 

help me decide if I want to upgrade.”570 

 “I would move on to next screen and find out what I need to do 

differently and how much it would cost. I would then probably go to 

another website to see what they say about the same information 

provided and compare price.”571 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

114. Seventeen percent of survey respondents indicated that they would 

conduct additional research to inform their decision to upgrade or not, including 

research on which product would best fit their needs.572 And 15% stated outright that 

they would look for alternative tax preparation solutions.573 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

568 Id. 

569 Id. 

570 Id. ¶ 30. 

571 Id. 

572 See id. ¶ 30 and Exhibit 5 (17% of respondents). 

573 Id. ¶ 29. 
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115. Had Intuit provided respondents with more information about alternative 

free filing options, specifically the IRS Free File program, it would not have resulted in 

fewer respondents choosing to upgrade with TurboTax.574 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

116. Before sale, consumers are told what the products they are purchasing 

will cost, if anything. Those disclosures include the price for any TurboTax product, 

such as Deluxe or Premium, as well as any paid add-on features.575 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

117. At any point before completing the transaction, consumers are able to 

leave the TurboTax website without paying and file their taxes in another way.576 

Response: Complaint Counsel admits the asserted fact. 

118. The FTC initiated its investigation into Intuit’s allegedly deceptive 

practices in May 2019.577 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

119. On June 28, 2019, the FTC issued a Civil Investigative Demand (“CID”) to 

Intuit.578 On May 18, 2020, the FTC issued a second CID to Intuit and separate CIDs for 

testimony to certain Intuit employees. The second set of CIDs to Intuit demanded 

574 Id. ¶ 25. 

575 Ryan Decl. ¶ 50; see also RX 14. 

576 GX 150 at 241:20-242:3; GX 152 at 129:20-130:15, 132:7-17; RX 35 at INTUIT-FFAFTC-000166060. 

577 Gringer Decl. ¶ 6. 

578 Id. 
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documents, written interrogatory responses, and testimony from a corporate 

representative of Intuit.579 

Response: Complaint Counsel admits the asserted fact. 

120. Each of the CIDs stated that the purpose of the FTC’s investigation was 

“to determine whether Intuit Inc. has engaged in deceptive or unfair acts or practices 

with respect to the marketing or advertising of online tax preparation products, in 

violation of the FTC Act, 15 U.S.C. § 45.”580 

Response: Complaint Counsel admits the asserted fact. 

121. In response to those CIDs, Intuit produced hundreds of thousands of 

documents, provided dozens of written interrogatory responses, and provided 

testimony from corporate representatives of Intuit.581 

Response: Complaint Counsel admits the asserted fact. 

122. Between September 29, 2020, and October 30, 2020, the FTC conducted 

investigational hearings for eight Intuit employees.582 

Response: Complaint Counsel admits the asserted fact. 

123. The FTC also issued subpoenas for documents to third parties.583 In 

response to those requests, the FTC received over a hundred documents of which Intuit 

is aware, and the FTC may have received substantially more documents that have not 

yet been identified or produced to Intuit. 

Response: Complaint Counsel admits the asserted fact. 

124. To date Intuit has been unable to take any document discovery of the FTC 

or nonparties, or depose any witnesses.584 

579 Id. 

580 Id. ¶ 7. 

581 Id. ¶ 8. 

582 Id. ¶ 9. 

583 Id. ¶ 11. 

584 Id. ¶ 12. 
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Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

125. On May 4, 2022, Intuit reached a settlement agreement with the State 

Attorneys General of all 50 states and the District of Columbia to settle potential claims 

related to Intuit’s marketing of its online tax-preparation products.585 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

126. This agreement, captured in an Assurance of Voluntary Compliance (the 

“Assurance”) with New York, a proposed final judgment and permanent injunction 

filed in Los Angeles County Superior Court in case no. 19STCV15644,586 and various 

other settlement documents filed with courts and regulators in the various states 

according to those states’ laws, was executed on May 4, 2022.587 Each of the settlement 

documents are substantively identical, and reflect the same agreement captured in the 

Assurance. 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

127. Intuit does not admit liability in the Assurance.588 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

128. The Assurance provides for injunctive relief, including and not limited to, 

requiring Intuit’s general compliance with state consumer protection laws, prohibiting 

Intuit from making certain representations about its online tax preparation products, 

requiring Intuit to make certain disclosures regarding these products, prohibiting data585 RX 76. 

586 RX 75. 

587 Id. 

588 RX 76 at 18. 
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clearing practices, prohibiting Intuit from rejoining the IRS Free File program, and 

requiring Intuit to make payments to settlement and administration funds.589 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

129. Specific provisions of the Assurance are set forth below: 

 Intuit must pay a total of $141,000,000 to the Settlement Fund and 

Administration Fund.590 

 “Intuit must not publish, or cause to be published, in any medium ... its 

‘free, free, free’ Video Advertisements” or “Video Advertisements that are 

substantially similar in their repetition of the word free.”591 

 Non-Space-Constrained592 ads for free tax preparation products “must 

disclose, Clearly and Conspicuously, and in Close Proximity to the 

representation that the product is free: (1) the existence and category of 

material limitations on a consumer’s ability to use that free product; and 

(2) that not all taxpayers qualify for the free product.”593 

 Space-Constrained ads “must disclose that eligibility requirements 

apply,” and “[i]f made online, Intuit must also (1) Clearly and 

Conspicuously include a hyperlink to a landing page or webpage on a 

TurboTax Website that Clearly and Conspicuously contains full disclosure 

of all material eligibility restrictions or (2) link by clicking on the 

Advertisement itself to a landing page or webpageon a TurboTax Website 

589 Id. at 18-34. 

590 Id. at 22. 

591 Id. at 21. 

592 “Space-Constrained Advertisement” is defined as “any online Advertisement ... or any Video Advertisement that has space, time, format, size, or technological restrictions

that limit Intuit from being able to make the disclosures required by this [agreement]. ... Space-Constrained Advertisements do not include Advertisements on a TurboTax 

Website.” Id. at 5-6. 

593 Id. at 20. 
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that Clearly and Conspicuously sets forth full disclosure of all material 

eligibility restrictions.”594 

 The TurboTax website must “disclose (1) Clearly and Conspicuously and 

very near to the representation all material limitations on a consumer’s 

ability to use that free product, including, but not limited to, eligibility 

criteria for that free product, or (2) through a hyperlink (i) that is very 

near to the representation, (ii) that indicates that there are material 

limitations on a consumer’s ability to use that free product, and (iii) that 

links to a landing page or webpage that Clearly and Conspicuously sets 

forth all material limitations on a consumer’s ability to use that free 

product, including, but not limited to, eligibility criteria for that free 

product.”595 

 Intuit must not misrepresent “[t]hat consumers must upgrade to a 

TurboTax Paid Product to file their taxes online if they are eligible to use 

the TurboTax Free Edition Product” or “[t]hat consumers can continue 

using and file their taxes for free with the TurboTax Free Edition Product 

when that is not the case.”596 

 Intuit must not misrepresent “[a]ny other fact material to consumers 

concerning any tax preparation product or service, such as the price; total 

cost; any material restrictions, limitations, or conditions; or any material 

aspect of its performance, efficacy, nature, or central characteristics.”597 

 One year after the effective date of the agreement, “Intuit must submit ... 

a compliance report, sworn under penalty of perjury, in which Intuit 

594 Id. 

595 Id. at 21. 

596 Id. at 19. 

597 Id. 
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must ... describe in detail whether and how Intuit is in compliance with 

each Section of” the agreement.598 Moreover, for the following five years, 

“Intuit must submit ... a compliance notice, sworn under penalty of 

perjury, within fourteen (14) days of any change in ... the structure of 

Intuit that may affect compliance obligations.”599 

Response: Complaint Counsel objects to the asserted fact because it is irrelevant 

and immaterial. 

Respectfully submitted, 

Dated: September 8, 2022 /s/ Rebecca Plett 

Roberto Anguizola, IL Bar No. 6270874 

Rebecca Plett, VA Bar No. 90988 

James Evans, VA Bar No. 83866 

Federal Trade Commission 

600 Pennsylvania Ave., NW, CC-6316 

Washington, DC 20580

(202) 326-3284 / ranguizola@ftc.gov 

(202) 326-3664 / rplett@ftc.gov 

(202) 326-2026 / james.evans@ftc.gov 

Counsel Supporting the Complaint

Federal Trade Commission 

598 Id. at 29. 

599 Id. 
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UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

COMMISSIONERS: Lina M. Khan, Chair

Noah Joshua Phillips

Rebecca Kelly Slaughter

Christine S. Wilson 

Alvaro M. Bedoya 

In the matter of: 

Intuit Inc., Docket No. 9408 a corporation, 

Respondent. 

COMPLAINT COUNSEL’S REPLY TO RESPONDENT INTUIT INC.’S 

OPPOSITION TO COMPLAINT COUNSEL’S MOTION FOR SUMMARY 

DECISION 

EXHIBIT LIST 

GX Description 

360 In re Natural Organics, Inc., No. 9294, 2001 WL 1478367 (F.T.C. Jan. 30,

2001) 

361 In re Homeadvisor, Inc., No. 9407, 2022 WL 3500430 (F.T.C. Aug. 2, 2022) 

362 First Specialty Ins. Corp. v. GRS Mgmt. Assocs., No. 08-cv-81356, 2009 U.S. 

Dist. LEXIS 72708 (S.D. Fla. Aug. 17, 2009). 

363 Estrella-Rosales v. Taco Bell Corp., 2020 WL 1685617 (D.N.J. Apr. 7, 2020) 

364 FTC v. DirecTV, No. 15-cv-01129, 2018 WL 3911196 (N.D. Ca. Aug. 16, 

2018) 

365 In re Daniel Chapter One, 147 F.T.C. 2009 FTC LEXIS 86 (FTC April 20, 

2009) 

366 NR Grp. 3 Contractors, Inc. v. Grp. 3 Contractors, LLC, No. 17-cv-21945, 

2017 WL 7792718 (S.D. Fla. Sept. 26, 2017) 
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WESllAW 

In the Matter of NATURAL ORGANICS, INC., a..., 2001 WL 1478367...

PUBLIC

2001 WL 1478367 (F.T.C.)

FEDERAL TRADE COMMISSION (F.T.C.)

In the Matter of NATURAL ORGANICS, INC., a corporation, and

GERALD A. KESSLER, individually and as an officer of the corporation.

Docket No. 9294

January 30, 2001

ORDER DENYING COMPLAINT COUNSEL'S MOTION FOR PARTIAL SUMMARY DECISION

I. HISTORY OF THE PROCEEDING

*1 On August 9, 2000, the Commission issued a complaint charging the Respondents, one corporation and one individual,

who have manufactured, advertised, labeled, offered for sale, sold and distributed products to the public, including Pedi-Active

A.D.D., with violating the provisions of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45. The Complaint

alleges Respondents have disseminated advertisements containing representations, that Respondents lacked a reasonable basis

substantiating such representations, and that the representations are false or misleading.

On October 18, 2000, Respondents were orally granted a stay in the proceeding in order to find new counsel and allow new

counsel to become familiar with the matter. On December 1, 2000, Respondents' current counsel entered its appearance in this

matter.

On January 3, 2001, Complaint Counsel filed its Motion for Partial Summary Decision (“Motion”) pursuant to Commission Rule

3.24. Complaint Counsel seeks a summary decision on two issues: (1) whether the four documents attached to the Complaint

make certain representations; and (2) whether Gerald A. Kessler, the Chief Executive Officer and owner of Natural Organics,

Inc., is legally responsible for the acts of Natural Organics.

Respondents filed their Opposition on January 16, 2001. Respondents assert that summary decision is inappropriate before

they have had the opportunity to take discovery. Respondents further assert that it is premature for the Administrative Law

Judge to determine at this stage, without the benefit of extrinsic evidence, what representations are made by the advertisements.

Respondents maintain that a determination that Kessler is individually liable before a determination of whether the company

is liable is also premature.

II. SUMMARY DECISION STANDARD

Commission Rule of Practice 3.24(a)(2) provides that summary decision “shall be rendered . . . if the pleadings and any

depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue as to any material

fact and that the moving party is entitled to such decision as a matter of law.” 16 C.F.R. § 3.24(a)(2). Commission Rule 3.24(a)

(3) provides that once a motion for summary decision is made and adequately supported, “a party opposing the motion may

not rest upon the mere allegations or denials of his pleading; his response, by affidavits or as otherwise provided in this rule,

must set forth specific facts showing that there is a genuine issue of fact for trial.” 16 C.F.R. § 3.24(a)(2). These provisions

are virtually identical to the provisions of Fed. R. Civ. P. 56 governing summary judgment in the federal courts. Hearst Corp.

et al., 80 F.T.C. 1011, 1014 (1972).

*2 The party moving for summary judgment bears the initial burden of identifying evidence that demonstrates the absence

of any genuine issue of material fact. Green v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999) (citing celotex Corp. v. Catrett, 477

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WESTLAW 

In the Matter of NATURAL ORGANICS, INC., a..., 2001 WL 1478367...

PUBLIC

U.S. 317, 323 (1986)). Summary decision under Rule 3.24 is improper “where the movant's affidavits are insufficient.” Hearst

Corp., 80 F.T.C. at 1014. “The movant has the burden of establishing the nonexistence of any genuine issue of material fact,

and all doubts are resolved against him.” Id; Matsushita Elec. Hindus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

Further, summary decision is improper where “various inferences can be drawn.” Hearst Corp., 80 F.T.C. at 1014.

III. CLAIMS FOR WHICH SUMMARY JUDGMENT IS SOUGHT

A. Representations Made in Advertisements

Complaint Counsel asserts that the four advertisements, attached to the Complaint as Exhibits A, B, C, and D, represent that the

Respondents' product will: treat or mitigate attention deficit/hyperactivity disorder (“ADJXD”) or its symptoms; will improve

the attention span and the scholastic performance of children who suffer from ADHD; and will improve the attention span and

the scholastic performance of children who have difficulty focusing on school work. Complaint Counsel asserts that “[t]hese

advertisements contain language that is expressly made or clear enough on its face to demonstrate that respondents made the

alleged claims.” Complaint Counsel's Motion for Partial Summary Decision at 7.

Respondents argue that the advertisements do not expressly make the representations alleged by Complaint Counsel. Rather,

Respondents assert that Complaint Counsel seeks a determination that the advertisements can be reasonably interpreted as

making these representations. Declaration of John R. Fleder Opposing Complaint Counsel's Motion for Partial Summary

Decision at 6-7.

Complaint Counsel presents no extrinsic evidence to support its assertion that Respondents made the alleged claims. Instead,

Complaint Counsel asks the Administrative Law Judge to conclude, from reading the advertisements, that Respondents have

made certain representations. “In determining what claims are conveyed by a challenged advertisement, the Commission relies

on two sources of information: its own viewing of the ad and extrinsic evidence. Its practice is to view the ad first and, if it is

unable on its own to determine with confidence what claims are conveyed in a challenged ad, to turn to extrinsic evidence.”

Kraft, Inc. v. Federal Trade Commission, 970 F.2d 311, 318 (7th Cir. 1992) (citing Thompson Medical, 104 F.T.C. 786, 788-89

(1984); Cliffdale Assocs. Inc., et al., 103 F.T.C. 110, 165-66 (1984); FTC Policy Statement, 103 F.T.C. 174, 176 (1983).

The advertisements do not expressly state that Pedi-Active A.D.D. will: treat or mitigate ADHD or its symptoms; will improve

the attention span and the scholastic performance of children who suffer from ADHD; or will improve the attention span and the

scholastic performance of children who have difficulty focusing on school work. Whether the ads may be reasonably interpreted

as making such statements is a genuine dispute. “The general rule is that when the meaning or effect of words or acts is fairly

disputed, the question is for the trier of the facts, to be decided after hearing all material evidence.” United States v. J. B. Williams

Co., Inc., 498 F.2d 414, 431 (2nd Cir. 1974) (citations omitted). In the absence of clear language in the exhibits expressly

stating what Complaint Counsel asserts the exhibits state, a summary decision before Respondents have had adequate time for

discovery is not warranted. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (summary judgment may be appropriate

“after adequate time for discovery.”) Accordingly, Complaint Counsel's motion for partial summary judgment is DENIED.

*3 B. Individual Liability

Complaint Counsel also seeks a determination on summary decision that Respondent Gerald A. Kessler is individually liable

because he participated directly in the acts or practices at issue, because he is the sole shareholder of Natural Organics, a closely

held corporation, and because Kessler held active managerial and policy making responsibilities relating to the corporation's

advertising during the period of time in question. Until a determination is made on whether Natural Organics violated the

FTC Act, a determination that Kessler is individually liable is premature. Accordingly, Complaint Counsel's Motion for Partial

Summary Decision is DENIED.

V. CONCLUSION

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WESTLAW 

In the Matter of NATURAL ORGANICS, INC., a..., 2001 WL 1478367...

PUBLIC

For the above stated reasons, Complaint Counsel's Motion for Partial Summary Decision is DENIED in full.

James P. Timony

Administrative Law Judge

FTC

2001 WL 1478367 (F.T.C.)

End of Document © 2022 Thomson Reuters. No claim to original U.S. Government Works.

 © 2022 Thomson Reuters. No claim to original U.S. Government Works. 3
FEDERAL TRADE COMMISSION | OFFICE OF THE SECRETARY | FILED 9/8/2022 | Document No. 605552 | PAGE Page 74 of 118 * PUBLIC *; 

WESTLAW 

In the Matter of HomeAdvisor, Inc., a corporation, d/b/a..., 2022 WL 3500430...

PUBLIC

2022 WL 3500430 (F.T.C.)

Federal Trade Commission (F.T.C.)

In the Matter of HomeAdvisor, Inc., a corporation, d/

b/a Angi Leads, d/b/a HomeAdvisor Powered by Angi.

Docket No. 9407

August 2, 2022

*1 COMMISSIONERS:

Lina M. Khan, Chair

Noah Joshua Phillips

Rebecca Kelly Slaughter

Christine S. Wilson

Alvaro M. Bedoya

ORDER DENYING SUMMARY DECISION

On March 11, 2022, the Commission issued a Complaint against HomeAdvisor, Inc., d/b/a Angi Leads, d/b/a HomeAdvisor

Powered by Angi (“Respondent”), alleging that Respondent engaged in unfair or deceptive practices in violation of Section 5(a)

of the Federal Trade Commission Act, 5 U.S.C. § 45(a). On April 7, 2022, Complaint Counsel moved for summary decision

on all counts. On April 18, 2022, Respondent asked the Commission to extend until May 27, 2022, the deadline to respond

to Complaint Counsel's motion, in order to allow Respondent to serve subpoenas on and take depositions of the individuals

who submitted declarations in support of the motion. The Commission granted this request. Respondent subsequently sought

an additional 10-day extension due to certain issues with the timing of discovery, and the Commission granted that extension

as well. On June 6, 2022, Respondent submitted its opposition to summary decision, along with a request for oral argument.

Complaint Counsel submitted their reply on June 14, 2022. The Commission scheduled oral argument for July 14 but moved

the argument to July 21 on Respondent's request.

Having reviewed the parties' submissions and arguments, the Commission has determined to deny the motion for summary

decision because it has concluded that there exist genuine disputes as to material facts, and therefore a decision on the merits

of Complaint Counsel's claims should await full factual development at trial. Mindful of the parties' need to prepare for the

upcoming evidentiary hearing, scheduled to begin on November 9, 2022, the Commission is issuing this Order now and will

issue a separate Opinion explaining its reasoning and addressing certain of Respondent's affirmative defenses at a later date.

Because there were substantial delays requested by Respondent in the briefing of this summary decision motion as well as the

timing of the oral argument on it, the Commission invites the parties to consider making a motion to reset deadlines in the

underlying litigation.

Accordingly,

IT IS HEREBY ORDERED THAT Complaint Counsel's Motion for Summary Decision, filed April 7, 2022, is DENIED.

By the Commission.

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FEDERAL TRADE COMMISSION | OFFICE OF THE SECRETARY | FILED 9/8/2022 | Document No. 605552 | PAGE Page 75 of 118 * PUBLIC *; 

WESTLAW 

In the Matter of HomeAdvisor, Inc., a corporation, d/b/a..., 2022 WL 3500430...

April J. Tabor

Secretary

Seal:

Issued: August 2, 2022

FTC

2022 WL 3500430 (F.T.C.)

PUBLIC

End of Document © 2022 Thomson Reuters. No claim to original U.S. Government Works.

 © 2022 Thomson Reuters. No claim to original U.S. Government Works. 2
FEDERAL TRADE COMMISSION | OFFICE OF THE SECRETARY | FILED 9/8/2022 | Document No. 605552 | PAGE Page 76 of 118 * PUBLIC *; 

GOVERNMENT 

EXHIBIT 

PUBLIC 

Caution 

As of: September 5, 2022 6:14 PM Z 

First Specialty Ins. Corp. v. GRS Mgmt. Assocs. 

United States District Court for the Southern District of Florida 

August 17, 2009, Decided; August 17, 2009, Entered 

CASE NO. 08-81356-CIV-MARRA 

Reporter 

2009 U.S. Dist. LEXIS 72708 *; 39 ELR 20195; 2009 WL 2524613 

362 

FIRST SPECIALTY INSURANCE CORPORATION, 

Plaintiff, vs. GRS MANAGEMENT ASSOCIATES, INC., 

NAUTICA ISLES WEST HOMEOWNERS 

ASSOCIATION, INC., and JEANNINE LE and THYNG 

LE, individually and as parents natural and legal 

guardians of THAILOR LE, a minor, Defendants. 

PHILADELPHIA INDEMNITY INSURANCE COMPANY, 

a Pennsylvania corporation, Plaintiff, vs. NAUTICA 

ISLES WEST CONDOMINIUM ASSOCIATION, INC., 

GRS MANAGEMENT ASSOCIATES, INC. and 

JEANNINE LE and THYNG LE, individually and as 

parents natural and legal guardians of THAILOR LE, a 

minor, Defendants. 

Prior History: First Specialty Ins. Corp. v. GRS Mgmt. 

Assocs., 2009 U.S. Dist. LEXIS 68617 (S.D. Fla., July 

20, 2009) 

Core Terms 

pollutant, contaminant, swimming pool, coverage, 

summary judgment, bodily injury, state court, material 

fact, non-moving, discovery, genuine, insured, pollution 

exclusion, property damage, settlement, injuries, irritant, 

microbes, acids, compl, viral 

Case Summary 

Procedural Posture 

Plaintiffs, an insurer and an indemnity company, moved 

for partial summary judgment, and sought a ruling that 

they had no duty to indemnify defendants, insureds, in 

connection with the insureds' claims in an underlying 

state court action. 

Overview 

The state court complaint alleged that one of the 

insured, a child, was injured as a result of exposure to 

dangerous, hazardous, and unsafe sanitary conditions 

in the community swimming pool. An expert 

toxicologist's report stated that the child contracted a 

virus as a result of ingesting swimming pool water in a 

community swimming pool. The court began by looking 

to the language of the insurance contract. As defined 

under the plain language of the policy, the meaning of 

the term "pollutant" included contaminant. Cases from 

the instant jurisdiction had ruled that similar pollutant 

clauses encompassed "contaminants" and microbes. 

Clearly then, the record evidence demonstrated that the 

substance in the swimming pool was a viral contaminant 

and a harmful microbe. Thus, the pollutant exclusion 

applied to the instant case. The court found that the 

pollution exclusion of both the insurer's and the 

indemnity company's policies unambiguously applied to 

the contaminant allegedly present in the swimming pool. 

Thus, the court concluded that the insurer showed that it 

had no duty to defend or indemnify and the indemnity 

showed that it had no duty to indemnify in the underlying 

litigation. 

Outcome 

The motions for partial summary judgment brought by 

the insurer and the indemnity company were granted. 

