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Federal Trade Commission v. Health Care One LLC

August 23, 2010

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
HEALTH CARE ONE LLC, AN ARIZONA LIMITED LIABILITY COMPANY, ALSO D/B/A "HEALTHCAREONE," "AMERICANS4 HEALTHCARE," "CITIZENS4HEALTHCARE," "AMERICAN EAGLE HEALTHCARE," "EASYLIFE HEALTHCARE," "ELITE HEALTHCARE," "GLOBAL HEALTHCARE," AND "REPUBLIC HEALTHCARE"; AMERICANS4HEALTHCARE INC., A DELAWARE CORPORATION; MICHAEL JAY ELLMAN, AN INDIVIDUAL; ELITE BUSINESS SOLUTIONS, INC., A NEVADA CORPORATION, ALSO D/B/A "EASYLIFE HEALTHCARE," "ELITE HEALTHCARE" AND "REPUBLIC HEALTHCARE"; ROBERT DANIEL FREEMAN, AN INDIVIDUAL; DEFENDANTS.



The opinion of the court was delivered by: Hon. James V. Selna United States District Judge

PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF PERMANENT RECEIVER, AND OTHER EQUITABLE RELIEF AGAINST DEFENDANTS ELITE BUSINESS SOLUTIONS, INC., ALSO D/B/A "EASYLIFE HEALTHCARE," "ELITE HEALTHCARE" AND "REPUBLIC HEALTHCARE"; AND ROBERT DANIEL FREEMAN

On August 3, 2010, Plaintiff Federal Trade Commission ("Commission" or "FTC"), pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, filed a Complaint for a permanent injunction and other equitable relief against Health Care One LLC ("Health Care One"), Americans4Healthcare Inc. ("Americans4Healthcare"), Elite Business Solutions, Inc. ("Elite Business Solutions"), Michael Jay Ellman, and Robert Daniel Freeman (also known as Dan Freeman). Plaintiff concurrently applied ex parte for a Temporary Restraining Order ("TRO"), and for an Order to Show Cause ("OSC") why a preliminary injunction should not be granted and why a permanent receiver should not be appointed over the corporate Defendants. On August 3, 2010, the Court entered a TRO, which would expire on, and scheduled a hearing on the OSC for, August 13, 2010. On August 11, 2010, the Court extended the TRO for good cause shown through, and rescheduled the OSC hearing for, August 27, 2010.

The parties having stipulated to entry of a preliminary injunction, and for good cause shown, the Court hereby enters this Preliminary Injunction With Asset Freeze, Appointment of Permanent Receiver and Other Equitable Relief:

FINDINGS OF FACT

1. This Court has jurisdiction over the subject matter of this case and personal jurisdiction over Defendants Elite Business Solutions, Inc., also doing business as Elite Healthcare, Republic Healthcare, and EasyLife Healthcare, and Robert Daniel Freeman.

2. Venue lies properly with this Court.

3. For purposes of this Order, the Complaint states a claim upon which relief may be granted.

4. There is good cause to believe that Defendants have engaged in and are likely to engage in acts that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Telemarketing Sales Rule, 16 C.F.R. Part 310, and that the Commission is likely to prevail on the merits of this action.

5. There is good cause to believe that immediate and irreparable harm will result from Defendants' ongoing violations of the FTC Act unless Defendants are restrained and enjoined by Order of this Court.

6. Good cause exists for the appointment of a Permanent Receiver over the Corporate Defendant, as well as any successors, assigns, affiliates, and subsidiaries that conduct any business related to the Defendants' "national healthcare discount program" and which the Permanent Receiver has reason to believe are owned or controlled in whole or in part by any of the Defendants.

7. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers -- including refunds, rescission and restitution, disgorgement or other equitable monetary relief -- will occur from the sale, transfer, or other disposition or concealment by Defendants of assets or records unless Defendants are immediately restrained and enjoined by Order of this Court.

8. Considering Plaintiff's likelihood of ultimate success and weighing the equities, a Preliminary Injunction ("Order") with an asset freeze, the appointment of a Permanent Receiver, and other equitable relief is in the public interest.

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

10. Nothing herein shall be deemed an admission of wrongdoing, an admission of any allegation in the complaint in this action, or a waiver of any defense or privilege, by Defendants.

11. Defendant Freeman expressly reserves the right to apply to the Court for an order modify this preliminary injunction to permit him to pay reasonable and necessary and ordinary living expenses and/or attorneys' fees and costs from frozen funds, in addition to any monetary releases agreed to by the FTC pursuant to Section III. A. of this Order.

ORDER

DEFINITIONS For purposes of this Order, the following definitions shall apply:

1. "Plaintiff" means the Federal Trade Commission.

2. "Defendants" refers to Defendants Elite Business Solutions, Inc., also d/b/a "EasyLife Healthcare," "Elite Healthcare" and "Republic Healthcare," and Robert Daniel Freeman, and each of them, by whatever names each might be known by, as well as their successors and assigns, whether acting directly or through any corporation, subsidiary, division, or other device, including, but not limited to, fictitious business names.

3. "Corporate Defendant" refers to Defendant Elite Business Solutions, Inc., also d/b/a "EasyLife Healthcare," "Elite Healthcare" and "Republic Healthcare."

