Federal Trade Commission v. Consumer Health Benefits Association et al, No. 1:2010cv03551 - Document 289 (E.D.N.Y. 2012)

Court Description: ORDER denying 265 266 267 268 269 Motions to Dismiss. For all of the foregoing reasons, Tow, Schwartz, and the GTLI Defendants' motions to dismiss pursuant to Rule 12(b)(6) and Rule 9(b) are DENIED. The GTLI Defendants' motion for a more definite statement pursuant to Rule 12(e) is also DENIED. Ordered by Senior Judge I. Leo Glasser on 5/21/2012.
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Federal Trade Commission v. Consumer Health Benefits Association et al Doc. 289 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------------x FEDERAL TRADE COMMISSION, Plaintiff, MEMORANDUM AND ORDER - against - 10 Civ. 3551 (ILG) (RLM) CONSUMER HEALTH BENEFITS ASSOCIATION, et al., Defendants. ------------------------------------------------------x GLASSER, Senior United States District J udge: On October 12, 20 11, the Court affirm ed Magistrate J udge Mann’s order dated August 18, 20 11 granting plaintiff the Federal Trade Com m ission (the “FTC”) leave to am end the com plaint in this consum er protection arising under the Federal Trade Com m ission Act (“FTC Act”), 15 U.S.C. §§ 45(a), 53(b) and 57b, the Telem arketing and Consum er Fraud and Abuse Prevention Act (“Telem arketing Act”), 15 U.S.C. §§ 610 1610 8, and the FTC Telem arketing Sales Rule (“TSR”), 16 C.F.R. § 310 , et seq. Order dated Oct. 12, 20 11 at 5-10 (the “Order”) (Dkt. No. 250 ). The FTC on October 13, 20 11 filed an am ended complaint, Am . Com pl. dated Oct. 13, 20 11 (Dkt. No. 252), and on Novem ber 22, 20 11, each of the defendants newly-nam ed in the am ended com plaint m oved to dism iss it pursuant to Rule 12(b)(6) and Rule 9(b) of the Federal Rules of Civil Procedure, largely rehashing argum ents Magistrate J udge Mann and the Court have already considered and rejected. Those newly-nam ed defendants are: J ohn Schwartz (“Schwartz”), a m em ber of NBC and NBS; Wendi Tow (“Tow”), also a m em ber of NBC and NBS; Guaranteed Trust Life Insurance Co. (“GTLI”); Vantage Am erica Solutions, Inc. (“Vantage”), a subsidiary of GTLI; Century Senior Services (“Century”), also a 1 Dockets.Justia.com subsidiary of GTLI; and a num ber of GTLI’s em ployees and officers: J effrey Burm an (“Burm an”); Richard Holson, III (“Holson”); and Barbara Taube (“Taube”) (together, the “GTLI Defendants”).1 The GTLI Defendants have m oved in the alternative for a m ore definite statem ent of the claim s against them pursuant to Fed. R. Civ. P. 12(e). For the following reasons, the m otions to dism iss and the m otion for a m ore definite statem ent are DENIED. I. BACKGROU N D The following facts are taken from the am ended com plaint and are accepted as true for the purpose of this m otion. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (20 0 9) (quoting Bell Atl. Corp. v. Twom bly, 550 U.S. 544, 570 , 127 S. Ct. 1955, 167 L. Ed. 2d 929 (20 0 7). This action concerns the deceptive m arketing of a m edical discount plan in violation of the FTC Act, the Telem arketing Act, and the TSR by the defendants. The crux of the am ended com plaint is that defendants, in a com m on enterprise, solicited consum ers seeking m ajor m edical insurance 2 and, in addition to using high-pressure 1 The Court will refer to GTLI, Vantage, and Century as the “GTLI Corporate Defendants,” and to Burm an, Holson, and Taube as the “GTLI Individual Defendants.” The other defendants in this action are: Consum er Health Benefits Association (“CHBA”), National Association For Am ericans (“NAFA”); National Benefits Consultants, LLC (“NBC”); National Benefits Solutions, LLC (“NBS”) (together, “Corporate Defendants”); Ron Werner, individually as Managing Mem ber of NBC and NBS and President and Managing Partner of CHBA; Rita Werner, individually and as the Senior Vice President and Director of Operations of CHBA; and Louis Leo, individually, as a Managing Mem ber of NBC and NBS, and as Vice President and Treasurer of CHBA. 2 While m ajor m edical health insurance generally involves an agreem ent between 2 sales tactics, falsely represented that their m edical discount plan was m ajor m edical health insurance, when it was not, or that their m edical discount plan would provide sim ilar coverage to major m edical health insurance, when it did not—actions that caused num erous consum ers to purchase the m edical discount plan. See, e.g., Am . Com pl. ¶¶ 22, 26, 29-31, 33.3 The FTC also alleges that defendants m ade false representations to consum ers regarding the discount plan’s cancellation policy and charged consum ers fees for the plan even after consum ers had been told that the plan had been cancelled. Am . Com pl. ¶¶ 39-40 . The role played by each of the newly-added defendants in the venture was one that bespeaks a com m on enterprise. GTLI acted as an adm inistrator for the m edical discount plan by, am ong other things, collecting consum er’s enrollm ent fees, paying rent for office space for CHBA, m aintaining bank accounts on behalf of defendants, and responding to consum er com plaints regarding deceptive m arketing of the m edical discount plan. Am . Com pl. ¶ 46. Three of its executives—Burm an, Taube, and Holson— sat on the de facto board of directors of CHBA, and discussed at m eetings sales strategies and m em bership goals, along with litigation brought by the Illinois Attorney General regarding deceptive sales practices. Am . Com pl. ¶ 47. GTLI also deposited an insurance com pany and a consum er in which the insurer agrees to pay a substantial portion of the healthcare expenses that a consum er m ight incur in exchange for paym ent of a prem ium by the consum er, the m edical discount plans m arketed by defendants “purported to provide” consum ers with access to various discounts on healthcare and healthcare related services and products. Am . Com pl. ¶ 25. 