Fed. Trade Comm'n v. Agora Fin., LLC

• Decision Date: 02 March 2020
• Docket Number: Civil Case No. 1:19-cv-3100-SAG
• Citation: 447 F.Supp.3d 350
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. AGORA FINANCIAL, LLC, et al., Defendants.
• Court: U.S. District Court — District of Maryland

447 F.Supp.3d 350

FEDERAL TRADE COMMISSION, Plaintiff,

v.AGORA FINANCIAL, LLC, et al., Defendants.

Civil Case No. 1:19-cv-3100-SAG

United States District Court, D. Maryland.

Signed March 2, 2020

Dillon J. Lappe, Alejandro Rosenberg, Omolara Bewaji Joseney, Pro Hac Vice, Gregory John Madden, Federal Trade Commission Bureau of Consumer Protection, Washington, DC, for Plaintiff.

Ari Nicholas Rothman, Venable LLP, Washington, DC, Megan Jeannette McGinnis, Joshua Jeremiah Gayfield, William M. Krulak, Jr., Miles & Stockbridge P.C., Baltimore, MD, for Defendants.

MEMORANDUM OPINION

Stephanie A. Gallagher, United States District Judge Plaintiff Federal Trade Commission (the "FTC") filed a Complaint against Defendants Agora Financial, LLC, Dr. Richard Gerhauser, Health Sense Media, LLC, Health Sense Publishing, LLC, NewMarket Health, LLC, Newmarket Health Publishing, LLC, and Zachary Scheidt (collectively "Defendants"), seeking preliminary and permanent injunctive relief against Defendants' advertising. ECF 1. The FTC simultaneously filed a Motion for Preliminary Injunction, ECF 2, along with a Memorandum of Law in support thereof, ECF 2-1 (collectively, "the Motion"). Defendants filed an Opposition, and the FTC filed a Reply. ECF 33, 37. A hearing was held on February 7, 2020. For the reasons that follow, the FTC's Motion is granted, although the scope of the preliminary injunction entered by the Court will be more limited than that requested by the FTC. In addition, Defendants filed a Motion to Dismiss the FTC's suit, ECF 41. This Court has reviewed that motion, along with the opposition and reply. ECF 44, 46. For the reasons stated herein, that Motion is denied.

I. FACTUAL BACKGROUND

Agora Financial, LLC ("Agora") and NewMarket Health, LLC ("NewMarket") are publishing entities under the umbrella of Monument and Cathedral Holdings, LLC ("M&C"). ECF 33-23 ¶ 3. M&C owns more than eighty separate entities. Id. Each entity has its own publisher or senior manager, and operates independently. Id. ¶¶ 4-6.

This case is premised on two separate promotions sponsored by Defendants, one for a health-related online publication and one involving a book provided for free with a subscription to an online financial newsletter. This Court will address each promotion separately. The Defendants in the health-related claims are Agora, NewMarket, NewMarket Health Publishing, LLC, Health Sense Publishing, LLC, Health Sense Media, LLC, and Dr. Richard Gerhauser, M.D. ("Dr. Gerhauser") (collectively "the Health Defendants"). ECF 2-1 at 1. The Defendants in the financial newsletter claims are Agora and Zachary Scheidt (collectively, "the Financial Defendants"). Id.

A. The Doctor's Secret to REVERSING Diabetes in 28 Days ("The Doctor's Guide")

Dr. Gerhauser is a licensed physician in good standing in Nevada, Arizona, and California. ECF 33-5 ¶ 3. Since 2016, Dr. Gerhauser has been the named author of a paid newsletter entitled National Health Response ("NHR"), which was originally published by Defendant Health Sense Media, LLC. Id. ¶ 10. Although some of the material is written by other employees, Dr. Gerhauser retains final editorial control over all content, and the informational publications bear his name as author. ECF 33-3 ¶ 7; ECF 33-5 ¶ 10.

In August, 2018, Defendant NewMarket Health Publishing, LLC ("NewMarket Publishing") took over as publisher of the NHR newsletter written by Dr. Gerhauser. ECF 33-3 ¶ 5. At that time, The Doctor's Guide was already "in the works", to be sold as an eleven-module protocol for treatment of Type 2 Diabetes without pharmaceuticals. Id. ¶ 6. Advertising for The Doctor's Guide included emails, internet banner advertisements, and advertisements in various newsletters distributed by Agora and other M&C companies. See, e.g., ECF 2-8 at 10; ECF 2-11, ECF 2-12. The emails, banner advertisements, and newsletter advertisements urged consumers to enroll to watch a "live" video, or to review the transcript of that video. See id. The video (and its transcript) depicted Dr. Gerhauser promoting The Doctor's Guide. ECF 2-19, 2-26. For example, the Health Defendants made the following representations in their email/newsletter advertisements or in the video/transcript:

• "Because after 37 years in practice, I recently discovered a simple, at-home treatment for Type 2 diabetes

. And no, it has nothing to do with diet or exercise. It doesn't involve a single drug either. Yet this new treatment is scientifically proven to reverse every symptom of your diabetes in 28 days. " ECF 2-5 at 2–3.

