Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—N.D. Ill.: FTC telemarketing action transferred from Illinois to Florida, (Jan 7, 2014)

By Edward L. Puzzo, J.D.

In a telemarketing sales rule case, the consideration due the FTC’s choice of forum was outweighed by the convenience for potential witnesses of a change of venue from the Northern District of Illinois to the Southern District of Florida, the federal district court in Chicago has ruled (Federal Trade Commission v. Acquinity Interactive, January 6, 2014, Kennelly, M.).

The FTC had alleged that the defendants violated sections 5(a) and 5(n) of the FTC Act, and the Telemarketing Sales Rule when they engaged in the practice of sending unsolicited text messages to consumers’ cellular telephones, suggesting that they had won a gift or prize, and directing them to a website that required them to supply personal or financial information and pay money to claim their “free” prize. Not only was the “free” merchandise not actually free, the FTC claimed, but consumers rarely received the promised merchandise. Instead, they allegedly found that their personal information was sold to co-defendants, who used it to initiate “robocalls” offering various goods and services, or to drive traffic to the defendants’ websites.

The defendants included Acquinity, a Florida limited liability company, and its Canadian affiliate; Worldwide Commerce Associates, a Nevada limited liability company; and Revenue Path E-Consulting, an Indian company licensed in Cyprus. The FTC investigation was initiated by its Midwest Regional Office in Chicago.

The FTC brought this action in the Northern District of Illinois. Acquinity, with the consent of the other defendants, moved to transfer the case to the Southern District of Florida. In assessing the transfer request, the court explained, it must evaluate the convenience of the parties and witnesses, using the following factors: (1) the plaintiff’s choice of forum, (2) the situs of material events, (3) the relative ease of access to proof, (4) the parties’ convenience, and (5) the witnesses’ convenience in litigating in the respective forums.

Choice of forum. Plaintiff’s choice in this regard is ordinarily entitled to substantial weight, but is entitled to less weight when the conduct complained of is not significantly connected to the forum chosen by plaintiff. The FTC had not suggested that the alleged scheme had a greater impact in the chosen district than elsewhere. Therefore, stated the court, the FTC’s choice of forum is not entitled to substantial weight in weighing the transfer request.

Access to proof. Since neither side argued that serious cost or technical considerations with document reproduction existed in this case, the court viewed this factor as neutral.

Convenience of the parties. Acquinity argued that the FTC, as a government agency, had offices throughout the country, so the location of its counsel was irrelevant. The FTC argued that it conducted this investigation out of its Chicago office, and thus its staff would incur additional time and travel costs litigating out of the district. Seventh Circuit precedent, the court stated, is that federal agencies are as entitled to consideration of the costs imposed by a transfer as private parties, since additional costs incurred by the agency would be a burden on taxpayers. Thus, the convenience of the parties in this case did not tilt the scale in favor of transfer, the court stated.

Convenience of the witnesses. Acquinity identified employees who were likely to have significant information regarding contested matters and who all continued to reside in South Florida even though they no longer worked for Acquinity. It was also noted that Acquinity lost more than 150 employees in 2012-13, over 80 percent of whom resided in South Florida. In contrast, the court noted, the FTC identified very few potential witnesses in the Illinois district. Thus, if the case remained in Illinois, a trial very well could consist largely of the presentation of deposition testimony. If the case were transferred to the Southern District of Florida, the court reasoned, a significant number of important witnesses would appear live because they would be subject to that court’s subpoena power. Thus, the court concluded, the convenience of witnesses was a significant factor favoring transfer.

The court concluded that, while the FTC’s choice of forum was entitled to significant consideration, the balance of other factors tilted significantly in favor of transfer. Therefore, the motion to transfer the case to the Southern District of Florida was granted.

The case is No. 13 C 5380.

Attorneys: Steven M. Wernikoff for Federal Trade Commission. Richard W. Epstein (Greenspoon Marder, PA) for Acquinity Interactive, LLC and Worldwide Commerce Associates, LLC. Ari Nicholas Rothman (Venable LLP) for Firebrand Group, SL, LLC.

Companies: Acquinity Interactive, LLC; Worldwide Commerce Associates, LLC; Firebrand Group, SL, LLC

Cases: ConsumerProtection Privacy FloridaNews IllinoisNews