3 NBC and NBS are specifically alleged to have engaged in telem arketing of the m edical discount plan beginning in 20 0 3 and 20 0 9 respectively. Am . Com pl. ¶ 24. 3 consum er paym ents for the m edical discount plan into an account that it m aintained and com m ingled these funds with funds unrelated to the plan. Am . Com pl. ¶ 48. Vantage prepared the founding corporate docum ents for CHBA and NBC, nam ed their directors, created NAFA and NBS, reviewed sales m aterials, selected m edical discount plan com ponents, and contracted with vendors to provide purported plan benefits. Am . Com pl. ¶ 49. It also reviewed m arketing m aterials, assisted with responding to consum er com plaints regarding the plan, and served as the Discount Medical Plan Organization (“DMPO”) that provided the plan. Am . Com p. ¶ 50 .4 In addition, Burm an, who sat on CHBA’s de facto board of directors, was its president. Am . Com pl. ¶¶ 51, 65-67. Meanwhile, Century, am ong other things, provided office space to CHBA and NBC, paid rent and utilities for the office space, shared expenses with CHBA and NBC, provided funding to hire em ployees and contractors for CHBA and NBC, operated a call center to m anage custom er service calls, and distributed m aterials to new m em bers of the m edical discount plan. Am . Com pl. ¶ 52. With respect to the GTLI Individual Defendants—Burm an, Taube, and Holson— in addition to sitting on the de facto board of CHBA, they were involved in the m arketing and sale of the m edical discount plan in the following ways: (1) Burm an designed the m edical discount plan and reviewed sales scripts and m arketing m aterials 4 As the DMPO, Vantage entered into a consent order with the Florida Office of Insurance Regulation regarding nearly a dozen violations of the Florida Insurance and Adm inistrative Codes, including violations based on the failure to properly advise consum ers of the plan’s no-refund policy, not providing refunds, and m aking it difficult for consum ers to cancel. Am . Com pl. ¶ 50 . 4 used by NBC and NBS, Am . Com pl. ¶ 65; (2) Taube determ ined how to distribute funds am ong the entity defendants and whether to refund consum ers who requested cancellations and refunds as a result of m isrepresentations concerning the plan, Am . Com pl. ¶ 68; and (3) Holson oversaw the sale and adm inistration of the m edical discount plan, Am . Com pl. ¶ 71. Tow and Schwartz were also responsible for overseeing certain aspects of the m edical discount plan. Tow, as Senior Vice President in charge of m em ber services of CHBA and m anaging m em ber of NBC, orchestrated these com panies’ business activities, including reviewing consum er com plaints and overseeing cancellation and refund practices. Am . Com pl. ¶ 61. Sim ilarly, Schwartz, as m anaging m em ber of NBC, orchestrated the com pany’s business activities, including training and m anaging NBC’s sales agents who m arketed the m edical discount plan. Am . Com pl. ¶ 63. In light of these allegations, the Court on October 12, 20 11 affirm ed Magistrate J udge Mann’s ruling granting the FTC leave to file an am ended com plaint and her conclusions that the proposed am ended com plaint contained sufficient factual allegations to survive a m otion to dism iss pursuant to Fed. R. Civ. P. 12(b)(6) and that the claim s at issue were not subject to the heightened pleading requirem ents of Fed. R. Civ. P. 9(b). Nevertheless, on Novem ber 22, 20 11, the GTLI Defendants filed a m otion to dism iss pursuant to Fed. R. Civ. 12(b)(6), or, alternatively, for a m ore definite statem ent pursuant to Fed. R. Civ. P. 12(e). GTLI’s Mem orandum of Law dated Nov. 22, 20 11 (“GTLI’s Mem .”) (Dkt. No. 270 ). That sam e day, Tow and Schwartz filed a m otion to dism iss pursuant to Fed. R. Civ. P. 9(b). Tow and Schwartz’s Mem orandum of Law 5 dated Nov. 22, 20 11 (“Tow’s Mem .”) (Dkt. No. 265). The FTC filed its opposition subm issions on Decem ber 13, 20 11. FTC’s Mem orandum of Law in Opposition dated Dec. 13, 20 11 (“Pl.’s Opp’n”) (Dkt. No. 276). The GTLI Defendants on Decem ber 23, 20 11 filed their subm issions in reply. GTLI’s Reply Mem orandum of Law dated Dec. 23, 20 11 (“GTLI’s Reply”) (Dkt. No. 278). Tow and Schwartz did not file reply subm issions. II. D ISCU SSION A. Ap p licable Le gal Prin cip le s 1. Le gal Sta n d ard fo r 12 ( b) ( 6 ) Mo tio n s Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a com plaint to include “a short and plain statem ent of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a m otion to dism iss pursuant to Rule 12(b)(6), the FTC’s pleading m ust contain “sufficient factual m atter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at 1940 (quoting Twom bly, 550 U.S. at 570 ). A claim has facial plausibility “when the plaintiff pleads factual content that allows the Court to draw the reasonable inference that the defendant is liable for the m isconduct alleged.” Iqbal, 129 S. Ct. at 1949. Although detailed factual allegations are not necessary, the pleading m ust include m ore than an “unadorned, the-defendant-unlawfully-harm ed-m e accusation;” m ere legal conclusions, “a form ulaic recitation of the elem ents of a cause of action,” or “naked assertions” by the plaintiff will not suffice. Id. at 1949 (alteration in original) (internal quotations, citations, and alterations om itted). This plausibility standard “is not akin to a ‘probability requirem ent,’ but it asks for m ore than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twom bly, 550 U.S. at 556). Determ ining whether a 6 com plaint states a plausible claim for relief is “a context-specific task that requires the reviewing court to draw on its judicial experience and com m on sense. But where the well-pleaded facts do not perm it the court to infer m ore than the m ere possibility of m isconduct, the com plaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 1950 (quoting Fed. R. Civ. P. 8(a)(2)). For the foregoing reasons, the m otions pursuant to Fed. R. Civ. P. 12(b)(6) are denied. 