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Federal Trade Commission v. Health Formulas LLC

United States District Court, D. Nevada

February 22, 2017

FEDERAL TRADE COMMISSION, Plaintiff,
v.
HEALTH FORMULAS, LLC, et al ., Defendants. FEDERAL TRADE COMMISSION, Plaintiff,
v.
JASON MILLER, individually and as an officer or manager of Weight Loss Dojo, LLC, Health Formulas, LLC, Method Direct, LLC, Pure Vitamins, LLC, and MDCC, LLC; and DANELLE MILLER, also known as Danelle Folta and Danelle Kenealy, individually and as an officer or manager of Method Direct, LLC, Health Formulas, LLC, MDCC, LLC, Pure Vitamins, LLC, and Weight Loss Dojo, LLC, 458 MEDIA LLC, a limited liability company; ALPHA BRANDS, LLC, a limited liability company; BARREL ROLL, LLC, a limited liability company; BLU STELLA, LLC, a limited liability company; BRILLIANT SKIN LLC, a limited liability company; BSC MARKETING, LLC, a limited liability company; CHERRY HILL MARKETING, LLC, a limited liability company; CSA VENTURES, LLC, a limited liability company; DIET CONCEPTS, LLC, a limited liability company; DISCOUNT PROVISIONS L.L.C., a limited liability company; DJD DISTRIBUTION, LLC, a limited liability company; EXTAMAX, LLC, a limited liability company; F12 MEDIA LLC, a limited liability company; FLEX FORMULAS, LLC, a limited liability company; GCB MARKETING LLC, a limited liability company; HEALTH FORMULAS, LLC, a limited liability company; HEALTH PRODUCTS DIRECT LLC, a limited liability company; KMS MARKETING LLC, a limited liability company; LONGHORN MARKETING, LLC, a limited liability company; LUMINOUS SKIN LLC, a limited liability company; MDCC, LLC, a limited liability company; MEN'S HEALTH FORMULAS, LLC, a limited liability company; METABOLIC LABS, LLC, a limited liability company; METHOD DIRECT, LLC, a limited liability company; METHOD FILMS, INC., a corporation; MIRACLE MALE, LLC, a limited liability company; MORINGA MARKETING LLC, a limited liability company; NATURAL PRODUCTS DIRECT LLC, a limited liability company; NORTHBOUND MARKETING LLC, a limited liability company; NORTHERN HEALTH PRODUCTS LLC, a limited liability company; PURE AND NATURAL HEALTH PRODUCTS LLC, a limited liability company; PURE AND SIMPLE HEALTH PRODUCTS LLC, a limited liability company; PURE VITAMINS, LLC, a limited liability company; RADIANT SKIN LLC, a limited liability company; SHIMMERING SKIN LLC, a limited liability company; SKINNY 7 LLC, a limited liability company; TINDY FILMS LLC, a limited liability company; WEIGHT LOSS DOJO, LLC, a limited liability company; WELLNESS LABS, LLC, a limited liability company; WELLNESS PRODUCTS, LLC, a limited liability company; VIP SAVINGS, LLC, a limited liability company; and YACON MARKETING LLC, a limited liability company. Defendants.

          DAVID C. SHONKA Acting General Counsel DANIELLE ESTRADA MELISSA DICKEY Federal Trade Commission BLAINE T.WELSH Assistant United States Attorney Attorneys for Plaintiff Federal Trade Commission

         NOTICE OF FILING STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AS TO DEFENDANTS JASON MILLER, DANELLE MILLER, 458 MEDIA LLC; ALPHA BRANDS, LLC; BARREL ROLL, LLC; BLU STELLA, LLC; BRILLIANT SKIN LLC; BSC MARKETING, LLC; CHERRY HILL MARKETING, LLC; CSA VENTURES, LLC; DIET CONCEPTS, LLC; DISCOUNT PROVISIONS L.L.C.; DJD DISTRIBUTION, LLC; EXTAMAX, LLC; F12 MEDIA LLC; FLEX FORMULAS, LLC; GCB MARKETING LLC; HEALTH FORMULAS, LLC; HEALTH PRODUCTS DIRECT LLC; KMS MARKETING LLC; LONGHORN MARKETING, LLC; LUMINOUS SKIN LLC; MDCC, LLC; MEN'S HEALTH FORMULAS, LLC; METABOLIC LABS, LLC; METHOD DIRECT, LLC; METHOD FILMS, INC.; MIRACLE MALE, LLC; MORINGA MARKETING LLC; NATURAL PRODUCTS DIRECT LLC; NORTHBOUND MARKETING LLC; NORTHERN HEALTH PRODUCTS LLC; PURE AND NATURAL HEALTH PRODUCTS LLC; PURE AND SIMPLE HEALTH PRODUCTS LLC; PURE VITAMINS, LLC; RADIANT SKIN LLC; SHIMMERING SKIN LLC; SKINNY 7 LLC; TINDY FILMS LLC; WEIGHT LOSS DOJO, LLC; WELLNESS LABS, LLC; WELLNESS PRODUCTS, LLC; VIP SAVINGS, LLC; AND YACON MARKETING LLC.

