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Federal Trade Commission v. RevMountain, LLC

United States District Court, D. Nevada

September 1, 2017

FEDERAL TRADE COMMISSION, Plaintiff,
v.
REVMOUNTAIN, LLC, a Nevada limited liability company, ROADRUNNER B2C, LLC, also d/b/a REVGO, a Nevada limited liability company, WAVE ROCK, LLC, a Nevada limited liability company, JUNIPER SOLUTIONS, LLC, a Nevada limited liability company, JASPER WOODS, LLC, a Nevada limited liability company, WHEELER PEAK MARKETING, LLC, a Nevada limited liability company, ROIRUNNER, LLC, a Nevada limited liability company, CHERRY BLITZ, LLC, a Nevada limited liability company, FLAT IRON AVENUE, LLC, a Nevada limited liability company, ABSOLUTELY WORKING, LLC, a Nevada limited liability company, THREE LAKES, LLC, a Nevada limited liability company, BRIDGE FORD, LLC, a Nevada limited liability company, HOW AND WHY, LLC, a Nevada limited liability company, SPRUCE RIVER, LLC, a Nevada limited liability company, TRIMXT, LLC, a Nevada limited liability company, ELATION WHITE, LLC, a Nevada limited liability company, IVORYPRO, LLC, a Nevada limited liability company, DOING WHAT'S POSSIBLE, LLC, a Nevada limited liability company, REVGUARD, LLC, a Colorado limited liability company, REVLIVE!, LLC, a Colorado limited liability company, BLUE ROCKET BRANDS, LLC, a Colorado limited liability company, CONVERTIS, LLC, a Colorado limited liability company, CONVERTIS MARKETING, LLC, a Colorado limited liability company, TURTLE MOUNTAINS, LLC, a Colorado limited liability company, BOULDER BLACK DIAMOND, LLC, a Colorado limited liability company, MINT HOUSE, LLC, a Colorado limited liability company, THUNDER AVENUE, LLC, a Colorado limited liability company, UNIVERSITY & FOLSOM, LLC, a Colorado limited liability company, BOULDER CREEK INTERNET SOLUTIONS, INC., a Colorado corporation, WALNUT STREET MARKETING, INC., a Colorado corporation, SNOW SALE, LLC, a Colorado limited liability company, BRAND FORCE, LLC, a Colorado limited liability company, WILD FARMS, LLC, a Colorado limited liability company, SALAMONIE RIVER, LLC, an Indiana limited liability company, INDIGO SYSTEMS, LLC, an Indiana limited liability company, NIGHT WATCH GROUP, LLC, an Indiana limited liability company, NEWPORT CROSSING, LLC, an Indiana limited liability company, GREENVILLE CREEK, LLC, an Indiana limited liability company, BROOKVILLE LANE, LLC, an Indiana limited liability company, ANASAZI MANAGEMENT PARTNERS, LLC, a Wyoming limited liability company, HONEY LAKE, LLC, a Wyoming limited liability company, CONDOR CANYON, LLC, a Wyoming limited liability company, BRASS TRIANGLE, LLC, an Arizona limited liability company, SOLID ICE, LLC, an Arizona limited liability company, SANDSTONE BEACH, LLC, an Arizona limited liability company, DESERT GECKO, LLC, an Arizona limited liability company, BLIZZARDWHITE, LLC, an Arizona limited liability company, ACTION PRO WHITE, LLC, an Arizona limited liability company, FIRST CLASS WHITENING, LLC, an Arizona limited liability company, SPARK WHITENING, LLC, an Arizona limited liability company, TITANWHITE, LLC, an Arizona limited liability company, DENTAL PRO AT HOME, LLC, an Arizona limited liability company, SMILE PRO DIRECT, LLC, an Arizona limited liability company, CIRCLE OF YOUTH SKINCARE, LLC, an Arizona limited liability company, DERMAGLAM, LLC, an Arizona limited liability company, SEDONA BEAUTY SECRETS, LLC, an Arizona limited liability company, BELLAATHOME, LLC, an Arizona limited liability company, SKINNYIQ, LLC, an Arizona limited liability company, BODY TROPICAL, LLC, an Arizona limited liability company, BLAIR MCNEA, individually and as an officer of REVGUARD, LLC, DANIELLE FOSS, individually and as an officer of BLUE ROCKET BRANDS, LLC and CONVERTIS, LLC, and an JENNIFER JOHNSON, individually and as an officer of REVMOUNTAIN, LLC, Defendants.

          PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF RECEIVER, AND OTHER EQUITABLE RELIEF AS TO DEFENDANTS BLAIR MCNEA, JENNIFER JOHNSON, AND ENTITY DEFENDANTS

          ANDREW P. GORDON UNITED STATES DISTRICT JUDGE

         Plaintiff, the Federal Trade Commission (“FTC”), filed its Complaint for Permanent Injunction and Other Equitable Relief pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b), and an Emergency Motion for Ex Parte Temporary Restraining Order pursuant to Federal Rule of Civil Procedure 65(b). On July 25, 2017, the Court granted the FTC's Emergency Motion for Ex Parte Temporary Restraining Order, including an order to show cause why a preliminary injunction should not issue, and entered a Temporary Restraining Order (“TRO”). Upon consideration of the material submitted by the parties and argument of counsel, the Court enters this Preliminary Injunction.

