united states district court for the northern district of illinois eastern · pdf...

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION __________________________________________ FEDERAL TRADE COMMISSION, and ) ) STATE OF FLORIDA, OFFICE OF THE ) ATTORNEY GENERAL, DEPARTMENT ) OF LEGAL AFFAIRS, ) ) Case No. 15 cv 5781 Plaintiffs, ) ) Judge Feinerman v. ) ) Magistrate Judge Gilbert LIFEWATCH INC., a New York corporation, ) also d/b/a LIFEWATCH USA and MEDICAL ) ALARM SYSTEMS, and ) ) EVAN SIRLIN, individually and as an officer ) or manager of Lifewatch Inc., ) ) Defendants. ) __________________________________________)

RESPONSE TO MOTION FOR PRELIMINARY INJUNCTION

Case: 1:15-cv-05781 Document #: 87 Filed: 11/10/15 of 33 PageID #:3835

TABLE OF CONTENTS

I. Introduction .................................................................................................................... 5

II. Statement of Material Facts ........................................................................................... 10

III. Argument ....................................................................................................................... 17

A. Plaintiffs’ Argument Ignores The Clear Distinction Between “Sellers” And “Telemarketers” Embodied In The Telemarketing Sales Rule. ................. 17

B. Plaintiffs’ Have Failed To Establish A Likelihood Of Success On The Merits Of Their “Do Not Call” And “Robocall” Claims. .................................. 19

1. Lifewatch cannot be held accountable for telemarketing of generic medical alarm devices and services. ......................................... 19

a. Liability as a “seller” under Section 310.4 requires a showing of a connection between the telemarketing transaction at issue and the putative “seller.” ............................... 21

b. A “seller’s” liability under Section 310.4 requires a showing that it caused the telemarketer to engage in the improper conduct. ......................................................................... 22

2. Most of the conduct at issue on Plaintiffs’ Motion appears to be tied to telemarketers with which Lifewatch no longer transacts business. .................................................................................. 23

C. Plaintiffs Have Not Established A Likelihood Of Success On The Merits Of Their Claims Tied To Misrepresentations.”………………………...26

1. Lifewatch takes reasonable measures to ensure that consumers do not receive inaccurate information about its products and services.. .................................................................................................26

2. Lifewatch’s quality control program helps it to identify and void involvement with telemarketers that procure customer accounts through misrepresentations…………………………………………….29

3. Lifewatch’s quality control program has evolved in response to complaints and to meet TSR compliance challenges as those challenges evolve……………………………………………………... 30

IV. Conclusion……………………………………………………………………………..31

2


TABLE OF AUTHORITIES

Cases

Opinions Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) .......................17 United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed.615 (1955) ...............17 U.S. v. Miscellaneous Firearms, Explosives, Destructive Devices and Ammunition, 376 F.3d 709, 712 (7th Cir. 2004) ...............................................................................................17 Matter of Lifschultz Fast Freight Corp., 63 F.3d 621, 628 (7th Cir. 1995).................................17 See U.S. v. Miscellaneous Firearms, Explosives, Destructive Devices and Ammunition, 376 F.3d at 712 .......................................................................................................18 FTC v Merchant Services Direct, LLC, 2013 WL 4094394, at *3 (E.D. Wash., 2013) ..............25 FTC v. Evans Products, Co., (9th Cir. 1985) ...............................................................................25 FTC v. Think Achievement Corp., 144 F.Supp. 2d 1013, 1017 (N.D. Ind. 2000) (aff’d, 312 F.3d 259 (7th Cir. 2002).............................................................................................25

Statutes

See 26 C.F.R. §310.2(cc) .............................................................................................................6 26 C.F.R. § 310.2(dd) ..................................................................................................................6 See 26 C.F.R. 310.2(aa) ...............................................................................................................6 16 C.F.R. §310.3 ..........................................................................................................................9 16 C.F.R. §310.4 ..........................................................................................................................9 16 C.F.R. § 310.2(cc) ...................................................................................................................17 16 C.F.R. 310.2(aa) ......................................................................................................................17 16 C.F.R. §310.2(dd) ...................................................................................................................18 See 16 C.F.R §310.2(cc) and (dd) ................................................................................................18 16 C.F.R. §310.4(b)(iii) ...............................................................................................................20

3


16 C.F.R. 310.4(b)(iii) .................................................................................................................20 16 C.F.R. § 310.2(cc) ...................................................................................................................20 16 C.F.R. §310.4(d) .....................................................................................................................21 16 C.F.R. §310.4(d) .....................................................................................................................21 16 C.F.R. §310.4 ..........................................................................................................................22 16 C.F.R. §310.4(b) .....................................................................................................................22 16 C.F.R. §310.4(C)(3)(i-iii)........................................................................................................23 16 C.F.R. §310.3 ..........................................................................................................................26 16 C.F.R. §310.3(b) .....................................................................................................................29

4


Defendants, Lifewatch Inc. (“Lifewatch”) and Evan Sirlin (“Sirlin”), by their counsel,

pursuant to 15 U.S.C. § 45(a), 16 C.F.R. §310, and Section 501.204 of FDUTPA, Chapter 501, Part

II, Florida Statutes, state in opposition to the Motion for Preliminary Injunction (Dkt. ## 9 and 10,

the “Motion”) brought by Plaintiffs, the Federal Trade Commission (the “FTC”) and the State of

Florida, Office of the Attorney General, Department of Legal Affairs (“Florida AG”), as follows:

I. Introduction

Lifewatch is a decades-old, New York company that provides personal emergency response

monitoring devices (“Monitoring Devices”) and services (“Monitoring Services”) to elderly,

disabled, and seriously ill customers. Lifewatch has over 60,000 customers, and it routinely

receives correspondence from satisfied customers thanking Lifewatch for its life-saving services.1

Lifewatch provides product fulfillment for medical alarm monitoring devices and services sold on a

generic basis by outside sellers, including telemarketers.2 More specifically, Lifewatch purchases

customer accounts (to be fulfilled by Lifewatch) from outside sellers, and some of those accounts

are procured by the outside sellers through telemarketing.3

This case does not involve allegations that the Monitoring Devices and Services do not

function properly. In fact, it is undisputed that they function properly and that they save lives.4

Plaintiffs’ Motion seeks injunctive relief against Lifewatch and its president, Sirlin, relative to

telemarketing of Monitoring Devices and Monitoring Services. To prevail on their Motion, it is

incumbent on Plaintiffs to establish the likelihood that they will succeed on the merits of their

1 Lifewatch has maintained a customer base of approximately 60,000 customers for the last several years. DX 1, Sirlin Declaration, ¶ 3. 2 DX 1, Sirlin Declaration, ¶ 9; DX 2, Baker Declaration, ¶ 5 . 3 DX 2, Baker Declaration, ¶ 5. 4 DX 1, Silrin Declaration, ¶ 5.

5


claims. Additionally, Plaintiffs must demonstrate that after balancing the equities, an injunction

jeopardizing Lifewatch’s viability, is in the public interest. Plaintiffs’ Motion fails in both regards.

Plaintiffs’ Motion is predicated on the false premise that Lifewatch is a telemarketer.

Lifewatch is not a “telemarketer,” as that term is defined in the Telemarketing Sales Rule (“TSR”).