LexisNexis® Headnotes 

Civil Procedure > ... > Summary 

Judgment > Entitlement as Matter of Law > General 

Overview 

HN1[ ] Summary Judgment, Entitlement as Matter 

of Law 

A court may grant summary judgment if the pleadings, 

depositions, answers to interrogatories, and admissions 

on file, together with the affidavits, if any, show that 

there is no genuine issue as to any material fact and 

that the moving party is entitled to a judgment as a 

Rebecca Plett 
+I +I 

I I 

+I +I 

I I 

Judgment > Burdens of Proof > Movant Persuasion

& Proof

HN2[ ] Burdens of Proof, Movant Persuasion &

Proof

The party moving for summary judgment bears the initial

responsibility of informing the district court of the basis

for its motion, and identifying those portions of the

record which it believes demonstrate the absence of a

genuine issue of material fact. To discharge this burden,

the movant must point out to the court that there is an

absence of evidence to support the nonmoving party's

case.

Civil Procedure > ... > Summary

Judgment > Entitlement as Matter of Law > Genuine

Disputes

Civil Procedure > ... > Summary

Judgment > Burdens of Proof > Nonmovant

Persuasion & Proof

Civil Procedure > ... > Summary

Judgment > Entitlement as Matter of Law > Need for

Trial

HN3[ ] Entitlement as Matter of Law, Genuine

Disputes

After the movant has met its burden under Fed. R. Civ.

P. 56(c), the burden of production shifts and the

nonmoving party must do more than simply show that

there is some metaphysical doubt as to the material

facts. According to the plain language of Fed. R. Civ. P.

56(e), the non-moving party may not rest upon the mere

allegations or denials of the adverse party's pleadings,

but instead must come forward with specific facts

showing that there is a genuine issue for trial. Fed. R. 

Civ. P. 56(e). 

Essentially, so long as the non-moving party has had an

ample opportunity to conduct discovery, it must come

forward with affirmative evidence to support its summary

judgment claim. A mere scintilla of evidence supporting

the opposing party's position will not suffice; there must

be a sufficient showing that the jury could reasonably

find for that party. If the evidence advanced by the nonmoving party is merely colorable, or is not significantly

probative, then summary judgment may be granted.

Evidence > Admissibility > Statements as

Evidence > Compromise & Settlement Negotiations

HN5[ ] Statements as Evidence, Compromise &

Settlement Negotiations

Evidence presented during settlement negotiations does

not prevent its discovery and use as long as that

evidence is otherwise discoverable.

Insurance Law > ... > Policy

Interpretation > Ambiguous Terms > Unambiguous

Terms

HN6[ ] Ambiguous Terms, Unambiguous Terms

Under Florida law, the interpretation of an insurance

contract is a matter of law to be decided by the court.

When an insurance contract is not ambiguous, it must

be given effect as it is written. An operative term is not

ambiguous by virtue of the fact that it is not defined.

Simply put, where the language in a policy is plain and

unambiguous, there is no special construction or

interpretation required, and the plain language of the

policy will be given the meaning it clearly expresses.

Civil Procedure > Judgments > Summary

Judgment > Evidentiary Considerations

Rebecca Plett 
PUBLIC 

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2009 U.S. Dist. LEXIS 72708, *72708 

HN7[ ] Summary Judgment, Evidentiary 

Considerations 

The rule that granting summary judgment is improper 

before a party has had an adequate opportunity to take 

discovery applies in cases where the evidence 

necessary to respond to the summary judgment motion 

is not within the non-moving party's possession, custody 

or control. Fed. R. Civ. P. 56(f). 

Counsel: [*1] For First Specialty Insurance 

Corporation, Plaintiff: John R. Catizone, LEAD 

ATTORNEY, Litchfield Cavo LLP, Tampa, FL. 

For Philadelphia Indemnity Insurance Company, a 

Pennsylvania Corporation, Plaintiff: Gary I. Khutorsky, 

Yelena Shneyderman, LEAD ATTORNEYS, Stephens 

Lynn Klein & McNicholas, Miami, FL. 

For GRS Management Associates,Inc., Defendant: 

Mary Park Morris, LEAD ATTORNEY, Morris & Morris 

PA, West Palm Beach, FL. 

For Nautica Isles West Homeowners Association,Inc., 

Defendant: Christopher Anthony Sajdera, Jonathan 

Seth Morris, LEAD ATTORNEYS, Jay Steven Levine 

PA, Boca Raton, FL. 

For Jeannine Le, Individually and as Parents, Natural 

and Legal Guardians of Thailor Le, a Minor, Thyng Le, 

Individually and as Parents, Natural and Legal 

Guardians of Thailor Le, a Minor, Defendants: Diana 

Leigh Martin, LEAD ATTORNEY, Ricci Leopold, Palm 

Beach Gardens, FL; William John McFarlane, III, LEAD 

ATTORNEY, McFarlane & Dolan, Coral Springs, FL. 

Judges: KENNETH A. MARRA, United States District 

Judge. 

Opinion by: KENNETH A. MARRA 

Opinion 

OPINION AND ORDER 

This cause is before the Court upon First Speciality 

Insurance Corporation's ("FSIC") Motion for Partial 

Summary Judgment (DE 10) and Philadelphia Indemnity 

Insurance Company's [*2] ("PIIC") Amended Motion for 

Summary Final Judgment (DE 89). The motions are fully 

briefed and ripe for review. The Court held oral 

argument on the motions on July 24, 2009. The Court 

has carefully considered the motions and is otherwise 

fully advised in the premises. 

I. Background 

The facts, as culled from the exhibits provided and 

reasonably inferred therefrom in a light most favorable 

to Defendants, for the purpose of this motion, are as 

follows: 

On or about May 20, 2008, the Nautica Isles West 

Homeowners Association, Inc. ("the Association") and 

GRS Management Associates, Inc. ("GRS") were 

named as defendants in an action styled Jeannine Le 

and Thailor Le, et al. v. Nautica Isles West Homeowners 

Association, Inc. et al., Case No. 2008 CA 

014580XXXMB brought before the Circuit Court for the 

15th Judicial Circuit in and for Palm Beach County, 

Florida. (State court complaint, Ex. A to DE 96.) The 

Association is a homeowners association for the 

residential community known as Nautica Isles West 

located in Greenacres, Florida. (State court compl. P 4.) 

GRS is the property management company which at all 

relevant times managed the Association's property, 

including its swimming pool. (State [*3] court compl. P 

P 15-17.) With respect to the Association and GRS, the 

Le complaint alleges, among other things, the following: 

Defendant knew or should have known that said 

swimming pool was improperly maintained and 

posed a substantial health risk to the health, safety 

and welfare of those individuals swimming in the 

defendant's swimming pool. (State court compl. P P 

8, 20.) 

On or about June 1, 2004 . . . Thailor Le was 

swimming in the Defendant's swimming pool when 

Thailor Le was exposed to the dangerous, 

hazardous, and unsafe sanitary conditions of the 

Defendant's swimming pool. (State court compl. P 

P 10, 22.) 

In pre-suit correspondence, Le's counsel advised GRS 

that Thailor Le was injured "after he contracted a viral 

infection from contaminants within the water of the 

Nautica Isles West community pool." 1 (Mar. 4, 2008 

letter, Ex. B-1, attached to DE 96.) An expert 

toxicologist's report submitted by the Les stated that 

Thailor Le contracted the Coxsackie virus as a result of 

ingesting swimming pool water in the Nautica Isles West 

1 The letter also requested insurance information pursuant to 

Florida Statute § 627.4137 and information regarding thirdparties who might be liable for Thailor Le's injuries. 

Rebecca Plett 
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2009 U.S. Dist. LEXIS 72708, *3 

community swimming pool. In addition, the expert report 

stated that chlorination of swimming pool water is "an 

effective way to kill harmful microbes, including 

[*4] Coxsackie viruses." (Harold I. Zeliger Letter, Ex. B3, attached to DE 96.) 

PIIC issued a primary general liability policy number 

PHPK053395 to the Association as the Named Insured; 

GRS also qualified as an insured under this policy. (PIIC 

Policy, DE 73.) PIIC's primary policy covered the period 

of June 30, 2003 to June 30, 2004 and provided 

coverage for "bodily injury" in the amount of $ 

1,000,000.00 per occurrence. The primary policy 

contained the following Total Pollution Exclusion 

Endorsement (form CG 21 49 09 99) (NI-0094, Exhibit 

C, DE 96.): 

2. Exclusions 

This insurance does not apply to: 

f. Pollution 

(1) "Bodily injury" or "property damage" which 

would not have occurred, in whole or in part, but for 

the actual, alleged or threatened discharge, 

dispersal, seepage, migration, release or escape of 

"pollutants" at any time. 

The term "pollutant" is defined in the policy as follows: 

SECTION V - DEFINITIONS 

"Pollutants" mean any solid, liquid, gaseous or 

thermal irritant or contaminant, including smoke, 

vapor, soot, fumes, [*5] acids, alkalis, chemicals 

and waste. Waste includes materials to be 

recycled, reconditioned or reclaimed. (Exhibit C, p. 

NI-0086) 

PIIC also issued to the Association an excess liability 

policy number PHUB020208, which covered the same 

period of time and which provided an additional $ 

2,000,000 in coverage. (DE 73.) The excess policy 

contains a similar pollution exclusion which provides as 

follows: 

3. Exclusions 

This insurance does not apply to: 

(p) "Bodily injury", "personal injury" or "property 

damage" arising out of the discharge, dispersal, 

release or escape of smoke, vapors, soot, fumes, 

acids, alkalis, toxic chemicals, liquids or gases, 

waste materials or other irritants, contaminants or 

pollutants. 

We shall have no obligation under this policy: 

(1) To investigate, settle or defend any claim or suit 

against any insured alleging actual or threatened 

injury or damage of any nature or kind to persons or 

property which arises out of or would not have 

occurred but for the "pollution hazard", or, 

(2) To pay any damages, judgments, settlements, 

loss, costs or expenses that may be awarded or 

incurred by reason of any such claim or suit of any 

such injury or damage, or in complying with any 

action [*6] authorized by law and relating to such 

injury or damage. 

As used in this exclusion: 

"Pollution hazard" means an actual exposure or 

threat of exposure to the corrosive, toxic or other 

harmful properties to any solid, liquid, gaseous or 

thermal pollutants, contaminants, irritants or toxic 

substances, including smoke, vapors, soot, fumes, 

acids or alkalis, and waste materials consisting of 

or containing any of the foregoing. 

(NI-0124, Ex. D, DE 96.) 

With respect to FSIC, under policy number 

FCP211000647200, effective December 5, 2003 to 

December 5, 2004, FSIC provided commercial general 

liability coverage to GRS pursuant to a Commercial 

General Liability Coverage Form, form no. CG 00 01 10 

01. The named insured on the policy is G.R.S. 

Management Associates. (Policy, Ex. C, DE 11.) 

The Commercial General Liability Coverage Form 

provides in relevant part: 

SECTION I - COVERAGES 

COVERAGE A BODILY INJURY AND PROPERTY 

DAMAGE LIABILITY 

1. Insuring Agreement 

a. We will pay those sums that the insured 

becomes legally obligated to pay as damages 

because of "bodily injury" or "property damage" to 

which this insurance applies . . . . 

The First Specialty policy contains a Total Pollution 

Exclusion Endorsement, [*7] form no. CG 21 49 09 99, 

which provides in pertinent part as follows: 

This insurance does not apply to: 

f. Pollution 

(1) "Bodily injury" or "property damage" which 

would not have occurred in whole or in part but for 

the actual, alleged or threatened discharge, 

Rebecca Plett 
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I 

+J 

I 

+I 

reconditioned or reclaimed.

waste. Waste includes materials to be recycled,

vapor, soot, fumes, acids, alkalis, chemicals and

thermal irritant or contaminant, including smoke,

15. "Pollutants" mean any solid, liquid, gaseous or

including consequential "bodily injury"...

g jyjy

HN1

II. Summary Judgment Standard

(Policy, Ex. C, DE 11.)

[ ] The Court may grant summary judgment "if the

[*8] 

fact and that the moving party is entitled to a judgment

show that there is no genuine issue as to any material

admissions on file, together with the affidavits, if any,

pleadings, depositions, answers to interrogatories, and

as a matter of law." Fed. R. Civ. P. 56(c). The

2548, 91 L. Ed. 2d 265 (1986)

Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct.

genuine issue of material fact lies with the moving party.

stringent burden of establishing the absence of a

. The Court should not

unnecessary, 

grant summary judgment unless it is clear that a trial is

Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986), and

moving party. 

any doubts in this regard should be resolved against the

Adickes v. S.H. Kress & Co., 398 U.S.

144, 157, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). 

HN2[ ] The movant "bears the initial responsibility of

material fact." 

believes demonstrate the absence of a genuine issue of

and identifying those portions of [the record] which it

informing the district court of the basis for its motion,

Celotex Corp., 477 U.S. at 323. To

the nonmoving party's case. 

Court that there is an absence of evidence to support

discharge this burden, the movant must point out to the

Id. at 325. 

HN3[ ] After the movant has met its burden under Rule 

56(c), the burden of production shifts and the

facts." 

there is some metaphysical doubt as to the material

nonmoving party "must do more than simply show that

Matsushita Electronic Industrial Co. v. Zenith

Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. 

its claim. 

must come forward with affirmative evidence to support

Anderson, 477 U.S. at 257. "A mere 'scintilla'

jury could reasonably find for that party." 

not suffice; there must be a sufficient showing that the

of evidence supporting the opposing party's position will

Walker v.

Darby, 911 F.2d 1573, 1577 (11th Cir. 1990). If the

judgment may be granted." 

colorable, or is not significantly probative, then summary

evidence advanced by the non-moving party "is merely

Anderson, 477 U.S. 242,

249-50, 106 S. Ct. 2505, 91 L. Ed. 2d 202. 

asserted

its duty to defend and to indemnify for the claims

court action. PIIC moves for summary judgment on both

connection with the Le's claims in the underlying state

ruling that it has no duty to indemnify any insured in

FSIC moves for partial summary judgment, seeking a

III. Discussion

 [*10] in the underlying state court action.

under 

letter nor the letter from the expert, Mr. Zeliger, is barred

Court to consider this evidence. Neither the pre-suit

Despite Defendants' protestations, it is proper for the

Coxsackie viruses." (Harold I. Zeliger Letter.)

"an effective way to kill harmful microbes, [such as the]

Significantly, chlorination of swimming pool water is an

the Nautica Isles West community swimming pool."

was contracted from "ingesting swimming pool water in

infection was identified as the Coxsackie virus, which

West community pool." (Mar. 4, 2008 letter.) This viral

from contaminants within the water of the Nautica Isles

22.) Specifically, Thailor Le "contracted a viral infection

community swimming pool. (State court compl. P P 10,

hazardous, and unsafe sanitary conditions" in the

injured as a result of exposure to "dangerous,

The state court complaint alleged that Thailor Le was

the underlying state case.

Court must first address the facts presented regarding

Before interpreting the insurance policies, however, the

Rule 408 of the Federal Rules of Evidence. To

settle the Le's claim. Instead, the letter merely 

begin, the pre-suit letter made no offer to compromise or

Rebecca Plett 
PUBLIC 

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2009 U.S. Dist. LEXIS 72708, *10 

[*11] requested that GRS provide the Le's attorney with 

insurance information pursuant to Florida Statute § 

627.4137 and information regarding the existence of 

any third-parties who may be liable for Thailor Le's 

injuries. Next, despite Defendants' complaint that Mr. 

Zeliger's letter was attached to the settlement demand 

letter, 2 that fact, if true, would not require the exclusion 

of this letter under Rule 408 of the Federal Rules of 

Evidence. Indeed, HN5[ ] evidence presented during 

settlement negotiations does not prevent its discovery 

and use as long as that evidence is otherwise 

discoverable. See NAACP Legal Defense Fund and 

Education Fund, Inc. v. United States Dept. of Justice, 

612 F. Supp. 1143 (D.D.C. 1985) ("Although the intent 

of Fed. R. Evid. 408 is to foster settlement negotiations, 

the sole means used to effectuate that end is a limitation 

on the admission of evidence produced during 

settlement negotiations for the purpose of proving 

liability at trial. It was never intended to be a broad 

discovery privilege."); 2 Jack B. Weinstein & Margaret A. 

Berger, Weinstein's Federal Evidence, § 408.07 (Joseph 

M. McLaughlin, ed., Matthew Bender 2d ed. 2005). 

Thus, in determining insurance coverage, [*12] the 

Court will consider the admissions by the Les that 

Thailor Le's injuries were caused by a viral contaminant 

and/or microbe. 

Turning now to the coverage issue, the Court begins, as 

it must, by looking to the language of the insurance 

contract. HN6[ ] Under Florida law, the interpretation 

of an insurance contract is a matter of law to be decided 

by the Court. Gas Kwick, Inc. v. United Pac. Inc. Co., 58 

F.3d 1536, 1539 (11th Cir.1995). "When an insurance 

contract is not ambiguous, it must be given effect as it is 

written." Siegle v. Progressive Consumers Ins. Co., 819 

So.2d 732, 735 (Fla. 2002). An operative term is not 

ambiguous by virtue of the fact that it is not defined. 

Swire Pacific Holdings, Inc. v. Zurich Ins. Co., 845 So. 

2d 161, 166 (Fla. 2003); [*13] see Jefferson Ins. Co. v. 

Sea World, 586 So.2d 95, 97 (Fla. Dist. Ct. App. 1991) 

("The mere failure to provide a definition for a term 

involving coverage does not necessarily render the term 

ambiguous"). Simply put, "where the language in a 

2 The Court is not considering the demand letter submitted by 

FSIC and PIIC (Demand Letter, Ex. B, DE 11; Demand Letter, 

Ex. B-2, DE 96). There is, however, a factual dispute as to 

whether Mr. Zeliger's letter was attached to the demand letter. 

Of course, on a motion for summary judgment, the Court must 

take the facts in the light most favorable to the non-moving 

party. Thus, the Court will assume, for the purpose of these 

motions, that Mr. Zeliger's letter was attached to the demand 

letter. 

policy is plain and unambiguous, there is no special 

construction or interpretation required, and the plain 

language of the policy will be given the meaning it 

clearly expresses." Fla. Farm Bureau Ins. v. Birge, 659 

So.2d 310, 312 (Fla. Dist. Ct. App.1994). 

As defined under the plain language of the policy, the 

meaning of the term pollutant includes contaminant. 

Furthermore, cases from this jurisdiction have ruled that 

similar pollutant clauses encompass "contaminants" and 

microbes. See, e.g., Phila. Indem. Ins. Co. v.

Yachtsman's Inn Condo Ass'n, 595 F. Supp. 2d 1319 

(S.D. Fla. 2009) (concluding that feces, raw sewage and 

battery acid fall within the policy pollutant definition of 

irritant or contaminant); Nova Casualty Co v.

Waserstein, 424 F. Supp. 2d 1325, 1333-34 (S.D. Fla. 

2006) (finding "living organisms," "microbial 

populations," "airborne and microbial contaminants," 

and "indoor allergens" fit the definition of "contaminant" 

[*14] and are excluded from coverage under the 

pollution exclusion clause); Deni Associates of Florida, 

Inc. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 

1135, 1139 (Fla. 1998) (rejecting the argument that the 

pollutant exclusion is ambiguous because the word 

"contaminant" is not defined). 3 (emphasis added) 

Clearly, the record evidence demonstrates that the 

substance in the swimming pool was a viral contaminant 

and a harmful microbe. Thus, the pollutant exclusion 

applies here. 4 

It is important to note that Defendants have not 

presented any evidence which would raise a genuine 

issue of material fact as to the cause of Thailor Le's 

injuries. The procedural posture they have chosen to 

take is merely to assert that Plaintiffs have not proven 

the cause of the injuries. Plaintiffs, however, have relied 

upon admissions from the [*15] Les, the parties 

claiming the injury and the parties in the best position to 

know the cause. There is no reason why Plaintiffs 

should not be entitled to rely upon admissions from the 

parties claiming the injury to prove causation in this 

case. No Defendant has even suggested that the injury 

had a different cause. Nor can Defendants rely upon a 

3 The Court chooses not to follow Keggi v. Northbrook Prop. & 

Cas. Ins. Co., 199 Ariz. 43, 13 P.3d 785, 789 (Ariz. App. Div. 

2000) (finding water-borne bacteria did not fit within definition 

set forth in pollutant exclusion) as suggested by the Le 

Defendants. 

4 The Court need not address FSIC's argument that the fungi 

or bacteria exclusion endorsement applies to the facts of this 

case. 

Rebecca Plett 
J;. 

PUBLIC 

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2009 U.S. Dist. LEXIS 72708, *15 

] The [ HN7 lack of discovery taken in this proceeding. 

r before rope rule that granting summary judgment is imp

a party has had an adequate opportunity to take 

discovery applies in cases where the evidence 

necessary to respond to the summary judgment motion 

is not within the non-moving party's possession, custody 

Walters v. City of ; see Fed. R. Civ. P. 56(f) or control. 

321 (5th Cir. 1980) 1 ngs, 626 F.2d 1317, Ocean Spri 5 (a 

hen motion is more likely to be granted w Rule 56(f)

cts are in exclusive control of the opposing relevant fa

party). Here, the information relating to the cause of 

Thailor Le's injuries is within the control of the Le 

Defendants and it is the evidence that they have 

produced which is being used to support Plaintiff's 

motion. For example, the Le Defendants have used Dr. 

Zeliger's report in the state court action to support their 

of causation. [*16] theory 6 The other Defendants, who 

have litigated against the Les in the underlying state 

court proceeding and had the opportunity to conduct 

discovery there to determine another cause, have 

presented nothing to suggest a record could be 

developed in this case which might create a genuine 

issue of material fact regarding causation. 

Based on the foregoing, the Court finds that the 

pollution exclusion of both FSIC and PIIC's policies 

unambiguously apply to contaminant allegedly present 

in the swimming pool. Thus, the Court concludes that 

PIIC has shown that it has no duty to defend or 

has no duty [*17] indemnify and FSIC has shown that it 

to indemnify in the underlying litigation. 

IV. Conclusion 

ORDERED AND ADJUDGED Accordingly, it is hereby 

as follows: 

1) FSIC's Motion for Partial Summary Judgment 

 FSIC shall inform the Court GRANTED. (DE 10) is 

within 10 days from the date of entry of this 

The decisions of the United States Court of Appeals for the 5 

Fifth Circuit, as that court existed on September 30, 1981, 

handed down by that court prior to the close of business on 

that date, shall be binding as precedent in the Eleventh Circuit, 

for this court, the district courts, and the bankruptcy courts in 

Bonner v. Prichard, 661 F.2d 1206, 1207 (11th Cir. the circuit. 

 (en banc). 1981)

At the oral argument, the parties informed the Court that this 6 

evidence was stricken in the state case, however, that fact 

does not change the Court's analysis in this case. 

 as to how this case should proceed. Order

2) PIIC's Amended Motion for Summary Final 

 The Court will GRANTED. Judgment (DE 89) is 

separately issue judgment for PIIC. 

 in Chambers at West Palm DONE AND ORDERED

Beach, Palm Beach County, Florida, this 17th day of 

August, 2009. 

/s/ Kenneth A. Marra 

KENNETH A. MARRA 

United States District Judge 

End of Document 

Rebecca Plett 
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WESTLAW 

PUBLIC

Estrella-Rosales v. Taco Bell Corporation, Not Reported in Fed. Supp. (2020)

2020 WL 1685617

2020 WL 1685617

Only the Westlaw citation is currently available.

United States District Court, D. New Jersey.

Nelson ESTRELLA-ROSALES

and Joann Estrella, individually

and as husband/wife, Plaintiffs,

v.

TACO BELL CORPORATION; Yum!

Brands Inc.; ABC Corporation (1-10),

and John Does 1-10, Defendants.

Civ. No. 2:19-18192 (WJM)

|

Filed 04/07/2020

Attorneys and Law Firms

Douglas Stuart Schwartz, Sisselman & Schwartz LLP,

Matthew Ross Mendelsohn, Mazie Slater Katz & Freeman

LLC, Roseland, NJ, for Plaintiffs.

