Affirmative Defenses: What’s Going to Stick to the Wall?

The recent opinion in FTC v. Quincy Bioscience Holding Co., 2020 U.S. Dist. LEXIS 36424*(S.D.N.Y. Mar. 2, 2020) (background here) is a primer on affirmative defenses in an FTC Act case alleging deceptive advertising of a dietary supplement.  The FTC and State of New York brought a case alleging deceptive advertising of the dietary supplement, Prevagen, which purports to improve one’s memory.  We have discussed this case in the past – here and here – and in this post we will focus on the eight affirmative defenses that the FTC  moved to strike.  The court granted some, and denied others.  As someone who hasn’t litigated in a while, but follows litigation, this opinion was a good refresher on some basics.

Laches and Waiver:  For those who haven’t thought of laches since law school, it is the legal doctrine that an unreasonable delay in seeking a remedy for a legal claim will prevent it from being enforced if the delay has prejudiced the opposing party.  The court dispenses with this defense quite quickly because, “It is well settled that the United States is not bound by state statutes of limitation or subject to the defense of laches in enforcing its right.”  U.S. v. Summerlin, 310 US 4144, 416 (1940).

Validity of FTC Quorum: As happens occasionally, the FTC had only two Commissioners vote to bring the action – two Commissioner seats were vacant, and one Commissioner declined to participate in the vote, so the vote to bring the case was 2-0. Defendants argued that this was an ultra vires act (beyond one’s legal authority), and there wasn’t a valid quorum.  In an earlier opinion (389 F.Supp. 3d. 211 (S.D.N.Y. 2019)), the court determined that Rule 4.14(b) of the FTC’s Procedures and Rules of Practice states, “A majority of the members of the Commission in office and not recused from participating in a matter (by virtue of 18 U.S.C. 208 or otherwise) constitutes a quorum for the transaction of business in that matter.” 70 Fed. Reg. 53296-01 (Sept. 8, 2005) (codified at 16 C.F.R. § 4.14(b)).  Quorum is not the number of votes, but the number of persons required to be present in order for the business of the meeting to be conducted: at the time of this case, the quorum was three, and they were all present.

Commercial Speech: Defendant next made the argument that the claims were protected by the right to commercial speech and immune from regulation. The court dispensed with this quickly, stating that “deceptive commercial speech has no constitutional protection,” and “since the purpose of the trial of this case is to determine whether or not the advertisement is deceptive, the motion to strike the defense is denied.”

Good Faith: Good faith – here, in conducting clinical studies and advertising the results – is not a defense to liability under Section 5 of the FTC Act, but it may be a valid defense to the granting of an injunction. The court denied the motion to strike this defense.

Primary Jurisdiction of the FDA: While there are times when an argument that the FDA retains primary jurisdiction might prevail (e.g., awaiting FDA guidance on “natural”), “[g]iven the two agencies’ ‘overlapping and concurring jurisdiction,’ the FDA’s supposed ‘primary jurisdiction’ is not a viable defense.”

State Claims:  Defendant argued that the New York General Business Law claims fail because the alleged conduct took place outside of New York.  As the court did with the Commercial Speech argument above, it pointed out that the purpose of the trial is to determine whether any deceptive conduct occurred in New York, and denied the motion to strike the defense.

Right to Raise Additional Defenses: This defense, at least in theory, appears in many motions, but the issue here is just how that defense should be drafted.  This court did not wish for defendants to reserve the “unilateral right to add new and different affirmative defenses as they became known to it at indeterminate times in the future” (quoting Cty. Vanlines Inc. v. Experian Info. Sols. Inc., 205 F.R.D. 148, 157-58 (S.D.N.Y. 2002).  The court indicates that defendants may raise other defenses “with the opposing party’s written consent or the court’s leave” under Fed. R. Civ. P. 15(a).

This opinion was a fascinating walk-through of the defenses that are fairly common in litigation that we see in our space, and a good primer for regulatory attorneys who may not delve too deep into the procedural aspects of litigation that they read about every day.