See 26 C.F.R. §310.2(cc). Additionally, Lifewatch does not engage telemarketers to sell its

products.5 Lifewatch’s accountability, if any, in connection with “telemarketing” as that term is

defined in the TSR, 26 C.F.R. § 310.2(dd), would be as a “seller,” as that term is defined in the

TSR. See 26 C.F.R. 310.2(aa). But Plaintiffs’ submissions, full of bluster, fail to establish that

Lifewatch has violated the TSR as a seller.

Further, the relief sought by Plaintiffs is not warranted through a balancing of the equities.

Specifically, following an FTC investigation into Lifewatch’s practice of purchasing customer

accounts from outside sellers, the FTC waited nearly two years before commencing this lawsuit and

filing a preliminary injunction motion. In the interim, Lifewatch added a number of proactive

measures to its existing quality control program that provide appropriate self-policing and address

the issues presented by Plaintiffs’ stale evidence from several years ago. 6 Among other measures,

Lifewatch: a) audits audio-recordings of the marketing used by the telemarketers to generate the

customer accounts offered to Lifewatch; b) offers customer refunds including to people who

purchased devices as a consequence of the telemarketing of which the Plaintiffs complain7; c)

began requiring all outside sellers to sign and notarize affidavits indicating compliance with

5 DX 2, Baker Declaration, ¶ 3; DX 1, Sirlin Declaration, ¶¶ 7-8. 6 DX 1, Sirlin Declaration, ¶ 19; DX 2, Baker Declaration, ¶¶ 16 – 25. 7 DX 1, Sirlin Declaration, ¶ 9. Lifewatch has provided refunds to consumers (PX 19, 33, 34, 38, 36, 53, 56 and 59), free shipping for returns (PX 19, 38 and 56) and stopped Monitoring Service charges, despite the consumers failure to return the device (PX 26, 34, 44 and 59), among other things.

6


Lifewatch’s guidelines and applicable laws; and d) terminated (and terminates) relationships with

any non-compliant outside sellers.8

The vast majority of the evidence submitted by Plaintiffs is stale and relates to conduct by

third-parties that have not transacted business for at least two years.9 The only “evidence” offered

to show a “risk of a recurrent violation” includes government investigator affidavits indicating that

some percentage of the sales of Lifewatch’s monitoring devices is accomplished through third-party

telemarketers, and in the past, a few of the telemarketers from which Lifewatch purchased accounts

engaged in improper conduct.10 But in those instances, Lifewatch acted on a timely basis to protect

the interests of its customers and to terminate its relationship with third-parties that acted

improperly.11 The outside sellers with which Lifewatch is presently working (all of which have

submitted notarized affidavits swearing to their compliance with Lifewatch’s guidelines and

applicable law) have not, upon information and belief, been the subject of any past complaints.12

For the reasons discussed in this brief, the evidence13 on which Plaintiffs’ Motion rests fails to

establish a likelihood of success on the merits. Further, when Plaintiffs’ submissions are considered

against the record as a whole, it becomes evident that Plaintiffs have not established that the

injunctive relief sought by them – putting Lifewatch’s viability in jeopardy – is in the public interest

when the equities are balanced. Thus, the Motion should be denied.

8 DX 2, Baker Declaration, ¶¶ 16 – 25. 9 Of the 50 purported consumer declarations submitted by Plaintiffs, 34 were signed in 2013, none were signed in 2014 and only 16 were signed in 2015. Of the 16 that were signed in 2015, many refer to activities that occurred in 2014 or before and/or do not refer to Lifewatch. Furthermore, to its knowledge, Lifewatch does not currently do business with any of the sellers that are the subject of any of the Declarations. See DX 2, Baker Declaration, ¶¶ 24-26. 10 Lifewatch does not currently do business with any of the sellers that are the subject of any of the Declarations. See DX 2, Baker Declaration, ¶¶ 24-26 . 11 DX 1, Sirlin Declaration, ¶¶ 13-18; DX 2, Baker Declaration, ¶¶ 9, 24 and 25. 12 DX 2, Baker Declaration, ¶ 25. 13 At the time of their submission of this brief, Defendants are only at the initial stage of discovery. Defendants anticipate that they will be submitting evidence developed through discovery in opposition to Plaintiffs’ Motion with their December 8, 2015 supplemental brief.

7


As Plaintiffs concede, Lifewatch is but one of many companies that provide medical alarm

devices and monitoring services.14 Plaintiffs’ Motion rests largely on evidence of conduct by

telemarketers connected to Lifewatch only in the sense that it relates to marketing of medical alarm

devices and services on a generic basis. In most instances, Plaintiffs cannot link the conduct on

which their Motion is based to Lifewatch. Most of the conduct of which Plaintiffs complain is by

telemarketers offering products and services for sale on a generic basis.15 And, many of the claims

on which Plaintiffs’ Motion rest are predicated on complaints that do not support relief under the

TSR and, in any event, were resolved by Lifewatch on a voluntary basis, in many cases several

years ago, even though there was no merit to the claims.16 Yet, Plaintiffs would have this Court

hold Lifewatch accountable for all telemarketing of medical alarm devices and services, even

absent a showing that Lifewatch either caused the telemarketing at issue to be undertaken or had an

obligation to fulfill contracts obtained by the telemarketers.17 Additionally, as addressed in

Lifewatch’s Motion to Strike, much of Plaintiffs’ evidence is plainly unreliable.18

The evidence shows that Lifewatch is proactive in responding to the few consumer

complaints that arise in connection with a statistically negligible percentage of Lifewatch’s overall

sales.19 And to the extent that Plaintiffs’ submissions establish that Lifewatch purchased contracts

obtained through a third-party’s telemarketing, the evidence does not support the draconian relief

14 Dkt. # 10, p. 4. 15 DX 1, Sirlin Declaration, ¶¶ 11-12. 16 DX 1, Sirlin Declaration ¶¶ 13-18. 17 One of the many examples is the Declaration of Donald Bristow (PX 23, Dkt. 24-19) in which Mr. Bristow complains about receiving 6 prerecorded telephone calls that say a doctor, friend or family member had recommended that he get a medical alert device. However, Mr. Bristow fails to identify the telemarketing company(ies) whose conduct he is complaining about and does not identify Lifewatch in any way. 18 Much of the evidence submitted by Plaintiffs is entirely unreliable resting on hearsay and unfounded conjecture. See Motion To Strike, Dkt. ## 45 and 56. Defendants’ arguments in that motion are incorporated by reference in this brief and will be renewed at the hearing to the extent Plaintiffs fail to withdraw that evidence from the Court’s consideration in connection with the Motion. 19 Plaintiffs claim that Lifewatch is responsible for the transmission of hundreds of millions of robocalls. Dkt. 10, p. 5. Plaintiffs concede that from 2012 to present, more than 90,000 consumers have complained about Dkt. 10, FN 9. This represents .007388 % of the 90,000 complaints. The number is still negligible when compared to the approximately 60,000 customers of Lifewatch -- .011083%; DX 2, Baker Declaration, ¶¶16-28.

8


sought by Plaintiffs in the context of the transactions identified by Plaintiffs, especially in view of

the refund and quality control programs that Lifewatch has in place.20

In sum, Plaintiffs’ TSR claims fall into essentially two “buckets.” In the first “bucket,”

Plaintiffs purport to hold Lifewatch and Sirlin accountable for alleged misrepresentations by

telemarketers in connection with the marketing of Monitoring Devices and Services, even though

the materials submitted by Plaintiffs suggest that the marketing was undertaken on a generic basis

and was not specific to Lifewatch’s devices or services. These claims turn on the application of 16

C.F.R. §310.3 to Lifewatch which is not proper without direct evidence connecting Lifewatch to the

conduct. In the second “bucket,” Plaintiffs also purport to hold Lifewatch and Sirlin accountable for

telemarketing calls to people on “Do Not Call” lists and for the concealment of identities of the

people responsible for the telephone calls. Under the TSR, 16 C.F.R. §310.4, these claims against

Lifewatch fail absent a showing that Lifewatch caused the complained of conduct.