Allen W. Burton, O'Melveny & Myers LLP, New York, NY,

for Defendant Taco Bell Corporation.

OPINION

WILLIAM J. MARTINI, U.S.D.J.

*1 In this action, Plaintiffs seek damages stemming from

their purchase of two Chalupa Cravings Boxes for a rate

of $5.99 from Defendant Taco Bell Corp. (“Taco Bell”)

after viewing a television ad promoting the items for $5.00.

Before the Court is Defendant's Motion for Judgment on

the Pleadings, ECF No. 14. For the reasons set forth below,

Defendant's motion is GRANTED.

I. BACKGROUND AND PROCEDURAL HISTORY

In May 2018, Taco Bell ran a nationwide promotion for the

Chalupa Cravings Box—a value box that included five items:

a Beefy 5-Layer Burrito, a Chalupa Supreme, a Crunchy Taco,

Cinnamon Twists, and a Medium Fountain Drink. ECF No.

1, Compl. ¶ 8. The television ad for the Chalupa Cravings

Box at issue in this case, called the “Librarian,” featured a

librarian who secludes herself away from a group of children

to enjoy a moment of respite along with a Chalupa Cravings

Box. Id. The ad concluded with a full-screen view of the

Chalupa Cravings Box and its contents, along with the text

“$5 Chalupa Cravings Box.” In the same frame as the “$5”

message, the advertisement included the following qualifying

disclosure about the $5 promotional price: “At participating

locations for a limited time. Prices may vary. Tax extra.” Id.

¶ 16.

Plaintiffs allege that they viewed “The Librarian”

advertisement in May 2018, id. ¶ 16, and that they “were

induced to travel” to the Taco Bell branded restaurant

located at 225–227 US Highway 22, Green Brook, New

Jersey (“Green Brook Restaurant” or “Restaurant”) around

8:00 p.m. on an unknown date “to specifically purchase

two Chalupa Cravings Boxes.” Id. ¶ 10. The Green Brook

Restaurant displayed “point of purchase” advertising for the

Chalupa Cravings Box on a menu board that indicated that

the restaurant charged $5.99 for the item. Ex. A, Gebhardt

Decl. ¶ 5. Plaintiffs allege that, after ordering two “Chalupa

Cravings Boxes,” they were provided with a receipt charging

them $12.18 before tax. Id. ¶ 11. That receipt indicated that

the Green Brook Restaurant charged $5.99 for the Chalupa

Cravings Box. Def.’s Mot. Ex. C. The receipt also indicated

that Plaintiffs chose to pay $0.20 extra for a soft taco

substitution ($0.10 for each box). Id. Plaintiffs were charged a

total of $12.99, inclusive of $0.81 of New Jersey sales taxes.

Id. ¶ 12. Plaintiffs allege that, after they were handed the

receipt, they “questioned the restaurant's management why

they were charged $12.18 for two $5.00 Cravings Boxes.” Id.

They allege the manager informed them that individual Taco

Bell restaurants, such as the Green Brook Restaurant, operate

as franchises that can set their own prices. Compl. ¶ 13.

On August 15, 2019, Plaintiffs Nelson Estrella-Rosales and

Joann Estrella sued Taco Bell in the Superior Court of

New Jersey, Middlesex County, bringing this individual

action for compensatory damages (based on an alleged $1.98

overcharge), punitive damages, and attorneys’ fees. Compl.

¶ 65. Plaintiffs purport to state two claims for relief: (1)

violation of the New Jersey Consumer Fraud Act (“CFA”),

and (2) common law fraud. Id. Invoking this Court's diversity

jurisdiction, Taco Bell removed the action on September 20,

2019. ECF No. 1.

II. STANDARD OF REVIEW

*2 Rule 12(c) of the Federal Rules of Civil Procedure

provides that “a party may move for judgment on the

pleadings” after the pleadings are closed. Fed. R. Civ. P. 12(c).

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Estrella-Rosales v. Taco Bell Corporation, Not Reported in Fed. Supp. (2020)

2020 WL 1685617

“A motion for judgment on the pleadings based on the defense

that the plaintiff has failed to state a claim is analyzed under

the same standards that apply to a Rule 12(b)(6) motion [to

dismiss].” Revell v. Port Auth. of N.Y., N.J., 598 F.3d 128,

134 (3d Cir. 2010). That is, the court must accept the truth

of all factual allegations in the complaint and must draw all

reasonable inferences in favor of the non-movant, id., but

“may [also] consider an undisputedly authentic document that

a defendant attaches as an exhibit to a motion to dismiss if the

plaintiff's claims are based on the document.” Pension Ben.

Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192,

1196 (3d Cir. 1993). For claims sounding in fraud, a plaintiff

fails to state a claim unless the circumstances of fraud are

pleaded with particularity in compliance with Rule 9(b). In re

Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1417 (3d

Cir. 1997).

A Rule 12(c) motion should be granted “if the movant

establishes that ‘there are not material issues of fact, and he

is entitled to judgment as a matter of law.’ ” Zimmerman v.

Corbett, 873 F.3d 414, 417 (3d Cir. 2017) (quoting Sikirica v.

Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005)). It is

“well settled that a court may determine as a matter of law that

an allegedly deceptive advertisement would not have misled

a reasonable consumer.” Fink v. Time Warner Cable, 714 F.3d

739, 741 (2d Cir. 2013) (per curiam).

III. DISCUSSION

The New Jersey Consumer Fraud Act (“CFA”) prohibits, in

relevant part, “[t]he act, use or employment by any person

of any unconscionable commercial practice, deception,

fraud, false pretense, false promise, misrepresentation, or

the knowing, concealment, suppression, or omission of

any material fact with intent that others rely upon such

concealment, suppression or omission, in connection with

the sale or advertisement of any merchandise.” N.J. Stat.

Ann. § 56–8:2. Under the CFA, “[t]o constitute consumer

fraud ... the business practice in question must be ‘misleading’

and stand outside the norm of reasonable business practice

in that it will victimize the average consumer.” New Jersey

Citizen Action v. Schering–Plough Corp., 367 N.J.Super. 8,

13, 842 A.2d 174 (App.Div.2003) (quoting Turf Lawnmower

Repair, Inc. v. Bergen Record Corp., 139 N.J. 392, 416,

655 A.2d 417 (1995)). Often, the determination of whether

business conduct “stand[s] outside the norm of reasonable

business practice” presents a jury question. Id. Nonetheless,

in recognition of the fact that the “capacity to mislead ... is

the prime ingredient of all types of consumer fraud [under the

CFA],” Turf, 139 N.J. at 416, 655 A.2d 417, and that “[m]ere

customer dissatisfaction does not constitute consumer fraud,”

Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 168

(3d Cir. 1998), courts have dismissed CFA complaints for

failure to state a claim where plaintiffs have failed to allege

that the defendant engaged conduct that could be considered

misleading within the meaning of the Act. See, e.g., Adamson,

463 F.Supp.2d at 501; Schering–Plough, 367 N.J.Super. at

13, 842 A.2d 174; see also Wendling v. Pfizer, Inc., 2008

WL 833549, at *4 (App.Div. Mar. 31, 2008); Delaney v.

American Express Co., No. 06–5134, 2007 WL 1420766, at

*7 (D.N.J. May 11, 2007). Because the alleged misleading

conduct at issue here does not stand outside the norm of

reasonable business practice in that it will victimize the

average consumer, the Court concludes that there are no

material issues of fact, and Defendant is entitled to judgment

as a matter of law.

It is a violation of the CFA to use “any type, size, location,

lighting, illustration, graphic depiction or color resulting

in the obscuring of any material fact.” N.J.A.C. 13:45 A

–9.2(a)(5). “Disclaimers permitted or required under this

section, such as ‘terms and conditions apply’ and ‘quantities

limited,’ shall be set forth in a type size and style that is

clear and conspicuous relative to the other type sizes and

styles used in the advertisement.” Id. Plaintiff argues that

Defendant violated N.J.A.C. 13:45 A-9.2(a)(5) by including

disclaimer language that is smaller than other language in the

shot, such as the five dollar price designation. ECF No. 22,

Pls.’ Resp. 6-7. Relying on its own screenshot of the final

shot of the Librarian ad showing both the price designation

and the disclaimer, Plaintiff states that the disclaimer is

“portrayed in white against a light grey background, making

it difficult to see and not conspicuous.” Id. at 7. Defendant

responds that the screenshot in Plaintiff's response brief

shows the disclaimer on a “white or light gray” background,

when in fact the ad includes white text against a dark

gray background, and surmises that this image “appears to

have been doctored.” ECF No. 23, Def.’s Reply, 12. Both

Plaintiffs’ and Defendant's sourced version of the Librarian

ad—respectively, a video file provided to the Court, and a

screenshot purportedly taken from a website, iSpot.tv, which

“captures commercials as they are actually displayed on

television” via streaming video—show white text against a

background that is a considerably darker gray than the image

in Plaintiff's opposition brief. See Def.’s Mot, Ex. A; ECF

No. 24, Pls.’ Letter; Pls.’ Resp. 7. The Court finds that the

disclaimer in the Librarian ad stating in part, “At participating

locations for a limited time” and “Prices may vary,” is

clear and conspicuous, and no material fact is obscured.

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Estrella-Rosales v. Taco Bell Corporation, Not Reported in Fed. Supp. (2020)

2020 WL 1685617

PUBLIC

It is commonplace for television advertisements to contain

some kind of qualifying disclaimers in the closing seconds

of the commercial. Just as “anyone familiar with fast-food

restaurants ... surely knows that prices are typically displayed

on menus located near the registers,” Killeen v. McDonald's

Corp., 317 F. Supp. 3d 1012, 1013 (N.D. Ill. 2018), anyone

familiar with television ads for consumer products knows that

these disclaimers are often presented at the end of the ad

toward the bottom of the screen. While the disclaimer at issue

here is smaller than font displaying the five dollar purchase

price of the Chalupa Cravings Box, it is nevertheless clear

and conspicuous, and consistent with “the norm of reasonable

business practice.”

*3 Point-of-purchase advertising at the Green Brook

Restaurant plainly disclosed the price at that location.1

Plaintiffs fail to state a claim for consumer fraud where they

affirmatively chose to buy a menu item—and even paid extra

for substitutions—after being put on notice that the Chalupa

Cravings Box was not being offered for $5 at the restaurant

they chose to visit. Here, “anyone familiar with fast-food

restaurants ... surely knows that prices are typically displayed

on menus located near the registers.” Killeen, 317 F. Supp.

3d at 1013. Just as in Killeen, “a straightforward, priceto-price comparison based on information available at the

point of purchase would unequivocally dispel any misleading

inference that could be drawn from” Taco Bell's advertising.

Id.

In sum, Plaintiffs were on notice of the $5.99 price of

a Chalupa Cravings Box at the Green Brook Restaurant,

yet decided to make the purchase anyway, including the

$0.20 substitution for two soft-shell tacos. Plaintiffs did not

reasonably rely on any misleading inference they claim could

be drawn from the “Librarian” ad, and they could not have

been injured by any of the accurate information conveyed in

that ad, which did not contradict any information Plaintiffs

received at the Green Brook Restaurant.

IV. CONCLUSION

Because Plaintiffs’ claims fail as a matter of law, they fail

to state a claim upon which relief can be granted under Rule

12(c). Defendants’ Motion for Judgment on the Pleadings is

GRANTED. Plaintiffs’ Complaint is DISMISSED WITH

PREJUDICE.

All Citations

Not Reported in Fed. Supp., 2020 WL 1685617

Footnotes 

1 Plaintiffs argue that Defendant cannot rely on point of purchasing advertising because it is “extraneous to the Complaint 

and claims asserted because none are ‘integral to or expressly relied upon’ by the Plaintiffs.” Pls.’ Resp. 7 (citing In re 

Burlington Coat Factory Sec. Litig., 113 F.3d 1410, 1426 (3d Cir. 1997). A court may consider a document if it is “integral 

to” the complaint or “if the plaintiff's claims are based on the document,” regardless of whether the plaintiff explicitly 

mentions the document or claims to have subjectively relied on it in making his purchase. Burlington Coat Factory, 114 

F.3d at 1425 (citing In re Donald J. Trump Casino Sec. Litig., 7 F.3d 357, 368 n.9 (3d Cir. 1993)). “[W]hat is critical is 

whether the claims in the complaint are ‘based’ on an extrinsic document and not merely whether the extrinsic document 

was explicitly cited.” Id. Because Plaintiffs’ visit to the Green Brook Restaurant, where they were exposed to in-store 

advertising, is central to their claims, the Court will consider point of purchasing advertising. 

End of Document © 2022 Thomson Reuters. No claim to original U.S. 

Government Works. 

 © 2022 Thomson Reuters. No claim to original U.S. Government Works. 3
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Federal Trade Commission v. DIRECTV, Inc., Not Reported in Fed. Supp. (2018)

2018 WL 3911196, 2018-2 Trade Cases P 80,489

KeyCite Yellow Flag - Negative Treatment

Distinguished by Federal Trade Commission v. Fleetcor Technologies, Inc.,

N.D.Ga., August 9, 2022

2018 WL 3911196

United States District Court, N.D. California.

FEDERAL TRADE COMMISSION, Plaintiff,

v.

DIRECTV, INC., et al., Defendants.

Case No. 15-cv-01129-HSG

|

Signed 08/16/2018

Attorneys and Law Firms

Dean Graybill, David C. Shonka, Federal Trade Commission,

Washington, DC, Eric David Edmondson, Boris Yankilovich,

Emily Cope Burton, Erika Ruth Wodinsky, Evan Rose,

Jacob Adam Snow, Karen Goff, Kerry O'Brien, Lin Wang

Kahn, Matthew David Gold, Federal Trade Commission,

San Francisco, CA, Faye Chen Barnouw, Kenneth Hatheway

Abbe, Raymond Edward McKown, Stacy Rene Procter,

Federal Trade Commission, Los Angeles, CA, for Plaintiff.

Chad Samuel Hummel, Bridget Santorelli Johnsen, Sidley

Austin LLP, Mark Douglas Campbell, Loeb & Loeb LLP,

Los Angeles, CA, Katie Dolan-Galaviz, Peter D. Marketos,

Reese Marketos LLP, Jeffrey Mark Tillotson, Tillotson Law,

Dallas, TX, Benjamin Milton Mundel, Sean Christopher

Griffin, Sidley Austin LLP, Washington, DC, Clayton S.

Friedman, Michael Yaghi, Sidley Austin LLP, Costa Mesa,

CA, Leslie R. Chaggaris, Reese Marketos LLP, Dallas, TX,

Ryan M. Sandrock, Sidley Austin, LLP, San Francisco, CA,

for Defendants.

ORDER GRANTING IN PART AND DENYING

IN PART MOTION FOR JUDGMENT ON

PARTIAL FINDINGS; FINDINGS OF FACT AND

CONCLUSIONS OF LAW

Re: Dkt. No. 396

HAYWOOD S. GILLIAM, JR., United States District Judge

*1 On March 11, 2015, the Federal Trade Commission

(“FTC”) brought this action alleging that Defendants

DIRECTV and DIRECTV, LLC (collectively, “DIRECTV”

or “Defendant”) violated Section 5(a) of the FTC Act, 15

U.S.C. § 45(a), as well as the Restore Online Shoppers

Confidence Act (“ROSCA”), 15 U.S.C. §§ 8401 et seq. See

Dkt. No. 1 (“Compl.”). A court trial was held in August 2017.

At the close of the FTC's presentation of its case-in-chief,

DIRECTV moved for judgment on partial findings pursuant

to Rule 52(c) of the Federal Rules of Civil Procedure, on

the ground that the FTC failed to prove essential elements

of its claims. Dkt. No. 396. Based on the evidence presented

at trial, the arguments of the parties and the applicable law,

the Court GRANTS IN PART DIRECTV's motion. This

memorandum opinion will constitute the Court's Findings of

Fact and Conclusions of Law pursuant to Rules 52(a) and (c).

I. BACKGROUND

A. Allegations

In this action the FTC challenges DIRECTV's advertisement

campaign for and sale of its subscription satellite television

services. The FTC commenced its investigation in April 2010

when it served DIRECTV with a civil investigative demand.

The FTC then filed the complaint in this action in March 2015.

See Compl. In the complaint, the FTC sought equitable relief,

including a permanent injunction and equitable monetary

relief. Id. at 11 (“Prayer for Relief”).

The FTC contends that from 2007 to the time of trial,

DIRECTV failed to adequately disclose in its advertising

certain terms of purchase for its satellite television services,

in violation of § 5 of the FTC Act. In particular, the FTC

alleges that DIRECTV failed to adequately disclose that:

(1) the introductory discounted price only lasts 12 months,

after which the subscriber is charged the then-prevailing

rate; (2) the subscriber is subject to a 24-month commitment

period; (3) a subscriber who cancels before the end of the

commitment period is assessed an early cancellation fee of

$20 per month for the remaining months in the commitment

period; and (4) subscribers receive a free premium channel

package (e.g., HBO, Starz, Cinemax, and Showtime) for

three months, but must affirmatively cancel these premium

channels before the end of the three-month period to avoid

monthly charges (the “premium channel negative option”).

See id. ¶¶ 12–14. The FTC further contends that DIRECTV

failed to clearly and conspicuously disclose the premium

channel negative option on its website, and that it also failed to

obtain express informed consent before charging consumers,

in violation of ROSCA. See id. ¶¶ 35–42.

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Federal Trade Commission v. DIRECTV, Inc., Not Reported in Fed. Supp. (2018)

2018 WL 3911196, 2018-2 Trade Cases P 80,489

Based on these claims, the FTC seeks restitution in the amount

of $3.95 billion. Dkt. No. 362 (“Tr. Vol. 1”) at 33:5–16

(transcript of FTC's opening statement).

B. Procedural Posture

This matter was tried to the Court, sitting without a jury,

from August 14, 2017, to August 25, 2017. After the close

of the FTC's case-in-chief, DIRECTV moved orally for

Judgment on Partial Findings pursuant to Federal Rule of

Civil Procedure 52(c). The Court suspended the trial before

DIRECTV presented its defense to allow DIRECTV to file its

motion, as well as the parties' respective proposed findings of

fact and conclusions of law. See Dkt. No. 390 (“Tr. Vol. 10”)

at 1708:25–1713:6.

II. LEGAL STANDARD

*2 Under Rule 52(c):

If a party has been fully heard on an issue during a nonjury

trial and the court finds against the party on that issue, the

court may enter judgment against the party on a claim or

defense that, under the controlling law, can be maintained

or defeated only with a favorable finding on that issue. The

court may, however, decline to render any judgment until

the close of the evidence. A judgment on partial findings

must be supported by findings of fact and conclusions of

law as required by Rule 52(a).

Fed. R. Civ. P. 52(c). Thus, the Rule “authorizes the court to

enter judgment at any time that it can appropriately make a

dispositive finding of fact on the evidence.” Granite State Ins.

Co. v. Smart Modular Techs., Inc., 76 F.3d 1023, 1031 (9th

Cir. 1996). In doing so, the Court draws its own conclusions

as factfinder and need not draw any inferences in favor of

the non-moving party. See Ritchie v. United States, 451 F.3d

1019, 1023 (9th Cir. 2006). As the plaintiff, the FTC bears the

burden of proof and must prove each element of its case by a

preponderance of the evidence. United States v. F/V Repulse,

688 F.2d 1283, 1284 (9th Cir. 1982). The Court should grant

the motion if it becomes apparent that plaintiff has failed to

carry an essential burden of proof. Cf. EBC, Inc. v. Clark

Bldg. Sys., Inc., 618 F.3d 253, 272 (3d Cir. 2010) (“The rule's

objective is to ‘conserve[ ] time and resources by making it

unnecessary for the court to hear evidence on additional facts

when the result would not be different even if those additional

facts were established.’ ”).

III. JURISDICTION AND VENUE

The Court has subject matter jurisdiction pursuant to 28

U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 45(a),

53(b). Venue is proper in this district under 28 U.S.C. §§

1391(b), (c)(2), and (d), and 15 U.S.C. § 53(b).

IV. FINDINGS OF FACT AND CONCLUSIONS OF

LAW

A. The Parties

The FTC is an independent agency of the United States

Government created by statute. 15 U.S.C. §§ 41–58. The FTC

enforces Section 5(a) of the FTC Act, which prohibits unfair

or deceptive acts or practices in or affecting commerce. The

FTC also enforces ROSCA, which prohibits certain methods

of negative option marketing on the Internet. The FTC is

authorized to initiate federal district court proceedings, by its

own attorneys, and to seek injunctive relief for violations of

the FTC Act and ROSCA. 15 U.S.C. § 53(b).

DIRECTV is a provider of subscription satellite television

services.1 Each of DIRECTV's subscription packages offers

a varying selection of channels, equipment, and video

quality. See, e.g., Ex. 172 (letter describing several available

subscription packages). Over time, the terms of DIRECTV's

subscription packages, including the price for each package,

have changed periodically. See Ex. 76 (summary of

subscription offers between 2008 and 2015, citing trial

exhibits describing the terms of each package), Ex. 617 (2014

“New Customer Offer Timeline” graphic showing offer terms

between 2008 and 2013).

*3 DIRECTV's subscription television services are a

“considered purchase,” such that consumers generally “go

through anywhere between [a] 45- to 90-day process” when

deciding whether or not to purchase. Dkt. No. 367 (“Tr.

Vol. 2”) at 308:16–309:4 (Bentley). The complexities of

the product stem from the “sheer number of different

tradeoffs and decisions that need to be made” regarding

the packages, “advanced receiver, size of the hard drive,

movies to save,” number of rooms, and whether advanced

receivers were required in each room. Tr. Vol. 2 at 294:19–

295:1 (Bentley); Dkt. No. 371 (“Tr. Vol. 4”) at 643:10–

11 (Guyardo) (DIRECTV is a “high involvement” and

“complex” purchase). Consumers who wish to subscribe to

DIRECTV must proceed through a lengthy and detailed

subscription process, either on the phone with a DIRECTV

representative or on the web. See Tr. Vol. 2 at 302:1–310:14

(Bentley); Tr. Vol. 4 at 661:20–662:19 (Guyardo); Dkt. No.

372 (“Tr. Vol. 5”) at 792:18–21 (Chen).

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DIRECTV acquires subscribers using multiple sales channels

that are broadly categorized as either “Direct Sales” or

“Indirect Sales.” Tr. Vol. 4 at 667:3–668:9 (Guyardo); Ex. 9

at 44. Direct Sales involves customers who subscribe either

by phone through one of DIRECTV's toll free numbers or on

the DIRECTV website, directv.com. Tr. Vol. 2 at 298:19–25

(Bentley). The majority of Direct Sales subscribers complete

their sign up over the phone, and only a small percentage

subscribe on the web. Dkt. No. 389 (“Tr. Vol. 9”) at 1441:23–

1442:15 (Leever).

Indirect Sales are made through a number of third-party

channels. Ex. 9 at 44. These include Consumer Electronics

(consumer electronics and other big box stores like Walmart

or Best Buy that sell DIRECTV in their stores, Tr. Vol. 2

at 299:10–23 (Bentley) ); Telco (partnerships with telephone

companies that sell DIRECTV services on their networks in

addition to phone and internet services, Tr. Vol. 2 at 299:2–5

(Bentley) ); National Strategic Partners (national third-party

dealers, Tr. Vol. 2 at 300:3–7 (Bentley) ); Local Strategic

Partners (local third-party dealers, Tr. Vol. 2 at 300:9–14

(Bentley) ); and Multi-Dwelling Units (multi-unit buildings

that contract with DIRECTV to make the service available to

residences). Ex. 9 at 44.

Many third-party providers, including Telco partners, used

their own advertising tactics. See Tr. Vol. 2 at 225:21–

226:20, 300:15–301:1 (Bentley); Dkt. No. 388 (“Tr. Vol.

8”) at 1328:20–23 (Pratkanis) (referring to Costco tactic).

