Opinion
Case Number: 16–21843–CIV–MORENO
2016-12-29
FEDERAL TRADE COMMISSION and The State of Florida, Plaintiffs, v. STUDENT AID CENTER, INC., Ramiro Fernandez–Moris, and Damien Alvarez, Defendants.
Aaron Haberman, Anne LeJeune, Reid Tepfer, James Robert Golder, U.S. Federal Trade Commission, Dallas, TX, Ryann H. Flack, Diane Oates, Office of the Attorney General, Miami, FL, for Plaintiffs. Ramiro Fernandez–Moris, Miami, FL, pro se. Damien Alvarez, Davie, FL, pro se. Howard D. DuBosar, Robert Cory Sheres, DuBosar Sheres, P.A., Boca Raton, FL, Gustavo Daniel Lage, Sanchez–Medina, Gonzalez, Quesada, Lage, Crespo, et al., Coral Gables, FL, for Defendants.
Aaron Haberman, Anne LeJeune, Reid Tepfer, James Robert Golder, U.S. Federal Trade Commission, Dallas, TX, Ryann H. Flack, Diane Oates, Office of the Attorney General, Miami, FL, for Plaintiffs.
Ramiro Fernandez–Moris, Miami, FL, pro se.
Damien Alvarez, Davie, FL, pro se.
Howard D. DuBosar, Robert Cory Sheres, DuBosar Sheres, P.A., Boca Raton, FL, Gustavo Daniel Lage, Sanchez–Medina, Gonzalez, Quesada, Lage, Crespo, et al., Coral Gables, FL, for Defendants.
ORDER ADOPTING MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION AND ORDER OVERRULING OBJECTIONS TO REPORT AND RECOMMENDATION
FEDERICO A. MORENO, UNITED STATES DISTRICT JUDGE
THE MATTER was referred to the Honorable John J. Sullivan, United States Magistrate Judge for a Report and Recommendation on Defendant Damien Alvarez's Motion to Dismiss Complaint, filed on July 15, 2016 , and on Defendant Ramiro Fernandez–Moris' Motion to Dismiss Complaint, filed on August 19, 2016 . The Magistrate Judge filed a Report and Recommendation (D.E. 33) filed on December 14, 2016 . The Court has reviewed the entire file and record. The Court has made a de novo review of the issues that the objections to the Magistrate Judge's Report and Recommendation present, and being otherwise fully advised in the premises, it is
ADJUDGED that United States Magistrate Judge John J. O'Sullivan's Report and Recommendation is AFFIRMED and ADOPTED . Accordingly, it is
ADJUDGED that Defendant Damien Alvarez's Motion to Dismiss Complaint is DENIED. It is further ADJUDGED that Defendant Ramiro Fernandez–Moris' Motion to Dismiss Complaint is DENIED. It is further,
ADJUDGED that no certificate of appealability issue.
DONE AND ORDERED in Chambers at Miami, Florida, this 29th of December 2016.
REPORT AND RECOMMENDATION
JOHN J. O'SULLIVAN, UNITED STATES MAGISTRATE JUDGE
THIS CAUSE comes before the Court on the Defendant Damien Alvarez's Motion to Dismiss Complaint and Incorporated Memorandum of Law (DE# 17, 7/15/16) and Defendant, Ramiro Fernandez–Moris' Motion to Dismiss Complaint [DE# 1] (DE# 31, 8/19/16). This matter was referred to the undersigned by the Honorable Federico A. Moreno, United States District Court Judge for the Southern District of Florida pursuant to 28 U.S.C. § 636(b). (DE# 29, 8/17/16). Having reviewed the motions, responses, and the Defendant Alvarez's reply, and the applicable law, the undersigned respectfully RECOMMENDS that the Defendant Damien Alvarez's Motion to Dismiss Complaint and Incorporated Memorandum of Law (DE# 17, 7/15/16) and Defendant, Ramiro Fernandez–Moris' Motion to Dismiss Complaint [DE# 1] (DE# 31, 8/19/16) be DENIED.