Plaintiffs cannot establish that there is a substantial likelihood that they will prevail on the

merits. Moreover, it is illogical to conclude that a balancing of the equities favors entry of the

injunctive relief sought by Plaintiffs. The relief sought by Plaintiffs would place Lifewatch’s

continued viability in jeopardy without protecting the public interest in any way. After all, the

outside sellers from which Lifewatch procures customer accounts do not sell “Lifewatch” products

and services but, rather, market monitoring devices and services on a generic basis and will

presumably continue to do that even if Lifewatch is no longer in business.21 Jeopardizing

Lifewatch’s ability to exist would therefore serve no public interest. Consequently, Plaintiffs’

Motion should be denied.

20 DX 2, Baker Declaration, ¶¶ 16 – 28. 21 DX 1, Sirlin Declaration, ¶¶ 11 and 12.

9


II. Statement Of Material Facts Lifewatch is a well-established business that has provided Monitoring Devices and

Monitoring Services to the public for many years.22 Lifewatch sells medical Monitoring Services to

the public.23 Medical Monitoring Services allow people who may need emergency assistance to

access emergency service providers at the press of a button.24 Organizations such as the AARP

have recommended Monitoring Devices and the ancillary Monitoring Services similar to those

offered by Lifewatch to older adults to make it safer for them to remain independent in their own

homes.25

Lifewatch primarily sells its Monitoring Services, while providing the Monitoring Devices

itself at no cost. Lifewatch customers are not obligated to pay separately for Lifewatch’s

Monitoring Devices in order to access its Monitoring Services. If a customer orders a Lifewatch

Monitoring Device, the customer pays for the Monitoring Services associated with the device and is

not required to purchase the Monitoring Device, which is provided without charge.26 Lifewatch’s

customers are offered a variety of payment plans for the Monitoring Services that it offers,

including monthly payment plans.27 Customers are not obligated to purchase Monitoring Services

for any set period of time and may terminate the Monitoring Services at any time. However, if a

customer cancels the Monitoring Services, the customer is required to return the actual monitoring

22 DX 1, Sirlin Declaration, ¶¶ 3- 6. 23 DX 1, Sirlin Declaration, ¶ 2. 24 DX 1, Sirlin Declaration, ¶ 4. 25 See Medical Alert Devices to the Rescue, Nov. 11, 2010 -- http://www.aarp.org/health/doctors-hospitals/info-11-2010/medical_alert_systems.html ; Medical-alert systems can be helpful, especially for older people living alone; October 27,2 014, The Washington Post --https://www.washingtonpost.com/national/health-science/medical-alert-systems-can-be-helpful-especially-for-older-people-living-alone/2014/10/24/70638906-2320-11e4-958c-268a320a60ce_story.html; New Technologies are Improving the Lives of Seniors, August 19, 2014, The Association of Mature American Citizens -- http://amac.us/new-technologies-improving-lives-seniors/. . 26 DX 2, Baker Declaration, ¶ 37. 27 DX 1, Sirlin Declaration, ¶ 38.

10


http://www.aarp.org/health/doctors-hospitals/info-11-2010/medical_alert_systems.html

http://www.aarp.org/health/doctors-hospitals/info-11-2010/medical_alert_systems.html

http://amac.us/new-technologies-improving-lives-seniors/

device which was provided for their use. If the customer does not return the monitoring device,

they are asked to pay for it.28

Lifewatch is not a telemarketer.29 Lifewatch does not have its own sales personnel or

marketing department.30 Lifewatch purchases customer accounts for Monitoring Services offered

for sale by various outside sellers.31 Lifewatch does not employ the outside sellers from which

Lifewatch purchases customer accounts for Monitoring Services and Monitoring Devices.32 Instead,

the outside sellers market generic Monitoring Devices and Monitoring Services to the public and

offer the customer accounts that they procure to Lifewatch and other medical alert companies on a

non-exclusive basis.33 The outside sellers engage in a variety of marketing techniques to sell

Monitoring Services on a generic basis to the public.34 Lifewatch provides the outside sellers with

whom it deals with information about technical specifications and attributes of its services and

devises the terms and conditions it extends to its customers, as guidance as to the types of customer

accounts it is willing to purchase from outside sellers.35

Outside sellers approach Lifewatch and offer to sell it customer accounts.36 The outside

sellers that offer customer accounts to Lifewatch use a variety of media including print advertising,

television advertising, radio advertising, internet advertising, and telemarketing to originate those

customer accounts.37 In many instances, outside sellers offering Lifewatch customer accounts have

28 DX 1, Sirlin Declaration, ¶ 38. 29 DX 2, Baker Declaration, ¶ 3. 30 DX 2, Baker Declaration, ¶ 8. 31 DX 1, Sirlin Declaration, ¶¶ 9-12; DX 2, Baker Declaration, ¶¶ 4-6. 32 Id. 33 Id. 34 DX 2, Baker Declaration, ¶ 5. 35 DX 2, Baker Declaration, ¶ 19. 36 DX 1, Sirlin Declaration, ¶ 9. 37 DX 2, Baker Declaration, ¶ 5.

11


represented that they have also sold and are selling other customer accounts to Lifewatch’s

competitors.38

Lifewatch does not actually hire outside sellers to market Lifewatch’s products and

services.39 As noted, Lifewatch purchases customer accounts from outside sellers that generate

those accounts by selling Monitoring Services on a generic basis.40 Importantly, Lifewatch does not

commit itself to purchase customer accounts sold by these outside sellers.41 And the outside sellers

that offer customer accounts to Lifewatch are free to market those accounts to Lifewatch’s

competitors.42 Specifically, Lifewatch and the outside sellers enter into purchase agreements.43 The

purchase agreements set the terms under which the outside sellers offer customer accounts for sale

to Lifewatch and provide Lifewatch the opportunity to acquire customer accounts from the outside

sellers on a non-exclusive basis.44 Lifewatch has no obligation to purchase customer agreements

that are offered to it by the outside sellers. Lifewatch always retains discretion under its agreements

with outside sellers to decline to purchase customer accounts.45

Indeed, there are numerous occasions when Lifewatch declines to purchase customer

accounts. For example, there are certain geographic regions in which Lifewatch has chosen not to

transact business. Consequently, Lifewatch does not purchase customer accounts from those

regions. 46 Sometimes, customer accounts are offered to Lifewatch in a manner that might challenge

its ability to provide appropriate customer support or that make it more difficult to obtain payment

from the customer on a going forward basis. An example would be when the customer accounts do

38 DX 1, Sirlin Declaration, ¶¶ 9-12. 39 DX 1, Sirlin Declaration, ¶¶ 7 and 8. 40 DX 1, Sirlin Declaration, ¶¶ 9-12. 41 DX 2, Baker Declaration, ¶¶ 32 and 33. 42 DX 1, Sirlin Declaration, ¶¶ 9-12. 43 DX 1, Sirlin Declaration, ¶ 9; Baker Declaration, ¶ 4. 44 DX 1, Sirlin Declaration, ¶ 9. 45 DX 2, Baker Declaration, ¶ 32. 46 DX 2, Baker Declaration, ¶ 33.

