Federal Trade Commission v. Partners In Health Care Association, Inc. et al

MOTION TO APPROVE THE NOTICE TO BE SENT TO BENEFICIARIES OF PLANS

S.D. Fla.September 15, 2014

1 LAW OFFICES OF MELAND RUSSIN & BUDWICK, P.A. 3200 SOUTHEAST FINANCIAL CENTER, 200 SOUTH BISCAYNE BOULEVARD, MIAMI, FLORIDA 33131 • TELEPHONE (305) 358-6363 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO.: 1:14-cv-23109-SCOLA FEDERAL TRADE COMMISSION, Plaintiff, v. PARTNERS IN HEALTH CARE ASSOCIATION, INC., et al., Defendants. / RECEIVER’S EXPEDITED MOTION FOR THE ENTRY OF AN ORDER APPROVING THE NOTICE TO BE SENT TO BENEFICIARIES OF PLANS SOLD OR ADMINISTERED BY PARTNERS IN HEALTH CARE ASSOCIATION INC. STATEMENT OF EXIGENCY The Receiver requests this Court enter an order approving the notice to be sent to beneficiaries of plans administered by the defendant. The Court suggested that notice to beneficiaries may be necessary. The Receiver seeks the Court’s approval of the notice to beneficiaries. Although the plan benefits are suspect, because the beneficiaries may need to pursue other sources of medical benefits, the approval and delivery of the notices is time-sensitive. Peter D. Russin, in his capacity as receiver (the “Receiver”) of Partners in Health Care Association, Inc.; United Solutions Group Inc.; and their subsidiaries, affiliates, successors and assigns (collectively the “Receivership Entities”), appointed pursuant to this Court’s Temporary Restraining Order dated August 25, 2014 [ECF No. 9] (the “TRO”); the Stipulated Preliminary Injunction Against United Solutions Group Inc., Constanza Gomez Vargas, and Walter S. Vargas [ECF No. 31] (the “USGI Preliminary Injunction”); and the Corrected Preliminary Injunction Against Partners In Health Care Association, Inc., and Gary L. Kieper [ECF No. 36] (the “PIHC Case 1:14-cv-23109-RNS Document 38 Entered on FLSD Docket 09/15/2014 Page 1 of 5 2 LAW OFFICES OF MELAND RUSSIN & BUDWICK, P.A. 3200 SOUTHEAST FINANCIAL CENTER, 200 SOUTH BISCAYNE BOULEVARD, MIAMI, FLORIDA 33131 • TELEPHONE (305) 358-6363 Preliminary Injunction”) 1 files this Motion, on an expedited basis, for the entry of an Order approving the suggested notice to be sent to beneficiaries of plans sold or administered by Partners In Health Care Association Inc (the “Motion”) and states: BACKGROUND 1. The United States Federal Trade Commission (the “FTC”) initiated this marketing fraud enforcement action, seeking to enjoin the sale of medical discount plans, which the FTC asserts were marketed falsely, at least in part, as health insurance. At the request of the Plaintiff and based upon a preliminary showing of marketing fraud, the Court issued the TRO. 2. At the evidentiary hearing held on September 4, 2014 on this Court’s Order to Show Cause why this Court should not enter a preliminary injunction against Defendants (the “Hearing”), the Court ruled that a preliminary injunction against the Receivership Entities should be entered, and further directed that the operations of United Solutions Group, Inc., and Partners In Health Association, Inc. (and its affiliates) shall cease. Additionally, the Court expressed the potential need for the customers of the Receivership Entities to receive notice of the cessation of operations, such that if they relied on the medical benefits provided by the Receivership Entities, the customers would be on notice that they need to seek an alternative. RELIEF REQUESTED 3. By this motion, the Receiver seeks entry of an Order approving the notices, which are attached as Exhibit A, to be sent to beneficiaries of plans sold or administered by Partners In Health Care Association Inc. 1 Collectively the USGI Preliminary Injunction and PIHC Preliminary Injunction are referred to as the “Preliminary Injunctions.” Case 1:14-cv-23109-RNS Document 38 Entered on FLSD Docket 09/15/2014 Page 2 of 5 3 LAW OFFICES OF MELAND RUSSIN & BUDWICK, P.A. 3200 SOUTHEAST FINANCIAL CENTER, 200 SOUTH BISCAYNE BOULEVARD, MIAMI, FLORIDA 33131 • TELEPHONE (305) 358-6363 MEMORANDUM OF LAW 4. Federal district courts have broad powers and wide discretion to determine relief in a receivership. See SEC v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992); SEC v. First City Fin. Corp., 890 F.2d 1215, 1230 (D. D.C. 1989). Courts should take actions “to ensure that all available assets . . . may be properly distributed to creditors.” See SEC v. Elmas Trading Corp., 620 F.Supp. 231, 233 (D. Nev. 1985), aff’d, 805 F.2d 1039 (9th Cir. 1986). Courts regularly approve notices to different classes of creditors. S.E.C. v. Hardy, 803 F.2d 1034, 1036 (9th Cir. 1986); S.E.C. v. Malek, 397 F. App'x 711 (2d Cir. 2010). 