2 . Le gal Sta n d ard fo r 12 ( e ) Mo tio n s Rule 12(e) of the Federal Rules of Civil Procedure provides, in relevant part, that a party m ay m ove for a m ore definite statem ent of a pleading which is “so vague or am biguous that the party cannot reasonably prepare a response.” Fed. R. Civ. P. 12(e). Motions pursuant to Fed. R. Civ. P. 12(e) “should not be granted unless the com plaint is so excessively vague and am biguous as to be unintelligible and as to prejudice the defendant seriously in attem pting to answer it. The Rule is designed to rem edy unintelligible pleadings, not to correct for lack of detail.” Maxwell v. N.Y. Univ., No. 0 8 Civ. 3583 (HB), 20 0 8 WL 5435327, at *2 (S.D.N.Y. Dec. 31, 20 0 8) (internal citations and quotation m arks om itted); accord 1 Michael C. Silberberg, et al., Civil Practice in the Southern District of New York § 11:19 (2d ed. 20 10 ) (“[A] m otion for a m ore definite statem ent should not be granted if the com plaint com plies with the requirem ents of Fed. R. Civ. P. 8.” (citations om itted)). Moreover, Rule 12(e) m otions are generally disfavored because of their dilatory effect. See, e.g., J oya v. Verizon N.Y., Inc., No. 0 8 Civ. 5328 (PKL), 20 0 8 WL 4667987, at *1-2 (S.D.N.Y. Oct. 20 , 20 0 8) (collecting cases). For the foregoing reasons, the m otion pursuant to Fed. R. Civ. P. 12(e) is denied. 7 3 . Th e Law o f th e Cas e D o ctrin e The law of the case doctrine “posits that when a court decides upon a rule of law, that decision should continue to govern the sam e issues in subsequent stages in the sam e case.” Arizona v. California, 460 U.S. 60 5, 618, 10 3 S. Ct. 1382, 75 L. Ed. 2d 318 (1983). The doctrine generally applies unless there has been “an intervening change in law, availability of new evidence, or the need to correct a clear error or prevent a m anifest injustice.” J ohnson v. Holder, 564 F.3d 95, 99-10 0 (2d Cir. 20 0 9). It is prudential and discretionary; it “does not rigidly bind a court to its form er decisions, but is only addressed to its good sense.” Higgins v. Cal. Prune & Apricot Grower, Inc., 3 F.2d 896, 898 (2d Cir. 1924) (L. Hand, J .); accord Doctor’s Assocs. v. Distajo, 10 7 F.3d 126, 131 (2d Cir. 1997) (“[The doctrine] does not constitute a lim itation on the court’s power but m erely expresses the general practice of refusing to reopen what has been decided.”). It ensures that “where litigants have once battled for the court’s decision, they should neither be required, nor without good reason perm itted, to battle for it again.” Official Com m . of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 167 (2d Cir. 20 0 3) (citation and internal quotation m arks om itted). Thus, as a general rule, a court should be “‘loathe’ to revisit an earlier decision ‘in the absence of extraordinary circum stances.’” N. River Ins. Co. v. Phil. Reinsurance Corp., 63 F.3d 160 , 165 (2d Cir. 1995) (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 80 0 , 817, 10 8 S. Ct. 2166, 2178, 10 0 L. Ed. 2d 811 (1988)). Additionally, “a court m ay raise law of the case issues sua sponte.” United States v. Matthews, 643 F.3d 9, 12 n.1 (1st Cir. 20 11) (citation om itted); see also DiLaura v. Power Auth. of State of N.Y., 982 F.2d 73, 75 (2d Cir. 1992). 8 4 . Se ctio n 5 o f th e FTC Act Section 5(a)(1) of the Federal Trade Com m ission Act (“FTC Act”) prohibits “[u]nfair or deceptive acts or practices in or affecting com m erce.” 15 U.S.C. § 45(a)(1). To state a claim for a deceptive act or practice under Section 5(a)(1), a plaintiff m ust allege facts sufficient to show: “[1] a representation, om ission, or practice, that [2] is likely to m islead consum ers acting reasonably under the circum stances, and [3], the representation, om ission, or practice is m aterial.” Fed. Trade Com m ’n v. Verity Int’l, Ltd., 443 F.3d 48, 63 (2d Cir. 20 0 6) (internal quotation m arks and citation omitted). There is no requirem ent that the deception be m ade with intent to deceive; it is enough that the representations or practices were likely to m islead consum ers acting reasonably. Id. Further, if the structure, organization, and operation of a business venture am ong separate corporate entities reveal a com m on enterprise or a “m aze of interrelated com panies,” the FTC Act disregards the corporate form . Del. Watch Co. v. Fed. Trade Com m ’n, 332 F.2d 745, 746 (2d Cir. 1964) (per curiam). Factors relevant in a court’s consideration of whether a com m on enterprise am ong entities exists include whether they (1) m aintain officers and em ployees in com m on, (2) operate under com m on control, (3) share offices, (4) com m ingle funds, and (5) share advertising and m arketing. See, e.g., Fed. Trade Com m ’n v. Neovi, Inc., 598 F. Supp. 2d 110 4, 1116 (C.D. Cal. 20 0 8) (corporations found to be in com m on enterprise and thus held jointly and severally liable where corporations shared office space, executives and em ployees, payroll funds, and advertising). With respect to individual liability, “[a]n individual will be liable for corporate violations of the FTC Act if (1) he participated directly in the deceptive acts or had the 9 