Reply Brief — Hi-Tech Pharmaceuticals, Inc., et al., Petitioners v. Federal Trade Commission, et al.

NO. 19-1445

In the

Supreme Court

of the United States

________________

HI-TECH PHARMACEUTICALS, INC., corporation;

JARED WHEAT, individually and as officer of the

corporation; STEPHEN SMITH, individually and as

officer of National Urological Group, Inc., and

National Institute for Clinical Weight Loss, Inc.;

NATIONAL UROLOGICAL GROUP, INC., d.b.a. Warner

Laboratories, et al.; THOMASZ HOLDA, individually

and as officer of the corporations, et al.,

Petitioners,

v.

FEDERAL TRADE COMMISSION; CERTUSBANK, N.A.,

Respondents.

________________

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

________________

REPLY BRIEF FOR PETITIONERS

________________

Robert F. Parsley

Anne M. Voigts

Meredith C. Lee

Counsel of Record

MILLER &

KING & SPALDING LLP

MARTIN PLLC

601 S. California Avenue

832 Georgia Avenue

Suite 100

Suite 1200

Palo Alto, CA 94304

Chattanooga, TN 37402 (650) 422-6700

(423) 756-6600

avoigts@kslaw.com

Counsel for Petitioners Jared Wheat

& Hi-Tech Pharmaceuticals, Inc.

(additional counsel listed on inside cover)

October 9, 2020

I. Cason Hewgley IV

KING & SPALDING LLP

1100 Louisiana Street

Suite 4100

Houston, TX 77002

(713) 751-3200

Counsel for Petitioners Jared Wheat

& Hi-Tech Pharmaceuticals, Inc.