12


not provide a street address and, instead, provides only a P.O. Box as the mailing address.

Lifewatch will not purchase those customer accounts.47 The outside sellers remain free, pursuant to

the terms of their Purchase Agreements with Lifewatch, to offer such customer accounts for sale to

any of Lifewatch’s competitors.

Lifewatch’s reputation is an invaluable asset that has been cultivated over the three decades

in which it has been in business.48 Indeed, consumer complaints about Lifewatch to the companies

that process payments on its behalf could cripple Lifewatch’s business.49 To protect its reputation

and its customers, Lifewatch takes proactive steps to ensure that the outside sellers do not engage in

improper conduct to generate sales.50 To that end, before Lifewatch purchases customer accounts

from outside sellers it requires, in addition to requiring the outside seller to execute a purchase

agreement, confirmation in a sworn declaration that the customer accounts offered by the seller are

not procured in violation of any state or federal statutes, rules, or regulations.51 Additionally,

Lifewatch provides the outside seller with accurate information about the products and services that

Lifewatch provides and the terms and conditions under which it provides those products and

services to customers to ensure that the outside seller does not offer customer accounts predicated

on misrepresentations.52

Outside sellers offer Lifewatch the opportunity to purchase customers by entering those

accounts into a Customer Relationship Management System (“CRM”).53 However, before an

outside seller is permitted to offer customer accounts for sale to Lifewatch through its CRM, the

47 DX 2, Baker Declaration, ¶ 32. 48 DX 1, Sirlin Declaration, ¶¶ 3 and 6. 49 DX 1, Sirlin Declaration, ¶ 20; DX 2, Baker Declaration, ¶¶16-35, 39-45. 50 DX 2, Baker Declaration, ¶¶ 17-19. 51 DX 2, Baker Declaration, ¶ 18. 52 DX 2, Baker Declaration, ¶ 19. 53 DX 2, Baker Declaration, ¶¶ 29-30.

13


outside seller must execute the purchase agreement and provide the affidavit discussed above.54 In

addition to receiving information about the products and services that Lifewatch is prepared to

fulfill, and guidance about what outside sellers should not communicate to consumers about

Lifewatch’s products and services, outside sellers are also provided with a script that must be

followed verbatim concerning the solicitation of customer personal information, including credit

card or bank information, so that payment can be collected and used by the outside processors with

which Lifewatch contracts.55 But, the outside sellers develop and design their own marketing

strategies.56

Lifewatch maintains an internal “Do Not Call” list.57 This list is generated from calls that

Lifewatch receives from people who request that they not receive telemarketing calls for

Lifewatch’s products.58 Because Lifewatch is not a telemarketer, and does not call consumers to

market its products, it provides a copy of its internal Do Not Call list to the outside sellers with

whom it has a purchase agreement at the inception of the business relationship.59 Lifewatch updates

its internal Do Not Call list as it receives new Do Not Call requests and provides regular updates to

the outside sellers from which it purchases customer accounts so that outside sellers can update

their Do Not Call lists.60 In the event that Lifewatch learns that a person that is on its internal Do

Not Call list was telemarketed by an outside seller, Lifewatch will warn or terminate the outside

seller, depending on the circumstances.61

Lifewatch’s quality control has evolved over time to meet the issues that it has encountered

in the course of conducting its business. To the extent that outside callers offer customer accounts

54 DX 2, Baker Declaration, ¶ 20. 55 DX 2, Baker Declaration, ¶ 18. 56 DX 1, Sirlin Declaration, ¶ 9. 57 DX 1, Sirlin Declaration, ¶ 40. 58 DX 2, Baker Declaration, ¶¶ 39-40. 59 DX 2, Baker Declaration, ¶ 41. 60 DX 2, Baker Declaration, ¶¶ 40 and 41. 61 DX 2, Baker Declaration, ¶ 42.

14


for purchase to Lifewatch, the outside sellers are required to maintain recordings of those calls.62 As

part of its internal quality control, Lifewatch undertakes regular weekly random quality assurance

testing of the calls that result in the customer accounts offered by the outside sellers to Lifewatch.63

In the course of its quality control review, in the event that Lifewatch identifies errors, omissions or

improper actions undertaken by outside sellers, Lifewatch follows up with the outside sellers to

address the issue.64 Depending on the circumstances, Lifewatch might undertake additional

evaluation to assess the extent of the issue. Depending on the nature of the issue and the extent of

the problem, Lifewatch may even cease purchasing customer accounts from a particular seller.65

In the event that Lifewatch learns that a sale was made to a consumer on Lifewatch’s

internal Do Not Call list, Lifewatch will raise the issue with the relevant outside seller.66 However,

Lifewatch has no ability to determine for itself whether any outside seller has contacted consumers

on the national Do Not Call registry unless the consumer makes a purchase and Lifewatch is offered

and then buys that customer account.67 Because the outside sellers design and conduct their own

marketing strategy without Lifewatch’s involvement, it is not possible for Lifewatch to know every

consumer the outside sellers call.68 But to be clear, Lifewatch has terminated its relationship with a

number of outside sellers when Lifewatch has learned of irregularities or improprieties.69

Lifewatch has offered redress, as appropriate, to customers based on findings by Lifewatch

in the course of its internal quality control. For example, in early 2014, Lifewatch became aware of

litigation commenced by the FTC and Florida against certain outside sellers from which Lifewatch

62 DX 2, Baker Declaration, ¶ 21. 63 DX 3, Vandewater Declaration, ¶¶ 2-3. 64 DX 3, Vandewater Declaration, ¶ 4. 65 Lifewatch tailors its response to errors by outside sellers to the specifics of the issue presented. It takes a proactive and balanced approach designed to protect its customers and its own reputation. DX 3, Vandewater Declaration, ¶ 4; DX 2, Baker Declaration, ¶¶ 22, 23 and 42. 66 DX 2, Baker Declaration, ¶¶ 21-23. 67 DX 2, Baker Declaration, ¶ 43. 68 DX 1, Sirlin Declaration, ¶ 9. 69 DX 3, Vanderwater Declaration, ¶ 4; DX 2, Baker Declaration, ¶¶ 23 and 42.

15


had purchased customer accounts.70 Alerted to allegations of misconduct by the targets of the

lawsuit, Lifewatch terminated its relationship with those outside sellers.71 Further, Lifewatch

undertook a program to confirm that the customers that had purchased Monitoring Services through

the targeted outside sellers had activated the devices. Lifewatch reached out to those customers who

had not activated their devices to follow up with them to ascertain whether they wanted to keep the

Lifewatch device and pay for the service.72 It even provided return labels to the customers who

indicated that they did not wish to keep the devices.73

There are many companies that market products and services similar to those offered by

Lifewatch.74 As set forth above, Lifewatch purchases customer accounts from outside sellers that

may also sell Monitoring Devices and Monitoring Services offered by Lifewatch’s competitors.

Therefore, Lifewatch does not tell outside sellers how to market the Monitoring Devices and

Monitoring Services but relies on the outside sellers for that.75 However, Lifewatch does provide

the outside sellers with guidance about its own products and services so that the outside sellers are

aware of what they can, and cannot, say about Lifewatch’s products and services, as this may be

different from what the outside sellers can say about the products and services offered by

Lifewatch’s competitors.76

Of course, Lifewatch is not in a position to address the quality control measures undertaken

by its competitors who purchase customer accounts from the same outside sellers from which

Lifewatch purchases customer accounts. The outside sellers from which Lifewatch purchases

customer accounts may, and often do, make sales that are offered to Lifewatch’s competitors.