Third-party providers also had offers that were different

from Direct Sales offers. Tr. Vol. 2 at 299:6–9 (Bentley).

For example, Telco partners offered bundles with their

telephone and Internet services and DIRECTV's television

services, and the Telco partners would offer such services,

including DIRECTV's, using their own sales network and

cross-selling to their existing customers. Tr. Vol. 2 at 300:15–

301:1 (Bentley). Likewise, there were over two thousand

National Strategic Partners that would create and place their

own advertising for DIRECTV. Tr. Vol. 2 at 225:21–226:20

(Bentley).

B. The Challenged Advertisements

Between 2007 and the time of the trial, DIRECTV advertised

its subscription television service through several different

media. DIRECTV aired television commercials, see, e.g.,

Exs. 472–478; disseminated tens of thousands of different

print advertisements through newspapers and direct mailings,

Dkt. 386 (“Tr. Vol. 6”) at 933:20–21 (Erdem) (over 40,000

ads); published over 150 different Internet banner ads, Ex.

1161; and used its website (directv.com), which was revised

several times during this period, Tr. Vol. 9 at 1448:12–20

(describing website redesigns).

i. Television Commercials

DIRECTV advertised on television in nationally-broadcast

30-second and one-to-two-minute ads about DIRECTV

called “direct response television.” Tr. Vol. 2 at 220:8–11

(Bentley). All television ads prompted consumers to call

1-800-DIRECTV and/or visit directv.com. Id.

ii. Print Advertising

*4 DIRECTV's print advertising has generally included

three broad categories: freestanding inserts disseminated

with Sunday newspapers (also known as Sunday Circulars),

Alternative Media, and Solo Mail.

a. Sunday Circulars

Sunday Circulars are multi-page advertisements inserted into

the Sunday newspaper. Tr. Vol. 2 at 312:7–9 (Bentley); Ex.

9 at 60. DIRECTV has circulated approximately 200–300

different types of freestanding newspaper inserts per month.

Tr. Vol. 2 at 231:7–10 (Bentley).

The number of consumers who called DIRECTV in response

to a Sunday Circular is “extremely small.” Tr. Vol. 5 at

883:6–17 (Gieselman). By way of example, in response to

a Sunday Circular distributed to 7 million consumers in or

around August 2013, only three one hundredths of a percent

(.03%) of the people who received the Sunday Circular called

DIRECTV, and only 32% of the people who called ultimately

subscribed to DIRECTV during the call. Tr. Vol. 5 at 879:21–

883:18 (Gieselman); Ex. 384 at 7.

b. Alternative Media

Alternative Media includes “hundreds of different tactics”

that generally are provided to consumers with material or

advertisements from other (and often many other) companies.

Tr. Vol. 2 at 223:22–224:2, 224:9–13, 313:22–314:10,

315:17–316:17 (Bentley); Ex. 9 at p. 59. Alternative Media

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advertisements are comprised of newspaper-delivered inserts,

shared mail or co-op mailings, mail inserts, or directories. Tr.

Vol. 2 at 223:22–224:13 (Bentley); Ex. 9 at p. 59.

DIRECTV sent out “anywhere from 2[00] to 300 [Alternative

Media] tactics every month” in multiple channels of

distribution. Tr. Vol. 2 at 312:5–6, 321:6–10 (Bentley)

(“there may be 300 different creative versions of [Alternative

Media] in a single month ...”); Ex. 9 at 59. Alternative

Media is high-volume, low-return marketing that targets the

same households week after week. Tr. Vol. 2 at 320:21–

321:10, 322:18-323:16 (Bentley) (one alternative media

advertisement disseminated 10 million pieces to generate

approximately 300 subscriptions).

c. Solo Mail

Solo Mail is a multipage letter sent in a standard envelope

to targeted, credit pre-approved households. Tr. Vol. 2 at

311:23–312:9, 315:9–16, 321:2–10 (Bentley); Ex. 9 at 58.

DIRECTV would use predictive models to determine which

households to target. Tr. Vol. 2 at 321:11–19 (Bentley).

DIRECTV generally sent 15 to 18 million Solo Mail letters

per month. Tr. Vol. 2 at 320:12–16 (Bentley).

iii. Banner Ads

Banner ads are animated images that appear on third-party

websites. Tr. Vol. 5 at 801:3–6 (Chen). When a consumer

clicks on the banner ad, she is routed to directv.com. Id.

iv. directv.com

Consumers may subscribe to DIRECTV's satellite television

services through directv.com. Few consumers who enter

DIRECTV's web flow complete the purchase on the website.

See, e.g., Tr. Vol. 5 at 794:13–18 (Chen) (rate of subscription

for prospects who entered the website and placed a package

in their cart ranged between 6.5 and 8.9%.); Ex. 1146 at 1.

Based on unique toll-free numbers on the website and

available data regarding visits to directv.com, out of

all subscriptions arising from a customer who visited

directv.com, approximately 70% of those consumers called

a toll-free number and completed their subscription with

a telephone customer service representative. Tr. Vol. 2 at

305:14–25 (Bentley).

C. The FTC Failed to Prove a Violation of Section 5(a) of

the FTC Act as to Any of Defendant's Print, Television

or Electronic Banner Advertisements

*5 Section 5(a) of the FTC Act prohibits “[u]nfair methods

of competition in or affecting commerce, and unfair or

deceptive acts or practices in or affecting commerce.” 15

U.S.C. § 45(a). A practice is deceptive in violation of § 5(a)

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.” F.T.C. v. Gill, 265 F.3d 944, 950

(9th Cir. 2001). Even if it contains some truthful disclosures,

a representation still “may be likely to mislead by virtue

of the net impression it creates.” F.T.C. v. Cyberspace.Com

LLC, 453 F.3d 1196, 1200 (9th Cir. 2006); see also Gill, 265

F.3d at 956 (evaluating the “overall ‘net impression’ ” of the

representations). And failure to disclose material information

may cause an advertisement to be false or deceptive within

the meaning of the Act even where the advertisement does not

state false facts. Simeon Management Corp. v. F.T.C., 579 F.2d

1137, 1145 (9th Cir. 1978). Actual deception is not required

for a Section 5 violation. Trans World Accounts, Inc. v. F.T.C.,

594 F.2d 212, 214 (9th Cir. 1979).

Here, the FTC does not contend that any of the over

40,000 advertisements it purports to challenge contained

affirmatively false representations. See Dkt. No. 337 (FTC's

section of joint pretrial statement) at 34 (“Because, in a failure

to disclose case, the deception does not turn on literal falsity,

the FTC need not demonstrate that reasonable consumers are

likely to take away some false message about [the] advertised

offer.”); Dkt. No. 412 (transcript of argument on motion

for partial findings) at 23 (“This is an omission case, not a

falsity case.”). Nor does the FTC contend in any systematic

or detailed way that the advertisements entirely omitted

the information it claims was necessary to ensure that the

statements in the advertisements were not misleading. See Tr.

Vol. 1 at 8:3–7 (FTC's opening statement) (“When you look

at the advertisements, you will see disclosures, if they exist at

all, flashing briefly on the screen, hidden behind hyperlinks,

buried in fine print, or obscured by dense paragraphs of

legal text.”) (emphasis added). Instead, the FTC's theory

is that Defendant's advertisements were likely to mislead

reasonable consumers because, in its view, critical details of

Defendant's offer were not disclosed prominently enough.

Tr. Vol. 1 at 15:10–13 (“In this case we are talking about

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omissions; omissions by inadequately disclosing material

terms after the advertised price has been prominently featured

in DIRECTV's advertisements.”)

The FTC fails to meet its burden as to Defendant's print,

television and electronic advertisements for at least two

reasons. First, as to the very small number of advertisements

actually analyzed by its expert witnesses, the FTC failed to

establish that there was any misleading “net impression,” or

even to identify clearly what it claims the net impression was.

Neither a facial review of these advertisements nor the FTC's

extrinsic evidence established that these materials are likely to

mislead a reasonable consumer. Second, the FTC also failed

to articulate what common net impression is conveyed by

the over 40,000 challenged advertisements (which spanned

several different formats), or to explain how and why that

impression would be likely to mislead a reasonable consumer.

i. The FTC's Theory

In the complaint, the FTC framed its allegation with regard to

the two-year requirement as follows:

In numerous instances, in connection with the advertising,

marketing, promotion, offering for sale, and sale

of Defendants' subscription service, Defendants have

represented, directly or indirectly, expressly or by

implication, that their programming packages can be

purchased by paying the advertised monthly prices,

typically for a twelve-month period.

*6 In numerous instances in which Defendants have

made the representation set forth in Paragraph 28 of

this Complaint, Defendants have failed to disclose, or to

disclose adequately, to consumers certain material terms

and conditions of the offer, including but not limited to:

A. The mandatory two-year agreement period, which

carries an early cancellation fee, for the subscription

service; and

B. The significantly higher price for programming

packages, typically $25 to $45 per month higher, during

the mandatory second year of the consumer's agreement.

This additional information would be material to

consumers in deciding to purchase Defendants'

subscription services.

Compl. ¶¶ 28–29.

As to the premium channel offer terms, the FTC alleged that:

In numerous instances, in connection with the advertising,

marketing, promotion, offering for sale, and sale

of Defendants' subscription service, Defendant have

represented, directly or indirectly, expressly or by

implication, that consumers could obtain certain premium

channels for free for a certain period of time, typically three

months.

In numerous instances in which Defendants have made the

representation set forth in Paragraph 31 of this Complaint,

Defendants have failed to disclose, or disclose adequately,

to consumers the material terms and conditions related to

the costs of the offer, including:

A. That Defendants automatically enroll consumers in a

negative option continuity plan with significant charges;

B. That consumers must affirmatively cancel the

negative option continuity plan before the end of the trial

period to avoid charges;

C. That Defendants use consumers' credit or debit card

information to charge consumers for the negative option

continuity plan; and

D. The costs associated with the negative option

continuity plan.

Compl. ¶¶ 31–32.

In its pretrial statement, the FTC articulated its theory this

way: “DIRECTV's advertisements consistently create an

overall ‘net impression’ that the company's service may be

obtained for substantially less than consumers ultimately

must pay over the course of their mandatory 24-month

contract.” Dkt. No. 337 at 3. Now, in its opposition to the

motion for judgment on partial findings, the FTC frames

its theory as being based on the principle that “prominently

advertising a half-truth while omitting or hiding qualifying

material information renders the net impression of the

advertisements misleading.” Dkt. No. 401 at 2 and n.2

(emphasis in original) (citing F.T.C. v. AMG Svc's, Inc., 29

F.Supp.3d 1338, 1351 (D. Nev. 2014) and Cyberspace.com,

453 F.3d at 1201).

ii. Net Impression Analysis

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In assessing whether the FTC has met its burden of

establishing liability under § 5(a), the Court must first

determine what “net impression” the advertisements at

issue create, so that it can then decide whether this net

impression was likely to mislead reasonable consumers. See

AMG Svc's, Inc., 29 F.Supp.3d at 1368 n.9 (explaining that

“the FTC Act requires the court to determine what ‘net

impression’ the [allegedly misleading] loan note creates”);

F.T.C. v. Commerce Planet, Inc., 878 F.Supp.2d 1048, 1063

(C.D. Cal. 2012), aff'd 642 Fed. Appx. 680 (9th Cir.

2016) (“District courts consider the overall, common sense

‘net impression’ of the representation or act as a whole

to determine whether it is misleading.”). In determining

what net impression an advertisement creates, the Court

considers the face of the advertisement, and may also consider

extrinsic evidence. See Commerce Planet, 876 F.Supp.2d

at 1062–78 (considering face of advertisements as well as

extrinsic evidence in assessing whether net impression was

misleading; “[a]lthough a facial examination of the sign-up

pages sufficiently demonstrates that the website marketing

of [company] was misleading to a reasonable consumer,

the Court may consider extrinsic evidence as corroborating

evidence”).2

*7 Generally, the FTC can succinctly describe its position

as to what the net impression is and explain why that net

impression is likely to mislead in its view. See F.T.C. v.

Johnson, 96 F.Supp.3d 1110, 1139–1140 (D. Nev. 2015)

(describing FTC's position that “a consumer proceeding

through the website pages would have a net impression that

they were getting a free CD for a minimal shipping and

handling or download fee,” while in truth “the sites collected

preliminary information without informing the consumer that

they would be enrolled in a core membership with a negative

option and additional upsell memberships with negative

options”).

In attempting to determine the net impression of the

advertisements at issue, the Court is confronted with an

immediate challenge: the FTC's evidence spans at least four

tiers, which together encompass tens of thousands of discrete

advertisements used by DIRECTV over an eight-year period.

First, the FTC's expert witness, Dr. Tülin Erdem, conducted

an online survey based on a print advertisement from

2013. Exs. 2374, 2375 (survey URL); Ex. 244 (underlying

advertisement); Tr. Vol. 6 at 928:3–934:6.

Second, Dr. Erdem testified that she chose this print

advertisement for her survey based on a review of 116

advertisements used by DIRECTV between 2007 and 2015,

and said she found the chosen ad to be “sufficiently

representative.” Tr. Vol. 6 at 934:7–21, 956:3–977:20,

996:17–997:10; Dkt. No. 393.3 Dr. Erdem claimed that the

results of her survey could be generalized to draw conclusions

about other print advertisements beyond the one she tested. Tr.

Vol. 6 at 956:8–957:10, 986:1–995:21. Another of the FTC's

expert witnesses, Dr. Anthony Pratkanis, testified similarly

that the characteristics of two print advertisements, Exhibits

238 and 273, were generalizable to “hundreds” of other

advertisements he reviewed. Tr. Vol. 8 at 1251:21–1266:3.

Third, the FTC introduced a total of approximately 228 print

advertisements, 17 television commercials, and 33 electronic

banner ads into evidence. Dkt. No. 401-1 (FTC's proposed

findings of fact and conclusions of law) at ¶¶ 41, 46, 50, 54,

56, 59, 62–63 (listing exhibit numbers of admitted exhibits in

each category). Witnesses testified regarding approximately

47 of these exhibits. A large number—approximately 231—

were introduced by stipulation without live witness testimony.

Dkt. No. 391.

Fourth, and finally, a much larger number of advertisements

that were disseminated during the period for which the FTC

claims DIRECTV customers are entitled to restitution—over

39,000—were never introduced into evidence at all. Tr. Vol.

6 at 933:20–21; cf. Dkt. Nos. 360-1, 363-1, 364-1, 368-1,

369-1, 376-1, 381-1, 382-1, 383-1, 392-1, 391, 395, 415 (lists

of exhibits admitted at trial and by stipulation).

All told, the FTC's theory of the case thus requires the

Court to attempt to determine the “net impression” of more

than 40,000 advertisements, across print, television, and

electronic formats. Simply to state this fact is to highlight the

extraordinary ambition—and daunting challenges—inherent

in the FTC's theory. The district court in Johnson noted similar

challenges in that case, where the FTC “ask[ed] the Court

to draw conclusions as to all of Defendants' sites, presented

to the Court or not, based on the exhibits presented and [its

expert's report]”:

*8 Immediately the Court is confronted with a problem.

As previously mentioned, the FTC has provided over

one-hundred exhibits of grant websites and the expert

report from [expert]. However, for the purposes of

summary judgment, the Court cannot rely solely on

the representations of the FTC and their expert as

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Federal Trade Commission v. DIRECTV, Inc., Not Reported in Fed. Supp. (2018)

2018 WL 3911196, 2018-2 Trade Cases P 80,489

to what the websites represent.... In its briefing, the

FTC picks examples of claims from across its grant

website exhibits to suit their arguments. It is not clear

to the Court, however, whether the FTC's examples

are representative of the grant website experience as a

whole.... The Court cannot adopt the FTC's approach of

using selected examples of claims picked from across the

entire universe of the FTC exhibits, seemingly without

a clear methodology, and draw conclusions as to every

one of Defendants' sites.

Johnson, 96 F.Supp.3d at 1118, 1121.

The challenges described by the Johnson court are

substantially multiplied here, given the enormous number

of advertisements at issue, the diversity of format of those

advertisements, and the varying nature of the representations

made in the advertisements over time.

Accordingly, the Court will proceed here in two stages.

First, the Court will examine the single print advertisement

analyzed by Dr. Erdem to determine whether the net

impression created by that advertisement would be

likely to mislead consumers acting reasonably under the

circumstances. Second, the Court will consider whether, even

if the net impression of this advertisement was misleading,

that impression can be generalized (1) to any of the other

advertisements in evidence or (2) to tens of thousands of

other advertisements, the vast majority of which were never

admitted in evidence, spanning an eight-year period across

different media.

iii. Print Advertisements

a. Analysis of print advertisement tested by Dr. Erdem (Ex.

244)4

1. Facial review

Exhibit 244, which Dr. Erdem used as the basis for her webbased survey, is a one-page advertisement with the heading

“Best Offer Ever” in gold, silver and yellow letters against a

blue background:

PUBLIC

Ex. 244.5

As would be expected for a complex multi-option product like

a satellite television subscription, the advertisement contains

a large amount of information about various programming

packages, pricing and equipment options, product quality

and installation logistics. Roughly the middle third of the

advertisement describes three tiers of programming packages:

the Entertainment Package, the Choice Package and the

Xtra Package. Each package includes a different number of

channels and a different number of on demand titles. Each

package also includes HBO, Starz, Showtime and Cinemax

“free for three months.”

The text box for each package includes a price “for 12

months” “after instant savings.” In each instance, that price

is crossed out by a red line, and a lower price appears in

white text against a red circle with the phrase “Act Now!”

at the top. So, for example, the crossed-out price for the

Entertainment Package is $29.99/month, and the “Act Now!”

price is $24.99/month. The price in the red bubble has a

caret next to it, which directs the viewer to the following

bolded text in the first line of a section of disclosures in

black text against a white background at the bottom of

the page: “BILL CREDIT/PROGRAMMING OFFER: IF

BY THE END OF PROMOTIONAL PRICE PERIOD(S)

CUSTOMER DOES NOT CONTACT DIRECTV TO

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CHANGE SERVICE THEN ALL SERVICES WILL

AUTOMATICALLY CONTINUE AT THE THENPREVAILING RATES.”6 Because most of the text in the

disclosure box is not bolded, not in all capital letters, and

not partially underlined, this information stands out visually.

See Ex. 1119 (FTC “.com Disclosures” guidance) at 17 (“A

disclosure in a color that contrasts with the background

emphasizes the text of the disclosure and makes it more

noticeable.”). The text in the disclosure box is smaller

than most of the text in the advertisement, though type in

different sizes, fonts and colors is used throughout the ad.

The next line in the disclosure box lists the current nonpromotional package price for each option (for example,

the non-promotional price at the time for the Entertainment

Package was $54.99 per month).

*9 Bolded text in black print against a white background

immediately below the three boxes describing the packages

explains that “ALL DIRECTV OFFERS REQUIRE 24-

MONTH AGREEMENT.* *” This same bolded language

appears again in smaller text (again black against a white

background) in the bottom third of the advertisement,

below three smaller boxes describing installation details,

HD DVR features and options for bundling TV, internet

and phone service. The two asterisks direct the viewer

to the following bolded text in the disclosure box at

the bottom of the page: “24-MONTH AGREEMENT:

EARLY CANCELLATION WILL RESULT IN A FEE

OF $20/MONTH FOR EACH REMAINING MONTH.”

Again, this information is one of the few pieces of text in

the disclosure section that is bolded, in all capital letters

and partially underlined, making the information stand out

visually.

Near the bottom of the page, above the disclosure section,

large text says “Upgrade to DIRECTV! Call 1-866-951-9617

or visit directv.com.”

Based on its facial review of Exhibit 244, the Court

finds that the net impression a reasonable consumer would

take away from this advertisement is that a promotional

price applies for 12 months, that a 24-month agreement is

required, that an early cancellation fee of $20 per month

will apply if the customer cancels before the end of the 24-

month period, that services will continue at the end of any

promotional period at the then-applicable regular rate unless

the customer contacts DIRECTV to change the services,

and that the customer needs to call a toll-free number or

are adequately disclosed throughout the advertisement, and

while the ad contains a substantial amount of information, a

reasonable consumer would understand that this is because

subscription satellite television service is a complex product

with a number of options for price, level of service, package

features and other components. See Tr. Vol. 2 at 308:16–

309:7 (subscribing to satellite television services involves a

large “number of different tradeoffs and decisions that need

to be made,” making subscribing a “considered purchase”)

(Bentley); Tr. Vol. 9 at 1439:14–24 (testimony of former

DIRECTV executive Karen Leever that satellite television

services are “a complex product” requiring customers to

make a number of decisions to customize their package).

Because the advertisement adequately discloses the details

that the FTC claims were omitted due to a lack of prominent

disclosure, the net impression of the advertisement on its face

would not be likely to mislead a reasonable consumer.7

2. Extrinsic evidence

The Court further finds that none of the extrinsic evidence

introduced by the FTC meets its burden of showing that

Exhibit 244, or any of the other print, electronic or television

advertisements analyzed by the FTC's experts, would be

likely to mislead a reasonable consumer.

a. Expert Testimony

1. Dr. Erdem

*10 The primary extrinsic evidence upon which the FTC

relies in support of its claim is a web-based survey conducted

by Dr. Tülin Erdem, a professor of business administration

and marketing at New York University. Tr. Vol. 6 at 902:19–

21. Dr. Erdem described her assignment as “evaluating

whether DIRECTV's website and print advertisements clearly

and conspicuously disclosed certain items about the contract,

price terms, et cetera.” Id. at 910:17–20. Dr. Erdem testified

that “in order to evaluate this hypothesis whether they are

indeed clear and conspicuous or not, I had to look at the

baseline understanding as well as whether it can be improved

with some targeted modifications.” Id. at 910:22–25.

Dr. Erdem created a web-based survey to test this hypothesis,

using the actual print ad as a control stimulus and creating a

go to DIRECTV's website to subscribe. These provisions modified test version of the ad as a comparative stimulus. Id.

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at 927:1–929:25, 936:23–937:22.8 In the modified version,

Dr. Erdem changed the manner in which certain information

regarding price and subscription terms appeared in the ad.

Id. at 936:23–937:22. She then asked survey respondents a

number of questions, and concluded that her modified version

of the ad increased “consumer understanding” of these terms.

Id. at 912:8–913:20.

Dr. Erdem's survey suffers from several flaws that essentially

negate its probative value as to the central issue in the

case: whether DIRECTV advertisements' are likely to mislead

reasonable consumers based on the net impression they

create.

First, Dr. Erdem's survey was designed to test consumers'

comprehension of certain terms and to determine whether

their understanding could be enhanced with minor

modifications to DIRECTV's disclosures. See id. at 926:20–

927:24, 963:2–24, 1010:1–15. But saying that changing

the presentation of certain information may result in better

recollection of that information simply does not support the

conclusion that the information was likely to mislead as

presented in its original form. Dr. Erdem acknowledged that

she did not perform a deception study, or do any copy testing

to determine “what is the overall impression of the consumer

from the ad.” See id. at 965:2–19, 990:1–22. While the FTC

suggests that deception studies are only relevant in Lanham

Act cases, see id. at 1013:14–14:10, it never explains why. Dr.

Erdem's generic testimony about principles of “shrouding”

also failed to establish that the ad was likely to mislead a

reasonable consumer. See id. at 924:10–13 (“[F]ine print is

a classic example of that kind of shrouding or a practice

that makes cognitive load of consumers high, and a majority

of consumers don't read the fine print.”). Accordingly,

the questions asked and answered by Dr. Erdem's survey

provide little, if any, support for the FTC's claim that the

tested advertisement (Ex. 244) would be likely to mislead

a reasonable consumer. Compare Commerce Planet, 878 F.

Supp. 2d at 1068 (expert's testimony focused on whether most

customers would understand negative option and continuity

program subscription aspects of website; analysis “focuse[d]

on what the user can perceive and what the user should do”).