E. Vaughn Dunnigan

2897 N. Druid Hills Road

Suite 142

Atlanta, GA 30329

(404) 663-4291

Counsel for Petitioner Stephen Smith

TABLE OF CONTENTS

TABLE OF AUTHORITIES ....................................... ii

REPLY BRIEF ............................................................ 1

A. Background ................................................... 2

B. This Court should grant certiorari .............. 5

CONCLUSION ......................................................... 13

ii

TABLE OF AUTHORITIES

Cases

AMG Capital Mgmt., LLC,

910 F.3d 417 (9th Cir. 2018).................................. 12

Barry v. Coombe,

26 U.S. 640 (1828).................................................... 6

Decker v. Nw. Envt’l Def. Ctr.,

568 U.S. 597 (2013)................................................ 13

Ford v. Kammerer,

450 F.2d 279 (3d Cir. 1971) ..................................... 7

FTC v. Credit Bureau Ctr., LLC,

937 F.3d 764 (7th Cir. 2019).................................. 12

Gates v. Shinn,

98 F.3d 463 (9th Cir. 1996)...................................... 9

Granny Goose Foods, Inc. v. Bhd. of

Teamsters & Auto Truck Drivers,

415 U.S. 423 (1974).................................................. 6

Hi-Tech Pharm., Inc. v. HBS Int’l Corp.,

910 F.3d 1186 (11th Cir. 2018).............................. 10

Int’l Longshoremen’s Ass’n

v. Phila. Marine Trade Ass’n,

389 U.S. 64 (1967).................................................... 6

La. Pub. Serv. Comm’n v. FCC,

476 U.S. 355 (1986)................................................ 12

Liu v. SEC,

140 S. Ct. 1936 (2020)............................................ 12

McComb v. Jacksonville Paper Co.,

336 U.S. 187 (1949)........................................ 5, 6, 12

Mohamad v. Palestinian Auth.,

566 U.S. 449 (2012)................................................ 11

iii

Niz-Chavez v. Barr,

789 F. App’x 523 (6th Cir. 2019) ............................. 7

Niz-Chavez v. Barr,

207 L. Ed. 2d 169 (2020) .......................................... 7

Plumley v. Austin,

135 S. Ct. 828 (2015).............................................. 10

Polo Fashions v. Stock Buyers Int’l,

760 F.2d 698 (6th Cir. 1985).................................... 8

Rosenstiel v. Rosenstiel,

278 F. Supp. 794 (S.D.N.Y. 1967) ........................... 9

Russell C. House Transfer

& Storage Co. v. United States,

189 F.2d 349 (5th Cir. 1951).................................... 7

Salinas v. U.S. R.R. Ret. Bd.,

765 F. App’x 79 (5th Cir. 2019) ............................... 7

Salinas v. U.S. R.R. Ret. Bd.,

140 S. Ct. 813 (2020)................................................ 7

Schmidt v. Lessard,

414 U.S. 473 (1974).................................................. 6

Torres v. Madrid,

769 F. App’x 654 (10th Cir. 2019) ........................... 7

Torres v. Madrid,

140 S. Ct. 680 (2019)................................................ 7

United States v. Borden,

769 F. App’x 266 (6th Cir. 2019) ............................. 7

United States v. Borden,

140 S. Ct. 1262 (2020).............................................. 7

Statute & Rule

28 U.S.C. § 1291 .................................................... 8, 10

Fed. R. Civ. P. 65(d) .......................................... passim

REPLY BRIEF

The FTC concedes that the injunction here didn’t

include the standard the court later incorporated in

imposing $40-million contempt sanctions. It concedes

that Federal Rule of Civil Procedure 65(d) requires an

injunction to “state its terms specifically” and

“describe in reasonable detail—and not by referring to

the complaint or other document—the act or acts

restrained.” And it concedes that injunctions must be

specific to support contempt sanctions. Those

concessions answer the question presented: Contempt

sanctions cannot stand when the underlying

injunction didn’t contain the standard supposedly

violated. The government thus poses a different

question—whether Petitioners had extratextual

notice of what the district court would ultimately

require—to argue no harm, no foul. Moreover, it

contends, the issue is waived, the splits in caselaw

best ignored, and the dispute too factbound for review.

None of that is true.

The first contention fails because both the

purported waiver and the lack of specificity stem from

the same original sin: The fact that the injunction

didn’t include the standard the government later

sought to enforce. The responsibility for that falls at

the government’s feet—it sought the injunction and

subsequent sanctions. Nevertheless, it would flip the

burden of proof to petitioners, forcing them to predict

evolving positions. Second, left unaddressed, those

splits over waiver and specificity encourage agency

overreach. Third, these issues are legal, not factual,

because the government concedes that the standard

the court applied isn’t in the injunction.

2

The government would excuse this failure by

contending Petitioners had notice that costprohibitive, product-specific, randomized clinical

trials (“RCTs”) were required to substantiate its

product claims. They didn’t, but regardless, Rule

65(d)—which is “no mere extract from a manual of

procedural practice,” but “a page from the book of

liberty,” H.K. Porter Co. v. Nat’l Friction Prods., 568

F.2d 24, 27 (7th Cir. 1977) (as amended)—contains no

exception

for

enjoined

parties’

subjective

understanding of what standards might later be read

into an injunction. And yet the government’s approach

uses the policies behind that rule to eviscerate its

plain language. Before the trial court’s decision and

the Eleventh Circuit’s affirmance, no court had

allowed the FTC to import new standards into its

injunctions to support sanctions. No court, this one

included, should.

A. Background

Three factual points in the Brief in Opposition

require correction. First, the FTC’s position changed

over time (though the injunction didn’t). Second,

neither the initial enforcement order nor subsequent

discussions with counsel 1 put Petitioners on notice

that the FTC would reinterpret the injunction to

reflect that change—and seek contempt sanctions

based on it. Third, Petitioners could raise specificity

on contempt—as they did consistently—without

challenging the injunction’s validity when it was first

1 The government alleges “voluminous evidence” of notice, but

relies on only these two items. BIO 8. Regardless, these lie

outside the injunction and cannot supply the lacking specificity.

3

entered because the party seeking sanctions must

always show specificity.

1. As the government concedes, the injunction

required only “competent and reliable scientific

evidence.” Doc. 945 at 57:21-24. But the government

doesn’t acknowledge that the FTC’s own experts

disagreed among themselves about what that

standard required. Doc. 945 at 55:6-56:24, 74; Doc. 946

at 34:17-39:12, 121:10-122:3; Doc. 952 at 155:6-157:8,

158:1-4. BIO 2. The government’s ultimate position,

adopted and upheld below, was that those claims must

be supported by:

independent, well-designed, well-conducted,

randomized, double-blind, placebo-controlled

clinical trials, given at the recommended

dosage involving an appropriate sample

population in which reliable data on

appropriate end points are collected over an

appropriate period of time … conducted on

the product itself.