70 DX 1, Sirlin Declaration, ¶ 13. 71 DX 1, Sirlin Declaration, ¶ 18. 72 DX 1, Sirlin Declaration, ¶ 17. 73 DX 2, Baker Declaration, ¶ 15. 74 DX 1, Sirlin Declaration, ¶¶ 11-12. 75 DX 1, Sirlin Declaration, ¶ 9; DX 2, Baker Declaration, Exs. C and E. 76 DX 2, Baker Declaration, ¶¶ 17-19.

16


Lifewatch is not in a position to address the conduct of the outside sellers regarding such sales to

Lifewatch competitors.

III. ARGUMENT

A. Plaintiffs’ Argument Ignores The Clear Distinction Between “Sellers” And “Telemarketers” Embodied In The Telemarketing Sales Rule. Plaintiffs’ Motion attempts to blur the clear line between “sellers” and “telemarketers”

incorporated in the TSR in an attempt to circumvent the plain language of the TSR. But in

evaluating Plaintiffs’ claims, the court should “’give effect, if possible, to every clause and word of

a statute.’” Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001)(quoting

United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed.615 (1955)). Courts should

not “construe a statute in a way that makes words or phrases meaningless, redundant, or

superfluous.” U.S. v. Miscellaneous Firearms, Explosives, Destructive Devices and Ammunition,

376 F.3d 709, 712 (7th Cir. 2004); Matter of Lifschultz Fast Freight Corp., 63 F.3d 621, 628 (7th

Cir. 1995). Ignoring these basic rules of statutory construction, Plaintiffs fail to distinguish between

“telemarketer” and “seller,” and their Motion is predicated on a construction of the TSR that

requires the Court to gloss over or ignore the words actually used in the TSR.

A “telemarketer” under the TSR is “any person who, in connection with telemarketing,

initiates or receives telephone calls to or from a customer or donor.” 16 C.F.R. § 310.2(cc). In

contrast, a “seller” under the TSR is a person or entity who, “in connection with a telemarketing

transaction, provides, offers to provide, or arranges for others to provide goods or services to the

customer in exchange for consideration.” 16 C.F.R. 310.2(aa). In other words, the provision or offer

to provide goods or services is not in the context of telemarketing, generally, but, rather, the

telemarketing, by definition, must be in the context of a specific transaction. “Telemarketing” is

defined as “a plan, program, or campaign which is conducted to induce the purchase of goods or

17


services…by use of one or more telephones and which involves more than one interstate telephone

call.” 16 C.F.R. §310.2(dd).

A telemarketer’s liability under the regulatory structure turns on its initiation or receipt of

telephone calls in connection with telemarketing. By definition, the telemarketer’s liability under

the regulatory structure is necessarily predicated on the telephone calls it places or receives in the

context of a telemarketing plan, program, or campaign. See 16 C.F.R §310.2(cc) and (dd).

However, by definition, a seller’s liability requires that there be a telemarketing transaction in

which the putative seller provides or offers to provide goods or services to the customer and not

simply telemarketing. But in the Motion, Plaintiffs fail to distinguish between whether Lifewatch is

a telemarketer or is a seller in connection with the conduct at issue, and Plaintiffs fail to address

whether they purport to hold Lifewatch accountable as a telemarketer or as a seller.

Plaintiffs’ Motion insinuates, without expressly saying so, that Lifewatch is a

“telemarketer.” This is because Plaintiffs argue that Lifewatch fails to transmit or disclose its

company name in telephone calls and contends that Lifewatch uses “recorded messages” that “are

crafted to appeal to the vulnerabilities of their target market, the elderly and disabled.” See Dkt. 10,

pp. 7, 8 and 10. Plaintiffs ignore the fact that in each of the telephone calls identified by them, the

party making the call did, in fact, identify itself. Plaintiffs would have this Court assume that either

Lifewatch, itself, made the calls or ignore the distinction in the regulation between telemarketer and

seller, a distinction that this Court should not ignore. See U.S. v. Miscellaneous Firearms,

Explosives, Destructive Devices and Ammunition, 376 F.3d at 712.

However, Lifewatch is not a telemarketer as it does not make or receive telephone calls in

connection with telemarketing. Contrary to Plaintiffs’ assertions, Lifewatch does not contact

potential consumers through the use of recorded messages or otherwise. Consequently, Lifewatch’s

18


liability under the TSR for specific transactions hinges upon whether it is a “seller.” The distinction

is not merely semantic. Since a seller’s liability arises not from telemarketing but, rather, requires a

telemarketing transaction, the TSR requires that Plaintiffs’ claims against Lifewatch and Sirlin be

framed in the context of particular telemarketing transactions rather than in the context of

telemarketing generally.

But Plaintiffs fail to make the distinction required by the words used in the TSR. Instead,

Plaintiffs refer to conduct they attribute to Lifewatch and Sirlin as “Defendants’ telemarketing.”

Since neither Lifewatch nor Sirlin77 is a telemarketer, Plaintiffs cannot establish either Defendant’s

liability as a “seller” simply by connecting it to telemarketing on a broad-brush basis. The plain

words used in the TSR require Plaintiffs to establish a connection between the telemarketing and

the transaction of which Plaintiffs complain. Plaintiffs have avoided that showing in their Motion,

presumably because they cannot make that showing. Consequently, their Motion necessarily falls

short and should be denied.

B. Plaintiffs’ Have Failed To Establish A Likelihood Of Success On The Merits

Of Their “Do Not Call” And “Robocall” Claims. 1. Lifewatch cannot be held accountable for telemarketing of generic medical alarm devices and services. Plaintiffs’ Motion concedes that Lifewatch is just one of a number of companies that

provide medical alarm monitoring devices and services. The Motion points to approximately 90,000

consumer complaints about the telemarketing of such devices from 2012 through the present. Yet,

of those, Lifewatch has only been specifically “identified” in 665 of the complaints. And, there is

no connection between approximately one third of the 665 complaints attributed to Lifewatch and

77 The FTC argues that Sirlin should be found personally liable because he “(1) participated directly in or had some measure of control over a corporation’s deceptive practices, and (2) had actual or constructive knowledge of the practices.” But, a plain review of the annexed Sirlin affidavit indicates that these bare conclusory allegations have been refuted.

19


telemarketing. Reference to the specifics of the 665 complaints and the follow-up raises

discoverable issues as to the merits (e.g. legitimacy) of the complaints and demonstrates that

Lifewatch has acted to resolve the issues presented to it. So Plaintiffs’ assertion that Lifewatch is

responsible for a torrent of improper telemarketing rests on the underlying demonstrably false

assumption that Lifewatch is responsible for all or even a statistically significant portion of the

telemarketing of medical alarm monitoring devices on which their Motion is predicated.

Plaintiffs’ “Do Not Call” claims are predicated on the TSR, 16 C.F.R. §310.4(b)(iii).

Subject to certain exceptions, it is a violation of the TSR “for a telemarketer to engage in, or for a

seller to cause a telemarketer to engage in…” the initiation of outbound telephone calls to people

who had previously communicated that they did not wish to receive calls from the particular seller

for whom the call was initiated or has caused his or her telephone number to be listed on a national

“do-not-call” registry. See 16 C.F.R. 310.4(b)(iii).

