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Amicus Brief Complies with the Type-Volume Limitations of Fed Case: 14-20128 Document: 00513507179 Page: 5 Date Filed: 05/16/2016 14-20128 ___________________________________________________ In The United States Court Of Appeals For The Fifth Circuit ___________________________________________________ Juan Ramon Torres; Eugene Robison, Plaintiffs–Appellees, v. S.G.E. Management, L.L.C.; Stream Gas & Electric, L.T.D.; Stream S.P.E. G.P., L.L.C.; Stream S.P.E., L.T.D.; Ignite Holdings, L.T.D.; et al., Defendants-Appellants ___________________________________________________ Appeal from the United States District Court for the Southern District of Texas ___________________________________________________ Brief of Amicus Curiae Truth In Advertising, Inc. in Favor of Appellees and in Support of Affirmance ___________________________________________________ Laura Smith Robert B. Gilbreath State Bar No. 428508 CT State Bar No. 07904620 [email protected] [email protected] Truth in Advertising, Inc. Hawkins Parnell P.O. Box 927 Thackston & Young LLP Madison, Connecticut 06443 4514 Cole Avenue, Suite 500 Telephone: (203) 421-6210 Dallas, Texas 75205 Facsimile: (203) 421-6211 Telephone: (214) 780-5114 Facsimile: (214) 780-5200 COUNSEL FOR AMICUS CURIAE Case: 14-20128 Document: 00513507179 Page: 6 Date Filed: 05/16/2016 Corporate Disclosure Statement Of Truth In Advertising, Inc. In accordance with Federal Rule of Appellate Procedure 29(c)(1), the undersigned counsel certifies that amicus curiae Truth in Advertising, Inc. is a 501(c)(3) nonprofit, non-stock corporation. It has no parent corporation, and no publicly traded corporation has an ownership interest in it of any kind. Pursuant to Fifth Circuit Rule 29.2, the undersigned counsel certifies that the following listed persons and entities, in addition to those already listed in the parties’ briefs, have an interest in the outcome of this case: Truth in Advertising, Inc. – amicus curiae Robert B. Gilbreath – counsel for Truth in Advertising, Inc. Laura Smith – counsel for Truth in Advertising, Inc. Respectfully submitted, /s/ Robert B. Gilbreath Robert B. Gilbreath ii Case: 14-20128 Document: 00513507179 Page: 7 Date Filed: 05/16/2016 Table of Contents Corporate Disclosure Statement Of Truth In Advertising, Inc. ...............................ii Table of Contents ................................................................................................... iii Index of Authorities ............................................................................................... iv Statement of Interest ............................................................................................... 1 Argument ................................................................................................................ 3 I. Class-Action Litigation Plays An Indispensable Role In Protecting Consumers From Pyramid Schemes ............................................................. 3 II. Pyramid Schemes Inflict Broad and Serious Harm to Consumers, Legitimate Business Competitors, and the General Public Alike ................... 7 III. To Succeed, Pyramid schemes Must Masquerade As Legitimate MLM Companies ....................................................................................... 13 Conclusion ............................................................................................................ 17 Certificate of Compliance ..................................................................................... 18 Certificate of Service ............................................................................................ 19 iii Case: 14-20128 Document: 00513507179 Page: 8 Date Filed: 05/16/2016 Index of Authorities Cases In re Am. Principals Holdings, Inc. Sec. Litig., 1987 U.S. Dist. LEXIS 16945, M.D.L. No. 653 (S.D. Cal. July 9, 1987) ...................................................................................................... 5 Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) .................................................................................... 5 In re Amway Corp., 93 F.T.C. 618 (1979) .................................................................................. 6 Arata v. Nu Skin Int’l, Inc., No. 92-15380, 1993 U.S. App. LEXIS 21747 (9th Cir. 1993) ....................... 5 Bostick v. Herbalife Int’l of Am., Inc., 13-cv-02488 C. ........................................................................................... 2 Carnegie v. Household Int’l, Inc., 376 F.3d 656 (7th Cir. 2004) ...................................................................... 4 Davis v. Avco Corp., 371 F. Supp. 782 (N.D. Ohio 1974), aff’d, 739 F.2d 1057 (6th Cir. 1984) ................................................................................................... 