App. 49-50, 223. This new standard—the same applied

to prescription drugs—wasn’t in the injunction.

Importing it, as the court did, conflicts with DSHEA,

FTC guidance, and other courts’ decisions. Pet. 7-8, 9,

14-15, 20-21 & n.4.

The government’s suggestion that this new

standard wasn’t a change in position is wrong. It was,

both here where the court allowed it, and in other

cases where courts have not. Pet. 8, 22-23 (discussing

cases).

2. a. The government tries to justify rewriting the

injunction based on the district court’s decision in the

initial enforcement action. That action concerned

4

different claims about different supplements, 2 for

which, the court held, Hi-Tech needed “well-designed,

well-conducted, randomized, double-blind, placebocontrolled clinical trials [RCTs] … on the product

itself.” App. 316. But it didn’t apply that standard in

the injunction. Rather, it held that “[d]ifferent

scientific evidence is required for different claims

impacting different products,” “different claims

require different substantiation,” and future efficacy

claims, including about other products, should be

substantiated by “competent and reliable scientific

evidence.” App. 279-80.

b. The government also excuses the injunction’s

failure to specify that only product-specific RCTs

would suffice because some of Wheat’s lawyers warned

him that the government and court might try

(incorrectly) to interpret the injunction accordingly

(with respect to different claims). BIO 5-6. They did,

as the record shows. But Hi-Tech, believing its

subsequent

claims

adequately

substantiated

under the competent-and-reliable-scientific-evidence

standard actually in the injunction, wasn’t required to

predict the FTC’s overreach or risk relieving the

government of its burden to prove specificity.

E.g., Doc. 332-3 at 84, 86; Doc. 476-4 at 27, 34.

3. a. Once the FTC sought sanctions, Hi-Tech

argued that the injunction, which never mentioned

RCTs (let alone required them) violated Rule 65(d)

and was insufficiently specific to support sanctions.

Doc. 346 at 14-21; Doc. 396 at 2-15. The district court

2 Both the initial action and the contempt proceedings involved

the name Lipodrene, but those products differed. App. 5.

5

nonetheless adopted the FTC’s new rule—established

through expert opinion, not the injunction itself or

positive law. On appeal, the Eleventh Circuit did not

reach Hi-Tech’s Rule 65(d) argument because it was

raised too early and was “premature”—the opposite of

waiver. 3 App. 38. On remand, Petitioners repeatedly

objected that the injunction didn’t contain the FTC’s

new standard. Doc. 876-1 at 3-8; Doc. 883 at 8-12;

Doc. 959 at 4-8; Doc. 963 at 1-17; Doc. 965 at 10-19, 3137 & n.14. Neither court below held otherwise; rather,

they excused the failure based on notice and waiver,

respectively.

B. This Court should grant certiorari

1. a. There was no waiver. Like the Eleventh

Circuit, the government relies entirely on a single

seventy-one-year-old

decision,

McComb

v.

Jacksonville Paper Co., 336 U.S. 187 (1949), to

wrongly argue waiver. This misreads McComb,

contradicts this Court’s subsequent case law, and

places a burden on enjoined parties that, in many

cases (including this one), no party can meet. The

respondent in McComb was enjoined from violating

the Fair Labor Standards Act’s minimum-wage,

overtime, and recordkeeping provisions, but the

injunction didn’t “compute the weekly and monthly

amount ... due each employee.” Id. at 194. It couldn’t,

because the court had no idea how many non-overtime

and overtime hours employees would work. Because

FLSA “provide[d] the formula by which the amounts

3 The Eleventh Circuit’s position leaves Petitioners in a Catch22, where the first appellate court to consider kill-the-company

contempt sanctions concluded it was too early to rule on

specificity, and the second that it was too late.