Lifewatch does not initiate calls to customers in connection with telemarketing, and it does

not receive calls from customers in connection with telemarketing. Through Lifewatch’s quality

control program, Lifewatch proactively undertakes measures to ensure that people on do not call

registries or the internal do not call list are not contacted by third-parties that offer to sell customer

accounts to Lifewatch. Consequently, Lifewatch is not a “telemarketer” as that term is defined in

the TSR. See 16 C.F.R. § 310.2(cc). Its liability under Section 310.4 of the TSR would hinge on it

being a “seller” in connection with the conduct at issue and a showing that Lifewatch, as a seller,

caused a telemarketer to engage in the prohibited conduct. In the present case, Plaintiffs fail in both

regards.

20


a. Liability as a “seller” under Section 310.4 requires a showing of a connection between the telemarketing transaction at issue and the putative “seller.” As discussed above, Lifewatch does not engage telemarketers to market its Monitoring

Devices or its Monitoring Services. And Lifewatch, itself, does not call or receive calls from

customers in the telemarketing of Monitoring Devices and Services. It is not a telemarketer, yet

Plaintiffs purport to hold Lifewatch accountable for the failure of the telemarketers from which

Lifewatch purchases customer accounts to identify themselves as being “Lifewatch.” But under 16

C.F.R. §310.4(d), it would be inappropriate for the telemarketers to identify themselves as

“Lifewatch” when in fact they are not. Moreover, since the telemarketers are calling to market the

Monitoring Devices and Services on a generic basis and not for Lifewatch in particular, it would be

inappropriate for them to identify Lifewatch as the “seller.” See 16 C.F.R. §310.4(d). Indeed, in the

context of those calls, the “seller” is the telemarketer as it is the entity that is contracting with the

customers to provide fulfillment (which it ultimately does by selling the customer account to a

third-party).

Lifewatch does purchase customer accounts in which it agrees to provide Monitoring

Devices and Monitoring Services on behalf of outside sellers that sold Monitoring Devices and

Services on a generic basis. The definition of “seller” as used in the TSR is on a transactional basis.

To the extent that Lifewatch purchases a customer account for Monitoring Devices and Monitoring

Services and that the purchased account was procured through telemarketing, Lifewatch would be a

“seller” in the context of that particular transaction.

Under the TSR’s definition of “seller,” the fact that an entity was a “seller” in the context of

a particular transaction with a telemarketer does not make the entity a “seller” in the context of all

telemarketing conduct by the telemarketer. Even if the entity was a “seller” in connection with other

21


transactions with the telemarketer, unlike a telemarketer that is responsible for all of the

telemarketing calls that it makes, a seller’s accountability under 16 C.F.R. §310.4 of the TSR

requires a connection between it and the particular transaction at issue. The TSR simply does not

support Plaintiffs’ attempt to hold Lifewatch accountable for all of the outbound telephone

marketing by telemarketers of generic Monitoring Devices and Monitoring Services.

b. A “seller’s” liability under Section 310.4 requires a showing that it caused the telemarketer to engage in the improper conduct. Further, the TSR does not make “sellers” strictly liable for the telemarketing conduct of

telemarketers even in those circumstances in which the seller provides the product or service that

the telemarketer sold. Instead, the TSR requires a showing that the “seller cause[d] a telemarketer to

engage in…” the prohibited conduct. See 16 C.F.R. §310.4(b). Yet, the Motion fails to offer

evidence to support its contention that Lifewatch did anything to cause any telemarketer to call a

person on a “do-not-call” registry or that had asked not to be contacted by Lifewatch.

Lifewatch has engaged in conduct to prevent telemarketers from contacting people who

requested not to receive telemarketing calls from or on behalf of Lifewatch. Before Lifewatch even

considers whether to purchase customer accounts from a telemarketer, it provides the telemarketer

with its internal Do Not Call list that it maintains identifying the consumers that had requested not

to receive telemarketing calls from Lifewatch. Lifewatch updates its internal “DNC List” as it

receives requests from consumers, and it circulates its updated internal “DNC List” to the outside

sellers with which it transacts business on a regular basis.

Lifewatch also requires each outside seller with which it transacts business, as a condition of

doing business with the entity, to provide verified confirmation that it undertakes the measures

required to comply with the federal and state statutes and regulations governing telemarketing,

22


including that the outside sellers confirm that their calls are not directed to people on “do-not-call”

registries. To the extent that Lifewatch discovers that an outside seller offers customer accounts that

were procured from people who were on “do-not-call” registries, Lifewatch terminates its

relationship with that outside seller. Lifewatch’s employees who receive calls from consumers as

well as those who work with outside sellers, are trained in Lifewatch’s proactive procedures

designed and implemented to prevent violations of Section 310.4.

Indeed, Lifewatch’s conduct in this regard brings it within the “safe harbor” provision

incorporated in Section 310.4 of the TSR. See 16 C.F.R. §310.4(C)(3)(i-iii). It has an established

policy that brings it within compliance with Section 310.4(b). It maintains and circulates its internal

DNC List. And it trains the employees who are responsible for the implementation and enforcement

of its policies designed to protect itself from telemarketers who offered to sell it customer accounts

procured through conduct in violation of the TSR.

2. Most of the conduct at issue on Plaintiffs’ Motion appears to be tied to telemarketers with which Lifewatch no longer transacts business.78 A majority of the submissions offered by Plaintiffs in support of their Motion are predicated

on actions undertaken, if at all, more than a year ago. The only connection to Lifewatch, to the

extent there is any connection to Lifewatch, is that Lifewatch may have purchased at least some

customer accounts from the telemarketers that made the calls documented in Plaintiffs’

submissions. But this does not support the relief sought by Plaintiffs.

As discussed, Lifewatch purchased customer accounts from outside sellers that procured

those accounts by marketing Monitoring Devices and Monitoring Services on a generic basis. The

78 Plaintiffs’ effort to connect Lifewatch to the conduct by third-parties including the telemarketers that were the subjects of the Worldwide Litigation rests on misrepresentations as well unfounded innuendo and false assumptions. Lifewatch and Sirlin expect to submit additional evidence on these points to counter Plaintiffs’ submissions after they are able to undertake at least a portion of the discovery they seek in connection with Defendants’ December 8 supplemental brief.

23


telemarketers were not engaged by Lifewatch to market Lifewatch’s monitoring Devices or its

Monitoring Services. To the extent that the telemarketers made the calls referenced in Plaintiffs’

submissions, those telemarketing calls were not specifically marketing Lifewatch’s Monitoring

Devices and Monitoring Services. Rather, had the calls been successful, the telemarketers

presumably would have offered the customer accounts obtained for purchase to Lifewatch or its

competitors. But based on the terms pursuant to which Lifewatch purchases customer accounts, it

has no right to obtain a customer account from an outside seller or to preclude that outside seller

from offering the account to Lifewatch’s competitors. Consequently, the only connection between

Lifewatch and the conduct of which Plaintiffs complain is that Lifewatch is among the companies

that may have purchased customer accounts from the telemarketers at issue.

But the fact that Lifewatch may have purchased some customer accounts from a particular

telemarketer does not mean that the telemarketer did not also offer customer accounts to others

among Lifewatch’s competitors. The injunction sought by Plaintiffs will not prevent the conduct of

which Plaintiffs complain because the injunction will not eliminate the market for customer

accounts for fulfillment of monitoring devices and services. However, the injunction will jeopardize

the viability of Lifewatch, an entity that has implemented policies and procedures designed to

prevent the conduct of which Plaintiffs complain. Thus, the injunction will not reduce a risk of

recurrence but may actually enhance that risk by eliminating an entity that has implemented

proactive measures reasonably designed to address the harm of which Plaintiffs complain.