authority to control them and (2) he had knowledge of the m isrepresentations, was recklessly indifferent to the truth or falsity of the m isrepresentation, or was aware of a high probability of fraud along with an intentional avoidance of the truth.” Fed. Trade Com m ’n v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 20 0 9) (citation om itted); see also Fed. Trade Com m ’n v. Am y Travel Serv., Inc., 875 F.2d 564, 574 (7th Cir. 1989). The degree of participation in a corporate defendant’s affairs can be probative of knowledge. See, e.g., Am y Travel, 875 F.2d at 574. Further, an individual’s status as a corporate officer on behalf of a corporate defendant can be probative of control. See, e.g. Fed. Trade Com m ’n v. Publ’g Clearing House, Inc., 10 4 F.3d 1168, 1170 (9th Cir. 1997) (president of defendant corporation with authority to sign docum ents on its behalf had requisite control over corporation such that individual liability could be im posed). 5. Th e Te le m arke tin g Sale s Ru le The Telem arketing Sales Rule was prom ulgated by the FTC under the Telem arketing and Consum er Fraud and Abuse Prevention Act, 15 U.S.C. § 610 1 et seq., and forbids a seller or telem arketer from , am ong other things, “[m ]isrepresenting, directly or by im plication . . . [a]ny m aterial aspect of the perform ance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer.” 16 C.F.R. § 310 .3(a)(2)(iii). It also requires a seller or telem arketer to disclose any norefund policy “in a clear and conspicuous m anner.” Id. § 310 .3(a)(1). This disclosure m ust be m ade “[b]efore a custom er consents to pay for goods or services.” Id. A violation of the TSR constitutes a “deceptive act or practice” in violation of Section 5(a) of the FTC Act. See 15 U.S.C. § 610 5(b) (allowing FTC to enforce violations of the TSR as though they were violations of the FTC Act); see also Stefanchik, 559 F.3d at 930 n.17. 10 The TSR also forbids “assisting or facilitating” violations of the TSR: “[i]t is a deceptive telem arketing act or practice and a violation of this Rule for a person to provide substantial assistance or support to any seller or telem arketer when that person knows or consciously avoids knowing that the seller or telem arketer is engaged in any act or practice that violates §§ 310 .3(a), (c) or (d), or § 310 .4 of this Rule.” 16 C.F.R. § 310 .3(b). The threshold for what constitutes “substantial assistance” is low: “there m ust be a connection between the assistance provided and the resulting violations of the core provisions of the TSR.” United States v. Dish Network, L.L.C., 667 F. Supp. 2d 952, 961 (C.D. Ill. 20 0 9) (substantial assistance found where defendant paid dealers to engage in telem arketing that violated TSR and allegedly knew or consciously avoided knowledge of violations). B. Ap p licatio n 1. Ru le 9 ( b) D o e s n o t Ap p ly to th e FTC’s Claim s The GTLI Defendants, along with Tow and Schwartz, argue the claim s in the am ended com plaint sound in fraud and thus require application of the heightened pleading standard of Fed. R. Civ. P. 9(b), which the factual allegations in the com plaint fail to m eet. GTLI’s Mem . at 4-6; Tow’s Mem . at 4-7. 5 It is true that there is a split in authority regarding whether claim s brought under the FTC Act and, by extension, the TSR require application of Fed. R. Civ. P. 9(b), com pare Fed. Trade Com m ’n v. Lights of Am ., Inc., 760 F. Supp. 2d 848, 854 (C.D. Cal. 20 10 ) (concluding that “Rule 9(b) applies to claim s for violation of the FTC Act”), with Fed. Trade Com m ’n v. Freecom Com m c’ns, 5 Fed. R. Civ. P. 9(b) provides that “[i]n alleging fraud or m istake, a party m ust state with particularity the circum stances constituting fraud or m istake. Malice, intent, knowledge, and other conditions of a person’s m ind m ay be alleged generally.” 11 Inc., 40 1 F.3d 1192, 120 4 n.7 (10 th Cir. 20 0 5) (noting in dicta that “[a] § 5 claim sim ply is not a claim of fraud as that term is com m only understood or as contem plated by Rule 9(b), . . . . Unlike the elem ents of com m on law fraud, the FTC need not prove scienter, reliance, or injury to establish a § 5 violation” (collecting cases)), and Fed. Trade Com m ’n v. Medical Billers Network, Inc., 543 F. Supp. 2d 283, 314 (S.D.N.Y. 20 0 8) (expressing doubt in dicta as to the applicability of Rule 9(b) to claim alleging violation of TSR); see generally 2-9 J am es W. Moore, Moore’s Federal Practice, § 9.0 3[e] (3d ed. 1997) (discussing split in authority). But the Court has already considered and rejected the contention that the claim s in the am ended com plaint sound in fraud. Order at 9 (“[T]he claim s at issue here do not sound in fraud and are thus not subject to the heightened pleading requirem ents of Fed. R. Civ. P. 9(b).”). This ruling is the law of the case, and prudence counsels against disturbing it. There is no controlling authority in this Circuit with respect to whether claim s arising under the FTC Act and the TSR sound in fraud; nor is there a need to correct a clear error or prevent a m anifest injustice. See Fogel v. Chestnutt, 668 F.2d 10 0 , 10 9 (2d Cir. 1991) (“Mere doubt . . . is not enough to open the point for full reconsideration.”). Even if the Court were to reach the issue of whether the claim s sound in fraud and are thus subject to the pleading requirem ents of Fed. R. Civ. P. 9(b), it would conclude that they do not. Instructive is the Second Circuit’s decision in Pelm an v. McDonald’s Corp., 396 F.3d 50 8, 511 (2d Cir. 20 0 5), in which the court considered whether claim s brought under Section 349 of the New York General Business Law—part of the New York Consum er Protection Act—were