Federal Trade Commission v. Lifewatch Inc.
176 F. Supp. 3d 757
N.D. Ill.2016Background
- Lifewatch, a medical-alert device company led by CEO Evan Sirlin, sells through third‑party telemarketers; plaintiffs (FTC and Florida AG) sued for violations of the FTC Act, the TSR, and Florida’s FDUTPA and sought a preliminary injunction.
- Evidence showed many telemarketing scripts and recorded calls containing material misrepresentations (e.g., that devices were "free," endorsed by national organizations, paid for or referred by friends/family/doctors, or that billing would not start until activation).
- FTC undercover calls and thousands of consumer and BBB complaints linked telemarketing campaigns to Lifewatch fulfillment and Lifewatch billing descriptors.
- Documents and emails indicate Lifewatch provided materials and exercised oversight (script attachments to licensing filings, staff emails revising scripts, CRM transfers to Lifewatch verification), while Lifewatch also claimed telemarketers were independent and that new quality‑control measures addressed past problems.
- The court found substantial evidence that (1) telemarketers acted as Lifewatch agents or at least under its control, (2) Lifewatch (and Sirlin individually) knew or should have known of misrepresentations, and (3) Lifewatch had a history of deceptive and abusive telemarketing continuing into 2015.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lifewatch is liable for telemarketers' misconduct (agency) | Telemarketers acted on Lifewatch's behalf and under its control; Lifewatch provided scripts, monitored calls, and received CRM transfers. | Telemarketers were independent contractors who sold generic accounts on a non‑exclusive basis; Lifewatch lacked control. | Court: Telemarketers functioned as Lifewatch agents (or at least acted on its behalf under its control); Lifewatch liable for their conduct. |
| Whether Lifewatch violated FTC Act and FDUTPA by deceptive misrepresentations | Misrepresentations were material and likely to mislead reasonable consumers; Lifewatch is liable as principal and Sirlin individually as controller/participant. | Lifewatch contests the linkage and asserts recent compliance efforts. | Court: Plaintiffs likely to succeed; misrepresentations were material and Lifewatch (and Sirlin) are likely liable. |
| Whether Lifewatch violated the TSR (deceptive/abusive acts, seller/substantial assistance) | Telemarketers made deceptive statements and engaged in abusive practices (DNC calls, robocalls, spoofing); Lifewatch is liable as seller or for providing substantial assistance. | Lifewatch argues narrow reading of "seller" and that it did not cause abusive acts; claims safe‑harbor/compliance. | Court: TSR liability applies; "cause" and substantial‑assistance provisions cover Lifewatch; safe‑harbor not shown. |
| Whether a preliminary injunction is warranted (equities & risk of recurrence) | Injunction necessary to prevent continued deception and harm to vulnerable consumers; likelihood of future violations exists. | Injunction would harm Lifewatch (possibly put it out of business); recent quality control reduces recurrence risk. | Court: Equities favor injunction; public interest and history of ongoing misconduct make recurrence likely. |
Key Cases Cited
- Univ. of Tex. v. Camenisch, 451 U.S. 390 (1981) (preliminary injunction preserves status quo and permits relaxed evidentiary standards).
- FTC v. World Travel Vacation Brokers, 861 F.2d 1020 (7th Cir. 1988) (standard for FTC preliminary injunction: likelihood of success and balancing public equities).
- FTC v. Bay Area Bus. Council, 423 F.3d 627 (7th Cir. 2005) (corporate liability where representations are materially likely to mislead reasonable consumers).
- FTC v. World Media Brokers, 415 F.3d 758 (7th Cir. 2005) (principal liable for agent misrepresentations).
- United States v. Dish Network, LLC, 667 F. Supp. 2d 952 (C.D. Ill. 2009) (TSR "cause" provision imposes liability without an intent requirement).
- Stefanchik v. FTC, 559 F.3d 924 (9th Cir. 2009) (principal liability for agent misrepresentations; standards for individual liability).