*11 Moreover, Dr. Erdem acknowledged that as part of her

survey results, she grouped participants who responded that

they didn't “know” about specific terms together with those

who responded that they didn't “recall” or “remember” the

terms. Tr. Vol. 6 at 966:6–968:11. The FTC argues that this

approach “is the right one for a deceptive-omission case,

where consumers are misled in part as a result of their lack

of knowledge.” Dkt. No. 401 at 14 (emphasis in original).

But the FTC's argument fails to recognize that Dr. Erdem's

survey did not test, and therefore cannot establish, why a

consumer responded that he or she did not know or recall the

terms. Because Dr. Erdem did not ask follow-up questions

or have subcategories for responses, she acknowledged that

she did not know whether these survey participants saw the

key terms but just could not recall what they had seen in the

print advertisement earlier, or whether they had the wrong

impression about these terms based on the advertisements.

Tr. Vol. 6 at 966:22–968:19, 970:2–16 (Erdem). Accordingly,

this characteristic of Dr. Erdem's survey further supports the

Court's conclusion that the results lack substantial probative

value on the question of whether Exhibit 244 was likely to

mislead a reasonable consumer.

Finally, the Court finds that given the centrality of the

disclosures in the text at the bottom of the ad to the issues

in this case, Dr. Erdem's web study did not adequately

replicate the experience of a prospective customer viewing

the ad in paper form, as it was actually distributed. Defendant

introduced a hard copy of the advertisement in its original

paper form. Ex. 2026A. With the paper version in hand, a

prospective customer could review those disclosures simply

by looking at the bottom of the page. By contrast, in Dr.

Erdem's survey, the survey taker had to scroll down the screen

to see those disclosures (in other words, the disclosures were

not visible unless the survey taker scrolled down). Tr. Vol. 6 at

973:7–15 (Erdem). Further, the Court's personal comparison

at trial of the paper and electronic survey versions of the

ad reflected that the disclosure text in the survey version

was substantially less clear and legible than the paper copy.

Compare Ex. 2026A with Ex. 2371 (URL link for survey).9

The fact that respondents could “zoom [in] on any part,” Tr.

Vol. 6 at 975:2–4 (Erdem), does not remedy this problem,

nor does it matter that none of the participants in Dr. Erdem's

pretest said that the text was not legible, Tr. Vol. 6 at 1013:1–

3. Survey participants were not asked if they could read the

disclosure block, Tr. Vol. 6 at 1015:6–11, and the Court finds

that it would not be apparent to a participant that the specific

content of the disclosure block could be relevant (in fact,

crucial) to the survey exercise.

For all of these reasons, the Court finds that Dr. Erdem's

survey has little to no probative value on the question of

whether the 2013 advertisement admitted as Exhibit 244 was

likely to mislead a consumer acting reasonably under the

circumstances.

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2. Dr. Pratkanis

The Court finds Dr. Pratkanis' “social influence analysis”

to be similarly unpersuasive on the question of whether a

reasonable consumer likely would be misled by Defendant's

advertisements. Dr. Pratkanis acknowledged that he did no

copy testing or other empirical testing of how consumers

perceive Defendant's advertisements. Tr. Vol. 8 at 1291:13–

1293:12. He also did not analyze Defendant's advertisements

to determine their net impression, or do any content analysis

that would support the conclusion that his conclusions were

generalizable to all of the ads at issue over the eightyear period at issue. Tr. Vol. 8 at 1304:6–1306:24, 1311:6–

1315:24.

Instead, Dr. Pratkanis testified that general principles of

social influence such as “throwing the lowball” and “free

gift” can increase the “likelihood” that someone would

make a purchase. Dr. Pratkanis' “fundamental finding” was

that DIRECTV employed a “lowball” initial offer to get

consumers to later agree to a less desirable offer. Id.

at 1249:12–1250:8. During his testimony, Dr. Pratkanis

discussed two print ads: another variant of the one-page “Best

Offer Ever” flyer from 2013 (Ex. 238) and a 2014 two-page

advertisement headed “Get 2 YEARS OF SAVINGS” (Ex.

273).

*12 Exhibit 238 describes the Entertainment Package, and

has a slashed-out price of $29.99 “FOR 12 MONTHS,” next

to the notation “With 24-mo. agreement.* *” A red bubble just

above the slashed-out price contains large white text reading

“ACT NOW! $24.99/MO.” with a caret. As with Exhibit

244, the print ad Dr. Erdem tested, the caret and asterisks

refer the viewer to a disclosure section of black text against

a white background that occupies approximately the bottom

one-third of the advertisement. The text in the disclosure

section that corresponds to the caret begins in the first line of

that section, and contains the following bolding, underlining

and capitalization: “BILL CREDIT/PROGRAMMING

OFFER: IF BY THE END OF PROMOTIONAL PRICE

PERIOD(S) CUSTOMER DOES NOT CONTACT

DIRECTV TO CHANGE SERVICE THEN ALL

SERVICES WILL AUTOMATICALLY CONTINUEAT

THE THEN-PREVAILING RATES.” Later text in

that line lists the “current prices” of each package. The

text in the disclosure section that corresponds to the

asterisks is bolded and in all capital letters, and says “24-

MONTH AGREEMENT: EARLY CANCELLATION

WILL RESULT IN A FEE OF $20/MONTH FOR EACH

REMAINING MONTH.”

Exhibit 273, like Exhibit 244, describes three different

packages. It contains the same red bubble price format,

slashed-out prices, and references to the disclosure section

via carets and asterisks. The formatting and content of

the disclosures described above with regard to Exhibit 244

(including underlining, bolding and capitalization) is identical

in Exhibit 273, except that the Court assumes that this was

a two-sided advertisement, such that the second page of text

and the disclosure section would appear on the back of the

piece.10

For the reasons described in its analysis of Exhibit 244 above,

the Court finds based on a facial review that neither Exhibit

238 nor Exhibit 273 creates a net impression that would be

likely to mislead a reasonable consumer.

Moreover, the Court accords minimal weight to Dr. Pratkanis'

opinions in light of this determination that the advertisements

at issue were not facially deceptive. Dr. Pratkanis' general

testimony regarding the “likelihood of the impressions that

[a consumer] would take,” Tr. Vol. 8 at 1347:1–1348:8, is

unpersuasive for several reasons. First, while Dr. Pratkanis

testified, for example, that a consumer would “have a

tendency and a likelihood” to perceive the slashed-out price

as the “real price or the regular price,” he acknowledged doing

no study or survey to determine whether customers in fact

held that belief. Id. at 1314:8–1315:15. Nor did Dr. Pratkanis

do any empirical testing of any advertisement, id. at 1301:4–

8, survey customers to ask what messages they took away

from ads, id. at 1303:16–1304:24, or do a content analysis of

any advertisements, id. at 1305:11–1306:4. Dr. Pratkanis has

performed this kind of testing in other instances, but did not

do so here because the FTC did not ask him to. Id. at 1303:16–

1304:24.

Similarly, Dr. Pratkanis conceded that he could not measure

how purported “lowball” representations would affect

consumers' understanding:

Q: But likelihood is what? Is it more likely than not? Does

that mean more than 50 percent who sign up don't know?

A: It would be an increase over base rate.

Q: Do you know what the base rate is?

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A: No.

Tr. Vol. 8 at 1312:2–6.

Third, as Defendant points out, the “lowball theory” also does

not map well to FTC's theory in this case, because that theory

presumes that consumers do understand the price that they

will pay before the time of purchase. Id. at 1320:12–1321:12;

see id. at 1348:4–8 (agreeing with the Court's statement that

“if they are exposed to the true terms up front there can't

be a lowball by definition”). Here, the Court has found that

the true terms are adequately and accurately disclosed in

the advertisements Dr. Pratkanis testified about. For at least

these reasons, the Court finds that nothing in Dr. Pratkanis'

testimony persuasively supports the FTC's contention that the

print advertisements at issue in this case created a misleading

net impression in violation of the FTC Act.

3. The Cases Upon Which the FTC Relies Reinforce the

Conclusion That the Agency Failed to Meet Its Burden of

Proof

*13 The cases the FTC relies upon in support of its argument

that these advertisements (and, by extension, the thousands

of others at issue in this case) were misleading by omission

are readily distinguishable. In those cases, the courts found

that advertisements created a misleading impression, even

when the relevant information was technically disclosed in

some form, because the overall presentation would lead

a reasonable consumer to conclude that the terms were

materially different than the true terms.

For example, in Cyberspace, the defendants mailed millions

of solicitations offering internet access to individuals and

small businesses. 453 F.3d at 1198. The solicitations included

a check, usually for $3.50, addressed to the recipient and

referencing the recipient's phone number on the “re” line. Id.

The check was “attached to a form resembling an invoice

designed to be detached from the check by tearing at the

perforated line.” Id. “The back of the check and invoice

contained small-print disclosures revealing that cashing or

depositing the check would constitute agreement to pay a

monthly fee for internet access, but the front of the check and

the invoice contained no such disclosures.” Id. Under those

circumstances, the Ninth Circuit readily rejected defendants'

argument that “the fine print notices they placed on the reverse

side of the check, invoice, and marketing insert preclude

liability” under the FTC Act. Id. at 1200. This was because

the “mailing created the deceptive impression that the $3.50

check was simply a refund or rebate rather than an offer for

services,” and gave the “overall impression that the check

resolves some small, outstanding debt.” Id. at 1200–1201.

Similarly, in AMG Services, defendants' loan note contained

two sets of representations: a Truth In Lending Act (“TILA”)

box, and additional fine print disclosures. 29 F.Supp.3d at

1366. The TILA box “represent[ed] that borrowers [were]

obligated to repay a fixed sum equal to the principal plus

a single finance charge.” Id. (emphasis added). But terms

in the fine print “contradict[ed] the terms disclosed in the

TILA box,” in that the repayment amount was not fixed,

the borrower was automatically enrolled in a ten pay-period

“loan renewal” plan that imposed multiple finance charges,

and the “renewal plan” increased the borrower's cost of credit

from $90 to $675. Id. at 1367. Given these contradictions,

the court had no trouble concluding that “[i]t requires no

citation of authority to demonstrate that the ‘net impression’

of a boldfaced representation, which states that the borrower

is responsible to repay a fixed sum, is misleading when the

fine print indicates that the boldfaced sum is not fixed.”

Id. at 1368; see also id. at 1351 (finding that “the net

impression of the Loan Note Disclosure is likely to mislead

borrowers acting reasonably under the circumstances because

the large prominent print in the TILA Box implies that

borrowers will incur one finance charge while the fine print

creates a process under which multiple finance charges will

be automatically incurred unless borrowers take affirmative

action”); 1373 (recommending that summary judgment be

granted because “the representation [was] clearly misleading

and the defendant relie[d] exclusively on the fine print to

correct the misrepresentation”).

Johnson also illustrates the usual type of representation found

to create a misleading net impression. In that case, the

FTC argued that a consumer reviewing defendant's website

“would have the net impression that they were getting a

free CD for a minimal shipping and handling or download

fee,” but failed to inform the consumer “that they would be

enrolled in a core membership with a negative option and

additional upsell memberships with negative options.” 96

F.Supp.3d at 1139–1140. Essentially, the FTC argued that “the

disclosures were presented in a way that made consumers

unlikely to expect them (because the claims ‘free’ and ‘risk

free’ were so prominent) and were unlikely to see them

(because the disclosures were inadequate or non-existent).”

Id. at 1140. The court agreed, finding it clear that the sites

did not advertise a membership program, and concluding that

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customers would be likely “to believe that they are ordering

a CD for a one-time fee and would not have reason to believe

they were enrolling in membership programs with monthly

charges.” Id. at 1145. The Court noted that “[i]nformation

about the trial memberships, and their associated costs, [was]

hidden in disclosures that consumers would be justified in

believing they did not have to examine closely.” Id. at 1146.

*14 Significantly, however, the Johnson court noted that

the circumstances before it were different than a squarelypresented offer regarding subscription services like the one at

issue in this case:

[T]here is a significant distinction between sites that clearly

offer subscription-based or membership-based services to

a consumer with a trial period and negative option, on

one hand, and sites that offer to ship a product for a onetime payment with a bundled membership trial period and

negative option on the other. In the first situation, the

consumer is made aware of an ongoing obligation for use

of the seller's service. Generally speaking, Defendants are

correct that a consumer's failure to cancel their membership

in that situation would be the fault of the consumer. The

Court's concern in this case is that the sites do not clearly

offer a membership program.... That is a significantly

different situation from one in which a consumer willingly

receives the benefit of a subscription or membership

program and forgets to cancel.

Id. at 1141-42.

Cyberspace and AMG Services also do not support the

FTC's argument as to the probative weight of Dr. Erdem's

analysis, Dkt. No. 401 at 14, and the critically different facts

of those cases highlight the weakness of the government's

evidence in this case. The Ninth Circuit's comment in

Cyberspace that the defendant's proffered survey “did not

probe whether the notices were sufficiently conspicuous to

draw the survey subjects' attention in the first place,” 453 F.3d

at 1201, addressed a circumstance in which (1) the supposed

disclosure was on the back of what appeared to be a check;

and (2) the misleading impression was that a reasonable

consumer would not understand that by cashing the check she

would be enrolling in a subscription service. Id. at 1200–1201.

Similarly, as explained above, the deception in AMG Services

was that the net impression made by the advertisements at

issue fundamentally and comprehensively contradicted the

true terms of the offered loan. In contrast, here Dr. Erdem's

survey treated respondents who did not recall the terms being

studied the same as those respondents who said they did not

know what the terms were, without providing any persuasive

basis for concluding that either answer reflected a misleading

net impression. See Tr. Vol. 6 at 966:22–970:16.

In sum, the facts in this case are plainly different from those

in cases in which the FTC has successfully established that

a misleading net impression existed. Nothing in one part of

Exhibit 244 (or Exhibits 238 or 273) contradicts any other

part of the advertisement. The advertisement makes plain that

it essentially describes an “offer for services,” Cyberspace

at 1200, accurately describes (within the limitations of a

one- or two-page flyer) the terms of the offer, and invites

an interested consumer to follow up to select a specific

package and subscribe through a phone- or website-based

process. The Court finds it self-evident that this case bears

no resemblance to cases in which a defendant represents in

an advertisement that the consumer will receive a benefit

(like the check in Cyberspace, the fixed interest rate in

AMG Services, or the free CD in Johnson ), only to turn

around and impose a concealed and unwanted burden (like the

hidden subscriptions and requirements in each of those cases).

Compare Ex. 1119 (FTC “.com Disclosures” guidance) at 18

(“Consumers who are trying to complete a task and obtain a

specific product or service may not pay adequate attention to

a disclosure that does not relate to the task at hand. This can be

problematic if, for example, an advertiser is selling a product

or service together with a negative option trial for a different

product or service.”) (emphasis added).

*15 Nor has the FTC shown that this advertisement was

a “deceptive door opener,” in which DIRECTV “induce[d]

first contact through deception, even if the buyer later

becomes fully informed before entering the contract.” Dkt.

No. 401-1 at 146 (citing Resort Car Rental Sys., Inc. v.

F.T.C., 518 F.2d 962, 964 (9th Cir. 1975) ). In Resort Car

Rental, defendant used the slogan “Dollar-A-Day” for its

car rental business, but apparently charged more than that.

Id. Under those circumstances, the Ninth Circuit agreed

with the FTC that “the trade name, ‘dollar-a-day’ by its

nature has a decisive connotation for which any qualifying

language would result in a contradiction in terms.” Id.

That principle is inapplicable here, because (1) the Court

has found that nothing in Exhibit 244 (or Exhibits 238 or

273) contradicts the true terms of DIRECTV's provision of

services; and (2) for a complex product like subscription

satellite television services, a reasonable consumer would

understand the limitations of how information is presented in

a one- or two-page flyer. See Tr. Vol. 2 at 243:2–23, 311:11–

317:11 (testimony of Brad Bentley that the amount of “real

estate” in a particular form of advertisement affects the layout

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of information included, but that “we made sure all the offer

details were available on each piece”).

Consistent with these observations, the Court finds that the

FTC has failed to establish that Exhibit 244, or Exhibits 238

or 273, would be likely to mislead a reasonable consumer.

b. Even had the FTC shown that these examples created

a misleading net impression, it failed to show how that

impression is generalizable to hundreds or thousands of

additional advertisements.

1. Expert Testimony

Dr. Erdem and Dr. Pratkanis' testified about the detailed

content of only three advertisements. Dr. Erdem's survey

concerned a single 2013 print advertisement, which she chose

as the basis for her test after reviewing a set of nearly 120

DIRECTV ads culled by her staff. Tr. Vol. 6 at 989:12–25. She

did not conduct any copy or content analysis, id. at 989:18–22,

but rather reviewed this small set of advertisements “across

different denominations like the content, the language, the

fine print, whether it was a circular, etc.” and “decided [the

2013 advertisement] was sufficiently representative.” Id. at

956:3–957:10. According to Dr. Erdem, the advertisements

“typically” had fine print, a promotional price, and package

choices. Id. at 996:6–13. She further testified that “the single

page format was easier to adopt for an online survey.”

Id. at 957:6–7. In this way, the advertisement was chosen,

at least in part, because of the limitations of the survey

methodology and not because the advertisement itself was the

most representative.

Even if the Court had found, contrary to the analysis above,

that Exhibit 244 was likely to mislead a consumer acting

reasonably under the circumstances, Dr. Erdem presented no

persuasive explanation in support of her assertion that this

single 2013 print advertisement was somehow representative

of even the advertisements she reviewed, let alone the

universe of 40,000 or more advertisements at issue in this

case.

The Court finds that the several years' worth of

advertisements accused by the FTC in this case took different

forms and depended on the specific offer in place at the time.

See Ex. 617 (timeline of offers). The ads contain everyday

low pricing or promote introductory pricing for 12 months;

require no commitment or state that a 24-month agreement

is required; have no premium channel offer or offer premium

channels free for 3 months; explain rebate credits (when

rebates were in effect) or, later, the instant rebate prices; and

disclose additional terms about equipment pricing, packages,

and cancellation in other areas and the disclosure block.

See, e.g., Exs. 78, 84, 85 (2007); Exs. 92, 95 (2008); Ex.

113 (2009); Exs. 124, 139 (2010); Exs. 172, 2014 (2011);

Exs. 175, 178/2707, 185 (2012); Exs. 203, 209, 212, 217

(2013); Ex. 281 (2014).12 Indisputably, there is substantial

variation in DIRECTV's print advertising with respect to,

among other things, tactics, page count, content, and the

frequency, placement, and manner of disclosures in the ads

Dr. Erdem reviewed. Compare, e.g., Ex. 2026A (paper copy

of single page ad used in Erdem study, described above),

with Ex. 2707 (original four-page Sunday Circular of Ex. 178

with no slashed out pricing; disclosing “FOR 12 MONTHS”

and “2-year” agreement immediately under each price point;

and disclosing first and second-year savings in large font on

inside left page and again, in red, on back cover), with Ex.

124 (advertising “50% OFF FOR ONE YEAR!” at top and

side; disclosing promotional price is “FOR 12 MONTHS” in

red bubble), with Ex. 92 (two-sided advertisement disclosing

promotional price is “FOR 12 MONTHS” with the “Reg.”

package price in red bubbles on front and back), with

Ex. 172 (four-page direct mail letter disclosing “FOR 12

MONTHS” and “2-yr agreement” immediately under each

price point; disclosing first and second-year savings in second

paragraph of first page, and under each promotional price

on later pages; disclosing value of premium channels next

to premium channel copy), with Ex. 209 (four-page ad

disclosing promotional price is “FOR 12 MONTHS” 12

times on front and back covers; disclosing first and secondyear savings under each package on back cover; disclosing

value of free premium channels next to premium channel

copy on inside right page), with Ex. 113/2011A (slashing out

regular package price rather than prior promotional price),

with Ex. 139/2013A (advertising “PACKAGES START

AT $29.99 Everyday Low Price” without promoting any

specific package or premium channels). This variation among

DIRECTV's ads precludes generalizing Dr. Erdem's survey

results to the relative handful of print ads she reviewed, let

alone to the some 40,000 she did not.13

*16 Contrary to the FTC's claim, neither DIRECTV nor

the Court is suggesting that the FTC had to introduce all

of the more than 40,000 advertisements into evidence. See

Dkt. No. 401 at 15. But the FTC does have to explain why

conclusions about a handful of advertisements can be applied

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to derive a uniform net impression for an extremely large

number of others that vary significantly in format, content

and emphasis. The FTC simply cannot meet this burden by

characterizing the advertisements at a high level of generality

and asserting that conclusions regarding one advertisement

apply uniformly to tens of thousands of others. See Dkt.

No. 401-1 (FTC's proposed findings of fact and conclusions

of law) at ¶¶ 82-91 (referencing inclusion of “some type

of ‘call to action’ ” in advertisements, as well as general

thematic and formatting consistency); Tr. Vol. 6 at 956:16–

20 (Erdem) (“[T]he common denominations were some kind

of promotional package—I mean, premium channels package

and promotional price, some kind of call to action, we call

these kind of ads call to action ads, and the templates were

similar.”). The Court does not find Dr. Erdem's opinion that

she would “expect no differences” in the empirical test results

across all of the dramatically different types of advertisements

at issue in this case, Tr. Vol. 6 at 996:21-997:10, to be

persuasive or adequately supported. The Court similarly

finds unpersuasive and inadequately supported Dr. Pratkanis'

assertion that his conclusions about Exhibits 238 and 273

can be generalized to a broader universe of Defendant's

advertisements.

2. Other Extrinsic Evidence

The Court also finds that none of the other extrinsic evidence

relied upon by the FTC meets its burden of establishing that

any of Defendant's advertisements was likely to mislead a

reasonable consumer.

a. Eye Tracking Studies

The FTC introduced evidence that in 2010, DIRECTV

contracted with Realeyes North America, a market research

firm, to perform eye tracking studies on four DIRECTV

advertising circulars. Hellstrom Depo. 9:19–23; Ex. 705 at 1–

2.14 DIRECTV engaged Realeyes to help its team understand

how consumers read circulars. Ex. 378 at 31; Ex. 408.

During this study, participants were shown a DIRECTV

print advertisement on a large computer screen. Tr. Vol. 7

at 1221:8 (Hellstrom Depo. at 25:25–26:07); Ex. 718 at 16.

Realeyes then tracked participants' “eye gaze data” for 30 to

90 seconds, aggregated that data, and created a “heat map” to

show where participants focused their “visual attention” on

DIRECTV's advertisement. Tr. Vol. 7 at 1221:8 (Hellstrom

Depo. at 62:16-63:12); Ex. 718 at 16; Ex. 720 at 3.

The four DIRECTV ads tested by Realeyes were each fourpage circular ads. Each of the circular ads was comprised of

three components—a front cover, a two-page inside spread,

and a back cover. Hellstrom Depo. 51:12–16. Realeyes

conducted individual tests of all three components of each

circular ad (twelve tests in all), and generated a report for

each test. Hellstrom Depo. 50:24–51:16; Exs. 708, 709, 710,

713, 714, 715, 718, 719, 720, 723, 724, 725. Each report

contained a bar graph called “Attention Allocation,” as well

as heat maps. See, e.g., Ex. 708. DIRECTV prepared an

internal document called “Heat Mapping Research: Learnings

& Recommendations” which presented the results of the

Realeyes eye tracking studies. Ex. 408.

These eye tracking studies are not persuasive on the

relevant issue: whether the studied advertisements, or any

of Defendant's advertisements, were likely to leave a

reasonable consumer with a misleading net impression.

These types of studies do not measure consumer sentiment,

persuasion, or understanding of an advertisement. Tr. Vol.

8 at 1339:24–1340:5 (Leever); see also id. at 1339:15–23

(Pratkanis) (answer to question “And you can't measure any

miscomprehension or any wrong impression from an ad based

on an eye tracking study?” was “Generally, that's correct.

