Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—M.D. Fla.: Receiver in FTC suit to stop robocall operation granted reduced fees, travel expenses, (Jan 13, 2015)

By Linda O’Brien, J.D., LL.M.

In an FTC action against an Orlando based telemarketing operation that used pre-recorded telephone calls to sell seniors supposedly free medical alert systems, the motion for fees and expenses by the receiver appointed over the corporate and individual defendants’ assets was granted in part by the federal district court in Orlando, Florida. However, the amount of receiver’s fees and travel expenses were reduced due to limited financial result and the estate’s inability to pay the requested fees and expenses (FTC v. Worldwide Info Services, Inc., January 9, 2015, Mendoza, C.).

In January 2014, the FTC and the Florida Attorney General filed a joint complaint, alleging the telemarketers violated the FTC Act, the Telemarketing Sales Rule (TSR), and Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) by sending unsolicited pre-recorded robocalls to senior citizens, falsely stating that they were eligible to receive a free medical alert system that was bought for them by a friend, family member, or acquaintance. The court entered a temporary restraining order (TRO), freezing the corporate and individual assets, and appointing Robb Evans as receiver.

The receiver’s duties were to take exclusive control and possession of all assets and documents of the defendants. To execute the TRO, Evans hired professionals and consultants, traveled to the defendants’ business premises to take control over documents and property located there, interviewed employees, notified the defendants’ financial institutions, and identified several creditors. In August 2014, Evan filed a motion for receiver’s fees, requesting over $213,000 in fees and expenses. A magistrate judge submitted a report and recommendation (R&R), reducing or denying certain fees and expenses. Evans filed objections to the R&R.

Receiver’s fees. In affirming the magistrate’s R&R as modified, the court determined that the amount of fees requested were excessive. As an officer of the court, the receiver is entitled to reasonable compensation and to be reimbursed for actual and necessary expenses, the court explained. In determining an appropriate award of fees, the court noted that the amount recovered from the defendants’ bank accounts was low compared to the extraordinary amount of effort expended in the recovery. Also, the receiver’s total requests exceeded the entirety of the estate. Moreover, most of the work on the receivership was completed within the first few days so the time required to complete to the receivership was minimal. Thus, the court reduced each category of receiver’s fees – receiver, accounting, and IT staff – by five percent.

Travel expenses. The travel expenses were determined to be excessive and were reduced by half. According to the court, the failure by Evan to coordinate with the FTC regarding the entry date for the TRO did not justify excessive airfare costs. The fact that many of the professionals hired by Evan traveled first class was beyond what constituted actual and necessary expenses. Moreover, the record indicated that it was unnecessary for three of the receiver’s professionals to travel to the defendants’ business premises in Florida. Therefore, expenses associated with those professionals would not be reimbursed.

Consulting fees. Evans produced evidence of expense reports for the consultants who performed a number of tasks in the receivership. Accordingly, he will be reimbursed for expenses related to the consulting firm, subject to certain deductions based on the limited financial result and inability of the estate to afford the requested fees and expenses.

Copying costs. Finally, Evan will be reimbursed for copying costs. He provided an invoice for copying records pursuant to a subpoena, seeking bank account information related to the receivership. Thus, the receiver was able to show sufficient records that indicate the origin of the copying costs as well as establish the reasonableness of those costs, the court concluded.

The case is No. 6:14-cv-8-Orl-41DAB.

Attorneys: David A. O'Toole for FTC. Denise D. Kim, Office of the Attorney General, for State of Florida. Franklin S. Homer (Greenspoon Marder, PA) for Worldwide Information Services, Inc., Elite Information Solutions Inc., Absolute Solutions Group Inc., Global Interactive Technologies, Inc., and Global Service Providers, Inc.

Companies: Worldwide Info Services, Inc.; Elite Information Solutions Inc.; Absolute Solutions Group Inc.; Global Interactive Technologies, Inc.; Global Service Providers, Inc.; Arcagen, Inc.; American Innovative Concepts, Inc.; Unique Information Services Inc.; National Life Network, Inc.

Cases: StateUnfairTradePractices ConsumerProtection FloridaNews