6

can be simply computed”—down to the hour and

cent—there was no doubt about what the injunction

required. Id. Here, by contrast, the injunction could’ve

required RCTs, but instead incorporated a standard

that, per the FTC’s own guidance, had “no fixed

formula for the number or type of studies required[.]”

Doc. 876-4 at 14.

The government’s reading of McComb makes Rule

65(d) meaningless and McComb impossible to

reconcile

with

International

Longshoremen’s

Association v. Philadelphia Marine Trade Association,

389 U.S. 64 (1967), Schmidt v. Lessard, 414 U.S. 473

(1974) (per curiam), and Granny Goose Foods, Inc. v.

Brotherhood of Teamsters & Auto Truck Drivers, 415

U.S. 423 (1974). Perhaps recognizing this, the

government tries vainly to distinguish them. True, in

International Longshoremen’s, 389 U.S. at 70-71, and

Schmidt, 414 U.S. at 476 n.1, the parties did seek

judicial clarification; but Petitioners here had no

reason to think the government would later assert

that “competent and reliable scientific evidence”

meant RCTs and only RCTs. Second, this Court in

Granny Goose, 415 U.S. at 444, did interpret the

temporary restraining order on its way to vacatur,

holding that the order didn’t give “notice of what the

injunction actually prohibits.”

McComb didn’t hold that an enjoined party must

predict the future and object immediately to any

ambiguity, even unforeseeable ones. Cf. Barry v.

Coombe, 26 U.S. 640, 652 (1828) (distinguishing

patent and latent ambiguity). Nor could Hi-Tech have

known that the government would interpret the

7

standard that was in the injunction contrary to its own

guidance.

b. Multiple splits in authority warrant review. As

an initial matter, this Court shouldn’t deny certiorari

because the opinion is unpublished. This Court

regularly reviews unpublished opinions, 4 and the FTC

can still cite those decisions as persuasive authority to

defend an approach that other courts have rejected.

This case also directly implicates a broader circuit

split. Other circuits have consistently held that

contempt cannot stand where an injunction doesn’t

clearly encompass the challenged conduct. E.g., Ford

v. Kammerer, 450 F.2d 279, 280 (3d Cir. 1971). Thus,

defendants can challenge an injunction’s specificity in

contempt proceedings. E.g., Russell C. House Transfer

& Storage Co. v. United States, 189 F.2d 349, 351 (5th

Cir. 1951).

The government attempts to distinguish every

case Hi-Tech cites, claiming they say nothing about

waiver. Of course they don’t, and that’s exactly the

point: Waiver doesn’t apply. The FTC had the burden

of showing by clear and convincing evidence that the

injunction was specific and unambiguous. App. 11. By

finding waiver, the Eleventh Circuit improperly

eliminated that obligation. This error stems from the

fact that the government, like the Eleventh Circuit,

4 At least four such cases are currently set for argument: Torres

v. Madrid, 769 F. App’x 654 (10th Cir.), cert. granted, 140 S. Ct.

680 (2019); Salinas v. U.S. R.R. Ret. Bd., 765 F. App’x 79 (5th

Cir. 2019), cert. granted, 140 S. Ct. 813 (2020); United States v.

Borden, 769 F. App’x 266 (6th Cir. 2019), cert. granted in part,

140 S. Ct. 1262 (2020); Niz-Chavez v. Barr, 789 F. App’x 523 (6th

Cir. 2019), cert. granted, 207 L. Ed. 2d 169 (2020).

8

confuses the injunction’s validity—which must be

raised when the injunction is issued—with specificity,

which must be proved in contempt proceedings. E.g.,

Polo Fashions v. Stock Buyers Int’l, 760 F.2d 698, 700

(6th Cir. 1985) (while “the validity of the injunction is

not an issue in … contempt [proceedings],” specificity

is).

The government also suggests that Circuit splits

exist only when cases conflict in every possible

application. BIO 12 (“[T]he court of appeals did not

hold that defendants can never challenge the

specificity of an injunction in contempt proceedings.”);

BIO 13 (“[N]one of those decisions held that the

doctrine of waiver is categorically inapplicable in

contempt proceedings.”). That’s both wrong and

irrelevant: The injunction entered against Hi-Tech is

impermissibly ambiguous, and in any Circuit other

than the Eleventh and Federal Circuits, Hi-Tech could

have litigated that challenge on the merits.

