Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—N.D. Cal.: Some affirmative defenses stand in FTC deceptive advertising lawsuit against DirecTV, (Dec 23, 2015)

By Edward L. Puzzo, J.D.

In a lawsuit brought by the FTC against DirecTV in connection with alleged deceptive advertising, DirecTV's affirmative defenses of claim preclusion and issue preclusion should be stricken, but the affirmative defenses of laches, estoppel, and waiver should stand, the federal district court in San Francisco has ruled (Federal Trade Commission v. DirecTV, December 21, 2015, Gilliam, H.).

On March 11, 2015, the FTC filed a lawsuit against DirecTV, a national provider of direct-to-home satellite television services with more than 20 million subscribers across the United States. The agency alleged that DirecTV's advertising was deceptive, in that it (1) failed to disclose or adequately disclose pricing of DirecTV’s satellite television subscription service; (2) failed to disclose adequately premium channel offer terms; (3) failed to disclose all material terms; and (4) failed to obtain consumers’ express informed consent.

DirecTV raised various affirmative defenses based on the 2010 entry of 51 judgments and consent orders, resulting from charges by all the states and the District of Columbia and arising from the same practices now alleged by the FTC. The FTC moved to strike the affirmative defenses.

Laches defense. DirecTV argued that the equitable doctrine of laches barred the FTC action because the FTC was invited to participate in the 2010 settlement of charges by the states, but delayed its lawsuit until 2015, prejudicing DirecTV by allowing it to design subsequent advertising disclosures in reliance on the settlement agreements. In response, the FTC alleged that the defense of laches was not available against a suit by a government agency seeking to protect a public interest. The court disagreed and denied the FTC's motion to strike this defense. Although DirecTV may have to prove affirmative misconduct on the part of the FTC in order to prevail on its laches defense, at the pleading stage, no more is required than fair notice of the defense, the court ruled.

Estoppel defense. The ultimate question of whether DirecTV can prove estoppel is not at issue at the pleading stage, the court stated. Similar to laches, DirecTV need only provide the FTC with notice that it will raise this defense. The court also declined to strike this defense.

Waiver defense. The FTC moved to strike the defense of waiver— the intentional relinquishment of a known right—on the grounds that it could not waive an Act of Congress. Since the FTC was vested with discretion to bring this lawsuit, the court stated, it was not statutorily required to bring this suit, and any successful use of this affirmative defense would not undermine any statutory obligation placed on the FTC. The court therefore declined to strike the defense on that basis.

The FTC further argued that, in order to prevail on a waiver defense, DirecTV must show that any waiver was "unmistakable," a high burden, and the facts of the Answer did not plausibly support that defense. The court agreed that the defendant may not be able to meet this burden, but at the pleading stage, the defense should not be stricken, it ruled.

Claim preclusion defense. DirecTV claimed that res judicata, or claim preclusion—barring successive litigation of the same claim—applied here because the settlement with the states' attorneys general was based on state analogues of the federal statute upon which the FTC was basing its action. However, the court stated, in the 2010 settlements, the attorneys general gave no indication that they were acting in a representative capacity for the federal government, nor did the courts take care to protect the interests of the federal government. Thus the claims were not the same, and claim preclusion did not apply. Thus the court granted the FTC's motion to strike this defense.

Issue preclusion defense. DirecTV claimed that collateral estoppel, or issue preclusion, applied because the multi-state settlements litigated law and fact and reached a final judgment. DirecTV conceded that issue preclusion would depend on whether the multistate judgments were intended to have preclusive effect, but argued that such an inquiry was a question of fact that could not be resolved on a motion to strike. The court stated that, generally, a preclusive effect is not presumed for multistate judgments of this type. The burden was on DirecTV to plead facts regarding intended issue preclusion sufficient to raise its right of relief above a speculative level. Having failed to do so, the FTC's motion to strike this affirmative defense must also granted, ruled the court.

The case is Civil Action No. 3:15-cv-01129-HSG.

Attorneys: Eric David Edmondson for FTC. Chad Samuel Hummel (Sidley Austin LLP) for DirecTV, Inc. and DirecTV LLC.

Companies: DirecTV, Inc.; DirecTV LLC

Cases: ConsumerProtection Advertising FederalTradeCommissionNews CaliforniaNews