         FINDINGS OF FACT

         The Court, having considered the Complaint, the Emergency Motion for Ex Parte Temporary Restraining Order and supplemental brief in support, declarations, exhibits, and memoranda filed in support thereof, and briefs, declarations, exhibits, and memoranda filed in opposition thereto, and being otherwise advised, finds that:

         A. This Court has jurisdiction over the subject matter of this case, and there is good cause to believe that it will have jurisdiction over all parties hereto and that venue in this district is proper.

         B. On July 24, 2017, the FTC filed its Complaint for Permanent Injunction and Other Equitable Relief, an Emergency Motion for Ex Parte Temporary Restraining Order, and related pleadings.

         C. On July 25, 2017, the Court entered the FTC's Temporary Restraining Order with Asset Freeze, Appointment of a Temporary Receiver, and Other Equitable Relief, and Order to Show Cause Why a Preliminary Injunction Should Not Issue. ECF No. 16.

         D. The FTC has demonstrated a likelihood of success in showing that, in numerous instances, Defendants misrepresented the price of trial offers, charged consumers for products they did not order or want, and enrolled consumers into continuity plans without their consent.

         E. There is good cause to believe that Defendants have engaged in and are likely to engage in acts or practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and Section 5 of the Restore Online Shoppers' Confidence Act (“ROSCA”), 15 U.S.C. § 8404, and that Plaintiff is therefore likely to prevail on the merits of this action. As demonstrated by Defendants' business records; consumer complaints and declarations; records of undercover purchases; a report by a usability expert; corporate, banking and payment processing records; and the additional documentation filed in this matter, the FTC has established a likelihood of success in showing that Defendants deceived consumers by misrepresenting the price of personal care products to obtain their credit card numbers, and then charging them $100 to $200 per month for additional products they did not order or want.

         F. There is good cause to believe that immediate and irreparable harm will result from Defendants' ongoing violations of the FTC Act and ROSCA unless Defendants continue to be restrained and enjoined by order of this Court.

         G. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers will occur from the sale, transfer, destruction or other disposition or concealment by Defendants of their Assets or records, unless Defendants continue to be restrained and enjoined by order of this Court.

         H. Good cause exists for appointing a permanent Receiver over the Receivership Entities and freezing Defendants' Assets.

         I. Weighing the equities and considering the FTC's likelihood of ultimate success on the merits, a preliminary injunction order with Asset freeze, the appointment of a permanent Receiver, and other equitable relief is in the public interest.

         J. No security is required of any agency of the United States for issuance of a preliminary injunction order. Fed.R.Civ.P. 65(c).

         DEFINITIONS

         For the purpose of this Preliminary Injunction, the following definitions shall apply:

         A. “Asset” means any legal or equitable interest in, right to, or claim to, any property, wherever located and by whomever held.

         B. “Billing Information” means any data that enables any person to access a customer's account, such as a credit card, checking, savings, share or similar account, utility bill, mortgage loan account, or debit card.

         C. “Charge, ” “Charged, ” or “Charging” means any attempt to collect money or other consideration from a consumer, including but not limited to causing Billing Information to be submitted for payment, including against the consumer's credit card, debit card, bank account, telephone bill, or other account.

         D. “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. 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;
6. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications;
7. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication; and
8. 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.

         4. “Close Proximity” means immediately adjacent to the triggering representation. In the case of advertisements disseminated verbally or through audible means, the disclosure shall be made as soon as practicable after the triggering representation.

         E. “Entity Defendants” means RevMountain, LLC; RoadRunner B2C, LLC, d/b/a RevGo; Wave Rock, LLC; Juniper Solutions, LLC; Jasper Woods, LLC; Wheeler Peak Marketing, LLC; ROIRunner, LLC; Cherry Blitz, LLC; Flat Iron Avenue, LLC; Absolutely Working, LLC; Three Lakes, LLC; Bridge Ford, LLC; How and Why, LLC; Spruce River, LLC; TrimXT, LLC; Elation White, LLC; IvoryPro, LLC; Doing What's Possible, LLC; RevGuard, LLC; RevLive!, LLC; Blue Rocket Brands, LLC; Convertis, LLC; Convertis Marketing, LLC; Turtle Mountains, LLC; Boulder Black Diamond, LLC; Mint House, LLC; Thunder Avenue, LLC; University & Folsom, LLC; Boulder Creek Internet Solutions, Inc.; Walnut Street Marketing, Inc.; Snow Sale, LLC; Brand Force, LLC; Wild Farms, LLC; Salamonie River, LLC; Indigo Systems, LLC; Night Watch Group, LLC; Newport Crossing, LLC; Greenville Creek, LLC; Brookville Lane, LLC; Anasazi Management Partners, LLC; Honey Lake, LLC; Condor Canyon, LLC; Brass Triangle, LLC; Solid Ice, LLC; Sandstone Beach, LLC; Desert Gecko, LLC; Blizzardwhite, LLC; Action Pro White, LLC; First Class Whitening, LLC; Spark Whitening, LLC; Titanwhite, LLC; Dental Pro At Home, LLC; Smile Pro Direct, LLC; Circle of Youth Skincare, LLC; DermaGlam, LLC; Sedona Beauty Secrets, LLC; Bellaathome, LLC; SkinnyIQ, LLC; Body Tropical, LLC; and each of their subsidiaries, affiliates, successors, and assigns.

