Antitrust Law Daily Wrap Up, ADVERTISING—5th Cir.: $25.3 million damage award against PPE supplier for deceptive advertising vacated, (Jun 17, 2025)

By Seth Abrams, J.D., M.A.

The court held that customers that did not receive any products were still entitled to damage award.

The U.S. Court of Appeals in New Orleans affirmed in part, vacated in part, and remanded for further proceedings an action brought by the FTC against Zaappaaz and Azim Makanojiya (collectively, “Zaappaaz”) for unfair and deceptive trade practices relating to the sale and delivery of PPE during the COVID-19 pandemic. The court held that an award of about $12.2 million for those who did not receive purchased PPE should be affirmed, despite a dissent from Judge Engelhardt. The court also held that an award of about $25.3 million should be vacated and remanded for reconsideration because it is not in line with the statutory standard (FTC v. Zaappaaz, L.L.C., No. 24-20234 (5th Cir. Jun. 16, 2025)).

Zaappaaz is an online retailer and Makanojiya is its founder, president, and director. During the COVID-19 pandemic, it began selling PPE and advertised on its website making claims that the products were “guaranteed to ship today,” “in stock—ships same day,” and “all products in stock ready to ship.” Despite these claims, Zaappaaz was “largely unable to ship PPE equipment the same day an order was placed, and customers did not receive the products they ordered by the promised delivery date, even if they paid for rush shipping.” The FTC sued Zaappaaz for these alleged misrepresentations under §§ 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57(b), and the Mail, Internet, or Telephone Order Merchandise Rule, 16 C.F.R. Part 435.

After the close of discovery, the FTC moved for summary judgment. A magistrate judge recommended partially granting summary judgment as to Zaappaaz’s liability but determined that “fact issues remained as to damages and injunctive relief.” This recommendation was adopted by the district court. The FTC requested approximately $37.5 million in damages, which is the total revenue received from late or unshipped PPE orders from March to December 2020, “minus any refunds or chargebacks issued for those orders.” This relief was divided into two groups: (1) for those who paid for PPE products not received (about $12.2 million) and (2) for those who received late-shipped PPE products (about $25.3 million).

Prior to the bench trial, the district court issued a pre-trial order that the FTC was (1) entitled to a presumption that Zaappaaz’s customers actually relied on its widely disseminated representations; (2) that Zaappaaz had not rebutted this presumption with argument or evidence; and (3) the FTC had established consumer injury as a result. The district court also concluded that the $12.2 million was necessary to redress consumer injuries for unreceived products. The remaining issues for trial were whether to grant injunctive relief and whether the FTC could establish the damages for late-shipped PPE.

After a bench trial, the court awarded this relief, along with a permanent injunction that Zaappaaz does not challenge here. Because some customers who received late-shipped products may have been satisfied with their order, the district court implemented a redress plan for the second part of the award. Zaappaaz appealed.

Reliance. The district court had applied a rebuttable presumption of consumer reliance to support consumer injury under 15 U.S.C. § 57b(b). Zaappaaz argued that this was in error. The court here disagreed with Zaappaaz, aligning with other circuits which permit the FTC to presume consumer reliance when misrepresentations are “of a kind that reasonable and prudent purchasers rely on, that they were widely disseminated, and that injured consumers actually purchased the defendant’s products.” The defendant may then rebut the presumption by “proving the absence of reliance.” The court held that the FTC met the presumption’s requirements and that Zaappaaz had not presented evidence to rebut the presumption.

$12.2 million award. Zaappaaz argued that the district court erred by establishing before trial the amount of net revenue from undelivered and unrefunded PPE. They contended that the district court erred because of “an alleged conflict between the magistrate judge’s report and recommendation on summary judgment, which the district court adopted, and the district court’s subsequent Rule 56(g) order.” The district court “acknowledged the alleged conflict with the magistrate judge’s report and recommendation but clarified that it granted the Rule 56(g) motion because the FTC had established, based on undisputed facts, that Zaappaaz’s revenue from undelivered and unrefunded PPE orders was [about $12.2 million.]” The court found no error in the district court’s determination. However, Judge Engelhardt dissented on this point. He argued that the Rule 56(g) ruling was improper because the earlier summary judgment ruling had held the damages figure to be genuinely disputed.

$25.3 million award. Zaappaaz also challenged the award of about $25.3 million for customers who received their orders late. The district court implemented a redress plan applicable to refunds for consumers who received late-shipped goods. The $25.3 million was to be held in escrow and funds must be returned if they remain unclaimed 120 days after consumers are notified of their availability. The court vacated this portion of the damages. It held that awarding full refunds for products that were eventually delivered—albeit late—was not necessarily “necessary to redress injury,” as required by 15 U.S.C. § 57b(b). Many customers may have still benefited from the products, despite late delivery. Full refunds would represent a windfall for these consumers, and the court also noted that it may run afoul of the statute’s prohibition on punitive damages. It vacated this damage award and remanded for reconsideration consistent with the statute.

The Case is No. 24-20234.

Judge: Haynes, C.

Attorneys: Mariel Goetz for the FTC. Michael Gregory Pattillo, Jr. (MoloLamken LLP) for Zaappaaz, LLC.

Companies: Zaappaaz, LLC

Cases: Advertising ConsumerProtection FederalTradeCommissionNews LouisianaNews MississippiNews TexasNews Covid19 GCNNews