Plaintiffs’ Motion largely rests on the conduct of telemarketers that were the targets of the

Worldwide Litigation. Lifewatch, its officers, and its employees were not ever joined as parties to

the Worldwide Litigation. Contrary to Plaintiffs’ assertions, Lifewatch did not create the scripts

used by the telemarketers who engaged in the conduct at issue in the Worldwide Litigation. And

24


Lifewatch did not cause those telemarketers to engage in the conduct that was the subject of the

Worldwide Litigation. Lifewatch’s only connection to those defendants is that it purchased

customer accounts from them. Lifewatch ceased transacting business with them when it became

aware of the conduct at issue in the Worldwide Litigation.

To obtain temporary injunctive relief under Section 13(b), the FTC must demonstrate a

likelihood of prevailing on its claim for a permanent injunction barring Defendants from

committing future violations of the FTC Act. FTC v Merchant Services Direct, LLC, 2013 WL

4094394, at *3 (E.D. Wash., 2013). Since the FTC “cannot base its request for injunctive relief

under [Section] 13(b) on evidence of past violations,” whether the FTC is likely to prevail on its

claims arising from prior alleged misconduct is not directly relevant to this analysis. Id. at *3.

(Preliminary injunction denied where after stale information was excised from the record, there was

little support for the proposition that the past violations would recur).

Plaintiffs point to evidence tied to the defendants in the Worldwide Litigation as somehow

being demonstrative of a risk of recurring violations by Lifewatch. But it is settled that “past

wrongs are not enough for the grant of an injunction” unless Plaintiffs establish that “the wrongs are

likely to recur.” FTC v. Evans Products, Co., (9th Cir. 1985)(citations omitted): see FTC v. Think

Achievement Corp., 144 F.Supp. 2d 1013, 1017 (N.D. Ind. 2000) (aff’d, 312 F.3d 259 (7th Cir.

2002)(recognizing that the FTC must establish “some reasonable likelihood of future violations”

when relying on past conduct).

In the present case, the changes that have been undertaken by Lifewatch, make this a case in

which past problems are not likely to be a harbinger of future problems. In particular, the proactive

measures implemented by Lifewatch are designed to prevent the conduct of which Plaintiffs

complain. Lifewatch communicates the do not call requests it receives to the outside sellers from

25


which it purchases customer accounts. And it requires the outside sellers from which it purchases

customer accounts to verify that they actually comply with all applicable telemarketing regulations.

While Lifewatch cannot prevent outside sellers from contacting people on do not call registries, it

has taken the reasonable measures available to it to ensure that it is not offered customer accounts

that are improperly procured. Lifewatch believes that it is no longer transacting business with the

telemarketers that are the subject of any of the complaints identified in this litigation. Lifewatch’s

actions, measures that have evolved in part in response to what it learned as a consequence of the

Worldwide Litigation, reduce the risk of recurring violations. Thus a balancing of the equities

weighs against entry of the injunctive relief sought by Plaintiffs.

C. Plaintiffs Have Not Established A Likelihood Of Success On The Merits Of Their Claims Tied To “Misrepresentations.”

1. Lifewatch takes reasonable measures to ensure that consumers do not

receive inaccurate information about its products and services. Plaintiffs’ claims against Lifewatch complaining of “deceptive practices” in the marketing

of Monitoring Devices and Monitoring Services are predicated on the TSR, 16 C.F.R. §310.3

Section 310.3(a) of the TSR prohibits telemarketers and sellers from engaging in certain types of

deceptive practices. The Section 310.3(a) conduct at issue on the Motion relates to representations

allegedly made to induce sales including concerning the price and terms of purchase, cancellation,

“prize promotion,” or concerning endorsements or sponsorships. But as discussed above, Lifewatch

does not engage in any of the conduct of which Plaintiffs complain.

As addressed above, Lifewatch, itself, is not a telemarketer. Its liability under 310.3(a) of

the TSR hinges on whether it was a seller and that it engaged in the conduct of which Plaintiffs

complain. Plaintiffs’ submissions fail to support their claims that Lifewatch engaged in the conduct

of which they complain.

26


Lifewatch does not have its own marketing or sales department. Lifewatch also does not

contract out to third-parties to telemarket on its behalf. Instead, it provides fulfillment services to

outside sellers that market Monitoring Devices and Monitoring Services on a generic basis.

Lifewatch does not have a relationship with any outside seller that provides for it to receive the

fruits of that seller’s labors on an exclusive basis. Lifewatch does not dictate to outside sellers how

those entities should identify interested consumers or how those entities should go about procuring

the customer accounts that those outside sellers offer to Lifewatch and others on a non-exclusive

basis for fulfillment. However, Lifewatch does require the outside sellers to affirm that they did not

procure those customer accounts through the use of any misrepresentations. To enable the outside

sellers to accomplish this, prior to doing any business with an outside seller, Lifewatch provides the

outside seller with information concerning the technical attributes of the products and services it

can provide, accurate factual background information about the product, and the terms and

conditions of payment including timing and its termination policy.

Lifewatch communicates to the outside sellers from which it purchases customer accounts

that it is willing to provide Monitoring Devices to customers at no cost with only the obligation to

pay for the Monitoring Services that are provided to them subject, however, to the customer’s

return of the Monitoring Device at the customer’s expense upon termination of the Monitoring

Services. And Lifewatch requires that the initial monthly payment for the Monitoring Services to be

processed at the inception of the relationship. Lifewatch communicates these terms as the terms

pursuant to which it is willing to provide fulfillment services in connection with the customer

accounts procured by the outside sellers at the inception of its relationship with its outside sellers.

Over time, Lifewatch has, on occasion, received complaints that outside sellers from which

it purchased customer accounts did not accurately communicate the terms and conditions of

27


Lifewatch’s fulfillment. In such instances, Lifewatch has gone back to the outside sellers from

which it purchased the customer account to evaluate whether the terms and conditions were

accurately communicated to the customer. Lifewatch has implemented quality control measures

which enables it to review the recordings of the calls through which a sale was procured to review

the exchange between the telemarketer and the customer. These calls can be lengthy, and the review

process is time-intensive. But Lifewatch endeavors to address customer complaints that arise in the

course of its business. And to the extent that an error was made in the communication of the terms

and conditions of the transaction, as Plaintiffs’ submissions to this Court demonstrate, Lifewatch

endeavors to make the customer whole through refunds; by paying for return shipping of the

device; or, in some instances, by excusing return shipping of the device. Indeed, as Plaintiffs’ own

submissions demonstrate, Lifewatch often provides accommodations and refunds even when the

objective evidence demonstrates that the customer is in error or misunderstood the terms and

conditions even though those terms and conditions were conveyed accurately.