subject to Rule 9(b)’s pleading 12 requirem ents.6 Answering this question in the negative, the Second Circuit found that “because § 349 extends well beyond com m on-law fraud to cover a broad range of deceptive practices, and because a private action under § 349 does not require proof of the sam e essential elem ents (such as reliance) as com m on-law fraud, an action under § 349 is not subject to the pleading-with-particularity requirem ents of Rule 9(b).” Id. at 511 (citations om itted).7 Sim ilarly, here, claim s brought under Section 5 of the FTC Act also do not require proof of the sam e essential elem ents of com m on law fraud. Fraud claim s under New York law require: (1) a m isrepresentation or an om ission of m aterial fact which was false and known to be false by the defendant; (2) the m isrepresentation was m ade for the purpose of inducing the plaintiff to rely upon it; (3) justifiable reliance of the plaintiff on the m isrepresentation or m aterial om ission; and (4) injury, see, e.g., J ablonski v. Rapalje, 14 A.D.3d 484, 487, 788 N.Y.S.2d 158 (2d Dep’t 20 0 5) (citations om itted), while claim s brought under Section 5 of the FTC Act require proof of neither scienter, nor reliance, nor injury, see, e.g., Freecom Com m c’ns, Inc., 40 1 F.3d at 120 4 6 7 The New York Court of Appeals has referred to the New York Consum er Protection Act as a “m ini-FTC act,” People v. Applied Card Sys., Inc., 11 N.Y.3d 10 5, 120 , 894 N.E.2d 1, 863 N.Y.S.2d 615 (20 0 8), and has noted that the New York legislature m odeled portions of it on the FTC Act, Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 , 26, 647 N.E.2d 741, 623 N.Y.S.2d 529 (1995). Section 349 m akes unlawful “[d]eceptive acts or practices in the conduct of any business, trade or comm erce or in the furnishing of any service in this state.” N.Y. Gen. Bus. Law § 349(a) (McKinney 20 12). The elem ents of a Section 349 claim are as follows: (1) the defendant’s challenged acts or practices m ust have been directed at consum ers, (2) the acts or practices m ust have been m isleading in a m aterial way, and (3) the plaintiff m ust have sustained injury as a result.” Cohen v. J P Morgan Chase & Co., 498 F.3d 111, 126 (2d Cir. 20 0 7) (citations om itted). 13 n.7. Moreover, like Section 349, Section 5 of the FTC Act covers a broad range of deceptive practices, declaring unlawful any “unfair or deceptive acts or practices in or affecting com m erce.” 15 U.S.C. § 45(a).8 Where, as here, sim ilar statutory provisions are found in com parable statutory schem es, courts should presum ptively apply them the sam e way. See, e.g., Ledbetter v. Goodyear Tire & Rubber Co., Inc., 550 U.S. 618, 640 , 127 S. Ct. 2162, 167 L. Ed. 2d 982 (20 0 7) (applying this canon of construction and finding National Labor Relations Act but not Equal Pay Act or Fair Labor Standards Act analogous to Title VII for lim itations purposes where it “provided a m odel for Title VII’s rem edial provisions”). Thus, were the Court to reach the issue of whether claim s brought under Section 5 of the FTC Act are subject to Rule 9(b), it would conclude that in light of the Second Circuit’s interpretation of Section 349 in Pelm an , the claim s in the am ended com plaint need not be pleaded with particularity.9 8 Both of these factors also hold true with respect to claim s brought under the TSR, violations of which also constitute violations of the FTC Act. See 15 U.S.C. § 610 5(b). 9 The Court finds unpersuasive the contention of Tow, Schwartz, and the GTLI Defendants that the Second Circuit’s decision in Rom bach v. Chang, 355 F.3d 164 (2d Cir. 20 0 4), controls. That case m erely involved the question of “whether the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure applies to claim s brought under Section 11 and Section 12(a)(2) of the Securities Act,” id. at 166, statutory provisions nothing like the one at issue here. Their reliance on district court decisions from the Ninth Circuit concluding that claim s brought under Section 5 of the FTC Act are subject to Rule 9(b) is sim ilarly m isplaced. The courts in two of those decisions did so based on Ninth Circuit precedent that a claim can sound in fraud without having all of the traditional com m on law elem ents of a fraud claim —a conclusion seem ingly at odds with Pelm an. See Fed. Trade Com m ’n v. Lights of Am ., Inc., 760 F. Supp. 2d 848, 852 (C.D. Cal. 20 10 ) (it is “wellestablished Ninth Circuit law . . . that, even where a claim does not include all of the elem ents of a claim for fraud, it is subject to the heightened pleading requirem ents of 14 The GTLI Defendants contend that even if the pleading requirements of Rule 9(b) do not apply, the am ended com plaint still fails to state a claim . GTLI’s Mem . at 7. Tow and Schwartz do not; they sim ply m ove to dism iss the am ended com plaint “for failure to plead fraud with particularity as required by Fed. R. Civ. P. 9(b).” Tow’s Mem . at 3. Since the Court has already concluded that the am ended com plaint sufficiently alleges claim s against Tow and Schwartz and that Fed. R. Civ. P. 9(b) is inapplicable, Tow and Schwartz’s m otion to dism iss is DENIED. The Court turns to the GTLI Defendants’ rem aining contentions in the following section. 