It might give you some input into understanding that, but

in general that's correct.”). The fact that study participants'

eyes may be more drawn to bright colors and pictures than

to written details during a simulation test conducted on a

computer simply does not provide persuasive support for the

FTC's claim that advertisements describing a multifaceted

offer for a plainly complex product like subscription satellite

television services were misleading.15

b. RIO – Subscriber Call Data

*17 DIRECTV's RIO customer service database includes

a note field where the agent writes down information about

a customer's telephone call. Tr. Vol. 8 at 1280:14–1281:9

(Pratkanis). DIRECTV developed proprietary text-mining

software that goes through the note field and assigns a primary

tag to the call, corresponding to the primary reason for the

phone call. (Id.). There are about 1,120 different primary tags.

Tr. Vol. 8 at 1281:10–12 (Pratkanis).

Dr. Pratkanis analyzed the RIO data by selecting 17 primary

tags he characterized as encompassing claims by customers,

at the fourth and thirteenth months of service, expressing

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surprise, confusion, or dislike over bill increases. Tr. Vol. 8

at 1281:17–1282:10 (Pratkanis). The 17 tags fall into four

categories: billing, 24-month commitment, early cancellation

fee, and possible remedies for a price increase. Id. Dr.

Pratkanis's RIO analysis was based on a random sample

drawn from the RIO database. Tr. Vol. 8 at 1285:12–23

(Pratkanis).

Dr. Pratkanis opined that spikes in the RIO data at months

4 and 13 “would confirm the kind of things you would

expect if the free gift as a negative option is not fully

disclosed.” Tr. Vol. 8 at 1282:19–1283:3. But as Dr. Pratkanis

recognized, month 4 is when subscribers wishing to cancel

their premium packages because the free period ended would

naturally call to do so. Id. at 1336:5–7. And in month 13,

“one possibility” is that subscribers call to explore other

package options once their introductory pricing ends. Id. at

1336:8–15. Critically, Dr. Pratkanis did no content analysis

to identify callers at these stages who called because they

claimed to have been misled about the conditions of their

subscriptions. Id. at 1336:17–24. While Dr. Pratkanis said he

excluded tags like “cancel premiums” or “cancel HBO” from

his analysis, id. at 1348:18–1349:6, the Court finds the RIO

analysis to be unpersuasive evidence of consumer deception

given Dr. Pratkanis' understandable inability to determine

anything about why subscribers were actually calling in the

months characterized as “spikes.”

c. Customer Experience Steering Committee Documents

The Court also heard evidence regarding findings

made by DIRECTV's “Customer Experience Steering

Committee” (“CX Committee”). The CX Committee was

a cross-functional group of DIRECTV executives led by

Rasesh Patel. Tr. Vol. 2 at 274:16–20 (Bentley), Tr. Vol.

6 at 1020:4–6 (Patel). The evidence showed that the CX

Committee was created in 2012 as part of a “company-wide

focus” to “improve the customer experience.” Tr. Vol. 6 at

1025:4–7 (Patel). The initiative focused on both current and

prospective DIRECTV customers. Tr. Vol. 6 at 1027:16–18

(Patel). The CX Committee reviewed customer research and

satisfaction data and operational data. Tr. Vol. 6 at 1029:19–

1030:2 (Patel). The CX Committee's goal was to “identify

customer pain points ... and then really prioritize the ones

that were most meaningful in terms of impact.” Tr. Vol.

6 at 1030:7–9 (Patel). The CX Initiative was “very selfcritical” and “discerning” in identifying “every opportunity ...

to improve the customer experience.” Tr. Vol. 6 at 1052:18–24

(Patel). By 2013, the CX Committee had identified numerous

customer “pain points,” which it categorized and prioritized

in a “Customer Pain Points—Review and Prioritization”

discussion document dated May 7, 2013. Tr. Vol. 6 at 1031:8–

22 (Patel); Ex. 589. The CX Committee identified a number of

these as “top recommended pain points” based on the “degree

of impact” a particular pain point might have on metrics such

as customer satisfaction, call volume, and numerous other

dimensions. Tr. Vol. 6 at 1043:10–18 (Patel); Ex. 589 at 7.

The CX Committee initiative lasted three years, until 2015.

Tr. Vol. 6 at 1029:3–7 (Patel).

*18 Nothing about the CX Committee materials introduced

at trial persuasively supports the FTC's claim that Defendant's

advertisements misled millions of customers between 2007

and 2015 (or were likely to do so). Instead, Mr. Patel

credibly testified that the CX Committee engaged in a

good-faith and comprehensive effort to evaluate DIRECTV's

operations, identify potential problem areas and recommend

improvements. The evidence at trial established that a number

of such improvements were implemented. For example, in

October 2012, DIRECTV moved from an offer requiring

customers to redeem a rebate via mail or online to an

“instant” rebate. Ex. 617 at 5. This policy ensured that every

customer would receive the discounted price starting with the

first month's bill, and addressed an issue noted by the CX

Committee. Tr. Vol. 2 at 293:11–21 (Bentley). This change

resulted in an $80 million reduction in revenue each year. Id.

at 294:3–11 (Bentley). As another example, around the same

time, DIRECTV adopted a “Simplified Bill” that incorporated

a number of changes with the goal of making the bill easier

to understand. Ex. 569. And third, another pain point that the

CX Committee identified was that customers were unable to

refuse the premium channel promotional offer at the point

of sale or request a future cancellation date for premium

channels. Ex. 589 at 4–9. In response to this pain point,

DIRECTV implemented changes to its premium offer policies

and processes so that customers could decline the premium

channel offer at the point of sale, or at any specified future

date without having to remember to call to cancel on the last

day of the trial period. Tr. Vol. 7 at 1053:1–11 (Patel).

Mr. Patel also credibly explained that if consumers believed

that the terms in DIRECTV's advertisements did not match

the terms disclosed when they sought to subscribe, that feeling

of deception would have been reflected in the findings of

the CX Committee and in DIRECTV's data collected on pain

points, consumer research, sales calls, closing rates, activation

rates, and churn. Tr. Vol. 8 at 1047:3–10451:9 (Patel). The

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evidence did not support the FTC's theory in this regard.

DIRECTV's “churn rate” (the rate at which customers leave

DIRECTV's platform) stayed constant at approximately 1.5%

from 2007 to 2013. Tr. Vol. 4 at 650:20–651:7 (Guyardo);

Ex. 991 at 5. DIRECTV improved its market share from

2008 to 2013, when “the DIRECTV subscriber base grew

by 3.5 million subscribers ... while all of [DIRECTV's] other

competitors combined only grew by 400,000.” Tr. Vol. 4

at 651:22–652:5 (Guyardo); Ex. 991 at 6. A subscriber's

average time on the platform has also steadily increased over

time. The average customer now stays with DIRECTV for

“close[ ] to seven years”—years after the initial 24-month

commitment period. Tr. Vol. 2 at 347:8–18 (Bentley).16

Finally, DIRECTV's Net Promoter Score increased over time

from 16 to 34 and from “second best in the industry to best in

class in the industry.” Tr. Vol. 7 at 1077:16–20 (Patel).17

DIRECTV's investment of substantial resources in analyzing

its operations, candidly identifying areas for improvement,

and following through on a number of improvements does not

support a finding that the company violated the FTC Act. If

anything, this evidence further underscores how this case is

very unlike the straightforward deception cases upon which

the FTC purports to rely.

d. Other Evidence

Finally, none of the FTC's other evidence persuasively

met its burden of proof of showing that DIRECTV's print

advertisements were likely to deceive a reasonable consumer.

The FTC's attempt to rely almost entirely on pretrial

deposition testimony regarding a large number of exhibits

never even discussed at trial is telling, and does not account

for the detailed and credible trial testimony that substantially

undercut its position. See Dkt. No. 401-1 at ¶¶ 411–453 (citing

virtually no trial testimony). Moreover, the FTC's approach

appears to have been to seize on language superficially

helpful to its case in documents, while consistently ignoring

pivotal context showing the actual meaning of the evidence.

*19 For example, the FTC called DIRECTV executive Brad

Bentley in its case-in-chief, and asked him a number of

questions about a study prepared by McKinsey consultants as

part of the CX Committee project. Tr. Vol. 2 at 279:17–282:5

(Bentley); Ex. 573 (July 10, 2012 “discussion document”

slide deck). FTC counsel focused on a slide called “NPS drops

early—opportunity to improve selling and on-boarding.” Tr.

Vol. 2 at 279:17–282:5 (Bentley); Ex. 573 at 18. Government

counsel suggested that the slide showed that “33 percent

of DIRECTV customers felt misled during the sign-up

process.” Tr. Vol. 2 at 281:4–9. But on redirect, Mr. Bentley

made clear that because this exercise surveyed customers

in the first 90 days of their subscriptions, this figure had

nothing to do with the issues that are the basis of the FTC's

complaint: second-year pricing, 24-month commitment or

early cancellation fees. Id. at 288:15–289:14. Moreover, Mr.

Bentley persuasively explained that the biggest complaint

among onboarding customers at this time was the first

month's bill not aligning with the customer's expectations,

an issue DIRECTV addressed by replacing its mail-in rebate

model with an automatic instant rebate model. Id. at 291:13–

294:14 (customers reported feeling misled in survey because,

although they “had to redeem [their] rebate” in order to

obtain the introductory price, “oftentimes consumers wouldn't

redeem [the rebate] quick[ly] enough for it to be reflected on

the first month bill.”).

iv. Conclusion

The evidence at trial conclusively established that the FTC

failed in its case-in-chief to meet its burden of proving a

Section 5 claim based on any of DIRECTV's non-website

advertisements. The FTC's ambition in attempting to show

that over 40,000 advertisements were likely to deceive

substantially exceeded the strength of its evidence: this case

did not involve the type of strong proof the Court would

expect to see in a case seeking nearly $4 billion in restitution,

based on a claim that all of DIRECTV's 33 million customers

between 2007 and 2015 were necessarily deceived. Tr. Vol.

1 at 34:3–16 (FTC's opening statement). Because the FTC

definitively failed to prove its case as to Defendant's nonwebsite advertisements, the motion for judgment on partial

findings is GRANTED as to the FTC's Section 5 claims to

the extent they are based on those advertisements.

D. The Court Will Defer Judgment With Regard to the

Claims Based on the Website

For now, the Court reaches a different conclusion with regard

to the Section 5 and ROSCA claims based on the various

iterations of Defendant's website. While the FTC's case as to

the websites was far from overwhelming, the Court finds it

appropriate to defer a determination on these claims until after

the close of the evidence.

 © 2022 Thomson Reuters. No claim to original U.S. Government Works. 16
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ENTERTAINMENT 

1 

Federal Trade Commission v. DIRECTV, Inc., Not Reported in Fed. Supp. (2018)

2018 WL 3911196, 2018-2 Trade Cases P 80,489

i. Website version tested by Dr. Erdem (Exs. 1052, 2033

and 2371)

Dr. Erdem conducted an online survey based on a modified

mockup version of the August 2013 version of DIRECTV's

website (known as the “Old Flow”). Ex. 2371; Tr. Vol. 6

at 929:1–11, 937:23–938:8; Tr. Vol. 4 at 683:17–684:4; Tr.

Vol. 9 at 1448:1–20 (Poling-Hiraldo and Leever). Dr. Erdem

testified that she used the August 2013 Old Flow version of

the website because she understood that this was the only

interactive live version the FTC was able to recover. Tr. Vol.

6 at 938:2–5. FTC expert witness Dr. Nathan Good prepared

the “UX” (or user experience) version of the August 2013

Old Flow that Dr. Erdem used as the basis for the treatment

stimulus. Tr. Vol. 1 at 114:8–20, 121:8–25 (Good). A number

of the links that were live on the actual website were not

live in Dr. Good's UX version (meaning that nothing would

happen when those links were clicked). Id. at 114:16–20,

121:8–126:14; see also generally Ex. 1052.

Dr. Erdem claimed that the results of her survey could be

generalized to draw conclusions about other versions of the

website beyond the one she tested. Tr. Vol. 6 at 956:3–

957:15, 986:1–995:25. She testified that she would “expect”

the results to be the same for other versions of the website, but

she did not test any other versions. Tr. Vol. 6 at 1003:16–23.

In the Old Flow, to complete a purchase, consumers would

navigate through a landing page, programming package

selection page, receiver selection page, a shopping cart

page, and several checkout pages. See Ex. 1045; see also

Ex. 2033 at .pdf p. 2 (Landing Page), 5–8 (Programming

Package Selection Page), 28 (Receiver Selection Page), 47–

49 (Shopping Cart Page), 107 (Checkout Page: Installation

Address), 111 (Checkout Page: Account Info), 112 (Checkout

Page: Billing Address), and 121–123 (Confirmation Page).

*20 Based on a facial review of the Old Flow, the Court

cannot say conclusively at this stage that the FTC has failed

to prove that this version of the website could create a net

impression that was likely to deceive a consumer acting

reasonably under the circumstances. In the Old Flow, on the

landing page of the website, near the introductory discounted

price, DIRECTV disclosed that the discounted price was for

12 months and required a 24-month agreement, see Ex. 2033

at 1; Dkt. No. 370 (“Tr. Vol. 3”) at 510:7–10 (Poling-Hiraldo).

However, other significant details only became visible if

the prospective customer moused over a small info hover,

PUBLIC

labeled only “Offer Details,” at the bottom of the landing

page under the “View All Packages” button. See Ex. 2033 at

2 (disclosures that all offers require a 24-month agreement,

the amount of the discount for the first 12 months, and the

$20/month early cancellation fee appeared only behind info

hover).

When a prospective customer clicked the “View All

Packages” button and provided her zip code, she would move

to the package selection page. Id. at 3–4. On that page, near

the introductory discounted price, DIRECTV disclosed that

the discounted price was for 12 months with a 24-month

agreement, and disclosed the regular package price, see Ex.

2033 at 4.

On the bottom of each of the package selection page, receiver

selection page, and cart page, DIRECTV disclosed that

all offers require a 24-Month Agreement, next to a blue

“Additional Offer Details” hyperlink, see Ex. 2033 at 7, 48,

92; Tr. Vol. 3 at 511:17–512:11 (Poling-Hiraldo).

 © 2022 Thomson Reuters. No claim to original U.S. Government Works. 17
FEDERAL TRADE COMMISSION | OFFICE OF THE SECRETARY | FILED 9/8/2022 | Document No. 605552 | PAGE Page 103 of 118 * PUBLIC *; 

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Federal Trade Commission v. DIRECTV, Inc., Not Reported in Fed. Supp. (2018)

2018 WL 3911196, 2018-2 Trade Cases P 80,489

PUBLIC

In the Cart, under a “Premium Channels” header, DIRECTV

disclosed the regular price of the premium channels in black,

Again, however, significant details appeared only if a

prospective customer clicked the blue “Additional Offer

Details” link on the package selection page, receiver selection

page, and cart page. Clicking this link led users to a light

box (i.e., a textbox overlay that appeared on the same page

and dimmed the background, Tr. Vol. 1 at 84:10–14 (Stahl);

Tr. Vol. 3 at 451:10–15 (Mandel) ) containing a long list of

details about the offer, including that the customer had to call

to change or cancel the premium channels after three months

or be charged the then-prevailing rate; the regular cost of

the premium channels for three months; the regular package

prices; the 24-month agreement; and the $20/month early

cancellation fee, see Ex. 2033 at 23-26; Tr. Vol. 3 at 512:12–

513:25 (Poling-Hiraldo). While this box is titled “Additional

Information,” much of this information is actually central to

a potential customer's ability to evaluate and understand the

terms of the subscription.

At the top of the shopping cart page, DIRECTV disclosed

the regular package price in black, and the first year discount

immediately underneath it, in green, as a bill credit labeled

for “Months 1-12,” see Ex. 2033 at 50. On the cart page,

immediately next to the package, the website included blue

language reading “What is my agreement?” Id. at 49. A

prospective customer who clicked on this language would see

a box reading “You agree to maintain DIRECTV service with

any base package of $29.99/mo. or above for 24 consecutive

months.” Id.; Tr. Vol. 3 at 514:23–515:12, 516:15–21 (PolingHiraldo).18

*21 At the top of the Cart, next to the “Package &

Programming” header, DIRECTV provided a “View Monthly

Cost” tab that opened a chart showing all costs for each of

the 24 months in six month blocks, including that the regular

price of the premium channels would be billed starting in

month four, and that the regular package price would be billed

starting in month 13, see 2033 at 78–79; Tr. Vol. 3 at 514:1–

22, 518:17–519:4 (Poling-Hiraldo).

and immediately underneath them, in green, a bill credit

labeled: “FREE for 3 months: HBO, SHOWTIME, STARZ,

and Cinemax”, see Ex. 2033 at 59. Again, the disclosure that

the customer must call to cancel the premium channels after

three free months or be charged the then-prevailing rate only

appeared if the prospective customer moused over an info

hover next to the premium channel bill credit in the shopping

cart on the cart page. See Ex. 2033 at 58; Tr. Vol. 3 at 517:10–

20 (Poling-Hiraldo).

Finally, on the checkout page of the Old Flow, before

the consumer could place an order and transmit financial

information to DIRECTV, the consumer was required to

affirmatively click the orange button affirming: “I Accept.

Submit My Order.” Ex. 2033 at 111. Next to the orange button

was a blue hyperlink labeled “By clicking ‘Submit Order’ I

agree to these Terms & Conditions.” Id. Clicking on this link

brought up a light box that detailed the 24-month agreement

and the $20/month early cancellation fee. See Ex. 1021 at

124-25; Tr. Vol. 3 at 519:5–15 (Poling-Hiraldo).

It was technically possible for a consumer to proceed through

the entire purchase process without ever clicking or hovering

over any of the hyperlinks or symbols described above. See

Ex. 1060 at 0:01–5:20, Ex. 1069 at 0:01–5:21; Tr. Vol. 9 at

1482:22–1483:3, 1513:11–1514:15 (Leever).

ii. Section 5

Based on a facial review of the Old Flow website, as well as

the evidence introduced at trial, the Court will defer a finding

as to what net impression that website would leave with

a consumer acting reasonably. The manner in which some

key terms were presented behind hyperlinks, info hovers and

tool tips leaves the Court unable to conclude at this stage

that judgment on partial findings is appropriate. The Court

likewise defers this analysis as to the other versions of the

website placed in evidence by the FTC.19

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iii. ROSCA

*22 ROSCA prohibits certain methods of negative option

marketing on the Internet. A “negative option feature” is “an

offer or agreement to sell or provide any goods or services, a

provision under which the customer's silence or failure to take

an affirmative action to reject goods or services or to cancel

the agreement is interpreted by the seller as acceptance of

the offer.” 16 C.F.R. § 310.2(w). ROSCA prohibits charging

consumers for goods or services in Internet transactions

through a negative option feature, unless the seller “provides

text that clearly and conspicuously discloses all material terms

of the transaction before obtaining the consumer's billing

information.” 15 U.S.C. § 8403(1). Additionally, ROSCA

requires sellers to obtain a “consumer's express informed

consent before charging the consumer's credit card, debit

card, bank account, or other financial account for products or

services through such transaction.” Id. § 8403(2).

Consistent with the above discussion of the Old Flow, the

Court will defer ruling on this claim until the close of the

evidence. The Court is not in a position to conclude on the

record presented thus far that the FTC cannot meet its burden,

given the manner in which information about the negative

option feature appeared on the website behind hyperlinks,

info hovers or tool tips. This decision to defer ruling until the

close of the evidence applies to all versions of the website in

existence in 2011 or later that were introduced in evidence by

the FTC.20

E. Remedy

Because the Court has granted Defendant's motion for

partial findings to the extent the FTC's case is based

on anything other than Defendant's website, the scope of

the maximum potential recovery in this case has been

substantially curtailed.21 Even in the event the FTC might

eventually be able to prevail on what remains of the case (a

question the Court need not answer at this stage), the Court

believes that there are a number of problems with the FTC's

equitable relief theories that suggest it will have difficulty

meeting its burden of providing an adequate basis for the

relief it seeks.

The Ninth Circuit has held that § 13(b) of the FTC Act

empowers the Court to award “any ancillary relief necessary

to accomplish complete justice, including restitution” and

injunctive relief. Commerce Planet, 815 F.3d at 598 (citing

F.T.C. v. Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir. 1994)

). This holding was premised on the principle that “[t]he

equitable jurisdiction to enjoin future violations of § 5(a)

carries with it the inherent power to deprive defendants of

their unjust gains from past violations....” Commerce Planet,

815 F.3d at 599. The Ninth Circuit has adopted a two-step

approach to determining the amount of unjust gains. Under

the first step, “the FTC bears the burden of proving that

the amount it seeks in restitution reasonably approximates

the defendant's unjust gains.” Commerce Planet, 815 F.3d at

603. In Commerce Planet, the Ninth Circuit held that unjust

gains in a case like that one are “measured by the defendant's

net revenues (typically the amount consumers paid for the

product or service minus refunds and chargebacks), not by the

defendant's net profits.” Id. If the FTC makes this showing,

at the second step “the burden then shifts to the defendant

to show that the FTC's figures overstate the amount of the

defendant's unjust gains.” Id. at 604. “[T]he purpose of such

an award is to prevent the defendant's unjust enrichment by

recapturing the gains the defendant secured in a transaction.”

Id. at 603 (quotation omitted).

Here, the Court has significant questions about the FTC's

ability to prove that the amount it seeks in restitution

reasonably approximates the Defendant's unjust gains, even

if it prevails to some extent with regard to its Section

5 claim based on the website. Expert witness Dr. Daniel

Rascher testified in support of the FTC's claim that $3.95

billion represents “a reasonable estimate (under Commerce

Planet ) of the unjust gains DIRECTV collected from

consumers.” Dkt. 337 at 11. To calculate this amount, Dr.

Rascher examined customer billing data for certain types of

programming packages identified by the FTC. Tr. Vol. 10 at

1552:5–10, 1554:11–17. He then calculated an estimate of

unjust gains related to second year pricing, Tr. Vol. 10 at

1599:09–1600:07 ($3.68 billion); Ex. 1321, and the premium

channel offer, Tr. Vol. 10 at 1605:12–16 ($268 million); Ex.

1322.22

*23 Dr. Rascher testified that he calculated DIRECTV's

“unjust gains” based on the assumption that “all DIRECTV

subscribers ... thought they would pay the same amount in

the second year as they paid in the first,” Tr. Vol. 10 at

1630:15–20 (emphasis added), and that he applied “that same

kind of presumption” with respect to unjust gains for the

premium channel offer, id. at 1681:11–25. He thus presumed

that all DIRECTV subscribers in his approximation of unjust

gains were misled, and that they were all misled in the same

way. Dr. Rascher testified that he was instructed that the

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FTC would prove what DIRECTV customers “thought” or

“believed” their deal with DIRECTV to be and thus supply

the core predicate for his analysis. Tr. Vol. 10 at 1616:13–

18, 1618:08–25 (Rascher). Dr. Rascher testified that the FTC

advised him that he could “presume reliance,” which he said

he then “operationalized” as a presumption that all subscribers

purchased DIRECTV service with the “expectation” that the

second-year price would be the same as the first year price

(and he adopted similar presumptions as to the other terms at

issue). Tr. Vol. 10 at 1554:5–1556:6.

The Court acknowledges the Ninth Circuit's holding that

once the FTC proves a defendant made widely-disseminated

material misrepresentations, it is “entitled to a presumption

that all consumers who purchased [defendant's product] did so

in reliance on the misrepresentations.” Commerce Planet, 815

F.3d at 604 (citing F.T.C. v. Figgie Int'l, 994 F.2d 595, 605-06

(9th Cir. 1993) ).23 But here, the Court believes the FTC has

an uphill climb to prove its “expectation” theory, because

it will be difficult to establish based on the presentation of

various terms in several different iterations of Defendant's

website that a reasonable consumer uniformly would expect

to pay the same price in year two that she paid in year one,

as Dr. Rascher assumed. See Tr. Vol. 10 at 1555:08–16 (to

determine the price that a customer would pay in the butfor world, Dr. Rascher simply used the price the customer

had paid in the first year based on the billing data). In other

words, Dr. Rascher simply presumed that customers had an

expectation that they would pay the same introductory price

for two years, based only on an instruction from the FTC.

