Success by Health denied summary judgment reconsideration
Success by Health’s bid to overturn summary judgment via a motion for reconsideration has been denied.
The FTC was granted liability summary judgment against Success by Health in September.
In their motion for reconsideration, the SBH defendants focused their attention on VOZ Travel.
The FTC maintains VOZ Travel was a pyramid scheme because it had no retail products.
VOZ Travel affiliates paid a fee, which qualified them to earn on recruited affiliates who also paid a fee.
The SBH defendants argue VOZ Travel wasn’t a pyramid scheme because
VOZ Travel packs were a legitimate product line that was about to launch at the time the FTC initiated this action and obtained the temporary restraining order.
It is the FTC itself that caused the VOZ Travel pack not to launch, preventing the product line from reaching consumers.
In support of this the SBH defendants tendered an email sent to their merchant vendor, which they assert proves they had a product contract.
Additionally the SBH defendants took issue with the FTC’s expert, Dr. Bosley, allegedly conducting ‘“no analysis” as to VOZ Travel.’
Submitted declarations from SBH affiliates were also cited, with the defendants claiming the declarations “explicitly list the VOZ Travel product.”
Finally the SBH defendants brought up their desire to relaunch VOZ Travel without MLM, as a demonstration that it wasn’t a pyramid scheme.
The court rejected all of the SBH defendant’s arguments.
As a general matter, the court found the SBH defendant’s motion ‘does not come close to satisfying LRCiv 7.2(g)’s standard for reconsideration.’
The Individual Defendants do not cite any new evidence or new legal authorities.
Instead, they simply attempt to offer new arguments in defense of the VOZ Travel program that they failed to raise in their response to the FTC’s summary judgment motion.
This is impermissible.
With respect to the email communication, the court shut down its submission as per FRCP Rule 56.
In granting liability summary judgment, the court relied on
extensive evidence suggesting that the Individual Defendants’ statements regarding the VOZ Travel program were “a complete fabrication,” that “[t]here was nothing,” that “SBM and Advantage Services both terminated the entities’ contract with each other” before the issuance of the TRO, and that the Individual Defendants “had not retained a new vendor as of the entry of the TRO.”
In their response to the FTC’s motion, the Individual Defendants failed to respond to the FTC’s proffered evidence on these points.
Because SBH failed to address the evidence, the court accepted it as undisputed (Rule 56(e)(2)).
The Court was entitled to rely on this undisputed evidence for purposes of its summary judgment analysis, and the Individual Defendants cannot obtain reconsideration of the summary judgment order by belatedly proffering evidence that was always available to them in an effort to create factual disputes.
In other words, you can challenge previously submitted evidence with “new” information.
The SBH defendants are instead challenging the FTC’s evidence with information that “was always available to them”, which through a reconsideration motion is not allowed.
With respect to VOZ Travel being a pyramid scheme, the court noted the SBH defendants didn’t challenge “the first prong of the pyramid scheme test”.
Instead, they seem to dispute only the finding as to the second prong—that participants’ rewards were primarily based on recruitment rather than retail sales.
Nothing in the Individual Defendants’ motion suggests this finding was incorrect, let alone manifestly erroneous.
As the FTC correctly points out in its response, sales of VOZ Travel packs spanned for many months despite the absence of an underlying product and the sales efforts even continued after relationship with Advantage Services began to fall apart.
Additionally, and as noted in the summary judgment order, it is undisputed that Noland made false statements during a December 20, 2019 phone call related to the VOZ Travel program, by falsely claiming that the “biggest travel deal ever” had “just happened” and been “inked” when, in fact, no new travel contract had just been signed.
“Noland” refers to SBH owner Jay Noland, one of the individual defendants challenging the summary judgment order.
With respect to the contents of SBH’s submitted email, specifically that their vendor relationship with Advantage Services might have been repaired, the court asserted this was “wholly speculative”.
Nor would such a hypothetical development have undermined the finding underlying the liability finding on Count One—that, on this record, VOZ Travel rewards were based primarily on recruitment.
SBH’s submitted affiliate declarations were rejected because
Defendants made no effort in their summary judgment response to identify any statements within the declarations—which were submitted as a single, 1,882-page exhibit—that touched upon the VOZ Travel program.
It was not the Court’s role to hunt through such a voluminous exhibit in search of isolated statements that might support the Individual Defendants’ position, particularly where the Individual Defendants made no effort in their response to defend the VOZ Travel program.
Nor do the belatedly proffered portions of the affiliate declarations create a triable issue of fact as to the VOZ Travel pyramid-scheme liability finding.
For example, even assuming that one consumer believed he was obtaining a “travel opportunity” when he purchased a VOZ Travel pack, the undisputed evidence submitted by the FTC establishes that no such opportunity actually existed.
On Dr. Bosley not addressing VOZ Travel, the FTC wrote;
The Individual Defendants’ arguments are “baffling” because “Dr. Bosley’s report includes a detailed analysis of VOZ Travel.
The court doesn’t specifically address this argument but appears to have adopted the FTC’s position (the court quotes Bosley citing VOZ Travel in her analysis).
Finally addressing the SBH defendant’s desire to launch VOZ Travel without MLM, the court wrote;
These statements shed no light on whether the Individual Defendants’ pre-lawsuit operation of VOZ Travel with an MLM component qualified as a pyramid scheme.
In other words, what SBH might or might not do with VOZ Travel today, has no bearing on the business they ran.
The court went on to affirm that Success by Health and VOZ Travel were the same business and deny the reconsideration motion.
Looking forward the SBH defendants are challenging the granting of a preliminary injunction.
The preliminary injunction was granted by the District Court after the Ninth Circuit rejected a previously filed appeal.
The appeal pertained to the Supreme Court’s AMG decision earlier this year. In essence the Ninth Circuit left it up to the District Court to rule on the motion.
The court granted the preliminary injunction and an appeal on that decision is back at the Ninth Circuit.