Opinion ID: 177675
Heading Depth: 1
Heading Rank: 3

Heading: Maihos is individually liable as an owner and corporate officer who lacked appropriate substantiation.

Text: The Defendants present one last argument on liability, arguing that the district court erred in holding Maihos individually liable. Individual liability for deceptive advertising is appropriate where an individual (1) was a corporate officer with the capacity to make decisions regarding the challenged conduct, and (2) knew or should have known that there was no reasonable basis for the deceptive claims. See, e.g., FTC v. Publishing Clearing House, Inc., 104 F.3d 1168, 1170 (9th Cir. 1997). The FTC produced ample support for each proposition, and the Defendants produced no evidence to the contrary. The FTC produced evidence that Maihos was a 50% owner of DMC and ITV, that he controlled both companies' purse strings and day-to-day operations, and that he was the contact for an attorney retained to review the infomercials for their legality under federal trade law. [10] Maihos (ignoring his status as an officer and half-owner of DMC) focuses on gaps in his responsibilities, relying on, e.g., his testimony that he did not edit the content of advertising. This is simply irrelevant. The question is whether he could have nipped the offending infomercials in the bud; the FTC produced evidence that he could, and he has produced no evidence even his own testimonyto indicate that he couldn't. See FTC v. Freecom Comm., Inc., 401 F.3d 1192, 1205 (10th Cir.2005) (finding individual liability where [e]verybody knew that [the defendant] was the principal shareholder of the company and his opinions and advice and direction were listened to very carefully and were generally followed or heeded). On the second prong, Maihos's knowledge, the FTC produced Maihos's own deposition testimony admitting that DMC did not have any substantiation for the claims made in either infomercial. Maihos also testified about an email he received from his then-girlfriend, a registered dietitian. The email provides both direct and circumstantial evidence of Maihos's knowledge. The email is direct evidence that the girlfriend informed Maihos that [c]alcium from anything cannot be 100 percent bioavailable and that [t]here's no evidence at all that Coral Calcium is better than ordinary calcium or has any special health-boosting properties. The girlfriend also asked Maihos, do you think there is a product ([over the counter] no less) that can prevent heart disease, diabetes, arthritis AND cancer? Maihos testified that he dismissed the email as mere skepticism. However, the email is also circumstantial evidence that Maihos actually requested the information from the girlfriend, who consulted third parties on Maihos's behalf. The email begins, Hello, as requested here are the responses I got. It also attached an email from the address Wic-talk@NAL. USDA.GOV, which a quick internet search reveals is an electronic discussion group promoted by the United States Department of Agriculture for use by individuals involved in providing nutrition services. See WIC-Talk, http://www.nal.usda.gov/ wicworks/Talk/index.html (last visited Oct. 19, 2010). Thus, the imputed exchange giving rise to the girlfriend's email implies that Maihos himself questioned the infomercials' claims. The FTC also produced evidence that Maihos had attended DMC meetings regarding the production of clean and re-edited versions of the infomercials while earlier versions of the infomercials still ran. Finally, the FTC produced evidence that an attorney suggested to Maihos in October 2003, well before the Defendants pulled the Supreme Greens infomercial off the air, [11] that the Supreme Greens infomercial required voluminous support and advanced BS claims. Again, the Defendants point to nothing that might challenge any of this evidence, relying instead on Maihos's protestations that he sincerely believed in the infomercials' health claims. It is true that two district court cases support the proposition that sincere belief may be an element in the individual liability calculus; however, even sincere belief is not sufficient here to overcome the overwhelming evidence that Maihos knew or, at the very least, should have known that the infomercials lacked any reasonable basis in scientific fact. See FTC v. Medical Billers Network, Inc., 543 F.Supp.2d 283, 320-22 (S.D.N.Y.2008) (finding individual liability); FTC v. Patriot Alcohol Testers, Inc., 798 F.Supp. 851, 860 n. 3 (D.Mass.1992). This is particularly so given that the patent ridiculousness of the infomercials' health claims was presented multiple times by multiple people to Maihos, who chose to remain willfully blind. Thus, there is no question that Maihos knew that the infomercials' claims lacked substantiation, that he had the authority to control DMC and ITV, and, nevertheless, that he did little or nothing. The district court did not err in holding Maihos individually liable for deceptive advertising, and we affirm.