It is not an improper “scare tactic” to identify the findings by the National Institute of Health

about the risk of falls to people over the age of 65 and the associated societal costs associated with

those falls.79 Rather, to the extent such information is communicated by telemarketers in the

marketing of medical alarm devices and monitoring services, it is factually accurate and protected

speech. And at least on a generic basis, Monitoring Devices and Monitoring Services substantially

the same as those offered by Lifewatch have been endorsed by a number of organizations to protect

older adults and infirm people from certain risks. Lifewatch communicates to the outside sellers

information about the products and services it offers. However, it is clear in its communications to

79 See http://nihseniorhealth.gov/falls/aboutfalls/01.html; www.ncoa.org/news/resources-for-reporters/get-the-facts/falls-prevention-facts/

28


http://nihseniorhealth.gov/falls/aboutfalls/01.html

http://www.ncoa.org/news/resources-for-reporters/get-the-facts/falls-prevention-facts/

http://www.ncoa.org/news/resources-for-reporters/get-the-facts/falls-prevention-facts/

the outside sellers with which it transacts business that its brand of monitoring devices and services

have not been endorsed.

Advertisements for Lifewatch’s products and services have been run on television, and the

product and service that it provides is substantially similar to those provided by a competitor that

has also run television advertisements. Indeed, Lifewatch and Connect America were each sued by

Life Alert in an action in California complaining about confusion engendered by statements made

in the marketing of Monitoring Devices and Monitoring Services. That litigation has been resolved

by settlement. As part of that settlement, Lifewatch provides a copy of the agreed injunction in

which it entered to the outside sellers with which it transacts business to avoid any confusion

between the Lifewatch products and services and those advertised by Life Alert.

2. Lifewatch’s quality control program helps it to identify and void involvement with telemarketers that procure customer accounts through misrepresentations. A seller violates the TSR by providing “substantial assistance or support to any seller or

telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer

is engaged in any act or practice that violates §§ 310.3(a), (c), or (d), or § 310.4 of this Rule. 16

C.F.R. §310.3(b). Lifewatch’s quality control program is designed to help it avoid providing

fulfillment services in support of telemarketers that have engaged in conduct in violation of §§

310.3(a), (c), or (d), or § 310.4 of the TSR. Liability under the TSR is highly fact-specific. Here,

Lifewatch’s screening, intake, and quality control measures distinguish it from the defendants in the

cases cited by Plaintiffs’ Motion.

As described above, Lifewatch’s quality control measures include actions that it undertakes

to avoid purchasing customer accounts from telemarketers that are not in compliance with the TSR.

But Lifewatch’s quality control does not stop with the agreements and affidavits it requires as a

29


prerequisite to transacting business with it. Rather, Lifewatch also undertakes random testing on a

regular basis of the recordings documenting the customer accounts it purchases to confirm that the

outside sellers, to the extent that they engage in telemarketer, do so in a manner consistent with

their obligations under §§ 310.3(a), (c), or (d), or § 310.4 of the TSR. Lifewatch also terminates its

relationships with outside sellers when Lifewatch’s own testing, customer complaints received by

it, or other information that it receives, indicates non-compliance with the TSR.

3. Lifewatch’s quality control program has evolved in response to complaints and to meet TSR compliance challenges as those challenges evolve.

Lifewatch has been in business for three decades. Over that time, Lifewatch’s quality

control program has evolved to meet the challenges of complying with the applicable regulations

and changes in the ways in which products are marketed. Lifewatch’s intake and quality control

procedures have evolved over the two-year period during which the FTC was undertaking its

investigation. Thus, the fact that much of Plaintiffs’ Motion rests on stale evidence is significant in

that Lifewatch’s self-policing addresses the issues that Plaintiffs cite as the justification for

injunctive relief.

For example, it is beyond dispute that medical alarm devices and monitoring services, at

least generically, are endorsed by an array of organizations. Plaintiffs have identified certain

statements made on behalf of Lifewatch years ago that were not accurate. Lifewatch corrected those

statements in response to the feedback that it received. Yet, Plaintiffs point to those instances as the

basis of their contention that it is somehow accountable for misrepresentations made by

telemarketers about medical alarm monitoring devices and services.

Plaintiffs’ desperation is highlighted by the fact that they point to an issue that was resolved

more than seven years ago as justification for the injunction they seek. In particular, Plaintiffs offer

30


an affidavit from AARP that points to cease and desist letters sent by that organization to Lifewatch

in 2006 and in 2008 complaining about alleged misuse of AARP’s logo on a Lifewatch website.

But as the AARP declaration makes clear, the issue was resolved promptly in both cases. See Dkt.

24-7, p. 1. The AARP declaration complains that it had heard of complaints that an unidentified

telemarketer had offered free medical alarm devices in affiliation with AARP. But the declarant

admitted that it had not identified the telemarketer or that the representations had even been made.

As Plaintiffs acknowledge, Lifewatch does investigate complaints made in connection with

its products. It obtains transcripts of calls. And it follows up with consumers to resolve disputes.

This is hardly the conduct of an entity that consciously avoids knowing of the practices through

which a sale was obtained. Rather, it is indicative of reasonable proactive conduct designed to

ensure that it does not run afoul of the TSR and to protect its reputation.

IV. CONCLUSION

Through this brief, Defendants have endeavored to explain their business. Essentially,

outside sellers offer customer accounts for Monitoring Devices and Services to Lifewatch and

others for purchase. The customer accounts are procured by the outside sellers through various

marketing approaches including advertisements and telemarketing. The customer accounts that are

offered are agreements for the provision of Monitoring Devices and Services sold on a generic

basis. Lifewatch is not a telemarketer under the TSR and does not hire telemarketers to sell its

Monitoring Devices and Services. Lifewatch is not a “seller” under the TSR except in connection

with the specific transactions its procures from telemarketers. And the evidence shows that

Lifewatch is meeting its obligations under the TSR as a seller.

Plaintiffs fail to establish a likelihood of success on the merits on their claims against

Lifewatch and Sirlin. Moreover, a balancing of the equities does not support the injunction sought

31


by Plaintiffs in light of Lifewatch’s proactive self-policing. Consequently, Plaintiffs’ Motion should

be denied for the reasons discussed in this initial response. Additionally, Defendants are in the

process of undertaking discovery pertaining to the various submissions offered by Plaintiffs in

support of the Motion and expect to address those submissions, and the failings of those

submissions, in their supplemental brief. But Lifewatch anticipates submitting a supplemental brief

following discovery that will underscore the defects in Plaintiffs’ Motion and that it will further

demonstrate those flaws as well as the merits of its position through the testimony and exhibits to

be presented at the scheduled evidentiary hearing. Thus, Plaintiffs’ Motion should be denied.

Respectfully submitted, /s/ David B. Goodman David B. Goodman [email protected] Patrick J. Cotter [email protected] Courtney A. Adair [email protected] Greensfelder Hemker & Gale, P.C. 200 West Madison Street, Suite 2700 Chicago, Illinois 60606 Telephone: (312) 419-9090 Facsimile: (312) 419-1930 Jason P. Sultzer [email protected] Joseph Lipari [email protected] The Sultzer Law Group 85 Civic Center Plaza Suite 104 Poughkeepsie, New York 12601 (646) 722-4266 Attorneys for Defendants LIFEWATCH, INC. EVAN SIRLIN

32


mailto:[email protected]





CERTIFICATE OF ELECTRONIC SERVICE

I, David B. Goodman, an attorney, hereby certify that on November 10, 2015, I electronically filed the foregoing Response to Motion For Preliminary Injunction with the Court using the CM/ECF system, which will automatically send copies to all attorneys of record in the case. /s/ David B. Goodman David B. Goodman #6201242 [email protected]

Greensfelder, Hemker & Gale, P.C. 200 West Madison Street, Suite 2700 Chicago, Illinois 60606 Telephone: (312) 419-9090 Facsimile: (312) 419-1930

33



united states district court for the northern district of illinois eastern · pdf...

Documents