Id. at 1618:08–25, 1667:02–09 (Rascher). The Court believes

that this issue, and the breadth of the FTC's interpretation of

the “presumption of reliance,” creates a significant possibility

that at the close of the evidence the FTC will be unable to

establish a reasonable approximation of damages, or that its

approximation will be substantially or even entirely rebutted

by the Defendant. In any event, the Court will confront this

concern if the FTC is able to prove liability as to what remains

of its case.24

V. CONCLUSION

Accordingly, the Court GRANTS IN PART Defendant's

motion for judgment on partial findings. To the extent the

motion is not granted, the Court declines to enter judgment

until the close of the evidence.

The Court SETS a case management conference for

September 4, 2018 at 2:00 p.m. to discuss (1) a schedule and

plan for completing what remains of the trial; and (2) whether

the parties believe that renewed settlement discussions would

be productive in light of the Court's findings and conclusions.

IT IS SO ORDERED.

All Citations

Not Reported in Fed. Supp., 2018 WL 3911196, 2018-2 Trade

Cases P 80,489

Footnotes 

1 DIRECTV was acquired by AT&T Inc. on July 24, 2015. See Dkt. No. 337 at 17. 

2 Defendant contends, citing two out-of-circuit district court cases, that “courts have consistently held that, where it is not 

reasonably clear from the face of the advertisement that reasonable consumers take away the alleged implied false 

message, extrinsic evidence is required to prove deception.” Dkt. No. 396 at 6 (citing United States v. Bayer Corp., 2015 

WL 5822595 at *11 and *13 (D.N.J. Sept. 24, 2015) and F.T.C. v. Nat'l Urological Grp., Inc., 645 F.Supp.2d 1167, 1193 

(N.D. Ga. 2008) (internal quotation marks omitted) ). Neither the Ninth Circuit nor any district court in this circuit has 

construed the requirements of the FTC Act in the manner Defendant urges, and the Court does not find these cases 

persuasive on this issue. 

3 Dr. Erdem testified that she reviewed “exactly 116 print ads” in detail. Tr. Vol. 6 at 934:22–935:2. At the Court's request, 

the parties submitted a stipulation listing the trial exhibit number for each of the items reviewed by Dr. Erdem, which 

included 119 print advertisements. Dkt. No. 393. 

This exhibit was admitted by stipulation. Dkt. No. 391. The parties' joint exhibit list describes it as “2013 print ad, offer 

ends 10/02/2013, ‘Best Offer Ever.’ ” Dkt. No. 353-1 at 34. 

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5 The Court notes for clarity of the record that the reproduction of Exhibit 244 in this order is substantially smaller than the 

actual size of the advertisement as it was distributed to potential consumers in paper form. See Exhibit 2026A (paper 

version of the advertisement measuring approximately 8.5# by 11#). The resolution of the original Exhibits 244 and 2026A 

is also substantially clearer than the resolution of the reproduction in this order. The Court has inserted a reproduction of 

Exhibit 244 simply to provide context for this order's narrative description of the advertisement's content. 

6 Brad Bentley, who has served as a sales and marketing executive at DIRECTV and then at its parent company AT&T 

for 17 years, referred to the section at the bottom of the advertisement as the “offer details” section. Tr. Vol. 2 at 217:9– 

230:25, 238:23–239:3, 265:22–266:3. 

7 As noted above, Exhibit 244 disclosed the then-current promotional price for each package. The FTC argues that “no 

DIRECTV print ad in evidence stated the actual price a consumer would pay during the second year of the 24-month 

contract because the regular price is subject to change.” Dkt. No. 401 at 6. The uncontradicted evidence at trial explained 

why: DIRECTV could not know in advance what the second-year price would be, because it had to take into account 

consistent increases in its own cost structure before it could set that figure. See Tr. Vol. 3 at 406:20–407:6 (Bentley). 

DIRECTV's costs to obtain content rose from 8 to 10 percent annually over a three year period, but the company could 

only pass on a 3 to 5 percent increase to its customers for business reasons. Id. at 331:1–333:5 (Bentley). The evidence 

at trial also established that annual price increases occur across the pay television industry. Id. at 333:12–20. 

8 FTC counsel used a slide deck as a demonstrative visual aid during Dr. Erdem's testimony. See, e.g., Tr. Vol. 6 at 938:22– 

24 (referring to “slide 47”). The FTC submitted the slide deck as “Attachment A” to its proposed findings of fact, and 

Dr. Erdem's control and test versions of the Exhibit 244 print advertisement as “Attachment B” to that filing. Dkt. Nos. 

401-2 and 401-3. However, the FTC never actually introduced the control and test stimuli in evidence, which it appears 

to recognize by attempting to submit this material as an “attachment” to its proposed findings. See Dkt. No. 401-2 at 

44 (depicting “Modifications to Original DIRECTV Print Ad” by showing original and treatment versions side by side, 

and referencing “Trial Exhibit 913”). Exhibit 913 was not offered for admission at trial, nor was it included in any of the 

parties' stipulations. Accordingly, the Court bases its analysis on the testimony Dr. Erdem offered at trial and the Court's 

recollection of the demonstrative slides, and rejects the FTC's apparent (and unacknowledged) attempt to supplement 

the record after the close of the evidence. 

9 Because all that was entered in evidence was the URL links, rather than an actual electronic copy of the survey, it is 

unclear how the FTC intends to preserve the evidence presented at trial for the record. 

10 No witness testified to how this exhibit, which was admitted by stipulation, see Dkt. No. 391, was laid out in the document 

potential DIRECTV customers actually saw. 

11 The evidence at trial established that this single 2013 advertisement would have resulted in only about 300 subscriptions, 

and even fewer activations. Tr. Vol. 2 at 323:13–16 (Bentley). 

12 As one example of the FTC's tendency to gloss over pertinent details, counsel in opening statement highlighted an 

advertisement from 2007 and asked “Where does it say what the higher second year price will be?” Tr. Vol. 1 at 11:12– 

13 (referencing and displaying Ex. 84). But the evidence ultimately established, without contradiction, that this offer did 

not require a two-year commitment, and that it contained standard rather than promotional pricing. Tr. Vol. 2 at 345:3– 

25 (comparing Ex. 84 to Ex. 617 (timeline of offers) ) (Bentley). 

13 This conclusion applies with even more force to the television commercials. Those commercials plainly differ in content, 

purpose, approach and format from print ads, and often relied primarily on overt humor to attract viewers' attention and 

interest them enough to call a toll-free number or visit the website to learn more. See Tr. Vol. 5 at 872:7–875:7 (testimony 

of former DIRECTV executive Jon Gieselman explaining that commercials focused on different main messages, with the 

main “proof points” being “technology superiority, programming superiority [and] customer service superiority”); Ex. 443 

(television commercial featuring a talking horse discussing benefits of DIRECTV); Tr. Vol. 2 at 260:13–18, 266:4–16 (the 

purpose of DIRECTV's advertisements was to “create some interest and start a dialogue by motivating the consumers 

to pick up the phone and call DIRECTV or to go on the DIRECTV website,” which is colloquially known as the “call to 

action” in DIRECTV's advertising) (Bentley). 

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14 The FTC played excerpts of Mr. Hellstrom's deposition at trial. Dkt. No. 387 (“Tr. Vol. 7”) at 1221:5–8. 

15 This conclusion applies equally to the “click-tracking studies” introduced by the FTC. See, e.g., Ex. 347; Tr. Vol. 8 at 

1340:6–9 (Pratkanis). A survey participant's response to an invitation to “click on the three parts of the [advertisement] 

that are most compelling to you,” Ex. 347 at slide 30, simply is not probative of whether the advertisement was likely to 

leave a reasonable consumer with a misleading net impression. 

16 DIRECTV witnesses testified that, due to upfront “subscriber acquisition costs” approaching $1,000 per subscriber, the 

company does not break even until, on average, a customer remains on the platform for 28 to 30 months. Tr. Vol. 2 at 

330:3–6 (Bentley); Tr. Vol. 8 at 881:25-882:2 (Gieselman). This means that it is “absolutely paramount” to DIRECTV's 

business model to retain the average customer for longer than the break-even point. Tr. Vol. 2 at 347:24–348:14 (Bentley). 

17 “Net Promoter Score,” or “NPS,” is a calculation of promoters (consumers who are satisfied or would recommend 

a service) minus detractors (consumers who are dissatisfied or would not recommend a service), the sum of which 

measures customer satisfaction. Tr. Vol. 3 at 363:12–364:11 (Bentley); Ex. 571 at 2. NPS is not a metric unique to 

DIRECTV; rather, it is a “self-critical” standardized metric that can be compared within and across industries. Tr. Vol. 

3 at 364:6–11 (Bentley). 

18 DIRECTV referred to this mechanism as a “tool tip.” A tool tip is a method DIRECTV used to disclose additional information 

on the same webpage when the consumer clicked on a prompt or icon signaling there was additional information (e.g., 

a blue “i” enclosed in a circle). Tr. Vol. 3 at 515:24–25, 516:7–11 (Poling-Hiraldo). Unlike a hyperlink, a tool tip does not 

redirect a user to another webpage. Id. at 516:7–11. 

19 DIRECTV's web flow underwent two major redesigns during the relevant time period. The design that existed until late 

2009 was referred to as the “Wizard Flow.” In late 2009, the Old Flow replaced the Wizard Flow, and the “New Flow” 

completely replaced the Old Flow in 2014. Tr. Vol. 4 at 683:17–684:4 (Poling-Hiraldo); Tr. Vol. 9 at 1448:12–20 (Leever). 

The New Flow was publically split-tested with the Old Flow from January to July of 2014. During that period, some 

consumers were directed to the Old Flow, and some were directed to the New Flow. Tr. Vol. 9 at 1493:7–1494:2 (Leever). 

After more than a year of development, the New Flow took over 100% of prospect traffic in July 2014. Tr. Vol. 9 at 

1486:21–1487:5 (Leever). The Wizard Flow, Old Flow, and New Flow differed significantly with respect to, among other 

things: the design and layout of information (e.g., whether the packages were presented vertically or horizontally); the 

number and placement of hyperlinks, tool tips, or info hovers that DIRECTV used to disclose information about its offers 

and product; and the icons and prompts signaling those hyperlinks, tool tips, or info hovers. Compare Ex. 1000 (9/4/09 

Wizard Flow), with Ex. 2033 (8/13 Old Flow), with Ex. 1065 (9/17/15 New Flow); see also Tr. Vol. 9 at 1448:22–1451:21 

(Leever). DIRECTV's web flow designs also differed with respect to the flow of webpages. For example, in the New Flow, 

between the package selection step and the receiver selection step, the consumer was directed to a “Choose add-on 

packages” step that was not in the Old Flow. At the top of this step, DIRECTV provided information and disclosures 

regarding the free premium channels offer. See Ex. 1065 at 10:58–11:14 (9/17/15 capture). 

20 ROSCA was enacted on December 29, 2010. 

21 See Tr. Vol. 9 at 1441:23–1442:15 (only approximately 20% of direct sales subscribers either subscribed via 

DIRECTV.com or subscribed via a phone number that indicated they started the subscription process on the website) 

(Leever). 

22 Dr. Rascher had never previously testified in a false advertising case before this trial. Tr. Vol. 10 at 1608:9–11. 

23 Defendants cite the Second Circuit's decision in F.T.C. v. Verity Int'l, 443 F.3d 48, 69 (2d Cir. 2006), in support of 

its argument that no presumption of reliance applies here. Dkt. No. 396 at 23. The Ninth Circuit has never adopted 

the reasoning of Verity, and in fact distinguished that case in an unpublished memorandum disposition. See F.T.C. v. 

Publishers Bus. Svcs., 540 Fed. Appx. 555, 556–557 (9th Cir. 2013) (reversing as inconsistent with Ninth Circuit law 

district court's holding, relying in part on Verity, that defendants' gain rather than consumers' loss was proper measure 

of equitable damages). 

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24 The Court will also have to consider whether injunctive relief is warranted, and assess the appropriate measure of recovery 

under ROSCA if the FTC proves that claim. 

End of Document © 2022 Thomson Reuters. No claim to original U.S. 

Government Works. 

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 2009 FTC LEXIS 86 

Federal Trade Commission 

April 20, 2009 

DOCKET NO. 9329 

Reporter

 2009 FTC LEXIS 86 * 

In the Matter of DANIEL CHAPTER ONE, a corporation, and JAMES FEIJO, 

Respondents 

Subsequent History: 

Motion denied by In re Daniel Chapter One, 2009 FTC LEXIS 87 (F.T.C., Apr. 20, 2009) 

Prior History: 

In re Daniel Chapter One, 2009 FTC LEXIS 85 (F.T.C., Apr. 20, 2009) 

Action 

[*1] 

ORDER ON COMPLAINT COUNSEL'S MOTION IN LIMINE TO PRECLUDE RESPONDENTS FROM 

INTRODUCING AT TRIAL EVIDENCE OF PURPORTED CONSUMER SATISFACTION AS A DEFENSE TO 

LIABILITY 

Administrative Law Judge-Decision 

D. Michael Chappell, Administrative Law Judge 

Order 

ORDER ON COMPLAINT COUNSEL'S MOTION IN LIMINE TO PRECLUDE RESPONDENTS FROM 

INTRODUCING AT TRIAL EVIDENCE OF PURPORTED CONSUMER SATISFACTION AS A DEFENSE TO 

LIABILITY 

I. 

On March 16, 2009, pursuant to the Scheduling Order in this case, Complaint Counsel submitted a Motion In Limine 

and Memorandum to Preclude Respondents from Introducing at Trial Evidence of Purported Consumer Satisfaction 

as a Defense to Liability ("Motion"). Respondents submitted their Opposition to the Motion on March 26, 2009 

("Opposition"). 
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Having fully considered all arguments in the Motion and Opposition, and as further discussed below, the Motion is 

GRANTED in part and DENIED in part. 

II. 

A. Generally Applicable Standards 

The admission of relevant evidence is governed by Commission Rule 3.43, which states in part: Relevant, material, 

and reliable evidence shall be admitted. Irrelevant, immaterial, and unreliable evidence shall be excluded. 16 C.F.R. 

§3.43(b)(1). [*2] Evidence, even if relevant, may be excluded if its probative value is substantially outweighed by 

the danger of unfair prejudice, confusion of the issues, or if the evidence would be misleading, or by considerations 

of undue delay, waste of time, or needless presentation of cumulative evidence. 16 C.F.R. §3.43(b)(1). See also In 

Re Telebrands Corp., Docket No. 9313, 2004 FTC LEXIS 270, at *2 (April 26, 2004). 

"Motion in limine" refers "to any motion, whether made before or during trial, to exclude anticipated prejudicial 

evidence before the evidence is actually offered." Luce v. United States, 469 U.S. 38, 40 n.2, 105 S. Ct. 460, 83 L. 

Ed. 2d 443 (1984); see also In re Motor Up Corp., Docket 9291, 1999 FTC LEXIS 207, at *1 (August 5, 1999). 

Although the Federal Rules of Evidence do not explicitly authorize in limine rulings, the practice has developed 

pursuant to the court's inherent authority to manage the course of trials. Luce, 469 U.S. at 41 n.4. The practice has 

also been used in Commission proceedings. E.g., In re Telebrands Corp., Docket 9313, 2004 FTC LEXIS 270 (April 

26, 2004); In re Dura Lube Corp., Docket 9292, 1999 FTC LEXIS 252 [*3] (Oct. 22, 1999). 

Motions in limine are generally used to ensure evenhanded and expeditious management of trials by eliminating 

evidence that is clearly inadmissible. Bouchard v. American Home Products Corp., 213 F. Supp. 2d 802, 810 (N.D. 

Ohio 2002); Intermatic Inc. v. Toeppen, No. 96 C 1982, 1998 U.S. Dist. LEXIS 15431, at *6 (N.D. Ill. Feb. 28, 1998). 

Evidence should be excluded on a motion in limine only when the evidence is clearly inadmissible on all potential 

grounds. Hawthorne Partners v. AT&T Technologies, Inc., 831 F. Supp. 1398, 1400 (N.D. Ill. 1993); see also Sec. 

Exch. Comm'n v. U.S. Environmental, Inc., No. 94 Civ. 6608 (PKL)(AJP), 2002 U.S. Dist. LEXIS 19701, at *5-6 

(S.D.N.Y. October 16, 2002). Courts considering a motion in limine may reserve judgment until trial, so that the 

motion is placed in the appropriate factual context. U.S. Environmental, 2002 U.S. Dist. LEXIS 19701, at *6; see, 

e.g., Veloso v. Western Bedding Supply Co., Inc., 281 F. Supp. 2d 743, 750 (D.N.J. 2003). In limine rulings are not 

binding on the trial judge, and the judge may change [*4] his mind during the course of a trial. Ohler v. United 

States, 529 U.S. 753, 758 n.3, 120 S. Ct. 1851, 146 L. Ed. 2d 826 (2000); Luce, 469 U.S. at 41 (stating that a 

motion in limine ruling "is subject to change when the case unfolds, particularly if the actual testimony differs from 

what was contained in the defendant's proffer"). "Denial of a motion in limine does not necessarily mean that all 

evidence contemplated by the motion will be admitted at trial. Denial merely means that without the context of trial, 

the court is unable to determine whether the evidence in question should be excluded." Noble v. Sheahan, 116 F. 

Supp. 2d 966, 969 (N.D. Ill. 2000); Knotts v. Black & Decker, Inc., 204 F. Supp. 2d 1029, 1034 n.4 (N.D. Ohio 

2002). 

B. Arguments of the Parties 

Complaint Counsel states that Respondents' exhibit list includes a section on "testimonials," and includes 34 such 

documents. See Respondents' Final Proposed Exhibit List, pp. 1-2, Exhibits R8-a through R8-ah. Complaint 

Counsel also points to Respondents' witness list, which includes a category of witnesses expected to testify: "With 

regard to their belief about their experience [*5] with DCO [Daniel Chapter One] products..." See Respondents' 

Final Proposed Witness List, pp. 4-5. Complaint Counsel also challenges certain of Respondents' proposed 

witnesses who are expected to testify "with regard to the operation of the Daniel Chapter One Ministry, including the 

collection and dissemination of information and the management of ministry programs." Respondents' Final 

Proposed Witness List, pp. 2-4. Complaint Counsel contends that despite the general language used to describe 

the testimony, the specific descriptions of certain witnesses' testimony include "testimonial" evidence about how the 

products have affected their lives, or the lives of others of which the witness is aware. Motion, pp. 2-3 and n.3. 
 

 

 

 

 

 

 

 

 

 

 

 

 

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2009 FTC LEXIS 86, *5

Complaint Counsel contends that evidence of consumer satisfaction is irrelevant to whether a violation of the FTC 

Act occurred. Complaint Counsel further argues that consumer satisfaction evidence is not necessary as "extrinsic 

evidence" to prove the meaning of Respondents' advertisements at issue, because the meaning is sufficiently clear 

on the face of the ads. Finally, Complaint Counsel asserts that the evidence should be excluded prior to trial 

because consumer [*6] testimonials do not constitute adequate substantiation for health-related efficacy claims, 

which require competent and reliable scientific evidence. 

Respondents state that none of the exhibits or witnesses to which Complaint Counsel objects is offered for the 

purpose of showing consumer satisfaction or substantiation, but for other matters. Opposition, pp. 2-3. 

Respondents contend that at least some of the challenged testimony is being offered to show that DCO is a ministry 

and that those who listen to their programs, access the website, and use the products are "members of a unique 

religious constituency," Opposition, p. 2, with a common religious orientation and view of health and healing, based 

in the Bible. Opposition, p. 4. According to Respondents, Complaint Counsel's proposed in limine order is 

overbroad, because it would preclude broad categories of evidence that may be relevant to other issues, such as: 

(1) whether DCO is an non-profit entity that is exempt from the FTC Act; (2) what impression Respondents' 

messages about their products conveyed to members of their community, at whom Respondents assert their 

messages were directed; and (3) as to at least one witness, [*7] whether Respondents authored certain 

representations on the DCO website. 

III. 

Evidence of customer satisfaction is not relevant to determining whether the claims made are deceptive. Fed. Trade 

Comm'n v. Amy Travel Serv., Inc., 875 F.2d 564, 572 (7th Cir. 1989) ("the existence of [satisfied] customers is not 

relevant to determining whether consumers were deceived and the magistrate was correct to exclude [such 

evidence]"); In re Horizon Corp., 97 F.T.C. 464, 1981 FTC LEXIS 47, at *37 (May 15, 1981) (stating: "It is not a 

defense to a charge of deception under Section 5 that some customers were satisfied with the product."). See also 

Independent Directory Corp. v. Fed. Trade Comm'n, 188 F.2d 468, 471, 47 F.T.C. 1821 (2d Cir. 1951) (holding that 

evidence of consumer satisfaction was properly excluded because "[t]he fact that petitioners had satisfied 

customers was entirely irrelevant"). 

Moreover, non-scientific, consumer testimonials of product effectiveness are generally considered inadequate 

substantiation. Fed. Trade Comm'n v. QT, Inc., 512 F.3d 858, 862 (7th Cir. 2008); Fed. Trade Comm'n v. Natural 

Solution, Inc. [*8] , Case No. CV 06-6112-JFW (JTLx), 2007 U.S. Dist. LEXIS 60783, at *15 (C.D. Cal. Aug. 7, 

2007); In re Warner-Lambert Co., 86 F.T.C. 1398, 1496 (1975), aff'd, 183 U.S. App. D.C. 230, 562 F.2d 749 (D.C. 

Cir. 1977) (stating: "Since there may be a divergence between what the user thinks the product will do for him and 

what the product actually does (or does not do), evidence of consumer beliefs has little probative value for 

determining whether" a product works in the manner claimed). 

Respondents state "none of the written testimonials or witnesses to which Complaint Counsel objects is offered for 

the purpose of 'introducing evidence of satisfied consumers to show the claims were not deceptive and evidence of 

consumer testimonials to show the claims were not unsubstantiated.'" Respondents' Opposition, p. 2. Accordingly, 

such evidence may not be offered for those purposes. However, it cannot be presumed, without the context of trial 

and a specific proffer of evidence, that all the proposed evidence referred to in Complaint Counsel's Motion and 

Respondents' Opposition is inadmissible on all potential grounds. 

Having fully considered all arguments in the Motion and [*9] Opposition, Complaint Counsel's Motion is GRANTED 

to the extent that Respondents seek to introduce evidence of satisfied consumers to show the claims were not 

deceptive and evidence of consumer testimonials to show the claims were not unsubstantiated. In all other 

respects, the Motion is DENIED. Other than the evidence which is being precluded herein, this Order shall not be 

construed as a ruling on the admissibility of evidence that may be proffered at trial. 

ORDERED: 

D. Michael Chappell 
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 2009 FTC LEXIS 86, *9

Administrative Law Judge 

Date: April 20, 2009 

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2017 WL 7792718

Only the Westlaw citation is currently available.

United States District Court, S.D. Florida.

NR GROUP 3 CONTRACTORS,

INC., Plaintiff,

v.

GROUP 3 CONTRACTORS, LLC, Gianni

Corradi, and Gaston Corradi, Defendants.

Case No. 17-21945-Civ-SCOLA/TORRES

|

Signed 09/26/2017

Attorneys and Law Firms

Brian W. Toth, Lauren Vanessa Lopez, Scott Daniel Ponce,

Holland & Knight, Miami, FL, for Plaintiff.

Jennifer Nicole Hernandez, Avila Rodriguez Hernandez

Mena & Ferri LLP, Coral Gables, FL, for Defendants.

