Owner of Hair Regrowth Product Required to Make $40M Personal Restitution9 Jul, 2012 By: John Waller, Blank Rome LLP, Jeffrey Richter
For nearly a decade, restitution under California’s Unfair Competition Law has been restricted by court rulings to the return of money or property that has been acquired directly by the perpetrator of an unfair business practice from the victims of such practices. As a result, it may come as a surprise to corporate officers and business owners that they may be personally liable to make restitution to such victims when the transactions at issue occurred between their company and the victims of those unfair business practices – notwithstanding that the individuals had no direct interaction with the victims.
A recent California appellate decision (Thomas v. Imbriolo, First District Court of Appeal, April 25) upheld a multi-million dollar jury verdict that imposed liability under both California’s Unfair Competition Law and its Consumers Legal Remedies Act against the defendants, including Global Vision and its president, and required its president to make $40 million in restitution to a class of victims who purchased Avacor hair regrowth products from Global Vision. In upholding the verdict against Global Vision’s president, Anthony Imbriolo, the Court of Appeal noted that he owned 51 percent of the company, created the Avacor hair regrowth products at issue and was responsible for the content of the company’s advertising about Avacor. The decision further explains that Global Vision paid Imbriolo substantial consulting fees, transferred hundreds of thousands of dollars to other companies that he owned, purchased a country house for him, and transferred more than $3 million to bank accounts that Imbriolo maintained outside the United States.
Imbriolo did not dispute that the court properly held him liable under the Unfair Competition Law because he directly participated in formulating Global Vision’s advertising of Avacor – a product that the court concluded was “worthless.” Rather, he argued that he could not be required to pay restitution because he had not received any money directly from members of the class. The Court of Appeal’s decision notes that restitution is an available remedy under the Unfair Competition Law when money or property have been lost by a plaintiff and acquired by a defendant. It found that the evidence in the case was more than sufficient to establish that Imbriolo acquired money, directly or indirectly, as a result of the unlawful business practices at issue and could properly be required to make restitution of same to the class of victims of those practices.
Thomas v. Imbriolo may be an aberration, but officers and shareholders who control the operations of a business that pursues aggressive positions that may be found to violate the Unfair Competition Law may find it prudent to read the case.
Jeffrey Richter and John Waller are partners at Los Angeles-based Finestone & Richter. They can be reached at (310) 575-0800.