Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—E.D. N.Y.: Medical alert CEO must pay $3.4M for violating FTC Act, Telemarketing Sales Rule, (Apr 16, 2015)

By Greg Hammond, J.D.

The FTC was granted summary judgment on claims that a medical alert monitoring and equipment company violated the FTC Act and Telemarketing Sales Rule (TSR) by making misrepresentations to induce consumers to pay for their services; using threats or intimidation to coerce consumer to pay them; and calling consumers whose numbers appear on the National Do Not Call Registry. The federal district court in Brooklyn determined that the defendants failed to submit any evidence to establish a material issue of fact (FTC v. Instant Response Systems, LLC, April 14, 2015, Glasser, I.).

Background. Jason Abraham is the founder, owner, and chief executive officer of Instant Response Systems, LLC—a company that sells medical alert monitoring services and equipment to the elderly. The FTC alleged that Instant Response had telemarketers contact elderly consumers, over the age of 64, who lived alone and had a limited or fixed income. The telemarketers purportedly told consumers they were calling in response to a request for information about medical alert services, or that a family member or loved one asked the company to contact them. In addition, Instant Response supposedly called consumers whose phone numbers were on the National Do Not Call Registry. For consumers that did not order medical alert services, Instant Response allegedly sent sales invoices or mailed products, demanding payment. The company used follow-up letters and telephone calls that accused consumers of ordering services, threatening to file suit, informing consumers they could have to pay “thousands of dollars,” and threatening to have consumers arrested.

The FTC brought its complaint against Instant Response in February 2013, claiming: (1) violation of the FTC Act through misrepresentations that consumers ordered medical alert services and owed money; and (2) violations of the TSR, based on Instant Response’s alleged misrepresentations to induce consumers to pay for services, defendants’ use of threats or intimidation to coerce consumers to pay, and defendants’ calls to consumers whose numbers were on the National Do Not Call Registry. After the court granted default judgment and issued an order for permanent injunction and monetary relief of over $3.4 million against Instant Response, the FTC moved for summary judgment against Abraham on all counts of its complaint.

FTC Act claim. The court first found that there was no genuine dispute that the defendants made material misrepresentations that consumers ordered medical alert services and owed Instant Response money when they did not. Although Abraham offered an unsworn affidavit from an independent contractor that worked for Instant Response as evidence, the court found that: (1) the affidavit was not signed under penalty of perjury and was therefore inadmissible; and (2) the independent contractor lacked personal knowledge of the consumer complaints or the calls at issue. Because Abraham failed to provide any affirmative evidence to support his defense, and only provided conclusory denials, summary judgment was granted as to the FTC Act misrepresentation claim.

TSR claims. Abraham additionally failed to present any evidence that established a genuine dispute of material fact with regard to the FTC’s TSR claims, including that Abraham made false or misleading statements to induce payments, made threats or intimidated to coerce payment, or that Abraham violated the Do Not Call Registry.

Independent liability. Because Abraham did not dispute his level of control and involvement in the company’s business affairs, there was no genuine dispute of material fact that he had authority to control Instant Response and participated directly in many of the company’s deceptive acts and practices. He was therefore individually liable for injunctive relief. Further, because the FTC presented unrebutted evidence that Abraham was intimately involved in Instant Response’s daily operations and was aware of at least 100 consumer complaints, there was no genuine dispute of material fact that he had an awareness of a high probability of fraud along with an intentional avoidance of the truth. He was therefore individually liable for restitution in the amount of $3,432,462.

The case number is 13 Civ. 00976 (ILG) (VMS).

Attorneys: Arturo A. DeCastro for Federal Trade Commission. Solomon J. Jaskiel for Instant Response Systems, LLC. Jason Abraham, pro se.

Companies: Instant Response Systems, LLC

Cases: ConsumerProtection FederalTradeCommissionNews NewYorkNews