5. Here, the Receiver seeks to inform a specific class of interested parties and potential creditors of the Receivership on an expedited basis such that they may take actions to ensure they are adequately protected in the absence of any health benefits terminated pursuant to the Preliminary Injunctions. The Receiver has prepared a list of approximately 1,700 current plan beneficiaries to which to send the notice. This list is provided by the enrollment program used by PIHC and indicates the last known active customers. The notice would be sent to the listed customers by mail as email addresses are generally unavailable. The Receiver is also attempting to post the notices on the web sites used by PIHC and its affiliates. It would be cost prohibitive to leave a voice mail message or to call the customers and frankly such calls may create confusion. 6. The Receiver has attempted to obtain (but has not yet obtained) a list of all former beneficiaries. The Receiver, however, has determined that notice should be sent to current beneficiaries, rather than former beneficiaries, as (i) there appear to be more than 15,000 former beneficiaries; (ii) the cost of providing notice to such individuals is burdensome; and (iii) unlike Case 1:14-cv-23109-RNS Document 38 Entered on FLSD Docket 09/15/2014 Page 3 of 5 4 LAW OFFICES OF MELAND RUSSIN & BUDWICK, P.A. 3200 SOUTHEAST FINANCIAL CENTER, 200 SOUTH BISCAYNE BOULEVARD, MIAMI, FLORIDA 33131 • TELEPHONE (305) 358-6363 former beneficiaries, present beneficiaries may be damaged by relying on benefits which they believe may exist. 7. “A district court's power to supervise an equity receivership once the receivership is underway is extremely broad.” F.T.C. v. Crittenden, 823 F. Supp. 699, 702 (C.D. Cal. 1993) aff'd, 19 F.3d 26 (9th Cir. 1994). “The court has broad powers to determine the action to be taken in the administration of the receivership.” Id. The Receiver submits that approval of this notice is well within the Court’s power and appropriate under the circumstances. WHEREFORE, the Receiver requests the Court approve the notices attached as Exhibit A, and grant such other and further relief as is just and appropriate. Respectfully submitted, s/ Lawrence E. Pecan Lawrence E. Pecan, Esquire Florida Bar No. 99086 lpecan@melandrussin.com MELAND RUSSIN & BUDWICK, P.A. 200 South Biscayne Blvd., Ste. 3200 Miami, Florida 33131 Telephone: (305) 358-6363 Telecopy: (305) 358-1221 Attorneys for Peter D. Russin, Receiver Case 1:14-cv-23109-RNS Document 38 Entered on FLSD Docket 09/15/2014 Page 4 of 5 5 LAW OFFICES OF MELAND RUSSIN & BUDWICK, P.A. 3200 SOUTHEAST FINANCIAL CENTER, 200 SOUTH BISCAYNE BOULEVARD, MIAMI, FLORIDA 33131 • TELEPHONE (305) 358-6363 CERTIFICATE OF SERVICE I hereby certify that the foregoing is being delivered to the following parties via transmission of Notices of Electronic Filing this 15 th day of September, 2014. s/ Lawrence E. Pecan Lawrence E. Pecan, Esquire Gary L. Ivens Federal Trade Commission 600 Pennsylvania Avenue NW Washington, DC 20580 202-326-2230 Fax: 326-3395 Email: givens@ftc.gov Christopher E. Brown U.S. Federal Trade Commission 600 Pennsylvania Ave NW Mail Stop CC-8509 Washington, DC 20580 202-326-2825 Email: cbrown3@ftc.gov Keith Thomas Grumer Grumer & Macaluso PA 1 East Broward Boulevard Suite 1501 Fort Lauderdale, FL 33301 954-713-2700 Fax: 954-713-2713 Email: kgrumer@grumerlaw.com Bruce S. Rogow Bruce S. Rogow PA 500 East Broward Boulevard Suite 1930 Fort Lauderdale, FL 33394 954-767-8909 Fax: 954-764-1530 Email: brogow@rogowlaw.com Tara A Campion Bruce S. Rogow, P.A. 500 East Broward Blvd. Suite 1930 Fort Lauderdale, FL 33394 (954) 767-8909 Fax: (954) 764-1530 Email: tcampion@rogowlaw.com Case 1:14-cv-23109-RNS Document 38 Entered on FLSD Docket 09/15/2014 Page 5 of 5