Fed. Trade Comm'n v. On Point Capital Partners LLC

17 F.4th 1066

FEDERAL TRADE COMMISSION, Plaintiff-Appellee,

v.ON POINT CAPITAL PARTNERS LLC, a limited liability company, Dragon Global LLC, a limited liability company, DragonGlobal Management LLC, a limited liability company, Dragon Global Holdings LLC, a limited liability company, Robert Zangrillo, individually and as an Officer of DG DMV LLC, Dragon Global LLC, Dragon Global Management LLC, Dragon Global Holdings LLC, On Point Capital Partners LLC, and On Point Global LLC, d.b.a. On Point, et al., Defendants-Appellants.

No. 20-10790

United States Court of Appeals, Eleventh Circuit.

November 4, 2021

Bradley Grossman, Michael Daniel Bergman, Sana Chaudhry, Sarah Waldrop, Federal Trade Commission, Office of the General Counsel, Washington, DC, for Plaintiff-Appellee.

Kenneth Dante Murena, Damian & Valori, LLP, Miami, FL, Matthew Lane Schwartz, Boies Schiller & Flexner, LLP, New York, NY, Mark W. Kelley, MoloLamken, LLP, New York, NY, Marshall Dore Louis, Boies Schiller & Flexner, LLP, MIAMI, FL, John T. Zach, Boies Schiller & Flexner, LLP, New York, NY, for Defendant-Appellant On Point Capital Partners LLC.

Matthew Lane Schwartz, Boies Schiller & Flexner, LLP, New York, NY, Mark W. Kelley, MoloLamken, LLP, New York, NY, Marshall Dore Louis, Boies Schiller & Flexner, LLP, MIAMI, FL, John T. Zach, Boies Schiller & Flexner, LLP, New York, NY, for Defendants-Appellants Dragon Global LLC, Robert Zangrillo, Dragon Global Management LLC, Dragon Global Holdings LLC.

Before Jordan, Jill Pryor, and Tjoflat, Circuit Judges.

TJOFLAT, Circuit Judge:

On December 9, 2019, the Federal Trade Commission ("FTC") brought suit under 15 U.S.C. § 53(b) of the Federal Trade Commission Act ("FTCA") against Burton Katz, Robert Zangrillo, Brent Levison, Arlene Mahon, Elisha Rothman, Christopher Sherman, and fifty-four corporate entities¹ under their control, alleging that they had engaged in "unfair or deceptive" business practices in violation of 15 U.S.C. § 45(a) under the collective name of "On Point." That same day, the FTC filed a motion for a temporary restraining order against the On Point parties to freeze their assets, place the On Point entities into a receivership, and enjoin all On Point parties from materially misrepresenting their services or from releasing consumer information obtained through On Point. Operating under then binding Eleventh Circuit precedent² interpreting § 53(b), the District Court granted the motion for a temporary restraining order in full on December 13. On January 14, 2020, following a two-day evidentiary hearing, the Court granted a preliminary injunction against On Point, extending the asset freeze, receivership, and injunction for the duration of the lawsuit. On Point now challenges this preliminary injunction on appeal under 28 U.S.C. § 1292(a).

We affirm the parts of the preliminary injunction enjoining the appellants from misrepresenting their services and releasing consumer information³ for the reasons set forth below. However, while this appeal was pending, the Supreme Court held in AMG Capital Management that 15 U.S.C. § 53(b) does not permit an award of "equitable monetary relief such as restitution or disgorgement," leaving the asset freeze and receivership aspects of the preliminary injunction unsupported by law. AMG Cap. Mgmt., LLC v. FTC , ––– U.S. ––––, 141 S. Ct. 1341, 1344, 209 L.Ed.2d 361 (2021). As a result of this ruling, all On Point appellants except for Dragon Global LLC ("DG"), Dragon Global Holdings LLC ("DGH"), Dragon Global Management LLC ("DGM"), On Point Capital Partners LLC ("OPCP") (collectively "Dragon Global"), and Zangrillo voluntarily dismissed their appeal and instead sought relief from the District Court. Accordingly, we vacate the parts of the preliminary injunction subjecting the remaining appellants to the asset freeze and receivership⁴ to the extent the District Court has not already provided relief.

I.

We have broken the factual background of this case into three subparts: Subpart A discusses On Point's allegedly deceptive activities, Subpart B discusses Zangrillo and Dragon Global's relationship with On Point, and Subpart C discusses the procedural history of the case.