          HONORABLE RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE.

         Plaintiff, Federal Trade Commission respectfully submits for the Court's review the attached Stipulated Permanent Injunction and Final Order against all the remaining defendants in the matter, Defendants Jason Miller; Danelle Miller; 458 Media LLC; Alpha Brands, LLC; Barrel Roll, LLC; Blu Stella, LLC; Brilliant Skin LLC; BSC Marketing, LLC; Cherry Hill Marketing, LLC; CSA Ventures, LLC; Diet Concepts, LLC; Discount Provisions L.L.C.; DJD Distribution, LLC; Extamax, LLC; F12 Media LLC; Flex Formulas, LLC; GCB Marketing LLC; Health Formulas, LLC; Health Products Direct LLC; KMS Marketing LLC; Longhorn Marketing, LLC; Luminous Skin LLC; MDCC, LLC; Men's Health Formulas, LLC; Metabolic Labs, LLC; Method Direct, LLC; Method Films, Inc.; Miracle Male, LLC; Moringa Marketing LLC; Natural Products Direct LLC; Northbound Marketing LLC; Northern Health Products LLC; Pure and Natural Health Products LLC; Pure and Simple Health Products LLC; Pure Vitamins, LLC; Radiant Skin LLC; Shimmering Skin LLC; Skinny 7 LLC; Tindy Films LLC; Weight Loss Dojo, LLC; Wellness Labs, LLC; Wellness Products, LLC; VIP Savings, LLC; and Yacon Marketing LLC.

         STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT FOR DEFENDANTS JASON MILLER, DANELLE MILLER, 458 MEDIA LLC; ALPHA BRANDS, LLC; BARREL ROLL, LLC; BLU STELLA, LLC; BRILLIANT SKIN LLC; BSC MARKETING, LLC; CHERRY HILL MARKETING, LLC; CSA VENTURES, LLC; DIET CONCEPTS, LLC; DISCOUNT PROVISIONS L.L.C.; DJD DISTRIBUTION, LLC; EXTAMAX, LLC; F12 MEDIA LLC; FLEX FORMULAS, LLC; GCB MARKETING LLC; HEALTH FORMULAS, LLC; HEALTH PRODUCTS DIRECT LLC; KMS MARKETING LLC; LONGHORN MARKETING, LLC; LUMINOUS SKIN LLC; MDCC, LLC; MEN'S HEALTH FORMULAS, LLC; METABOLIC LABS, LLC; METHOD DIRECT, LLC; METHOD FILMS, INC.; MIRACLE MALE, LLC; MORINGA MARKETING LLC; NATURAL PRODUCTS DIRECT LLC; NORTHBOUND MARKETING LLC; NORTHERN HEALTH PRODUCTS LLC; PURE AND NATURAL HEALTH PRODUCTS LLC; PURE AND SIMPLE HEALTH PRODUCTS LLC; PURE VITAMINS, LLC; RADIANT SKIN LLC; SHIMMERING SKIN LLC; SKINNY 7 LLC; TINDY FILMS LLC; WEIGHT LOSS DOJO, LLC; WELLNESS LABS, LLC; WELLNESS PRODUCTS, LLC; VIP SAVINGS, LLC; AND YACON MARKETING LLC.

         Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), filed its Complaint for Permanent Injunction and Other Equitable Relief, subsequently amended as Amended Complaint for Permanent Injunction and Other Equitable Relief (“Complaint”), for a permanent injunction and other equitable relief in this matter, pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 53(b), 57b. The Commission and Defendants Jason Miller; Danelle Miller; 458 Media LLC; Alpha Brands, LLC; Barrel Roll, LLC; Blu Stella, LLC; Brilliant Skin LLC; BSC Marketing, LLC; Cherry Hill Marketing, LLC; CSA Ventures, LLC; Diet Concepts, LLC; Discount Provisions L.L.C.; DJD Distribution, LLC; Extamax, LLC; F12 Media LLC; Flex Formulas, LLC; GCB Marketing LLC; Health Formulas, LLC; Health Products Direct LLC; KMS Marketing LLC; Longhorn Marketing, LLC; Luminous Skin LLC; MDCC, LLC; Men's Health Formulas, LLC; Metabolic Labs, LLC; Method Direct, LLC; Method Films, Inc.; Miracle Male, LLC; Moringa Marketing LLC; Natural Products Direct LLC; Northbound Marketing LLC; Northern Health Products LLC; Pure and Natural Health Products LLC; Pure and Simple Health Products LLC; Pure Vitamins, LLC; Radiant Skin LLC; Shimmering Skin LLC; Skinny 7 LLC; Tindy Films LLC; Weight Loss Dojo, LLC; Wellness Labs, LLC; Wellness Products, LLC; VIP Savings, LLC; and Yacon Marketing LLC stipulate to the entry of this Stipulated Order for Permanent Injunction and Monetary Judgment (“Order”) to resolve all matters in dispute in this action between them.

         THEREFORE, IT IS ORDERED as follows:

         FINDINGS

         1. This Court has jurisdiction over this matter.

         2. The Complaint charges that Defendants participated in deceptive acts or practices in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) & 52; Section 907(a) of the Electronic Fund Transfer Act, 15 U.S.C. § 1693e(a); Section 4 of the Restore Online Shoppers' Confidence Act, 15 U.S.C. § 8403; Section 205.10(b) of Regulation E, 12 C.F.R. § 205.10(b); and the FTC's Trade Regulation Rule entitled the Telemarketing Sales Rule (“TSR”), 16 C.F.R. Part 310, in connection with the deceptive labeling, advertising, marketing, promotion, offering for sale, or sale of Dietary Supplements, skin creams, and Upsell products.

         3. Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Order. Only for purposes of this action, Defendants admit the facts necessary to establish jurisdiction.

         4. Defendants waive any claim that they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of this Order, and agree to bear their own costs and attorney fees. Defendants further waive and release any claims that they may have against the Commission, the Receiver, and their agents that relate to this action.

         5. Defendants and the Commission waive all rights to appeal or otherwise challenge or contest the validity of this Order.

         DEFINITIONS

         For the purpose of this Order, the following definitions apply:

         A. “Acquirer” means a business organization, financial institution, or an agent of a business organization or financial institution that has authority from an organization that operates or licenses a credit card system (e.g., Visa, MasterCard, American Express, and Discover) to authorize Merchants to accept, transmit, or process payment by credit card through the credit card system for money, goods or services, or anything else of value.

         B. “Charge” includes causing billing information to be submitted for payment, including against the consumer's credit card, debit card, bank account, phone bill, or other account, or otherwise attempting to collect money or other consideration.

         C. “Clear(ly) and Conspicuous(ly)” means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways:

1. In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means.
2. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood.
3. An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it.
4. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable.
5. On a product label, the disclosure must be presented on the principal display panel.
6. The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears.
7. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications.
8. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.
9. When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, “ordinary consumers” includes reasonable members of that group.

         D. “Corporate Defendants” means 458 Media LLC; Alpha Brands, LLC; Barrel Roll, LLC; Blu Stella, LLC; Brilliant Skin LLC; BSC Marketing, LLC; Cherry Hill Marketing, LLC; CSA Ventures, LLC; Diet Concepts, LLC; Discount Provisions L.L.C.; DJD Distribution, LLC; Extamax, LLC; F12 Media LLC; Flex Formulas, LLC; GCB Marketing LLC; Health Formulas, LLC; Health Products Direct LLC; KMS Marketing LLC; Longhorn Marketing, LLC; Luminous Skin LLC; MDCC, LLC; Men's Health Formulas, LLC; Metabolic Labs, LLC; Method Direct, LLC; Method Films, Inc.; Miracle Male, LLC; Moringa Marketing LLC; Natural Products Direct LLC; Northbound Marketing LLC; Northern Health Products LLC; Pure and Natural Health Products LLC; Pure and Simple Health Products LLC; Pure Vitamins, LLC; Radiant Skin LLC; Shimmering Skin LLC; Skinny 7 LLC; Tindy Films LLC; Weight Loss Dojo, LLC; Wellness Labs, LLC; Wellness Products, LLC; VIP Savings, LLC; and Yacon Marketing LLC, and their successors, assigns, affiliates, and subsidiaries.

