Federal Trade Commission v. Adept Management, Inc. et al

Filing 233

OPINION AND ORDER: The motion for bifurcation 226 is DENIED. Additionally the Court adopts, in part, the schedule proposed by the FTC, as indicated below. The parties should note two additional dates on the list. First, if the FTC wishes to con duct additional depositions in this case, they must submit such a request by February 23. Second, please note the date for "Requests to file Summary Judgment Motions." This deadline indicates that all parties will be required to request per mission from the Court prior to filing a motion for summary judgment. Such request must be filed in writing and include a brief,no longer than three (3) pages, memorandum outlining the basis for the motion requested. The Court adopts the following ca se schedule: FTC Request for additional depositions is 02/23/2018; Discovery Motions are due 04/02/2018; Close of Fact Discovery 05/01/2018; Initial Expert Disclosures 05/15/2018; Requests to file summary judgment 05/25/2018; A telephonic Status Conf erence is set for 06/01/2018 at 10:00 AM (the Court will initiate the call); Expert rebuttals 06/15/2018; Close Expert Discovery 07/16/2018; Dispositive Motions are due 08/03/2018; An in person Pretrial Conference is set for 10/22/2018 at 10:00 AM. A Court trial is set for 10/29/2018 at 9:00 AM. Please access entire text by document number hyperlink. Ordered by Magistrate Judge Mark D. Clarke. (rsm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION

FEDERAL TRADE COMMISSION,

Civ. No. 1: l 6-cv-00720-CL

Plaintiff,

OPINION AND ORDER
v.
ADEPT MANAGEMENT INC., et al,
Defendants.

CLARKE, Magistrate Judge.
This case comes before the Court on a motion (#226) by the Hoyal defendants to
bifurcate the issues in this case for trial. The Hoyal defendants assert that the preliminary issue
that should be bifurcated and addressed first is ··whether or not the mailers used to solicit
newspaper subscriptions were deceptive."

DISCUSSION
"For convenience, to avoid prejudice, or to expedite and economize, the court may order
a separate trial of one or more separate issues. claims, crossclaims, counterclaims, or third-party
claims." Fed. R. Civ. P. 42(b). Rule 42(b) "confers broad discretion upon the district court to
bifurcate a trial, thereby deferring costly and possibly unnecessary proceedings pending
resolution of potentially dispositive preliminary issues." Zivkovic v. S. Cal. Edison Co., 302 F.3d
1080, 1088 (9th Cir. 2002). "In determining whether to bifurcate, courts consider a number of

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factors. including whether bifurcation would promote efficient judicial administration, promote
convenience, simplify discovery or conserve resources. reduce the risk of juror confusion, and
separability of the issues." Lam Research Corporation v. Schunk Semiconductor, 65
F.Supp.3d 863, 865 (N.D. Cal. 2014).
The Hoyal defendants move to bifurcate the case so that the alleged deceptiveness of the
subject mailers is adjudicated first. Many of the cases cited by the defendants in support of their
motion indicate that bifurcating liability from remedy issues can be cost and time efficient, and
certainly this Court has seen instances where this is the case. The Hoyal defendants do not
propose to bifurcate all questions of liability, however. Instead, they propose to limit the first
phase of the Court's determination to whether or not the mailers used were "deceptive." The
defendants claim that this is a narrow, discrete. and simple issue, which can be adjudicated
quickly and may be dispositive of the case. The Court disagrees.
First it is undisputed that the FTC's case will rest on the allegation that the defendants
engaged in "unfair or deceptive acts or practices in or affecting commerce." See 15 U.S.C. §
45(a)( 1). "An act or practice is deceptive if 'first, there is a representation, omission, or practice
that, second, is likely to mislead consumers acting reasonably under the circumstances, and third,
the representation, omission, or practice is material."' F. TC. v. Gill, 265 F.3d 944, 950 (9th
Cir.2001) (citing F. TC v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir.1994)). 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). Rather, Section 5 .. only requires a showing that misrepresentations
·possess a tendency to deceive."' F. T. C. v. Commerce Planet. Inc., 878 F.Supp.2d 1048, 1073
(C.D.Cal.2012) (quoting Trans World Accounts, Inc., 594 F.2d at 214). Furthermore, the Court
considers "the overall, common sense 'net impression' of the representation or act as a whole to

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determine whether it is misleading," and a Section 5 violation may still be found even if the fine
print and legalese were technically accurate and complete. Commerce Planet, 878 F.Supp.2d at
1063 (citing Gill, 265 F.3d at 956)); see also FTC v. Cyberspace.Com LLC, 453 F.3d 1196,
1200 (9th Cir.2006) (stating that a representation "may be likely to mislead by virtue of the net
impression it creates even though the [representation] also contains truthful disclosures").
In this case, while the deceptiveness of the mailers is a key factor in the overall
deceptiveness of the "practice'' or business at issue, such a determination does not depend solely
on the words used in each notice; the context of the mailers is just as important to liability. This
includes whether or not defendants were authorized to offer or sell the subscriptions offered,
whether or not the recipients were led to believe they owed money for existing subscriptions, and
whether or not recipients who ordered subscriptions based on the mailers ever received the
products as advertised. Such contextual considerations rely on information regarding the
functional operation of the businesses at issue, and how the defendants interacted with each other
and with the consumers - how they ran those operations - is at the heart of that question.
Indeed, unlike some of the cases cited by the defendants, here the complex questions
r-.'g:irdint: how the defendants me rdated. and hov; they oper:ited individually and together, are
not confined to issues of remedy, as suggested by the defendants. Instead, a significant amount
of overlap exists between the facts the FTC will have to show to prove liability and the facts it
will have to show to determine the appropriate remedy. Therefore, bifurcation would not be an
efficient use of the Court's and the parties' resources.
Second, even if bifurcation would streamline separable issues ofliability and remedy for
trial, it would not simplify discovery, as claimed by the defendants. This case has already
progressed through several phases of complicated discovery for the last two years. By now, the

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FTC, and, the Court presumes, all of the parties, have already completed a significant amount of
the discovery necessary for issues of both liability and remedy. Thus, even if this motion were
well taken, it would have been more appropriately posed at the start of this case.
Third, there is no risk of juror confusion in this case because it will be tried to the Court.
ORDER

The motion for bifurcation (#226) is DENIED. Additionally the Court adopts, in part,
the schedule proposed by the FTC, as indicated below. The parties should note two additional
dates on the list. First. if the FTC wishes to conduct additional depositions in this case, they
must submit such a request by February 23.
Second, please note the date for "Requests to file Summary Judgment Motions." This
deadline indicates that all parties will be required to request permission from the Court prior to
filing a motion for summary judgment. Such request must be filed in writing and include a brief,
no longer than three (3) pages, memorandum outlining the basis for the motion requested.
The Court adopts the following case schedule:
FTC Request for add'l depositions
Discovery Motions due
Close of Fact Discovery
Initial Expert Disclosures
Requests to File Summary Judgment
Status Conference
Expert Rebuttals
Close Expert Discovery
Dispositive Motions due
Pretrial Conference
Bench Trial

February 23, 2018
April 2, 2018
May 1, 2018
May 15
May25
June 1
June 15
July 16
Aug3
October 22@ lOAM
October 29, 2018

United States Magistrate Judge

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