2nd Circuit Rules Defunct Ad Network LeadClick Liable for Deceptive Content
LeadClick, a now-defunct affiliate marketing network, is liable for deceptive advertising content it had no hand in producing and that was promoted on fake news websites, said the 2nd U.S. Circuit Court of Appeals, upholding a lower court ruling that…
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
sided with the FTC and Connecticut. But Judge Denny Chin, who wrote Friday's 3-0 opinion (in Pacer), reversed, in part, the summary judgment by the U.S. District Court for the District of Connecticut in New Haven, which said then-parent CoreLogic should be liable as a relief defendant. The FTC and Connecticut sued LeanSpa in December 2011 for selling purported weight-loss products. That case was settled in January 2014. But the District Court ruled LeadClick and CoreLogic should turn over $11.9 million gained through their arrangement with LeanSpa. Consumers were lured to LeanSpa's website through fake news websites developed by LeadClick's affiliates, wrote Chin. LeadClick said a defendant can be held liable for deceptive acts or practices under Section 5 of the FTC Act only if it created the deceptive content. But Chin, citing cases in the 9th and 11th Circuits, said a defendant can be held liable "if, with knowledge of the deception, it either directly participates in a deceptive scheme or has the authority to control the deceptive content at issue." He also rejected LeadClick's argument the FTC Act doesn't "expressly provide" for aiding and abetting liability. Chin said LeadClick also isn't entitled to immunity, as the company had sought, under Section 230 of the Communications Decency Act, which is designed to protect children from sexually explicit content. But he said the lower court erred in saying CoreLogic must disgorge $4.1 million it got from LeadClick, which closed shop in 2011, because CoreLogic had a "legitimate claim to repayment from its prior advances to LeadClick." CoreLogic declined to comment Monday.