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A recent federal court decision found that FleetCor, a company that sells fuel card services to businesses, and its CEO had violated the Federal Trade Commission (FTC or Commission) Act through a series of deceptive and unfair acts and practices. It is not every day that the FTC sues the CEO of a publicly traded company, and it is even less often that we see a federal court opinion on the topic, so this decision warrants a deep dive.

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But before we focus on the decision, we need to get some unusually messy procedural history tied to the AMG decision out of the way. The FTC <a href="https://www.ftc.gov/news-events/news/press-releases/2019/12/ftc-alleges-fuel-card-marketer-fleetcor-charged-hundreds-millions-hidden-fees">filed its case against FleetCor and its CEO</a> in December 2019, alleging that the company engaged in a range of deceptive and unfair practices regarding savings on fuel costs. The complaint sought monetary equitable relief under Section 13(b) of the FTC Act. While the case was in litigation, in April 2021, the Supreme Court decided the AMG case, thereby preventing the FTC from seeking monetary relief in the federal case it had filed. The case continued, however, with the FTC focused on injunctive relief. And in August 2021, the FTC filed a <a href="https://www.ftc.gov/news-events/news/press-releases/2021/08/ftc-sues-fleetcor-its-ceo-fleecing-small-businesses-mystery-fuel-card-fees">separate administrative action</a> against FleetCor and its CEO regarding the same practices. For those who have not been closely following FTC monetary issues, the agency can eventually seek money <a href="https://www.adventures-in-law.com/ftc/the-ftc-administrative-process-get-prepared-for-an-extended-engagement/">after administrative litigation</a> if the conduct at issue is fraudulent or dishonest; thus the second case.

So at this point, we have two FTC litigations, one in federal court and one that is administrative, though the Commission <a href="https://www.ftc.gov/system/files/documents/cases/d09403fleetcororderstayingproceeding.pdf">stayed the administrative acti</a>on soon after it was filed pending the FTC’s motion to dismiss the federal action. The federal action, however, did not get dismissed; instead, the FTC sought summary judgment in the case, and FleetCor moved for partial summary judgment.

With that complex procedural detour, we turn to the summary judgment decision. Spoiler alert: Things did not go well for the defendants. Indeed, paragraph two notes that the FTC’s case “is compelling and overwhelms FleetCor’s evidentiary and legal defenses.” And it goes downhill from there for FleetCor, with the Court going through all the challenged claims in turn, finding that each one was made and was material and deceptive. And it is noteworthy that the court takes a very dim view of the use of disclaimers to modify claims. The decision is a veritable course in advertising claim interpretation and disclosures, but a few key passages should provide some helpful lessons and insights into the court’s thinking on the merits of the case.

As the enhanced disclaimer remains inscrutable, the Court provides the relevant text below after having significantly magnified the text.

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Contrary to Defendants’ position, where the advertisement’s claim is explicit, or where it is “clearly and conspicuously implie[d],” no extrinsic evidence – in the form of consumer surveys or otherwise – is required to ascertain whether the representation was made.

Disclaimers or qualifications in any particular ad are not adequate to avoid liability unless they are sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression.

[T]he tiny, inscrutable print of the disclaimers does not cure the net impression of the representations in the ads cited, which promise that consumers would be afforded certain per-gallon savings.

There is, consequently, formidable evidence that the rebate ads “were not just likely to mislead consumers, but actively [did] so, with hundreds of customer complaints ... and a consumer survey to rely on.”

[D]efendants attempt[ed]to gum up the analysis with facts that are irrelevant to the legal framework and/or that challenge one pebble in the FTC’s large body of evidence.

Just because an injury is small does not mean it is not “substantial.” An act or practice can cause “substantial injury” by doing a “small harm to a large number of people, or if it raises a significant risk of concrete harm.”

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And then we turn to the issue of individual liability. The FTC also sued FleetCor’s CEO and chairman of the board, arguing that he was “individually liable for FleetCor’s unlawful practices by virtue of his authority to control and participation in the company’s sales practices and his knowledge of those practices.” As background, the precise legal standard for individual liability can vary somewhat based on which circuit you are in and whether the FTC is seeking money; a good primer in the issue can be <a href="https://www.adventures-in-law.com/ftc/im-a-lawyer-what-do-you-mean-im-being-named-in-an-ftc-complaint-the-ftc-act-and-individual-liability/">found here</a>. The court’s precise standard here, in an action for injunctive relief, was that “[a]n individual is liable for a corporation’s violations of the FTC Act, and may be enjoined for such violations, if the FTC demonstrates that (1) ‘the individual either “participated directly in the practice or acts or had the authority to control them,”’ and (2) ‘the individual had “some knowledge of the practices.”’

With respect to the first prong, the focus was on authority to control, although the court noted that the FTC also had argued direct participation. The court emphasizes that the CEO was the ultimate decision-maker and had the final say on decisions for the fuel card business. He approved some of the decisions that were relevant to issues in the lawsuit. The court states that the CEO had broad authority and could have “nipped the offending [activities] in the bud.” In a footnote, the court even notes that “employees who disagree with [the CEO] too frequently are removed.” The court did not buy the defendants’ argument that the CEO’s authority and oversight were “only high-level, and thus his position is insufficient to establish his authority to control FleetCor’s unlawful practices.”

For the second prong – showing some knowledge of the practices – the FTC came to court with receipts. They included emails, internal studies and public reports about the challenged practices. For example, emails showed the CEO requesting information about marketing and fee practices and information being provided to the CEO that showed that saving claims were not being obtained by many customers. The court noted, “Despite his awareness of considerable data regarding customer complaints, customers’ lack of discounts, and other issues, Clarke dismissed public reports . . . as ‘fake news’ during a presentation to investors.” The court finds that he had knowledge of or, at a minimum, reckless indifference to the unlawful practices.

Next Steps and Lessons Learned

In early September, the court will have a hearing to assess the scope of injunctive relief to be awarded. And FleetCor <a href="https://investor.fleetcor.com/news-releases/news-release-details/fleetcor-appeal-ruling-ftc-case">has already announced</a> that it will be appealing the decision. The FTC has not yet announced its next steps, but certainly one would imagine that the agency staff will attempt to use the court’s decision to expedite the currently stayed administrative decision, and eventually will use Section 19 of the FTC Act to attempt to obtain monetary relief in federal court.

This is one district court decision, and the case is far from over. But one can be quite certain that the FTC will be citing quite frequently to this decision in future cases involving individual liability. In almost every investigation, the FTC staff will investigate the company and will also evaluate whether there are individuals who should also be named. This case will certainly increase the focus on individuals in future cases. And it is worth noting that the standard for individual liability is easier to meet than you might anticipate. The case also serves as a practical reminder that listening to complaints and responding to them appropriately is advisable. At times, with complaints comes knowledge, and that can lead to potential individual liability.

And on the disclaimer front, the case also reminds us that the FTC (along with some courts) seems to be taking a more narrow view of the utility of disclaimers. The agency is currently reviewing the <a href="https://www.adventures-in-law.com/ftc/dot-com-guideline-revisions-focus-hyperlinks-dark-patterns-metaverse/">dot-com guidelines</a>, and we will keep you up to date as we learn more about those revisions.

Recent Summary Judgment Decision in FleetCor Case Spells Trouble for CEOs and Disclaimers