2 . Th e GTLI D e fe n d an ts ’ Re m ain in g Co n te n tio n s are Me ritle s s The GTLI Defendants next argue that the am ended com plaint fails to allege facts sufficient to support claim s based on com m on enterprise liability against the GTLI Corporate Defendants. GTLI’s Mem . at 7-10 . The Court has already rejected this argum ent and addressed each of the cases upon which the GTLI Defendants rely in support of this contention: The Magistrate J udge correctly set forth the various factors that courts balance in determ ining whether a com m on enterprise existed—none of which is dispositive—and identified a num ber allegations in the am ended com plaint that were sufficient to support a claim of com m on enterprise liability. As for the cases relied on by the GTLI Corporate Defendants, each involved a different procedural posture than the one presented here and, in any event, each ultim ately concluded that com m on enterprise liability existed. See, e.g., Fed. Trade Com m ’n v. Nat. Urological Grp., 645 F. Supp. 2d 1167, 1183-84 (N.D. Ga. 20 0 8) (sum m ary judgm ent denied where “overwhelm ing evidence of the corporations’ interrelated functions” Rule 9(b) if it sounds in fraud” (citation, quotations, and alteration om itted)); Fed. Trade Com m ’n v. Ivy Capital, Inc., No. 2:11-CV-283 J CM (GWF), 20 11 WL 2118626, at *3 (D. Nev. May 25, 20 11) (following reasoning of Lights of Am erica). As for the third, Federal Trade Com m ’n v. Benning, No. C 0 9-0 3814 RS, 20 10 WL 260 5178, at *3-4 (N.D. Cal. J une 28, 20 10 ), the court there applied Rule 9(b) without explanation. 15 existed); Fed. Trade Com m ’n v. Neovi, Inc., 598 F. Supp. 2d 110 4, 1116 (S.D. Cal. 20 0 8) (comm on enterprise existed where evidence presented on sum m ary judgm ent “show[ed] that there [wa]s no real distinction between the com panies for the purposes of assessing liability under FTC case law”); Fed. Trade Com m ’n v. Data Med. Capital, No. 99 Civ. 1266 (AHS) (EEX), 20 10 WL 10 49977, at *23 (C.D. Cal. J an 15, 20 10 ) (evidence presented at civil contem pt hearing sufficient to establish com m on enterprise am ong corporate defendants). As the Magistrate J udge noted, “[w]hether the evidence ultim ately shows that a com m on enterprise existed need not be determ ined at this stage.” Order at 13. Order at 6-7. These rulings are the law of the case, and the Court declines to revisit them . The am ended com plaint sufficiently alleges FTC Act claim s against the GTLI Corporate Defendants based on a theory of com m on enterprise; accordingly, the GTLI Defendants’ m otion dism iss the FTC Act claim s against the GTLI Corporate Defendants is DENIED. The GTLI Defendants also contend the am ended com plaint fails to allege facts sufficient to show that the GTLI Individual Defendants are jointly and severally liable for the actions of the GTLI Corporate Defendants. GTLI’s Mem . at 10 -15.10 The Court previously stated: [The GTLI Individual Defendants] contend, am ong other things, that the am ended com plaint fails to allege sufficient facts to state a claim that they had the requisite knowledge of the m aterial m isrepresentations at issue in the case. GTLI Mem . at 7-12. This argum ent fails. The Magistrate J udge’s conclusion that the am ended com plaint contains sufficient factual allegations to state a claim that the GTLI Individual Defendants had at least “‘reckless indifference to the truth or falsity of [the] m isrepresentations,’” Order at 16 (quoting Fed. Trade Com m ’n v. Am y 10 They earlier contended, am ong other things, “the am ended com plaint fails to allege sufficient facts to state a claim that they had the requisite knowledge of the m aterial m isrepresentations at issue in the case.” Order at 7. They acknowledge, m oreover, that they m ade this argum ent to the Court previously. GTLI’s Mem . at 11 (“The GTL Defendants have already argued this point in their Objections, and respectfully refer the Court to that discussion.”). 16 Travel Serv., Inc., 875 F.2d 564, 574 (7th Cir. 1989)), was neither clearly erroneous nor contrary to law. Indeed, the am ended com plaint alleges that each of the GTLI Individual Defendants sat on the de facto board of directors of CHBA and participated in board m eetings in which the board discussed sales strategies, m em bership goals, and litigation brought by the Illinois Attorney General regarding deceptive sales practices. Am . Com pl. ¶¶ 66, 69, 72. Further, it alleges that (1) Burm an, am ong other things, designed the Corporate Defendants’ m edical discount plan and reviewed sales scripts and m arketing m aterials used by NBC and NBS, Am . Com pl. ¶ 65, (2) Taube, am ong other things, determ ined how to distribute funds am ong the Corporate Defendants and whether to refund consum ers who requested cancellations and refunds, Am . Com pl. ¶ 68, (3) Holson, am ong other things, oversaw the sale and adm inistration of the m edical discount plan, Am . Com pl. ¶ 71. This ruling is the law of the case as well, and the am ended com plaint contains sufficient factual allegations to show that the GTLI Individual Defendants, by virtue of their roles as officers of the GTLI Corporate Defendants 11 and their participation in various key aspects of the Corporate Defendants’ business had control over the Corporate Defendants and at least a “reckless indifference to the truth or falsity of [the] m isrepresentations” at issue in the case, Am y Travel, 875 F.2d at 574. Indeed, with respect to the GTLI Individual Defendants’ knowledge, the am ended com plaint alleges that they each were part of a group referred to internally as “Team CHBA,” participated in CHBA m eetings in which they discussed sales strategies, m em bership goals, and “litigation regarding deceptive practices.” Am . Com pl. ¶¶ 66, 69, 72.12 11 The 12 Court has already concluded that the am ended complaint sufficiently alleges that the GTLI Corporate Defendants were engaged in a com m on enterprise with the Corporate Defendants. The GTLI Individual Defendants m ake m uch of the FTC’s use of the term “de facto board,” contending that “no inference of control should be drawn