2. The Circuits disagree whether a district court’s

deciding a previously waived issue confers the right to

appeal the issue under 28 U.S.C. § 1291. The

government tacitly concedes the split’s existence but

discounts its importance. BIO 15-16. But it’s not

merely “the circuit courts’ procedural rules” at stake,

BIO 16 (cleaned up), and nothing the government cites

suggests that litigants’ rights should be overlooked

merely because a “procedural” rule does the damage.

The government also claims this Court should

ignore this issue because of waiver. BIO 13-16. But

waiver isn’t a serious obstacle here because the

district court didn’t find waiver. It spent 40 pages

finding the injunction sufficiently specific without

9

once mentioning “waiver” or “forfeiture.” App. 69-104,

117, 150 n.29. It understood Petitioners’ failure to

object to the injunction’s non-specificity about RCTs

when it was entered not as waiver, but as evidence

that Petitioners knew what was required, whether or

not it appeared in the injunction. App. 73-74, 85-86,

97-99. And it didn’t find “the absence of a timely

appellate challenge dispositive.” App. 86. The

government doesn’t even argue that the Eleventh

Circuit’s holding otherwise was right, just that it was

reasonable. BIO 14. It was neither.

Throughout the contempt proceedings, Petitioners

did press specificity. The Eleventh Circuit and the

government contend that not anticipating this issue

and contesting the injunction’s specificity when it was

first entered relieved the government of its burden of

proving

specificity

in

subsequent

contempt

proceedings. No case supports such a conclusion. In

fact, courts expressly consider Rule 65(d) specificity

arguments in contempt proceedings. See, e.g., Gates v.

Shinn, 98 F.3d 463, 471-72 (9th Cir. 1996) (vacating

contempt because consent decree was not “specific in

terms” as Rule 65(d) requires). And of course, the

party seeking sanctions bears the burden of proof.

Rosenstiel v. Rosenstiel, 278 F. Supp. 794, 803

(S.D.N.Y. 1967).

Far from presenting a factbound barrier to review,

the Eleventh Circuit’s ruling begs for review. It’s

Kafkaesque—an unpublished affirmance of a $40million contempt sanction imposed based on a

standard not in the injunction, and affirmed based on

an alternative ground the district court never

mentioned. Cf. Plumley v. Austin, 135 S. Ct. 828, 831

10

(2015) (Thomas, J. & Scalia, J., dissenting from denial

of certiorari).

Nor is this some intra-circuit squabble, as the

government supposes, just because Hi-Tech

Pharmaceuticals, Inc. v. HBS International Corp., 910

F.3d 1186, 1194 (11th Cir. 2018), is to the contrary.

BIO 16. The Circuits disagree both internally and with

each other, and that calls for review. Certiorari is

warranted to resolve the split and to clarify that an

issue not pressed but unreservedly passed on by a

district court is appealable of right under 28 U.S.C.

§ 1291. 5

3. On the merits, the government contends that

notice based on matters outside the injunction can

substitute for the specificity Rule 65(d) requires. That

impermissibly elevates the policies behind Rule 65(d)

over its plain text.

The government argues that Rule 65(d) is

satisfied because the words “competent and reliable

scientific evidence,” App. 244, appear in the

injunction, and that they should be read to require

RCTs based on the district court’s summary judgment

ruling. But that order imposed one standard for the

claims before it, and the injunction another going

forward. That deliberate choice of two different

standards cannot be squared with the government’s

argument that they are in fact the same; and in any

5 The government calls “inapposite” the analogy to granting

certiorari where state courts passed on issues not pressed.

BIO 14; Pet. 29. Of course those cases are not controlling—no one

has suggested otherwise—but they explain how an unraised

issue can (and should) be reviewed where the court has

nonetheless weighed in.

11

event, Rule 65(d) says “other documents” cannot

supply missing specificity. Any other result creates an

extratextual exception that swallows the rule.

