Today a three-judge panel of the US Court of Appeals for the Fourth Circuit dismissed William Isely’s appeal of a Federal Trade Commission order refusing to compensate Isely for the $130,000 in legal fees he incurred defending himself in an earlier FTC case. The FTC had falsely accused Isely, an elderly retiree, of running a foreign website that allegedly made false claims about the health benefits of certain herbal supplements. FTC staff intentionally ignored evidence that another individual was responsible for the website.
Despite ultimately dismissing its own case against Isely, the FTC refused to compensate him, as required by federal law. FTC Chairman Jon Leibowitz said in a February decision that any FTC case was “substantially justified” — the legal threshold for assessing damages against the Commission — if it was tried on the merits. Since the FTC itself decides whether to try a case on the merits, Leibowitz’s decision, left undisturbed by the Fourth Circuit, effectively exempts the Commission from ever having to pay attorney fees to prevailing defendants, even in cases where there is demonstrable prosecutorial misconduct.
The Fourth Circuit refused to consider the merits of Isely’s appeal. Instead, the court granted the FTC’s motion to dismiss the appeal on the grounds that Isely filed several days after the statutory deadline. Isely said he was confused by conflicting information in the federal court rules as well as advice he received directly from the Fourth Circuit clerk. (Isely represented himself on appeal as he could no longer afford his prior attorney; I contacted several attorneys — including some who work for prominent “free-market” groups — to accept the case, but all declined.)