Federal Trade Commission v. IAB Marketing Associates, LP, 2014 U.S. App. LEXIS 5679

Background

The FTC sued IAB Marketing Associates and individual Wood defendants alleging deceptive sales of trade-association memberships marketed as if they were major medical insurance; many sales were via third‑party telemarketers (HSP and others).
FTC undercover calls and consumer complaints indicated sales representatives misrepresented the nature of the products; cancellations exceeded new memberships from 2009–2012.
The district court granted a temporary restraining order freezing assets and appointing a receiver; after a one‑day hearing it entered a preliminary injunction barring further sales, maintained an asset freeze, and appointed the receiver; IAB appealed.
The receiver’s accounting estimated IAB and affiliates earned over $70 million from 2009–2012, largely from membership sales; assets frozen totaled about $2.3 million.
IAB raised three main challenges on appeal: (1)FTC failed to show entitlement to injunctive relief; (2)the asset freeze was improper without a prior calculation of ill‑gotten gains; and (3)the McCarran‑Ferguson Act preempts the FTC’s claims as involving the business of insurance.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Entitlement to preliminary injunction	FTC: Likely to succeed on merits; public interest supports injunctive relief for deceptive telemarketing	IAB: Misconduct was by rogue third‑party telemarketers; IAB lacked knowledge/control; post‑sale disclosures cured any misimpressions	Court: FTC met burden — evidence showed Woods knew of misrepresentations and had authority/control; post‑sale disclosures do not cure pre‑sale misrepresentations; injunction affirmed
Individual liability for third‑party telemarketers	FTC: Individuals who participated in or controlled deceptive practices are liable	IAB: Cannot be held liable absent direct participation, knowledge, ability to control independent contractors	Court: Applied precedent holding individuals liable if involved in policy or had knowledge/control; evidence satisfied that standard
Asset freeze without precise restitution calculation	FTC: Freeze is an equitable power; only a reasonable approximation of ill‑gotten gains is required	IAB: Court abused discretion by freezing assets before calculating ill‑gotten gains and deducting consumer value of services	Court: Asset freeze appropriate; receiver provided revenue estimates; frozen assets were a small fraction of revenues; exactitude not required
McCarran‑Ferguson reverse preemption (business of insurance)	FTC: FTC Act applies because IAB’s activities are not the business of insurance	IAB: Activities regulated by state insurance law; McCarran‑Ferguson preempts FTC action	Court: Applied Pireno three‑part test — IAB’s plans did not transfer/spread risk, were not an insurer/insured relationship, and were not limited to the insurance industry; McCarran‑Ferguson does not preempt FTC claims

Key Cases Cited

CFTC v. Wilshire Inv. Mgmt. Corp., 531 F.3d 1339 (11th Cir.) (standard of review for preliminary injunction)
FTC v. Univ. Health, Inc., 938 F.2d 1206 (11th Cir.) (FTC need not show irreparable harm for injunctive relief; elements for relief)
FTC v. Amy Travel Serv., Inc., 875 F.2d 564 (7th Cir.) (individual liability for corporate deceptive practices where participation or control and knowledge exist)
FTC v. Gem Merch. Corp., 87 F.3d 466 (11th Cir.) (individual liability and scope of equitable relief including asset freezes)
SEC v. ETS Payphones, Inc., 408 F.3d 727 (11th Cir.) (only a reasonable approximation of ill‑gotten gains required for asset freezes)
Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (Sup. Ct.) (three‑part test defining the business of insurance)
Humana Inc. v. Forsyth, 525 U.S. 299 (Sup. Ct.) (McCarran‑Ferguson framework and when federal statutes apply to insurance)
McGregor v. Chierico, 206 F.3d 1378 (11th Cir.) (fraud in selling, not product value, determines entitlement to refunds)