from the FTC’s talism anic recitation of the phrase ‘de facto.’” GTLI’s Reply at 7. The Court draws no such inference. The GTLI Individual Defendants’ participation in CHBA m eetings— 17 Further, each of the cases relied upon by the GTLI Individual Defendants in support of their contention are inapposite. In Federal Trade Com m ission v. Swish Marketing, No. C 0 9-0 3814 RS, 20 10 WL 653486, at *5-6 (N.D. Cal. Feb. 22, 20 10 ), the court granted the m otion to dism iss of the individual defendant, the corporate defendant’s chief executive officer, where the FTC argued that the individual’s “status as CEO, standing alone, plausibly dem onstrates his control over the com pany (and warrants the inference of involvem ent in the deception)” and where the com plaint presented “no facts to tie [the individual] to the . . . schem e or to suggest his knowledge.”13 By contrast, here, the FTC does not rely solely on the GTLI Individual Defendants’ titles in establishing their control or knowledge, and the am ended com plaint contains a num ber of allegations tying the GTLI Individual Defendants to the Corporate Defendants’ schem e: (1) their participation in de facto CHBA board m eetings, Am . Com pl. ¶¶ 66, 69, 72; (2) Burman’s design of the Corporate Defendants’ m edical discount plan and review of the sales scripts and m arketing m aterials used by NBC and NBS, Am . Com pl. ¶ 65; (3) Taube’s determ ination of whether to refund consum ers who requested cancellations and refunds as a result of m isrepresentations regarding the m edical discount plan, Am . Com pl. ¶ 68; and (4) Holson’s oversight of the sale and adm inistration of the m edical discount plan, Am . Com pl. ¶ 71. whether de facto board m eetings or not—instead shed light on the GTLI Individual Defendants’ knowledge concerning the representations at issue in the case. 13 The court in Federal Trade Com m ission v. Wellness Support Network, Inc., No. C– 10 – 0 4879 J CS, 20 11 WL 130 3419, at *11 (N.D. Cal. Apr. 4, 20 11), upon which the GTLI Individual Defendants also rely, granted a m otion to dism iss the claim against an individual defendant for the sam e reason—where “the only factual allegation . . . about [the individual defendant] is that she was an officer of [the corporate defendant].” 18 Meanwhile, in Federal Trade Com m ision v. Benning, No. C 0 9-0 3814 RS, 20 10 WL 260 5178, at *5-6 (N.D. Cal. J une 28, 20 10 ), a later decision in the sam e case as Swish and involving the sam e individual defendant, the court found that the am ended com plaint did in fact sufficiently allege individual liability under the FTC Act where the FTC averred that the individual defendant owned 30 % of the closely-held corporate defendant and that he received and responded to em ails detailing the possibly fraudulent nature of the corporate defendant’s alleged m isrepresentations. As the FTC correctly notes, however, this case offers “little discussion of what ‘floor’ is required to m eet the m inim um threshold for pleading individual liability,” Pl.’s Opp’n at 30 n.19, and is thus of lim ited usefulness. The sam e is true with respect to the other cases upon which the GTLI Individual Defendants rely. See Wellness Support Network, Inc., 20 11 WL 130 3419, at *10 (m otion to dism iss FTC Act claim against individual defendant denied where FTC alleged that he was president and owner of corporate defendant, the corporation was closely held, and he controlled or participated in the corporation’s advertising and m arketing); Fed. Trade Com m ’n v. Innovative Mktg., Inc., 654 F. Supp. 2d 378, 388 (D. Md. 20 0 9) (m otion to dism iss FTC Act claim against individual defendants denied where FTC alleged, am ong other things, that individual defendants, a corporate officer and his father, harbored m illions of dollars of proceeds from m arketing schem e); Fed. Trade. Com m ’n. v. Network Servs. Depot, Inc., 617 F.3d 1127, 1140 (9th Cir. 20 10 ) (affirm ing finding of personal liability of individual defendants on sum m ary judgm ent where, am ong other things, they were aware of num erous warning signs regarding the suspicious practices of one of their com pany’s business partners).14 14 The GTLI Defendants advance the argum ent that the “generic group pleading” 19 For all of the foregoing reasons, the GTLI Individual Defendants’ m otion dism iss the FTC Act claim s against them is DENIED.15 Finally, the GTLI Defendants contend the FTC has failed to sufficiently allege claim s against them for violations of the TSR, m erely pointing the Court to their prior briefing on the issue. GTLI’s Mem . at 16. With respect to the GTLI Defendants’ argum ent that the am ended complaint fails to sufficiently allege a violation of the TSR based on a theory of substantial assistance, the Court has already rejected this argum ent, and the GTLI Defendants have provided no reason for it to revisit rulings that are now the law of the case. See Order at 8-9 (“[T]he am ended com plaint contains sufficient factual allegations to support a claim that the nature of these defendants’ assistance was m ore than m ere casual or incidental dealing with a seller or telem arketer relating all of the defendants in this action is of little use to the Court in assessing the sufficiency of the claim s against them . See, e.g., GTLI’s Mem . at 7 (“Here, the FTC claim s that each of fifteen defendants collectively: (i) solicited consum ers seeking m ajor m edical health insurance; and (ii) falsely represented plan discounts, participating providers and the plan’s cancellation and refund policy. These allegations, which do not specify which of the fifteen defendants m ade which m isrepresentations, fail to satisfy either Rule 8 or Rule 9(b).” (internal citations om itted)). Notably, the court in Innovative Marketing rejected nearly the identical argum ent. See 645 F. Supp. 2d at 388 n.3 (“[The individual defendant] contends that in weighing the sufficiency of the Com plaint, this Court should disregard the allegations relating to the Defendants collectively. However, [his] argum ent is m isguided. The allegations pertaining to the Defendants as a whole provide the context that allows this Court to understand and weigh the significance of the claim s specifically relating to [the individual defendant.]”). 