Beware of Success by Health – Review Part 3

The success of Health’s move for reconsideration to reverse summary judgment was rejected.

In September, the FTC was awarded liable summary judgment against Success by Health.

The SBH defendants focused on VOZ Travel in their move for reconsideration.

Because VOZ Travel had no retail merchandise, the FTC believes it was a pyramid scheme.

Affiliates of VOZ Travel paid a fee, which entitled them to earn commissions on recruited affiliates who also paid a fee.

According to the SBH defendants, VOZ Travel was not a pyramid scheme because

At the time the FTC started this case and won the temporary restraining order, VOZ Travel packs were a genuine product line that was scheduled to debut.

The FTC is to blame for the VOZ Travel pack’s failure to launch, preventing the product line from reaching customers.

The SBH defendants presented an email addressed to their merchant vendor as evidence that they had a product contract.

Furthermore, the SBH defendants objected to the FTC’s expert, Dr. Bosley, purportedly undertaking “no study” of VOZ Travel.

SBH affiliate disclosures were also highlighted, with the accused saying the declarations “explicitly include the VOZ Travel product.”

Finally, the SBH defendants said that they wanted to relaunch VOZ Travel without MLM as proof that it was not a pyramid scheme.

All of the SBH defendant’s arguments were dismissed by the court.

The court concluded that the SBH defendant’s request “does not come close to fulfilling LRCiv 7.2(grequirement )’s for reconsideration.”

Individual Defendants present no new evidence or legal authority.

Instead, they merely try to raise new defenses of the VOZ Travel program that they did not present in their answer to the FTC’s summary judgment motion.

This is not permitted.

Regarding the email exchange, the court dismissed it in accordance with FRCP Rule 56.

The court based its decision on liable summary judgment on

extensive evidence indicating that the Individual Defendants’ statements about the VOZ Travel program were “a complete fabrication,” that “[t]here was nothing,” that “SBM and Advantage Services both terminated the entities’ contract with each other” prior to the TRO’s issuance, and that the Individual Defendants “had not retained a new vendor as of the TRO’s entry.”

Individual Defendants failed to reply to the FTC’s evidence on these grounds in their answer to the FTC’s motion.

The court accepted the evidence as uncontested since SBH neglected to challenge it (Rule 56(e)(2)).

The Court was authorized to rely on this indisputable evidence in its summary judgment analysis, and the Individual Defendants cannot get the summary judgment decision reconsidered by belatedly presenting material that was always accessible to them in an attempt to generate factual disagreements.

In other words, you can use “new” information to refute previously supplied evidence.

Instead, the SBH defendants are contesting the FTC’s evidence using material that “was always available to them,” which is not permitted through a reconsideration request.

The court noted that the SBH defendants did not contest “the first prong of the pyramid scheme test” in relation to VOZ Travel being a pyramid scheme.

Instead, they appear to be disputing solely the second prong’s finding—that participants’ rewards were predominantly dependent on recruiting rather than retail sales.

Nothing in the motion of the Individual Defendants implies that this determination was inaccurate, much alone clearly erroneous.

As the FTC properly points out in its response, notwithstanding the absence of an underlying product, sales of VOZ Travel packs continued for several months, and sales attempts even persisted after the relationship with Advantage Services began to deteriorate.

Furthermore, as stated in the summary judgment order, it is undisputed that Noland made false statements during a phone call related to the VOZ Travel program on December 20, 2019, by falsely claiming that the “biggest travel deal ever” had “just happened” and been “inked” when, in fact, no new travel contract had been signed.

SBH owner Jay Noland, one of the individual defendants opposing the summary judgment ruling, is referred to as “Noland.”

The court stated that the contents of SBH’s provided email, especially that their vendor relationship with Advantage Services may have been mended, were “wholly hypothetical.”

Such a potential development would not have jeopardized the conclusion underpinning the liability finding on Count One—that, on this evidence, VOZ Travel awards were principally based on recruiting.

The affiliate declarations made by SBH were rejected because

Defendants made no attempt in their summary judgment answer to locate any statements in the declarations, which were filed as a single, 1,882-page exhibit, that mentioned the VOZ Travel program.

It was not the Court’s responsibility to go through such large material in search of isolated remarks that would support the Individual Defendants’ viewpoint, especially since the Individual Defendants made no effort to defend the VOZ Travel program in their answer.

Moreover, the late-promised sections of the affiliate statements do not raise a triable question of fact regarding the VOZ Travel pyramid-scheme liability determination.

Even if one consumer felt he was purchasing a “travel opportunity” when he purchased a VOZ Travel pack, the indisputable evidence presented by the FTC indicates that no such opportunity existed.

The FTC replied in response to Dr. Bosley’s failure to address VOZ Travel:

The claims of the Individual Defendants are “baffling” since “Dr. Bosley’s study provides a full examination of VOZ Travel.”

The court did not expressly address this point, but appears to have agreed with the FTC (the court quotes Bosley citing VOZ Travel in her analysis).

Finally, in response to the SBH defendant’s request to start VOZ Travel without the use of MLM, the court wrote:

These remarks provide no insight into whether the Individual Defendants’ pre-lawsuit operation of VOZ Travel, which had an MLM component, qualified as a pyramid scheme.

In other words, what SBH does or does not do today with VOZ Travel has no influence on the business they conducted.

The court then ruled that Success by Health and VOZ Travel were the same company and denied the reconsideration request.

In the future, the SBH defendants intend to challenge the award of a preliminary injunction.

The District Court issued the preliminary injunction after the Ninth Circuit dismissed an earlier appeal.

The appeal concerned the Supreme Court’s AMG ruling issued earlier this year. In essence, the Ninth Circuit left the decision on the motion to the District Court.

The judge approved the preliminary injunction, and an appeal has been filed with the Ninth Circuit.

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