         E. “Credit Card Factoring” means:

1. Presenting or depositing into, or causing or allowing another to present or deposit into, the credit card system for payment, a Credit Card Sales Draft generated by a transaction that is not the result of a credit card transaction between the cardholder and any of the Defendants;
2. Employing, soliciting, or otherwise causing or allowing a Merchant, or an employee, representative, or agent of a Merchant, to present to or deposit into the credit card system for payment, a Credit Card Sales Draft generated by a transaction that is not the result of a credit card transaction between the cardholder and the Merchant; or
3. Obtaining access to the credit card system through the use of a business relationship or an affiliation with a Merchant, when such access is not authorized by the Merchant Account agreement or the applicable credit card system.

         F. “Credit Card Sales Draft” means any record or evidence of a credit card transaction.

         G. “Defendants” means all of the Individual Defendants and the Corporate Defendants, individually, collectively, or in any combination.

         H. “Dietary Supplement” means:

1. any product labeled as a Dietary Supplement or otherwise represented as a Dietary Supplement; or
2. any pill, tablet, capsule, powder, soft gel, gel cap, liquid, or other similar form containing one or more ingredients that are a vitamin, mineral, herb or other botanical, amino acid, probiotic, or other dietary substance for use by humans to supplement the diet by increasing the total dietary intake, or a concentrate, metabolite, constituent, extract, or combination of any ingredient described above, that is intended to be ingested, and is not represented to be used as a conventional Food or as a sole item of a meal or the diet.

         I. “Drug” means: (a) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; (b) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans or other animals; (c) articles (other than Food) intended to affect the structure or any function of the body of humans or other animals; and (d) articles intended for use as a component of any article specified in (a), (b), or (c); but does not include devices or their components, parts, or accessories.

         J. “Food” means: (a) any article used for Food or drink for humans or other animals; (b) chewing gum; and (c) any article used for components of any such article.

         K. “Individual Defendants” means Jason Miller and Danelle Miller.

         L. “Merchant” means a Person who is authorized under a written contract with an Acquirer to honor or accept credit cards, or to transmit or process for payment credit card Charges, for the purchase of goods or services.

         M. “Merchant Account” means an account with an Acquirer that authorizes and allows a Merchant to honor or accept credit cards, or to transmit or process for payment credit card Charges, for the purchase of goods or services or a charitable contribution.

         N. “Negative Option Feature” means, in an offer or agreement to sell or provide any good or service, a provision under which the consumer's silence or failure to take an affirmative action to reject a good or service or to cancel the agreement is interpreted by the seller or provider as acceptance or continuing acceptance of the offer or agreement.

         O. “Outbound Telephone Call” means a telephone call initiated by a Telemarketer to induce the purchase of goods or services or to solicit a charitable contribution.

         P. “Person” means a natural person, organization, or other legal entity, including a corporation, limited liability company, partnership, proprietorship, association, cooperative, government or governmental subdivision or agency, or any other group or combination acting as an entity.

         Q. “Receiver” means Robb Evans & Associates LLC, the temporary receiver appointed in Section XIII of the Preliminary Injunction Order issued as to the Defendants [D.E. 149] and whose appointment is continued in Section XII of this Order and any deputy receivers that shall be named by the Receiver.