4. "Individual Defendant" refers to Defendant Robert Daniel Freeman.

5. "Receivership Defendants" refers to Elite Business Solutions, Inc., also d/b/a "EasyLife Healthcare," "Elite Healthcare" and "Republic Healthcare," Mile High Enterprise, Inc., Freeman Consulting, and Lighthouse Business Solutions LLC, as well as any successors, assigns, affiliates, and subsidiaries that conduct any business related to the Defendants' "national healthcare discount program" and which the Permanent Receiver has reason to believe are owned or controlled in whole or in part by any of the Defendants.

6. "Assisting others" means knowingly providing any of the following goods or services to another person or entity:

a. performing customer service functions, including, but not limited to, receiving or responding to consumer complaints; or

b. formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other marketing material; or

c. providing names of, or assisting in the generation of, potential customers; or

d. performing marketing services of any kind.

7. "Assets" means any legal or equitable interest in, right to, or claim to, any real or personal property, including, without limitation, chattels, goods, instruments, equipment, fixtures, general intangibles, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, contracts, receivables, shares of stock, and all cash, wherever located.

8. The term "document" is equal in scope and synonymous in meaning to the terms "document" and "electronically stored information," as described and used in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and any other data compilations from which information can be obtained. A draft or non-identical copy is a separate document within the meaning of the term.

9. "Material fact" means any fact that is likely to affect a person's choice of, or conduct regarding, goods or services.

10. "Person" means a natural person, organization, or other legal entity, including a corporation, partnership, proprietorship, association, cooperative, or any other group or combination acting as an entity.

I. PROHIBITED REPRESENTATIONS

IT IS THEREFORE ORDERED that Defendants and their successors, assigns, officers, agents, servants, employees, and attorneys, and those persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, marketing, promotion, offering for sale or sale of any good or service, are hereby restrained and enjoined from falsely representing, or from assisting others who are falsely representing, any of the following:

A. The program that Defendants are selling or marketing is health insurance;

B. The program that Defendants are selling or marketing is affiliated with or endorsed or sponsored by the federal government;

C. Enrollment in the program that Defendants are selling or marketing will result in substantial healthcare savings to the consumers;

D. Consumers who enroll in the program that Defendants are selling or marketing will be able to obtain program benefits from the consumers' current healthcare providers and from other healthcare providers in the consumers' local communities;

E. Defendants will provide a full refund, subject to no or only a nominal processing fee to consumers who enroll in the program that Defendants are selling or marketing, if the consumer submits a cancellation request before the thirty-day trial period expires; and

F. Any other fact material to a consumer's decision to purchase any good or service from Defendants.

II. PROHIBITION AGAINST VIOLATING THE TELEMARKETING SALES RULE

IT IS FURTHER ORDERED that Defendants and their successors, assigns, officers, agents, servants, employees, and attorneys, and those persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the telemarketing of any good or service, are hereby restrained and enjoined from violating any provision of the Telemarketing Sales Rule, 16 C.F.R. Part 310, including, but not limited to:

A. Violating Section 310.3(a)(2)(iii) of the TSR, 16 C.F.R. § 310.3(a)(2)(iii), by misrepresenting, directly or by implication, material aspects of the performance, efficacy, nature, or central characteristics of the program, including that:

1. The program that Defendants are selling or marketing is health insurance;

2. Enrollment in the program that Defendants are selling or marketing will result in substantial healthcare savings to the consumer;

3. Consumers who enroll in the program that Defendants are selling or marketing will be able to obtain program benefits from the consumers' current healthcare providers and from other healthcare providers in the consumers' local communities; or

4. Any other fact material to a consumer's decision to purchase any good or service from Defendants; and

B. Violating Section 310.3(a)(2)(iv) of the TSR, 16 C.F.R. § 310.3(a)(2)(iv), by misrepresenting, directly or by implication, material aspects of the nature or terms of the seller's refund or cancellation policies, including that Defendants will provide a full refund, subject to no or only a nominal processing fee, if the consumer submits a cancellation request before the thirty-day trial period expires.

III. ASSET FREEZE

IT IS FURTHER ORDERED that each of the Defendants is hereby restrained and enjoined, until further order of this Court, from:

A. Transferring, encumbering, selling, concealing, pledging, hypothecating, assigning, spending, withdrawing, disbursing, conveying, gifting, dissipating, or otherwise disposing of any funds, property, coins, lists of consumer names, shares of stock, or other assets, wherever located, that are (1) owned or controlled by any of the Defendants, in whole or in part; (2) in the actual or constructive possession of any of the Defendants; (3) held by an agent of any of the Defendants, as a retainer for the agent's provision of services to a Defendant; or (4) owned, controlled by, or in the actual or constructive possession of, or otherwise held for the benefit of, any corporation, partnership, or other entity directly or indirectly owned or controlled by any of the Defendants; provided, however, Defendants may make such transfers or withdrawals authorized in writing by counsel for Plaintiff, or by the Permanent Receiver (with respect to assets of any of the Receivership Defendants), or by further order of this Court;

B. Opening or causing to be opened any safe deposit boxes titled in the name of any of the Defendants, or subject to ...


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