5 Evans v. Armenta, No. 14-cv-00329 (E.D. Ky. Aug. 29, 2014) ............................................... 11 Evans v. Burrell, No. 14-cv-00330 (E.D. Ky. Aug. 27, 2014) ............................................... 11 Fed. Trade Comm’n v. BurnLounge, Inc., 753 F.3d 878 (9th Cir. 2014) ............................................................ 7, 13, 16 In re Glenn W. Turner Enters. Litig., 521 F.2d 775 (3d Cir. 1975) ......................................................................... 5 Marshall v. Holiday Magic, Inc., 550 F.2d 1173 (9th Cir. 1977) ...................................................................... 5 iv Case: 14-20128 Document: 00513507179 Page: 9 Date Filed: 05/16/2016 Nguyen v. FundAmerica, Inc., 1990 U.S. Dist. LEXIS 15031 (N.D. Cal. Aug. 16, 1990) ............................. 5 Piambino v. Bailey, 610 F.2d 1306 (5th Cir. 1980) ..................................................................... 5 Reyes v. Netdeposit, LLC, 802 F.3d 469 (3d Cir. 2015) ....................................................................... 4 Sec. Exch. Comm’n v. Koscot Interplanetary, Inc., 365 F. Supp. 588 (N.D. Ga. 1973) ............................................................. 10 Sec. Exch. Comm’n v. Koscot Interplanetary, Inc., 497 F.2d 473 (5th Cir. 1974) .......................................................... 10, 12, 14 Secs. Exch. Comm’n v. Glenn W. Turner Enters., Inc., 348 F. Supp. 766 (D. Ore. 1972), aff’d 474 F.2d 476 (9th Cir. 1973) .................................................................................................... 9, 15 Stull v. YTB Int’l, Inc., No. 10-600, 2011 U.S. Dist. LEXIS 109376 (S.D. Ill. Sept. 26, 2011) .......................................................................................................... 5 Torres v. S.G.E. Mgmt., L.L.C., No. 09-cv-2056 (S.D. Tex. Jan. 29, 2014) ................................................ 16 Torres v. S.G.E. Mgmt., L.L.C., 805 F.3d 145 (5th Cir. 2015) ................................................................ 14, 15 Webster v. Omnitrition Int’l, Inc., 79 F.3d 776 (9th Cir. 1996) ........................................................... 5, 9, 11, 13 Rules of Procedure Fed. R. App. P. 29(c)(1) ..................................................................................ii Fed. R. App. P. 29 (c)(5) ................................................................................. 1 Fed. R. App. P. 29(d) .................................................................................... 18 Fed. R. App. P. 32(a)(5) ................................................................................ 18 v Case: 14-20128 Document: 00513507179 Page: 10 Date Filed: 05/16/2016 Fed. R. App. P. 32(a)(6) ................................................................................ 18 Fed. R. App. P. 32(a)(7)(B)(iii) ..................................................................... 18 Fed. R. Civil P. 23(f) ..................................................................................... 16 Fed. R. Civ. P. 23 ........................................................................................ 4, 5 Other Authorities Dana Mattioli and Emily Glazer, Amid the Latest Criticism, Herbalifers Stay Resolute, WALL ST. J., Jan. 6, 2013 ..................................... 8 FTC Advisory Opinion, 16 C.F.R. § 15.155(d) (1988) ................................... 10 Nat’l Ass’n Consumer Advocates, Standards & Guidelines for Litigating and Settling Consumer Class Actions (3d ed. 2014) ................... 4 Preliminary Injunction Order, Fed. Trade Comm’n v. Vemma Nutrition Co., No. 15-cv-1578 ............................................................. 12, 14 vi Case: 14-20128 Document: 00513507179 Page: 11 Date Filed: 05/16/2016 Statement of Interest1 Truth in Advertising, Inc. (TINA.org) is a 501(c)(3) nonprofit, nonpar- tisan organization whose mission is to combat the systemic and individual harms caused by deceptive marketing. To further its mission, TINA.org inves- tigates deceptive marketing practices and advocates before federal and state government agencies, as well as courts. With respect to pyramid schemes in particular, TINA.org has filed sev- eral complaints with the Federal Trade Commission (“FTC”) regarding such fraudulent marketing ventures. Recently, TINA.org’s efforts in this regard prompted the FTC to file suit for a permanent injunction against an Arizona- based pyramid scheme, a case in which TINA.org worked with the Commis- sion, providing it with its investigation findings, as well as testimony at the preliminary injunction hearing in the District Court of Arizona. See FTC Acts to Halt Vemma as Alleged Pyramid Scheme, Press Release (Aug. 26, 2015), https://www.ftc.gov/news-events/press-releases/2015/08/ftc-acts-halt-
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