         R. “Receivership Defendants” means all of the Corporate Defendants.

         S. “Receivership Estate” means all assets of the Corporate Defendants, including but not limited to: (a) any assets of the Corporate Defendants currently in the possession of the Receiver, including but not limited to accounts identified in Appendix 6; (b) all the funds, property, premises, accounts, documents, mail, and all other assets of, or in the possession or under the control of the Corporate Defendants, wherever situated, the income and profits therefrom, all sums of money now or hereafter due or owing to the Corporate Defendants, and any other assets or property belonging or owed to the Corporate Defendants; (c) any assets of the Corporate Defendants held in asset protection trusts; (d) any reserve funds or other accounts associated with any payments processed on behalf of any Corporate Defendant, including but not limited to, such reserve funds held by a payment processor, credit card processor, or bank, and including but not limited to accounts identified in Appendices 1 through 3 and Appendices 7 through 12; and (e) all proceeds from the sale of such assets, except those assets the sale of which the Receiver determines will not add appreciably to the value of the estate.

         T. “Reliably Reported, ” for a human clinical test or study (“test”), means a report of the test has been published in a peer-reviewed journal, and such published report provides sufficient information about the test for experts in the relevant field to assess the reliability of the results.

         U. “Telemarketer” means any Person who, in connection with Telemarketing, initiates or receives telephone calls to or from a customer or donor.

         V. “Telemarketing” means any plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones, and which involves a telephone call, whether or not covered by the TSR.

         W. “Upsell” means a solicitation for the purchase of any good or service following an initial transaction during a single telephone call.

         X. “Weight Loss Product” means any product, service, or program manufactured, labeled, packaged, distributed, advertised, promoted, offered for sale, or sold for the express or implied purpose of causing weight loss, maintaining weight loss, maintaining weight, or otherwise affecting weight gain or loss, whether individually or in any combination. For the purposes of this Order only, “Weight Loss Product” does not mean or include an exercise program or exercise equipment.

         ORDER

         I. BAN ON NEGATIVE OPTION SALES

         IT IS ORDERED that Defendants are permanently restrained and enjoined from advertising, marketing, promoting, or offering for sale any good or service with a Negative Option Feature, whether directly or through an intermediary, including by consulting, planning, participating, facilitating or advising.

         II. BAN ON SALES OF WEIGHT LOSS PRODUCTS

         IT IS FURTHER ORDERED that Defendants are permanently restrained and enjoined from manufacturing, labeling, packaging, advertising, marketing, promotion, offering for sale, sale, or distribution, or assisting in the manufacturing, labeling, packaging, advertising, marketing, promotion, offering for sale, sale, or distribution of any Weight Loss Product.

         III. PROHIBITED BUSINESS ACTIVITIES

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, and employees, and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with promoting or offering for sale any good or service are permanently restrained and enjoined from:

         A. Before a customer consents to pay for such good or service, failing to disclose, or assisting others in failing to disclose in a Clear and Conspicuous manner, expressly or by implication, all material terms and conditions of any offer, including:

1. the total cost or price of the good or service;
2. the amount, timing, and manner of all fees, Charges or other amounts that a consumer will be Charged or billed, including but not limited to the date of the Charge and whether it will be a credit card or checking account Charge; and
3. the mechanism for consumers to stop a Charge.

         B. Before a customer consents to pay for such good or service, failing to disclose, or assisting others in failing to disclose in a Clear and Conspicuous manner, expressly or by implication, all material terms and conditions of any refund and cancellation policy, including:

1. the specific steps and means by which such requests must be submitted;
2. the customer service telephone number or numbers that a customer must call to cancel and return goods or services;
3. the email address, web address, or street address to which such requests must be directed;
4. any mechanism that customers must use to return any goods or services, including any requirement for specific tracking methods or delivery confirmation for a package;
5. if there is any policy of not making refunds or cancellations, including any requirement that a product will not be accepted for return or refund unless it is unopened and in re-sellable condition, a statement regarding this policy; and
6. the duration of Defendants' refund and cancellation policy, including the date that it begins to run.

         C. Misrepresenting, or assisting others in misrepresenting, expressly or by implication, any fact material to consumers concerning any good or service, such as:

1. that a good or service is free, a bonus, a gift, a trial, without cost, or without obligation;
2. that consumers can obtain a good or service for a minimal processing, service, or administrative fee with no further obligation;
3. that a purchase is “risk free, ” or offered with a satisfaction guarantee, or with a money-back guarantee;
4. the total cost for any good or service;
5. the timing or manner of any Charge or bill, including but not limited to the date of the Charge and whether it will be a credit card or a checking account Charge;
6. any material restrictions, limitations, or conditions to purchase, receive, or use ...

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