As the government acknowledges, the injunction

defined “[c]ompetent and reliable scientific evidence”

as “tests, analyses, research, studies, or other evidence

based on the expertise of professionals in the relevant

area, that has been conducted and evaluated in an

objective manner by persons qualified to do so, using

procedures generally accepted in the profession to

yield accurate and reliable results.” App. 234. Hi-Tech

hired experts in clinical research, nutrition, exercise

physiology, weight-loss medicine, and pharmacology,

and submitted over 100 publications, including peerreviewed studies analyzing each product’s active

ingredients, as well as double-blind, placebocontrolled RCTs for materially identical products.

Doc. 368 at 19-25.

The government argues that “the level of

specificity that petitioners appear to demand is not

practical for many injunctions.” BIO 19. But even if

practicality could trump due process, Rule 65(d), and

contempt requirements, the injunction here could’ve

easily required RCTs, as the FTC has elsewhere.

Pet. 30-33 (collecting cases). It didn’t. Cf. Mohamad v.

Palestinian Auth., 566 U.S. 449, 456 (2012) (applying

basic interpretive principle that different words mean

different things). As every other court to consider the

issue held, that choice precludes the FTC from seeking

sanctions for violating standards never incorporated

in the underlying injunction. Pet. 22-23.

The government’s fall-back argument, that

subjective knowledge provides the otherwise-lacking

12

textual specificity, also fails. Like the Eleventh

Circuit, the government points to no case upholding

sanctions where the underlying injunction was

insufficiently specific. That’s because only the

Eleventh Circuit has held that courts can look to the

enjoined parties’ subjective understanding to cure

specificity that’s lacking. This Court should grant

certiorari to resolve that split.

b. The government asserts that “[t]he district

court did not clearly err when it found that petitioners

lacked competent and reliable scientific evidence.”

BIO 21. That’s false, but the district court’s legal

error—looking beyond the injunction to supply the

specificity it lacked—calls out for further review.

4. Finally, the government asserts that Liu v.

SEC’s limitation, 140 S. Ct. 1936 (2020), “does not

apply to civil contempt proceedings.” BIO 22. Citing

McComb, it argues that courts can order “full remedial

relief” on contempt. 336 U.S. at 193. The question isn’t

what remedy the court can order, but what remedy the

FTC is statutorily empowered to seek. Agencies

“literally [have] no power to act ... unless and until

Congress confers power upon [them].” La. Pub. Serv.

Comm’n v. FCC, 476 U.S. 355, 374 (1986). The

government gives no reason why the FTC can seek

greater damages in a contempt proceeding than in

enforcement actions concerning the same conduct. 6

This Court recently granted certiorari in FTC v. Credit

Bureau Center, LLC, 937 F.3d 764 (7th Cir. 2019), and AMG

Capital Management, LLC, 910 F.3d 417 (9th Cir. 2018), to

address limits on the FTC’s equitable authority in enforcement

actions (S. Ct. Case Nos. 19-825 and 19-508). All these cases

6

13

CONCLUSION

Contempt proceedings shouldn’t be a game of

three-card monte where agencies can belatedly choose

the cards that serve them best. This Court should

grant certiorari.

involve administrative overreach—there in enforcement actions

and here in contempt proceedings. This Court ought not hand the

FTC a “permission slip for the arrogation of power” in either

context. Decker v. Nw. Envt’l Def. Ctr., 568 U.S. 597, 620 (2013)

(Scalia, J., concurring in part and dissenting in part).

14

Respectfully submitted,

E. Vaughn Dunnigan

Anne M. Voigts

2897 N. Druid Hills Road Counsel of Record

Suite 142

KING & SPALDING LLP

Atlanta, GA 30329

601 S. California Avenue

Suite 100

Counsel for Petitioner

Palo Alto, CA 94304

Stephen Smith

(650) 422-6700

avoigts@kslaw.com

Robert F. Parsley

Meredith C. Lee

MILLER & MARTIN PLLC

832 Georgia Ave., Ste. 1200

Chattanooga, TN 37402

I. Cason Hewgley IV

KING & SPALDING LLP

1100 Louisiana St., Ste. 4100

Houston, TX 77002

(713) 751-3200

October 9, 2020

Counsel for Petitioners

Jared Wheat & Hi-Tech

Pharmaceuticals, Inc.