15 Contrary to their contention that the am ended com plaint nam es Holson, Burm an, and Taube in both their official and individual capacities, GTLI’s Mem . at 10 n.4, the am ended complaint sim ply alleges that these defendants are jointly and severally liable for the acts of the Corporate Defendants, Am . Com pl. ¶ 21. Accordingly, the GTLI Defendants’ application to strike the designation “individually” from the am ended com plaint is also denied. 20 that is unrelated to the violation of the Rule.” (internal quotation m arks and citation om itted)). As for their contention that the am ended com plaint fails to sufficiently allege a direct violation of the TSR because none of the GTLI Defendants are “sellers” or “telem arketers” within the m eaning of the rule, GTLI’s Reply at 8, the Court finds this contention unpersuasive. Though it is true, as the GTLI Defendants contend, that only “sellers” or “telem arketers” can be held liable for direct TSR violations, 16 C.F.R. § 310 .3(a),16 there is no question that NBC and NBS—two of the Corporate Defendants— constitute sellers and telem arketers, Am . Com pl. ¶¶ 24, 25, and that under the FTC’s com m on enterprise theory this status m ay be im puted to the GTLI Corporate Defendants, CHBA, and NAFA, all of whose actions the GTLI Individual Defendants m ay be held jointly and severally liable for. See, e.g., Fed. Trade Com m ’n v. Wash. Data Res., — F. Supp. 2d. —, No. 0 9 Civ. 230 9– T– 23– TBM, 20 12 WL 1415323, at *20 (M.D. Fla. Apr. 23, 20 12) (“[A]n act by one entity constitutes an act by each entity com prising the ‘com m on enterprise.’”). 3 . Th e GTLI D e fe n d an ts ’ Mo tio n fo r a Mo re D e fin ite State m e n t is D e n ie d The GTLI Defendants argue in the alternative that if the Court declines to dism iss the claim s against them , it should require the FTC to provide a m ore definite statem ent 16 The Telem arketing Act defines “telem arketing” as a “plan, program , or cam paign which is conducted to induce purchases of goods or services . . . by use of one or m ore telephones and which involves m ore than one interstate telephone call.” 15 U.S.C. § 610 6(4). Telem arketer “m eans any person who, in connection with telem arketing, initiates or receives telephone calls to or from a custom er or donor.” 16 C.F.R. § 310 .2(cc). Seller “m eans any person who, in connection with a telem arketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the custom er in exchange for consideration.” Id. § 310 .2(aa). 21 pursuant to Fed. R. Civ. P. 12(e). Specifically, the GTLI Defendants m aintain that “[t]o sustain each of the claim s it asserts against the GTL Defendants, the FTC m ust definitely state the specific FTC Act or TSR violation and role of each GTL Defendant with respect thereto.” GTLI’s Mem . at 17. Yet the Court has no basis on which to require any m ore definite statem ent by the FTC. The am ended com plaint is hardly incom prehensible or unintelligible, and its narrative with respect to each of the GTLI Defendants’ roles in the com m on enterprise is sufficient to put them on notice of the claim s against them .17 A m otion for a m ore definite statem ent is not m eant to serve as a substitute for discovery. See, e.g., J oya, 20 0 8 WL 4667987, at *1 (“‘The preferred course is to encourage the use of discovery procedures to apprise the parties of the factual basis of the claim s m ade in the pleadings.’” (quoting In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liab. Litig., No. 0 0 Civ. 1898 (SAS), MDL 1358, 20 0 5 WL 150 0 893, at *2 (S.D.N.Y. J une 24, 20 0 5))). Accordingly, “[t]he appropriate m eans for attending to the business of particularizing and specifying issues raised by [the am ended com plaint] are the procedures of pretrial discovery set forth in Rules 26-37 of the Federal Rules of Civil Procedure, to which the parties are hereby com m ended.” 777388 Ontario Ltd. v. Lencore Acoustics Corp., 10 5 F. Supp. 2d 56, 65-66 (E.D.N.Y. 20 0 0 ). The GTLI Defendant’s m otion for a m ore definite statem ent is thus DENIED. 17 Neither of the cases upon which the GTLI Defendants rely involves a com m on enterprise am ong the defendants. See Caraveo v. Nielsen Media Res., Inc., No. 0 1 Civ. 960 9 (LBS), 20 0 2 WL 530 993, at *2-4 (S.D.N.Y. Apr. 8, 20 0 2) (Rule 12(e) m otion granted where pro se plaintiff alleged 30 causes of action against 25 defendants and failed to identify the specific defendants against whom he was asserting each of his causes of action); Bower v. Weism an, 639 F. Supp. 532, 538 (S.D.N.Y. 1986) (Rule 12(e) m otion granted where defendant could not determ ine whether claim s were brought against him in his individual capacity or against the two business he owned). 22 III. CON CLU SION For all of the foregoing reasons, Tow, Schwartz, and the GTLI Defendants’ m otions to dism iss pursuant to Rule 12(b)(6) and Rule 9(b) are DENIED. The GTLI Defendants’ m otion for a m ore definite statem ent pursuant to Rule 12(e) is also DENIED. SO ORDERED. Dated: Brooklyn, New York May 21, 20 12 / s/ I. Leo Glasser Senior United States District J udge 23