• "World famous doctor and diabetes expert, Dr. Richard Gerhauser, just made a shocking announcement. He said ‘Type II Diabetes is not caused by what you eat.’ " ECF 2-7 at 2.

• "Shocking study shows 100% cure rate." ECF 2-26 at 2.

• "It has nothing to do with changing your diet or exercising more." Id.

• "Can this new treatment really reverse Type II Diabetes in 28 days? Without diet, exercise, or a single drug? Sure, it sounds impossible ... But according to a new study from the University of Kansas, it's true ..." ECF 2-9.

• "How to Reverse Diabetes Without Dieting." ECF 2-8 at 10.

In The Doctor's Guide , which consists of eleven modules, Module #11 is entitled "How to ‘Eat Away’ Your Diabetes." ECF 2-25 at 73–83. It contains dietary recommendations, including that protocol followers "[e]at a seasonal, low-carb, organic diet with plenty of seafood," and engage in intermittent fasting. Id. at 75. The last four pages of Module #11 contain a seven-day meal plan. Id. at 80-83.

Prospective customers who responded to the advertisements had to watch the entire video, or scroll through the entire transcript, before they could purchase The Doctor's Guide. ECF 33-3 ¶ 8. On December 11, 2018, when The Doctor's Guide video and transcript went live, its purchase price was $150.00. Id. ¶ 9. After that date, the price was $250.00. Id. The Doctor's Guide came with a 100% unconditional money back guarantee for dissatisfied customers. Id. The Doctor's Guide is no longer promoted or offered for sale, although the customers who purchased it retain access to their copies. Id. ¶ 10.

B. Congress' Secret $1.17 Trillion Giveaway ("Congress' Secret ")

In 2017, Evaldo Albuquerque, a copywriter charged with developing marketing concepts and strategies for Agora's publications, developed the idea of using "Congressional Checks" as a metaphor for certain dividend income. ECF 33-1 ¶¶ 3, 5, 6. Albuquerque reached out to Defendant Zachary Scheidt, the editor of Agora's subscription financial newsletter, Lifetime Income Report ("LIR"), to suggest that Scheidt write a book about the anticipated tax-advantaged treatment of certain pass-through dividend income that would result from the 2017 Tax Cuts and Jobs Act ("TCJA") passed by the Republican Congress in 2017. Id. ¶¶ 6, 7, 9. At least one news article had suggested that the real estate tax breaks in the TCJA would personally benefit some Republican lawmakers. See ECF 33-2. Scheidt approved Albuquerque's proposed book, and authorized the promotion of the book using the metaphor "Congressional Checks." ECF 33-1 ¶ 10. The book, entitled Congress' Secret $1.17 Trillion Giveaway, "identifies 13 companies with high yield potential." ECF 33-24 ¶ 17. Congress' Secret was published on approximately March 26, 2018. Id.

Advertisements for LIR and the book occurred by email, online newsletters, internet banner ads, and the Financial Defendants' websites.¹ See, e.g., ECF 2-70, 2-51, 2-65, 2-68. Advertisements included the following representations:

• "In case you haven't heard yet, a small group of in-the-know Americans are now collecting ‘Congressional Checks’ of up to $6,235 each. In fact, there is $ 1.17 Trillion at stake thanks to section 199A of Trump's new tax law. And if you follow the instructions on the next page, you could add your name to the list, too. But if you do not act by the October 18th deadline, you will miss out on the next check, and ... your money will be sent to somebody else ... To prevent your check from being sent to someone else, you must get on the list for the next ‘Congressional Check’ by Thursday, October 18." ECF 2-68.

• "With the information inside this book, you'll have the chance to collect up to 40 Congressional Checks every year ... Checks that go anywhere from $939 to as high as $6,235 or more." ECF 2-51.

• "This Free Book is Packed with Details on How To Legally Collect $1,000s From US Government Every Month. Just 945 Copies Exist! Claim Yours Now." ECF 2-70 at 3.

• "[T]he law dictates that this pile of cash MUST be distributed! That's not a question of if ... It's the law! These cash distributions are contractually required by the U.S. government ... So if you don't collect someone else will." ECF 2-126 at 14-15.

• "You just need to add your name to the list of check payees before October 18^th." Id. at 15.

• "As a taxpayer, nobody deserves this money more than you. Remember, this is wide open to the public. There's no income requirement. No age limit." Id. at 22.

• "The potential massive payout opportunities inside are actually fully legal – I'd say add your name to the list of recipients for them starting within 5 minutes of getting this ... Again, you could potentially collect a 6k check for doing nothing except applying what was perfectly within your rights anyways!" ECF 2-73 at 2–3.

• "The average Social Security monthly stipend of about $1,400 simply isn't enough to pay for housing, groceries, and medical bills. Fortunately, there's hope ... If you're looking for retirement income, I strongly encourage you to check out what's inside this book." ECF 2-74.

Defendants' advertisements include images of consumers holding checks with their names and the amounts received, and the words "Congressional Check" or "Republican Check" emblazoned across the top in large writing, with the seal of the United States Congress. See, e.g., ECF2-35, 2-37. Those photos are actually stock photos (available online), which have been...