On Friday, the Eleventh Circuit Court of Appeals issued an opinion in the case of Federal Trade Commission v. Dorfman, affirming the district court decision which denied the defendant’s motion to dissolve a preliminary injunction freezing his assets and imposing a receivership against him.
According to the opinion, the defendant, Steven Dorfman, is the owner of six companies that operated a “bait and switch” scheme selling underinclusive health insurance plans to consumers for over four years starting 2013. The court states that through the scheme the unwitting consumers believed that they were purchasing comprehensive coverage, but in reality the plans were “practically worthless” in the event of catastrophic medical bills. Additionally, the court states that the companies wrongly assured the customers that the plans allowed the consumers to avoid the Affordable Care Act’s tax penalty for non-compliant plans.
In October 2018, the Federal trade Commission (FTC) filed a complaint against Dorfman and the six companies he owned and controlled alleging unfair or deceptive business practices and violations of the agency’s telemarketing sales rule. The opinion states that following a temporary restraining order, the district court issued a preliminary injunction freezing the companies’ assets and imposing a receivership.
Afterwards, Dorfman lost two appeals to the Eleventh Circuit, first challenging the order granting the preliminary injunction and then appealing a subsequent motion to dissolve the injunction. Following the appeals, the FTC filed a second amended complaint to add a basis for relief under § 19 of the FTC Act in addition to § 13(b) which was the basis it relied on to issue the injunction.
The court states that three years into the litigation, in 2021, the Supreme Court issued an opinion, AMG Cap. Mgmt., LLC V. FTC, that narrowed the relief available under § 13(b) by no longer allowing monetary awards. The opinion purports that Dorfman immediately filed an emergency motion again to dissolve the injunction arguing the Supreme Court’s opinion, limiting relief under § 13(b), made the preliminary injunction freezing his assets and imposing a receivership unlawful.
The district court denied the motion, holding it had the authority to issue the preliminary injunction under § 19 of the FTC Act, which the FTC cited in its second amended complaint. Dorfman timely appealed, leading to the present opinion.
The three judge panel for the Eleventh Circuit stated Dorfman was right that the Supreme Court’s decision limits the Commission’s §13(b) authority, but he misapplied to his case. Just as the district court did, the Eleventh Circuit held that the updated complaint invoked § 19 of the FTC Act which provides broad remedies. Further, the court held that § 19 permits a preliminary injunction freezing assets and imposing a receivership as potential remedies. Accordingly, the court affirmed the district court’s decision.