Last November the Success by Health defendants appealed to the Ninth Circuit, seeking to overturn the granted preliminary injunction.
On July 26th the Ninth Circuit submitted its decision, affirming the District Court’s decision to deny the motion to dissolve the preliminary injunction.
The Ninth Circuit’s decision was filed on the FTC v. Success by Health case docket on September 22nd.
In affirming the decision to deny the Success by Health defendants permission to dissolve the preliminary injunction, the Ninth Circuit wrote;
Despite the absence of any ruling from the Supreme Court at the time this appeal was filed, Defendants-Appellants argue that the Court’s grant of the petition for writ of certiorari in AMG Capital Management, LLC v. FTC, constituted a significant change in the law.
The district court correctly concluded to the contrary, and we affirm its denial of the motion to dissolve or modify the preliminary injunction.
When the AMG decision was handed down earlier this year, it was widely celebrated by companies engaged in litigation with the FTC.
The belief that the AMG decision would result in the collapse of FTC cases however has proven misguided.
Whereas we have seen restrictions placed on monetary penalties, the FTC is nonetheless seeing the cases to conclusion.
Having upheld the preliminary injunction, the Ninth Circuit punted the issue back to the District Court, writing;
We leave it to the district court in the first instance to consider whether and to what extent the decision in AMG Capital Management, LLC v. FTC, bears on the preliminary injunction.
Whereas the District Court previously expressed concern regarding jurisdiction absent a decision by the Ninth Circuit, on September 23rd a new order granted the preliminary injunction and asset freeze.
IT IS ORDERED that:
(1) The FTC’s motion for preliminary injunction with asset freeze and receivership is granted.
(2) The Individual Defendants’ motion to dissolve preliminary injunction and stay or dismiss § 13(b) proceedings is denied.
The new preliminary injunction and asset freeze circumvents the AMG decision.
(The FTC’s) motion essentially seeks to keep in place the preliminary injunction that was issued in February 2020 by identifying additional grounds for relief that are not implicated by AMG Capital.
The Court has already found, in the summary judgment order, that the Individual Defendants committed the alleged § 19 violations and are liable for any monetary harm arising from those violations.
The Individual Defendants’ liability as to the § 19 claims has already been established via summary judgment.
The bottom line is that the FTC has advanced a non-frivolous reason why a substantial damages award may be in the offing in the near future.
The Individual Defendants’ dissolution and dismissal arguments are based on a faulty premise.
Moreover … the now-established § 19 violations justify the asset freeze.
With respect to the SBH defendants’ attempt to dissolve the Receivership, on the basis monetary relief via Section 13(b) was off the table, the court wrote;
The Court agrees with the FTC that AMG Capital does not undermine the receivership component of the original order granting a preliminary injunction.
The purpose of the receivership was not merely to preserve assets in anticipation of a future award of monetary remedies pursuant to the FTC’s § 13(b) claims—to the contrary, a key reason why the Court imposed the receivership was to prevent ongoing and future harm, by ousting the Individual Defendants from their management positions in entities that were likely functioning as pyramid schemes and making false income representations.
In related news, Success by Health’s legal team is falling apart.
Last month one of the Success by Health defendant’s attorneys moved to withdraw from the case.
The stated reason is the law firm representing the defendants had split into two smaller firms.
The motion to withdraw was granted on September 22nd. This left the Success by Health defendants with two attorneys.
This in itself wasn’t newsworthy. But on October 1st, one of the remaining attorneys filed a motion to withdraw.
The stated reason for the requested withdrawal was
the economic impact of this court’s orders on the individual defendants’ ability to pay for a legal defense.
Both the FTC and the former receiver (who was also counsel for the corporate defendants) have vigorously argued against any attempt to permit the individual defendants access to their assets to use for living or legal expenses.
Unfortunately, this means continued representation of the individual defendants will result in an unreasonable financial burden on (the law firm), which cannot continue as it has for many, many months, if it continues to work without payment of the many hundreds of thousands of dollars owed.
It seems the law firm was banking, no pun intended, on court decisions going their way.
Based on court filings, we’d previously learned Jay Noland (right) had raised just under $600,000 from SBH affiliates to cover legal fees.
Whether that money has been exhausted (or alternatively spent on other things), is unclear.
According to the withdrawal motion;
The individual defendants have retained new counsel to represent them in this matter.
Given the motion was only filed yesterday, it has yet to be granted.
The Success by Health’s new legal team has yet to file an appearance.
On September 23rd the Success by Health defendants also filed a motion for reconsideration of the summary judgment order.
A decision on that motion is expected later this month.
Update 24th October 2021 – The attorney withdrawal motion was granted on October 19th.
Update 30th October 2021 – The motion for reconsideration of the summary judgment order has been denied.