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Federal Trade Commission v. Health Care One LLC

September 1, 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 HEALTH CARE ONE LLC, AMERICANS4HEALTHCARE INC., AND MICHAEL ELLMAN

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, and the Telemarketing and Consumer Fraud and Abuse Protection Act, 15 U.S.C. §§ 6101-6108, 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.

On August 23, 2010, the Court entered a stipulated preliminary injunction against Defendants Elite Business Solutions, Inc., and Robert Daniel Freeman, and appointed Thomas W. McNamara as permanent receiver over Elite Business Solutions, Inc., and Freeman's affiliated entities, including Mile High Enterprise, Inc., Freeman Consulting, and Lighthouse Business Solutions LLC.

On August 27, 2010, after consideration of the briefs and evidence filed in support of and in opposition to the OSC, and upon good cause shown, the Court granted Plaintiff's application for a preliminary injunction against Defendants Health Care One, Americans4Healthcare, and Michael Ellman and appointment of a permanent receiver over Health Care One, Americans4Healthcare, and Ellman's affiliated entities, including Secure Healthplan Corporation, HCO Marketing Inc., The American Mint, Ltd., Red Carpet Skincare Inc., Quad Digital Corporation, AutoPlanOne Inc., and Magnum Financial Management, Inc. The Court ordered that the TRO entered on August 3, 2010 be extended to remain in full force and effect until the entry of the preliminary injunction.

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

The Court has considered the Complaint, Plaintiff's Ex Parte Application for TRO, memorandum of points and authorities, supplemental brief, and evidence filed in support thereof, Defendants' memorandum of points and authorities and evidence filed in opposition thereto, and the Reports filed by the Temporary Receiver, and it appears to the satisfaction of the Court that:

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

2. There is good cause to believe that Defendants Health Care One LLC, Americans4Healthcare Inc., and Michael Jay Ellman ("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.

3. 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.

4. Good cause exists for the appointment of a Permanent Receiver over Corporate Defendants Health Care One LLC, Americans4Healthcare Inc., and Defendant Ellman's affiliated entities, including Secure Healthplan Corporation, HCO Marketing Inc., The American Mint, Ltd., Red Carpet Skincare Inc., Quad Digital Corporation, AutoPlanOne Inc., and Magnum Financial Management, Inc.

5. 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, immediate access, and other equitable relief is in the public interest.

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

ORDER

DEFINITIONS

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

1. "Plaintiff" means the Federal Trade Commission.

2. "Defendants" means Defendants Health Care One LLC; Americans4Healthcare Inc.; and Michael Jay Ellman, 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 Defendants" refers to Defendants Health Care One LLC and Americans4Healthcare Inc.

4. "Individual Defendant" refers to Defendant Michael Jay Ellman.

5. "Receivership Defendants" refers to Defendants Health Care One LLC, Americans4Healthcare Inc., and Defendant Ellman's affiliated entities, including Secure Healthplan Corporation, HCO Marketing Inc., The American Mint, Ltd., Red Carpet Skincare Inc., Quad Digital Corporation, AutoPlanOne Inc., and Magnum Financial Management, Inc., 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 ...


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