A.

Through its various corporate entities, On Point owns and operates over two hundred websites aimed at providing the public with information about government benefits and services. On Point has four primary lines of business: 1) a "freemium" service that provides free guides about public benefit and services programs in exchange for customer information, 2) a domain ownership business that buys and sells valuable domain names, 3) a "pay for clicks" business that generates revenue by enticing visitors to click on advertisements, and 4) an e-commerce business that sells guides and services for obtaining government benefits and services like driver's license renewal, passport assistance, and Section 8 housing.

The typical On Point website in the e-commerce line focused on providing information about a benefit or license in a particular state. For example, On Point operated a website known as "floridadriverslicenses.org," which featured an image of the state's border and claimed to be "Your source for [state] driver's information." On Point also operated "DMV.com," which claimed in Facebook advertisements that "[y]ou can renew you [sic] driver licenses online here!! Skip the lines doing it from you [sic] home." Both DMV.com and state-specific websites like floridadriverslicenses.org would redirect consumers to a landing site, also owned by On Point, where On Point would attempt to induce visitors to buy paid guides or give up personal information with bold headlines like "Renew Drivers License In Your State."

Consumers who continued further on the landing page would then be prompted to enter credit card information and to "SELECT A SERVICE," with options including "Renew Driver's License," "Replace Driver's License," and "Reinstate Suspended License;" depending on the option chosen, On Point would then ask for further information such as birth date. However, once the consumer completed the transaction, they received a guide to obtaining the service based entirely on publicly available information; the selected service was not actually provided through the site or the transaction. Consumers would initially be charged a small amount (usually $3.99 or $4.99), but several days later would be charged a larger amount for the same purchase (usually $19.99 or $21.99). On Point followed this general website and payment model for other state benefits and services such as hunting and fishing licenses.

On Point also operated forty-five websites in its "freemium" line aimed at inducing consumers to provide personal information to determine their eligibility for programs such as housing assistance, Medicaid, and unemployment benefits. For example, "section-8-housing.org" invited consumers to "Find Out If You Are Eligible for the Section 8 Program" and solicited consumer names, email addresses, zip codes, phone numbers, birth dates, gender, employment status, health insurance coverage status, medical diagnoses, disability status, and debt level. Only once consumers provided all this information would they be informed that the site did not actually determine eligibility. Instead, consumers simply received a PDF document containing general advice for estimating eligibility, regardless of the information provided. This consumer information would then be sold to third parties; soon thereafter, consumers would receive spam emails and text messages offering services such as psychic counseling or claiming that the consumer had won prizes in sweepstakes or was eligible for government grants. Between January 2018 and November 2019, On Point raised over eighty million dollars through its e-commerce line and seventeen million through selling consumer information.

On Point did provide some disclaimers. For example, On Point sites disclosed at the top of each page in small, gray letters that they were not affiliated with any government agencies or office and would describe their site in paragraphs under their bold headlines as providing "guide[s] and resources." On Point also provided a "notice" in a pop-up window that consumers had to click "I understand and accept" on to proceed with their purchase. One such notice informed consumers that:

Driving a motor vehicle without a valid driver's license, car registration or car title may be illegal, as is driving with expired credentials. Motor vehicle services and applications must be processed by an official DMV location/website. The assistance and services on this site simplify the process by providing personalized guides, documents, and live support for a fee. This site store [sic] cookies, by clicking ‘I UNDERSTAND AND ACCEPT’ you acknowledge the statements above and that this site is privately owned and is not affiliated with nor endorsed by an official agency. To aid in this task, our detailed website has compiled and lists the most important information surrounding your motor vehicle services, so you can ensure the process is handled in a compliant and timely manner.

However, On Point never provided a disclosure or notice that explicitly informed customers that the desired government benefit or service could not be obtained on its websites. Nor were consumers entering personal information told that information would be sold to third parties; they were simply provided with a statement that their use of the site constituted "express written consent for [site] and our Marketing Partners to contact" the consumer.

As a result of these practices, hundreds of consumers submitted complaints to the FTC, other law-enforcement organizations, and the Better Business Bureau, claiming that On Point had misrepresented their services as providing actual government benefits, not just guides. Furthermore, a consumer survey⁵ commissioned by the FTC found that most visitors to an On Point websites...