         F. “Defendant(s)” means Entity Defendants, Blair McNea, and Jennifer Johnson, individually, collectively, or in any combination.

         G. “Document” is synonymous in meaning and equal in scope to the usage of “document” and “electronically stored information” in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, sound and video recordings, images, Internet sites, web pages, websites, electronic correspondence, including e-mail and instant messages, contracts, accounting data, advertisements, FTP Logs, Server Access Logs, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, computer records, customer or sales databases and any other electronically stored information, including Documents located on remote servers or cloud computing systems, and other data or data compilations from which information can be obtained directly or, if necessary, after translation into a reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

         H. “Electronic Data Host” means any person or entity in the business of storing, hosting, or otherwise maintaining electronically stored information. This includes, but is not limited to, any entity hosting a website or server, and any entity providing “cloud based” electronic storage.

         I. “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 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.

         J. “Receiver” means the Receiver appointed in Section XIII of this Order and any deputy receivers or agents that shall be named by the Receiver.

         K. “Receivership Entities” means Entity Defendants as well as any other entity that has conducted any business related to Defendants' marketing of negative option offers, including receipt of Assets derived from any activity that is the subject of the Complaint in this matter, and that the Receiver determines is controlled or owned by any Defendant.

         ORDER

         I. PROHIBITION AGAINST MISREPRESENTATIONS IT IS THEREFORE ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, in connection with the advertising, marketing, promoting, offering for sale, or sale of any goods or services, are restrained and enjoined from misrepresenting or assisting others in misrepresenting, expressly or by implication, any material fact, including:

A. That consumers will be charged only a nominal fee plus shipping and handling costs for a one-time shipment; and
B. That clicking through a website's pages will complete a single transaction for a single product.

         II. REQUIRED DISCLOSURES RELATING TO NEGATIVE OPTION FEATURES

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, attorneys, 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, are restrained and enjoined from obtaining Billing Information from a consumer for any online transaction involving the advertising, marketing, promoting, offering for sale, or sale of any good or service that includes a Negative Option Feature, without first disclosing Clearly and Conspicuously, and in Close Proximity to where a consumer provides Billing Information, all material terms, including:

         A. The total cost (or range of costs) the consumer will be charged; B. That a consumer is automatically enrolled in a monthly negative option plan; C. The extent to which the consumer must take affirmative action(s) to avoid any Charges; and D. That consumers who complete a transaction are purchasing two separate products with separate monthly negative option plans.

         III. OBTAINING EXPRESS INFORMED CONSENT

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, attorneys, 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, are restrained and enjoined from using Billing Information to obtain payment from a consumer for any online transaction in connection with the advertising, marketing, promoting, offering for sale, or sale of any good or service with a Negative Option Feature, unless Defendants first obtain the express informed consent of the consumer before Charging the consumer's credit card, debit cards, banks accounts or other financial accounts for products or services.

         IV. PROHIBITION ON RELEASE OF CUSTOMER INFORMATION

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, 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, are hereby restrained and enjoined from:

         A. Selling, renting, leasing, transferring, or otherwise disclosing, the name, address, birth date, telephone number, email address, credit card number, bank account number, Social Security number, or other financial or identifying information of any person that any Defendant obtained in connection with any activity that pertains to the subject matter of this Order; and

         B. Benefitting from or using the name, address, birth date, telephone number, email address, credit card number, bank account number, Social Security number, or other financial or identifying information of any person that any Defendant obtained in connection with any activity that pertains to the subject matter of this Order.

         Provided, however, that Defendants may disclose such identifying information to a law enforcement agency, to their attorneys as required for their defense, as required by any law, regulation, or court order, or in any filings, pleadings or discovery in this action in the manner required by the Federal Rules of Civil Procedure and by any protective order in the case.

         V. ASSET FREEZE

         IT IS FURTHER ORDERED that Defendants and their officers, agents, employees, and attorneys, 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, are hereby restrained and enjoined from:

         A. Transferring, liquidating, converting, encumbering, pledging, loaning, selling, concealing, dissipating, disbursing, assigning, relinquishing, spending, withdrawing, granting a lien or security interest or other interest in, or otherwise disposing of any Assets that are:

1. owned or controlled, directly or indirectly, by any Defendant;
2. held, in part or in whole, for the benefit of any Defendant;
3. in the actual or constructive possession of any Defendant; or
4. owned or controlled by, in the actual or constructive possession of, or otherwise held for the benefit of, any corporation, partnership, Asset protection trust, or other entity that is directly or ...

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