Court declines to change SBH status quo post AMG (for now)
The Success By Health asset-freeze appears to be hanging by a thread.
For now at least, a decision has been made to maintain the asset freeze and appointed Success by Health Receivership.
The Success by Health defendants had hoped to have the asset freeze lifted following the Supreme Court’s AMG decision back in April.
The FTC secured an asset freeze and appointment of a Success by Health Receiver under FTC Act rule 13(b).
As per the AMG Supreme Court ruling, the FTC can no longer seek monetary relief under rule 13(b).
Following the AMG decision, the Arizona District Court
issued an order requiring the parties to file a joint memorandum setting forth their views on “whether the asset freeze and receivership in this action should be modified or vacated in light of AMG Capital.”
Those memorandums were filed, and the court held a subsequent hearing on the matter.
As per a filed June 15th order, the court came close to ending the asset-freeze and dissolving the Receivership.
Judge Lanza expressed concerns over jurisdiction;
If I were either persuaded that I currently have jurisdiction or if some steps were taken in the future to return jurisdiction to me, my tentative view is, if the case were in front of me right now, I would dissolve the asset freeze as it pertains to the individual defendants.
The issue is a an appeal by the Success by Health defendants filed prior to the AMG decision.
Ironically the appeal is against an earlier decision, denying a motion seeking to dissolve the the preliminary injunction now at issue.
As to the Success by Health Receivership in place;
The Court also explained that, assuming the jurisdictional issues were satisfactorily resolved, it would consider “allowing the receivership to remain in place in this case,” because the relevant legal authorities support “the concept that in general a receiver to prevent future harm is still permissible post AMG Capital,” but would also consider dissolving the receivership because “there might be other tools at my disposal to prevent consumers from continuing to be harmed short of having a receiver to stay in place.”
In an effort to resolve jurisdiction concerns, the court
authorized the Individual Defendants “to file a motion to ask (the court) to dissolve or modify the preliminary injunction and receivership.
The Individual Defendants did not quite comply with this invitation.
Instead, on May 21, 2021, they filed a memorandum (not a motion) entitled “The Effect of AMG Capital Management on this Case.”
In their response to the memorandum, the FTC pointed out Success by Health’s memorandum ‘not styled as a motion and does not include a proposed order’.
Nonetheless, the FTC argued ‘that the memorandum may be treated as a motion despite these shortcomings’. In their response the FTC treated the memorandum like a motion, objecting to it ‘on the merits for an array of reasons’.
In another self-goal filed by Success by Health, they;
fault(ed) the FTC for improperly attempting “to recharacterize the memorandum of law filed with this court as some sort of motion” and argue that the Court must sua sponte dismiss this action based on its judicial oath.
Based on these proceedings and filings, the June 15th order reveals the court
declines to take any action at this time.
First, there is no proper request for judicial relief pending before the Court.
Rule 7(b)(1)(B) of the Federal Rules of Civil Procedure provides that “[a] request for a court order must be made by motion” and that “[t]he motion must . . . state with particularity the grounds for seeking the order.”
Here, for reasons that are not apparent from the record, the Individual Defendants declined the offer to file a motion to dissolve or modify the preliminary injunction and receivership and instead chose to file a memorandum.
Furthermore, when the FTC argued the memorandum could be treated as a motion, the Individual Defendants took umbrage with this suggestion and clarified that their filing wasn’t a motion.
So be it.
While that sounds conclusive, the court did elaborate on what might have happened had Success by Health not shot itself in the foot.
Even if a motion had been filed (or if the memorandum could be treated as a motion), the Court does not believe it has jurisdiction to dissolve or modify the asset freeze and receivership in light of the Individual Defendants’ pending appeal.
Interestingly, the court noted that
in several recent decisions, the Ninth Circuit did not seem to interpret AMG Capital in the expansive manner urged in the Individual Defendants’ memorandum.
The court noted that in one case a “$24 million award of equitable monetary relief” was reversed by the Ninth Circuit.
The granted injunction in that case however was preserved. The case was kicked back to a District Court court “to determine if any other relief is warranted”.
It isn’t an MLM case so I’m not following it, but reading between the lines it sounds like the $24 million is likely to be obtained via alternate relief.
I think cutting off this process is what courts faced with dealing with the AMG decision are wary of.
In any event, regarding the Success by Health case, no action will be taken pending the outcome of the previously filed injunction appeal.
Stay tuned for updates as we continue to track the case.
Update 2nd October 2021 – Following the Ninth Circuit denying the Success by Health defendant’s appeal, the District Court has issued a new preliminary injunction and asset freeze.