REPORT AND RECOMMENDATION ON

PLAINTIFF'S MOTION TO STRIKE AFFIRMATIVE

DEFENSES

EDWIN G. TORRES, United States Magistrate Judge

*1 This matter is before the Court on NR Group 3

Contractors, Inc.’s (“Plaintiff”) Motion to Strike (“Motion”)

several affirmative defenses and to treat others as denials

against Group 3 Contractors, LLC, Gianni Corradi, and

Gaston Corradi (collectively, “Defendants”). Defendants

responded on August 22, 2017 [D.E. 17] and Plaintiff replied

on August 29, 2017. [D.E. 18]. Therefore, Plaintiff's Motion

is now ripe for disposition. After careful consideration of

the Motion, response, reply, and relevant authority, and for

the reasons discussed below, Plaintiff's Motion should be

GRANTED in part and DENIED in part.

I. BACKGROUND

On May 25, 2017, Plaintiff filed a five-count complaint

asserting various claims against Defendants. [D.E. 1]. Counts

I through III relate to trademark infringement whereas Counts

IV and V relate to breaches of contract. More specifically,

Count I is for violations of section 43(a) of the Lanham

Act, 15 U.S.C. § 1125(a). Count II is a claim for trademark

infringement under Florida's common law. Count III is for

violations of Florida's Deceptive and Unfair Trade Practices

Act, §§ 501.201 et seq., Florida Statutes. Count IV is based

on Defendants' breached o the parties' agreement regarding

the payment of office expenses. And Count V is based on

the Defendants' breach of the parties' agreement regarding

payment for construction projects.

II. APPLICABLE PRINCIPLES AND LAW

A party may move to strike pursuant to Rule 12(f) of the

Federal Rules “an insufficient defense or any redundant,

immaterial, impertinent, or scandalous matter.” Fed. R. Civ.

P. 12(f). “An affirmative defense is one that admits to the

complaint, but avoids liability, wholly or partly, by new

allegations of excuse, justification or other negating matter.”

Royal Palm Sav. Ass'n v. Pine Trace Corp., 716 F. Supp.

1416, 1420 (M.D. Fla. 1989) (citing Fla. East Coast Railway

Co. v. Peters, 72 Fla. 311 (Fla. 1916) ). Thus, affirmative

defenses are pleadings, and as a result, must comply with all

the same pleading requirements applicable to complaints. See

Home Management Solutions, Inc. v. Prescient, Inc., 2007

WL 2412834, at *1 (S.D. Fla. Aug. 27, 2007). Affirmative

defenses must also follow the general pleading standard

of Fed R. Civ. P. 8(a), which requires a “short and plain

statement” of the asserted defense. See Morrison v. Executive

Aircraft Refinishing, Inc., 434 F. Supp. 2d 1314, 1318 (S.D.

Fla. 2005). A defendant must admit the essential facts of

the complaint and bring forth other facts in justification or

avoidance to establish an affirmative defense. See id.

“The striking of an affirmative defense is a ‘drastic remedy’

generally disfavored by courts.” Katz v. Chevaldina, 2013

WL 2147156, at *2 (S.D. Fla. May 15, 2013) (citations

omitted); see also Blount v. Blue Cross & Blue Shield of

Florida, Inc., 2011 WL 672450, at *1 (M.D. Fla. Feb. 17,

2011) (“Striking a defense ... is disfavored by the courts.”);

Pandora Jewelers 1995, Inc. v. Pandora Jewelry, LLC, 2010

WL 5393265, at *1 (S.D. Fla. Dec. 21, 2010) (“Motions to

strike are generally disfavored and are usually denied unless

the allegations have no possible relation to the controversy

and may cause prejudice to one of the parties”) (internal

quotations omitted) (quoting another source).

*2 But, a “defendant must allege some additional facts

supporting the affirmative defense.” Cano v. South Florida

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Donuts, Inc., 2010 WL 326052, at *1 (S.D. Fla. Jan. 21,

2010). Affirmative defenses will be stricken if they fail

to recite more than bare-bones conclusory allegations. See

Merrill Lynch Bus. Fin. Serv. v. Performance Mach. Sys.,

2005 WL 975773, at *11 (S.D. Fla. March 4, 2005) (citing

Microsoft Corp. v. Jesse's Computers & Repair, Inc., 211

F.R.D. 681, 684 (M.D. Fla. 2002) ). “An affirmative defense

may also be stricken as insufficient if: ‘(1) on the face of the

pleadings, it is patently frivolous, or (2) it is clearly invalid

as a matter of law.” ’ Katz, 2013 WL 2147156, at *1 (citing

Blount v. Blue Cross and Blue Shield of Fla., Inc., 2011 WL

672450 (M.D. Fla. Feb. 17, 2011) ).

“Furthermore, a court must not tolerate shotgun pleading of

affirmative defenses, and should strike vague and ambiguous

defenses which do not respond to any particular count,

allegation or legal basis of a complaint.” Morrison v. Exec.

Aircraft Refinishing, Inc., 434 F. Supp. 2d 1314, 1318 (S.D.

Fla. 2005). An affirmative defense should only be stricken

with prejudice when it is insufficient as a matter of law.

See Kaiser Aluminum & Chemical Sales, Inc. v. Avondale

Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982) (citing

Anchor Hocking Corp. v. Jacksonville Elec. Auth., 419 F.

Supp. 992, 1000 (M.D. Fla. 1976) ). Otherwise, district

courts may strike the technically deficient affirmative defense

without prejudice and grant the defendant leave to amend the

defense. See Microsoft Corp., 211 F.R.D. at 684.

III. ANALYSIS

Plaintiff's Motion seeks to strike Defendants' second, seventh,

eleventh, fourteenth, and seventeenth affirmative defenses.1 “

‘Affirmative defenses are ‘established only when a defendant

admits the essential facts of the complaint and sets up other

facts in justification or avoidance.’ ’ ” Helman v. Nationstar

Mortg., LLC, 2015 WL 11199691, at *1 (S.D. Fla. May 29,

2015) (quoting Will v. Richardson-Merrell, Inc., 647 F. Supp.

544, 547 (S.D. Ga. 1986) (emphasis in the original) ). “A

defense which only points to a defect in a plaintiff's case is

not an affirmative defense.” Helman, 2015 WL 11199691, at

*1 (citing In re Rawson Food Serv. Inc., 846 F.2d 1343, 1349

(11th Cir. 1988) ).

Plaintiff contends that Defendants' second affirmative defense

should be stricken because it does not allege the elements to

establish mootness. As for Defendants' seventh and eleventh

affirmative defenses, Plaintiff suggests that they should be

deemed mere denials. And finally, Plaintiff believes that

Defendants' fourteenth and seventh affirmative defenses

should either be stricken or deemed as mere denials.

A. The Second Affirmative Defense

Defendants' second affirmative defense relates to the

trademark claims in Counts I and III of Plaintiff's complaint.

Defendants argue that both Counts are moot because

Defendants have ceased use of the name “Group 3

Contractors” and that Plaintiff's allegations fail as a matter of

law:

Defendants Are Ceasing Use of the Name ‘Group 3

Contractors’. The LLC is ceasing its use of the subject

name and diminutive, i.e., ‘Group 3 Contractors’ and

‘G3C,’ without waiver of any kind and with a full

reservation of rights. Accordingly, there is no need to

further litigate the purported infringement or the requested

injunction alleged in Counts I through III of the Complaint,

as this issue is now moot.

*3 [D.E. 12]. Plaintiff takes issue with the second

affirmative defense because “[t]he doctrine of voluntary

cessation provides an important exception to the general rule

that a case is mooted by the end of the offending behavior.”

Troiano v. Supervisor of Elections in Palm Beach Cty., Fla.,

382 F.3d 1276, 1282 (11th Cir. 2004); see also United States v.

W.T. Grant Co., 345 U.S. 629, 632 (1953) (“[T]o say that the

case has become moot means that the defendant is entitled to a

dismissal as a matter of right. The courts have rightly refused

to grant defendants such a powerful weapon against public

law enforcement.”). As such, Plaintiff argues that Defendants'

qualifying language falls short of the type of representation

necessary to satisfy the doctrine of voluntary cessation and

that Defendants' second affirmative must be stricken.

However, Plaintiff is mistaken on the difference between

simply raising an affirmative defense and an attempt to

dismiss allegations in a complaint. A case is moot when it no

longer presents a case or controversy and where the court can

no longer give meaningful relief. See Sheely v. MRI Radiology

Network, P.A., 505 F.3d 1173, 1183 (11th Cir. 2007). On the

other hand, the doctrine of voluntary cessation operates as

an exception to the mootness rule in that “[a] case might

become moot if subsequent events made it absolutely clear

that the allegedly wrongful behavior could not reasonably

be expected to recur.” Friends of the Earth, Inc. v. Laidlaw

Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189 (2000) (internal

quotations omitted); accord, FTC v. Sage Seminars, Inc., 1995

WL 798938, at *6 (N.D. Cal. Nov. 2, 1995).

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At this stage of the litigation, Defendants are not attempting

to dismiss the allegations presented in Counts I and III.

They are merely raising the affirmative defense of mootness

because the facts are in dispute about whether Defendants

have ceased the offending behavior. If Defendants can later

establish that it is absolutely clear that the alleged wrongful

behavior cannot reoccur then there is the possibility that

the second affirmative defense may ultimately prevail.2

Stated differently, it is possible that the Court could find

no likelihood of recurrence and therefore deny Plaintiff's

requested injunctive relief. The second affirmative defense

is also not conclusory and is stated with sufficient clarity to

provide Plaintiff with fair notice of the defense. As such,

“[n]o further factual enhancement is necessary at the pleading

stage,” because “[b]oth parties will be afforded an opportunity

to test each other's allegations and defenses,” with respect

to the trademark infringement claims through discovery. See

Hilson v. D'more Help, Inc., 2015 WL 5308713, at *3 (S.D.

Fla. Sept. 11, 2015). Because we are merely at the pleading

stage and the second affirmative defense meets all of the

required elements under Rule 8, Plaintiff's motion to strike

the second affirmative defense should be DENIED. See, e.g.,

F.T.C. v. Hang-Ups Art Enterprises, Inc., 1995 WL 914179, at

*6 (C.D. Cal. Sept. 27, 1995) (“If defendants can establish that

they were unaware of the artworks' counterfeit nature, and that

once they became aware they ceased selling the artworks, it

is possible that the court finds no likelihood of recurrence and

denies injunctive relief. This factual issue mandates denial of

plaintiff's request to strike the twelfth affirmative defense.”)

(emphasis added).

B. The Seventh Affirmative Defense

*4 Defendants' seventh affirmative defense states that

Plaintiff has impermissibly split her contractual claims

in the complaint and that the allegations constitute a

mischaracterization of the parties' business relationship:

Impermissible Splitting of Contractual Claims. In the

Complaint, NR has impermissibly split its contract claims,

including by asserting multiple claims for breaches

of allegedly separate contracts, which amounts to a

mischaracterization. There was one business venture

between the parties, which had multiple aspects.

[DE. 12]. Plaintiff argues that the aforementioned is not an

affirmative defense and that it must be treated as a mere

denial. Plaintiff suggests it is also unaware of any cases that

recognize the splitting of contractual claims as a valid defense

to liability and that the seventh affirmative defense is merely

disguised as a defect in how Plaintiff presented its allegations.

We agree with Plaintiff that the splitting of contractual

claims is not an affirmative defense. We have not found any

case where a court has found that the mischaracterization

of a contractual breach arises to an affirmative defense.

An affirmative defense (1) admits the essential acts of the

complaint and then (2) sets up other facts in justification

or avoidance. The seventh affirmative defense is noticeably

missing both requirements. Instead, it merely points out a

mischaracterization of a contractual breach and points to a

defect in plaintiff's case. See Helman, 2015 WL 11199691, at

*1 (“A defense which only points to a defect in a plaintiff's

case is not an affirmative defense.”) (citing In re Rawson

Food Serv. Inc., 846 F.2d at 1349). As such, Plaintiff's motion

should be GRANTED and the seventh affirmative defense

should be treated as a denial because “[t]he proper remedy

when a party mistakenly labels a denial as an affirmative

defense is not to strike the claim but instead to treat it as a

specific denial.” Ramnarine v. CP RE Holdco 2009-1, LLC,

2013 WL 1788503, at *4 (S.D. Fla. Apr. 26, 2013).

C. The Eleventh Affirmative Defense

Defendants' eleventh affirmative defense states that Plaintiff's

damages are speculative. Plaintiff argues that this is not an

affirmative defense because Defendants are neither admitting

any allegations of the complaint nor pleading new facts

to explain why Defendants are not liable. Instead, Plaintiff

contends that Defendants are merely alleging that Plaintiff's

evidence on damages will be speculative and therefore

incapable of proving the damages element of Plaintiff's

claims.

As most courts have found, allegations that a plaintiff's

damages are speculative do not constitute affirmative

defenses because those statements are merely allegations

that Plaintiff has not met its burden of proof. See Taylor

v. Chase, 2016 WL 6575072, at *3 (N.D. Ind. Nov. 7,

2016) (“[A]sserting that a plaintiff's claimed damages are

speculative, vague, or even non-existent does not constitute

an affirmative defense.”) (citing Manley v. Boat/U.S. Inc.,

2016 WL 1213731, at *5 (N.D. Ill. Mar. 29, 2016) (“[S]imply

accusing [a plaintiff] of pleading vague and speculative

damages does not state an affirmative defense”); Varrasso

v. Barksdale, 2016 WL 1375594, at *2 (S.D. Cal. Apr.

5, 2016) (affirmative defense that plaintiffs' damages are

“speculative or nonexistent ... are simply allegations that

Plaintiffs did not meet their burden of proof ... [so] they

are not affirmative defenses”); Joe Hand Promotions, Inc.

v. Kurti, 2015 WL 5276691, at * (C.D. Cal. Sept. 8, 2015)

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(“[S]peculative damages, is a defense to damages, not an

affirmative defense”) ).

*5 In other words, alleging that Plaintiff's damages

are speculative is not an affirmative defense because

“[a]ffirmative defenses plead matters extraneous to the

plaintiff's prima facie case, which deny plaintiff's right to

recover, even if the allegations of the complaint are true.”

Fed. Deposit Ins. Corp. v. Main Hurdman, 655 F. Supp. 259,

262 (E.D. Cal. 1987); see also Hernandez v. Dutch Goose,

Inc., 2013 WL 5781476,*3 (N.D. Cal. 2013) (an “affirmative

defense is a defense that does not negate the elements of the

plaintiff's claim, but instead precludes liability even if all of

the elements of the plaintiff's claim are proven.”). Because

Defendants' eleventh affirmative defense states that Plaintiff's

damages are speculative, we agree that this does not constitute

a proper affirmative defense. Accordingly, Plaintiff's motion

should be GRANTED and the eleventh affirmative defense

should be treated as a denial.

D. The Fourteenth Affirmative Defense

Next, Plaintiff argues that Defendants' fourteenth affirmative

defense should be stricken, or deemed a denial, because it

alleges that Plaintiff failed to register the trademark at issue:

Failure to Register Trademark. At all material times,

NR did not have a registered trademark. The Complaint

mischaracterizes the subject name and diminutive as

purported ‘trademarks.’ NR submitted an application to

register the subject name in late 2016, after the parties'

relationship began to deteriorate. In addition, NR filed

this application without informing Defendants and in

surreptitious manner inconsistent with the duties owed by

NR under the subject business venture.

[D.E. 12]. Plaintiff contends that the fourteenth affirmative

defense fails because it is an irrelevant allegation premised

upon the legally incorrect position that the claims alleged in

the complaint require that the marks be registered.

Plaintiff suggests that neither federal nor Florida law require

that trademarks be registered to bring forth an unfair trade

practices violation. See, e.g., Planetary Motion, Inc. v.

Techsplosion, Inc., 261 F.3d 1188, 1193 (11th Cir. 2001)

(“Section 43(a) of the Lanham Act [Count I] forbids

unfair trade practices involving infringement of trade dress,

service marks, or trademarks, even in the absence of federal

trademark registration.”) (emphasis added); Rain Bird Corp.

v. Taylor, 665 F. Supp. 2d 1258, 1267 (N.D. Fla. 2009)

(holding that the “legal standards” governing federal claims

of trademark infringement and unfair competition are the

same standards applicable to claims for Florida common law

infringement (Count II) and violations of FDUTPA (Count

III) ); Tally-Ho, Inc. v. Coast Community College District, 889

F.2d 1133, 1022-23 (11th Cir. 1989) (addressing acquisition

of common law rights in a trademark). Plaintiff asserts that

the fourteenth affirmative defense must be stricken or deemed

a denial because it only attempts to negate the element of

ownership that Plaintiff must establish in connection with the

infringement claims asserted in Counts I through III. Stated

differently, Plaintiff contends that the fourteenth affirmative

defense does nothing to negate liability in this case, but only

points out a defect in the allegations presented.

We agree with Plaintiff that the failure to register a trademark

does not constitute a proper affirmative defense in this

action because it does not assist Defendants with avoiding

liability with “new allegations of excuse, justification, or

other negating matter.” Royal Palm Sav. Ass'n, 716 F. Supp.

at 1420 (citing Fla. East Coast Railway Co., 72 Fla. at 311).

Instead, the fourteenth affirmative defense is a denial of the

ownership element that plaintiffs must establish in every

trademark case. See CJ Prod. LLC v. Snuggly Plushez LLC,

809 F. Supp. 2d 127, 147 (E.D.N.Y. 2011) (“[I]n a trademark

case, plaintiffs must establish their ownership of the mark in

question.”) (citing Pan Am. World Airways, Inc. v. Flight 001,

Inc., 2007 WL 2040588, at *3–4 (S.D.N.Y. July 13, 2007) ).

Accordingly, Plaintiff's motion should be GRANTED and the

fourteenth affirmative defense should be deemed a denial of

Plaintiff's ownership of the trademarks in question.

E. The Seventeenth Affirmative Defense

*6 The final issue presented is whether the seventeenth

affirmative defense should be stricken or deemed a denial:

Ownership of Web Pages, Social Media and Pictures. One

or more of the Defendants developed and established web

pages and social media sites and own same. Defendants

originally did this as part of the venture with NR and

Rojas. As previously noted, Defendants are ceasing using

the name and logo on these sites. NR does not own these

sites or domains and has no claim or right to them. In

addition, the pictures used by Defendants of past projects

were paid for using Defendants' monies, in whole or in part,

and Defendants have the express right to use the pictures

from the owners of the projects. NR has no claim to these

items.

[D.E. 12]. Plaintiff argues that the seventeenth affirmative

defense fails for two reasons. First, Plaintiff contends that

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it is premised, in part, on mootness and that Defendants'

qualified statement on voluntary cessation is inadequate.

Second, Plaintiff suggests that the defense alleges that some

or all of the content on Defendants' internet website does not

infringe on Plaintiff's trademarks. This is supposedly not an

affirmative defense because Defendants are neither admitting

any allegations of the complaint nor pleading new facts to

avoid liability. Instead, Plaintiff accuses Defendants of merely

denying the element of Plaintiff's infringement-related claims

that requires Plaintiff to establish that the “defendant made

unauthorized use [of the] trademarks ‘such that consumers

were likely to confuse the two.’ ” Custom Mfg. & Eng'g, Inc.

v. Midway Servs., Inc., 508 F.3d 641, 647–48 (11th Cir. 2007)

(quoting Lone Star Steakhouse & Saloon, Inc. v. Longhorn

Steaks, Inc., 106 F.3d 355, 358 (11th Cir. 1997) ); see also

SunAmerica Corp. v. Sun Life Assurance Co. of Canada, 77

F.3d 1325, 1334 (11th Cir. 1996).

Plaintiff's arguments are well taken. The seventeen

affirmative defense merely asserts that Defendants have not

violated any purported trademark and that Defendants have

the express right to display some of the content in dispute.

This is not an affirmative defense because it merely denies

that Plaintiff has any ownership or rights to Defendants' web

pages, social media, and pictures. There is nothing in the

seventeen affirmative defense that admits the allegations in

the complaint and articulates a basis for avoiding liability.

Because “[a]ffirmative defenses which simply deny the

complaint's allegations are ... not affirmative defenses,”

Plaintiff's motion should be GRANTED and the seventeenth

affirmative defense should be deemed a denial. Home Design

Serv. Inc. v. Park Square Enter., Inc., 2005 WL 1027370,

*7 (M.D. Fla. 2005) (citing Losada v. Norwegian (Bahamas)

Ltd., 296 F.R.D. 688, 690 (S.D. Fla. 2013) ).

IV. CONCLUSION

For the foregoing reasons, the Court RECOMMENDS that

Plaintiff's Motion to Strike [D.E. 13] be GRANTED in part

and DENIED in part. With respect to the second affirmative

defense, Plaintiff's Motion should be DENIED. As for the

remaining affirmative defenses, Plaintiff's Motion should be

GRANTED.

Pursuant to Local Magistrate Rule 4(b) and Fed. R. Civ. P. 73,

the parties have fourteen (14) days from service of this Report

and Recommendation within which to file written objections,

if any, with the District Judge. Failure to timely file objections

shall bar the parties from de novo determination by the

District Judge of any factual or legal issue covered in the

Report and shall bar the parties from challenging on appeal

the District Judge's Order based on any unobjected-to factual

or legal conclusions included in the Report. 28 U.S.C. §

636(b)(1); 11th Cir. Rule 3-1; see, e.g., Patton v. Rowell, 2017

WL 443634 (11th Cir. Feb. 2, 2017); Cooley v. Commissioner

of Social Security, 2016 WL 7321208 (11th Cir. Dec. 16,

2016).

*7 DONE AND SUBMITTED in Chambers at Miami,

Florida, this 26th day of September, 2017.

All Citations

Not Reported in Fed. Supp., 2017 WL 7792718

Footnotes 

1 Defendants' answer asserts a total of seventeen affirmative defenses. 

2 We note that “[e]ven if the allegedly improper conduct has ceased, an injunction may be appropriate if there is a 

‘cognizable danger of recurrent violation.” ’ Hang-Ups Art Enterprises, Inc., 1995 WL 914179, at *6 (quoting United States 

v. W. T. Grant Co., 345 U.S. 629, 633 (1953) ). 

End of Document © 2022 Thomson Reuters. No claim to original U.S. 

Government Works. 

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Public 

FEDERAL TRADE COMMISSION | OFFICE OF THE SECRETARY | FILED 9/8/2022 | Document No. 605552 | PAGE Page 118 of 118 * PUBLIC *; 

CERTIFICATE OF SERVICE 

I hereby certify that on September 8, 2022, I electronically filed the foregoing 

Complaint Counsel’s Reply in Response to Complaint Counsel’s Motion for Summary 

Decision, Complaint Counsel’s Responses and Objections to Intuit Inc.’s Statement of 

Material Facts as to Which There Exists a Genuine Issue for Trial, and Exhibits in 

Support of Complaint Counsel’s Reply in Response to Complaint Counsel’s Motion for 

Summary Decision electronically using the FTC’s E-Filing system, which will send 

notification of such filing to: 

April Tabor Hon. D. Michael Chappell

Office of the Secretary Chief Administrative Law Judge Federal Trade Commission Federal Trade Commission 

600 Pennsylvania Avenue, NW 600 Pennsylvania Avenue, NW

Suite CC-5610 Suite H-110 

Washington, DC 20580 Washington, DC 20580 ElectronicFilings@ftc.gov 

Administrative Law Judge Secretary of the Commission

Clerk of the Court 

I further certify that on September 8, 2022, I caused the foregoing document to be 

served via email on: 

David Z. Gringer Jonathan E. Paikin 

Wilmer Cutler Pickering Hale & Dorr Jennifer Milici 

LLP Derek A. Woodman 

7 World Trade Center Wilmer Cutler Pickering Hale & Dorr LLP 250 Greenwich Street 1875 Pennsylvania Avenue NW New York, NY 10007 Washington, DC 20006 David.Gringer@wilmerhale.com Jonathan.Paikin@wilmerhale.com 

(212) 230-8800 Jennifer.Milici@wilmerhale.com 

Derek.Woodman@wilmerhale.com 

(202) 663-6000 

Attorneys for Respondent, Intuit Inc. 

/s/ James Evans 

James Evans 

1