Consumer complaints “manipulated” Lifewatch says in preliminary injunction battle with FTC

consumer complaintsLifewatch, Inc. has alleged that the FTC “manipulated” consumer complaints in order to attribute alleged violations of the Telemarketing Sales Rule (“TSR”) to the New-York based medical alert systems company as part of its preliminary injunction battle with the FTC.  As part of that fight, Lifewatch has sought to strike some 17,000 consumer complaints from the record, which the FTC submitted in support of its request for a preliminary injunction.

At the end of June 2015, the FTC, in conjunction with the Florida Attorney General’s Office, filed a lawsuit against Lifewatch claiming that Lifewatch had violated the TSR by blatantly using “illegal and deceptive robocalls to trick older consumers throughout the United States and Canada into signing up for medical alert systems with monthly monitoring fees ranging from $29.95 to $39.95.  Since that time, quite the brouhaha has developed over the FTC’s motion seeking a preliminary injunction.

FTC Alleges Lifewatch Engaged in Abusive and Widespread Deceptive Telemarketing Practices

As part of its complaint and its memorandum in support of its motion for preliminary injunction, the FTC asserted:

The simple truth is that Lifewatch is well aware of, and responsible for, the illegal tactics employed by its telemarketers.  These tactics are not the unavoidable result of bad conduct by a few rogue telemarketers – these tactics are responsible for making Lifewatch the company it is today.  Unfortunately, most if not all of its sales come from blatantly illegal tactics.  Plaintiffs have submitted overwhelming evidence demonstrating both Lifewatch’s abusive telemarketing practices and its widespread deceptive telemarketing practices. Either basis is sufficient to grant Plaintiffs’ motion for a preliminary injunction, which seeks an immediate halt to the illegal telemarketing. The requested relief is necessary to prevent ongoing injury to consumers throughout the country, but is narrowly tailored so as not to interfere with any of Lifewatch’s legitimate business.

In support of its motion for a preliminary injunction, the FTC also submitted voluminous exhibits and other evidence, which contained an expert summary of 17,000 consumer complaints from the Sentinel database that purportedly link to Lifewatch’s telemarketing practices.  The 17,000 consumer complaints are alleged to link to Lifewatch’s telemarketing partners violations of the TSR.

Lifewatch Seeks Expedited Discovery to Respond to FTC’s Motion

In its initial response to the FTC’s motion, Lifewatch argued that “since Plaintiffs’ claims largely rest on the truth of assertions by third-parties of what was allegedly communicated to them orally, it is clear that significant discovery will be required to allow Defendant to adequately respond to the FTC’s motion.”  However, while Lifewatch did not fully respond to the FTC’s motion, it did state that the FTC was “misleadingly imply[ing] to the Court that 100% of the complained of calls are attributable to Lifewatch, even when their own evidence suggests that such is not the case.”

In reply, the FTC lobbied the court to deny Lifewatch’s request for expedited discovery, and, instead, to enter its proposed preliminary injunction order against all defendants, claiming:

In the face of the overwhelming evidence detailing their illegal and deceptive robocalling campaigns, Defendants Lifewatch Inc., and Evan Sirlin, have not responded substantively to Plaintiffs’ preliminary injunction motion. Instead, Defendant Lifewatch has asked this Court to delay the entry of a preliminary injunction order so that it can propound full-blown discovery. Lifewatch’s proposed discovery, in addition to being overly broad and burdensome, would not aid in the Court’s resolution of Plaintiffs’ preliminary injunction motion. Indeed, given the Ninth Circuit’s holding that Lifewatch is responsible for the actions of its telemarketers, the only relevant issue in a preliminary injunction hearing is whether Lifewatch should be required to take steps to make certain that its telemarketers discontinue these brazenly illegal tactics. This delay tactic is nothing new for Lifewatch, however, as it employed the same tactic in negotiations with Plaintiffs, as well as in other litigation.

However, the court disagreed with the FTC’s position, thus permitting Lifewatch’s request for expedited discovery.

Following expedited discovery, Lifewatch filed its formal response to the FTC’s motion for preliminary injunction.  In its response, Lifewatch claimed that the FTC’s motion was “predicated on the false premise that Lifewatch is a telemarketer.”  Furthermore, Lifewatch claimed that “[t]he 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.”  Therefore, in addition to filing its formal response, Lifewatch has filed a motion to strike certain evidence the FTC marshals in support of its motion.

Lifewatch Moves to Strike Consumer Complaints

In its motion to strike, Lifewatch seeks to strike the voluminous consumer complaints submitted by the FTC  in support of its motion.  Lifewatch claims the FTC’s consumer complaint data is “unreliable,” “manipulated,” and “engineered.”  Lifewatch represents that out of the 17,000 complaints submitted by the FTC, only two actually reference Lifewatch and “[m]any of the complaints have no connection whatsoever to medical alert devices.  And some of the complaints are specifically connected to Lifewatch’s competitors.”  Likewise, only 28 of the complaints out of the 17,000 can be directly attributed to Lifewatch’s outside sellers, Lifewatch claims.

Lifewatch argues that the FTC has taken the small number of consumer complaints it can attribute to Lifewatch and/or its outside sellers and expanded on those complaints in a “result-oriented” approach, which lacks reliability.  As a result, Lifewatch claims that the FTC is using the Sentinel database inappropriately by “expand[ing] the complaints by searching telephone numbers associated with certain companies named in database complaints.  At the same time, [the FTC] selectively disregarded other company names associated with the same telephone numbers found in the same data set.”  Lifewatch also noted that “[the FTC’s expert] conceded that he did not even look to see whether the complaints that came up in his expanded search identified the companies that the consumers identified in the call or the types of products being marketed in the calls.”  Accordingly, Lifewatch claims that the FTC’s data submitted in support of its motion for preliminary injunction is undoubtedly flawed and even “engineered” to produce a desired result regardless of the veracity of the FTC’s data.

Lifewatch’s challenge to the FTC’s motion for preliminary injunction, if successful may spell trouble for the FTC’s quest to enjoin Lifewatch’s business practices.  If the consumer complaints are stricken, the FTC will face a much tougher battle in proving the merits of their motion, meaning the FTC will have to do far more than just enter a single “keyword” in its complaint database in order to attribute all of the purported complaints to Lifewatch.