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INSIDER Law

Supreme Court won’t hear $40 million sanctions case against supplement maker

TAGS: Litigation
Supreme Court 2019
Hi-Tech Pharmaceuticals Inc. has exhausted its appeals in a long-running battle with the federal government—and it will cost the supplement company dearly.

A manufacturer of dietary supplements and two individuals are on the hook for $40 million in sanctions for violating a 2008 court injunction by failing to support advertising statements with “competent and reliable scientific evidence.”

The U.S. Supreme Court on Tuesday denied a petition for a writ of certiorari filed by Hi-Tech Pharmaceuticals Inc. and several others.

Through its refusal to hear the case, the nation’s highest court left undisturbed a 2019 federal appeals court ruling, which upheld a previous order that imposed $40 million in sanctions against Hi-Tech, its president Jared Wheat and a sales executive, Stephen Smith. A fourth defendant was ordered to pay $120,000 in sanctions after being found in contempt for violating a separate injunction.

The hefty sanctions were re-imposed in 2017 after years of litigation between Hi-Tech and the Federal Trade Commission over advertisement statements that touted four fat-burning and weight loss products. After conducting a bench trial, Federal Senior Judge Charles A. Pannell Jr. concluded in 2017 that the defendants lacked the necessary evidence—specifically randomized, double-blind, placebo-controlled clinical trials—to support their advertising statements.

In FTC’s civil action against Hi-Tech, Wheat and Smith, the judge explained the sanctions he imposed corresponded to the gross receipts for the sales of four weight loss products over a period in which the defendants “engaged in contumacious conduct."

“The court recognizes that the compensatory sanctions are significant, but so, too, was the defendants’ contumacious conduct," Pannell wrote in his 132-page order in 2017. “While the defendants essentially claim that several of the violations were honest mistakes, the record is replete with evidence—both direct and circumstantial—showing an intentional defiance of the court’s injunctions."

In 2019, the U.S. Court of Appeals for the Eleventh Circuit upheld Pannell's order and denied a request for a rehearing en banc, which prompted Hi-Tech to seek review with the Supreme Court.

Neither Wheat nor Anne Voigts, a lawyer who filed the petition with the Supreme Court, immediately commented on Tuesday's decision in response to a reporter's email. An FTC spokesman declined to comment.

 

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