INTRODUCTION
The Federal Trade Commission ("FTC") and the State of Florida (collectively "plaintiffs") filed a Complaint for Permanent Injunction and Other Equitable Relief against the Student Aid Center, Inc., and Damien Alvarez and Ramiro Fernandez–Moris individually and as officers or directors of the Student Aid Center, Inc. The FTC seeks preliminary and permanent injunctive relief as well as other equitable relief against the defendants for violations of Section 13(b) of the FTC Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), and the Telemarketing Sales Rule ("TSR"). The State of Florida seeks similar relief pursuant to the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), the Telemarketing Act, and the TSR. Both individual defendants are presidents of the corporate defendant, who are alleged to have formulated, directed, controlled, had the authority to control, or participated in the acts and practices of the corporate defendant.
The plaintiffs allege that the defendants operated an unlawful debt relief enterprise that preyed on consumers' anxiety about student loan debt by falsely promising to reduce or eliminate that debt. Additionally, the defendants marketed their services through inbound telemarketing calls from consumers responding to the defendants' Internet, social media, radio advertising, and through outbound telemarketing calls to consumers who responded to the defendants' websites. The defendants improperly charged advance fees that exceeded the statutory limits.
Damien Alvarez ("Alvarez") seeks dismissal of the Complaint on the following grounds: 1) the plaintiffs have not pled a claim upon which relief could be granted; 2) the plaintiffs have inadequately pled their claims under the heightened pleading requirements of Rule 9(b); 3) the plaintiffs insufficiently alleged individual participation under Florida state law; and 4) the plaintiffs' claims are moot because the corporate defendant ceased doing business.
Ramiro Fernandez–Moris ("Fernandez–Moris") seeks dismissal of the Complaint on the following grounds: 1) the plaintiffs failed to satisfy the pleading requirements of Rule 8(a); 2) the plaintiffs failed to satisfy the heightened pleading requirements of Rule 9(b); 3) the plaintiff's complaint is a "shotgun pleading" that fails to satisfy the pleading requirements of Rule 10(b) and 10(c); 4) the plaintiffs' claims are not deceptive and/or are contradicted by the documents the plaintiffs referenced in their Complaint; 5) the plaintiffs failed to allege facts necessary to support each element of the plaintiffs' claims.
In their responses, the plaintiffs oppose the defendants' motions to dismiss on the following grounds: 1) the plaintiffs' complaint satisfied the exceedingly low threshold to survive a motion to dismiss under the relevant notice pleading requirements of Rule 8(a); the heightened pleading requirements of Rule 9(b) do not apply to the plaintiffs' complaint in equity; 3) even if the heightened pleading requirements of Rule 9(b) applied, the plaintiffs met this standard; 4) the plaintiffs sufficiently pled their claims to satisfy either pleading standard; 5) the plaintiffs have adequately alleged individual participation under Florida state law; 6) the plaintiffs' claims are not moot as Alvarez has not satisfied the substantial burden of showing that it is absolutely clear that he will not revert to the old conduct; 7) Fernandez–Moris' Rule 10 argument is meritless as the Rule only provides permissive guidance on the form pleadings may take; 8) Fernandez–Moris' argument that the plaintiffs' claims are contradicted by the documents referenced in the Complaint is not valid on a motion to dismiss and relies on inapplicable law; and 8) the plaintiffs adequately alleged facts necessary to support each element of the claims asserted.
The motions to dismiss are ripe for disposition. Because the issues raised in the defendants' motions overlap, the undersigned will address the motions together.
In Defendant, Ramiro Fernandez–Moris' Motion to Dismiss [DE 1] (DE# 31, 8/19/16), the defendant incorporates by reference Defendant, Damien Alvarez's Motion to Dismiss Complaint and Incorporated Memorandum of Law [DE 17] and Defendant Damien Alvarez's Reply in Support of Defendant's Motion to Dismiss [DE 24]. Fernandez–Moris' Motion at 3 (DE# 31, 8/19/16).
ANALYSIS
I. Standard of Review
Rule 8(a) of the Federal Rules of Civil Procedure requires a pleading to set forth " ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ " Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ); see Fed. R. Civ. P. 8(a). A plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555, 127 S.Ct. 1955 (citation omitted). A plaintiff must supply "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S.Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ); Bishop v. Ross Earle & Bonan, P.A., 817 F.3d 1268, 1270 (11th Cir. 2016).
The Federal Rules apply a heightened pleading standard to complaints alleging fraud or mistake. Fed. R. Civ. P. 9(b). The Supreme Court has specifically limited the application of Rule 9(b) to claims of fraud or mistake. Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993). Rule 9(b) requires that a plaintiff "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Rule 9(b) requires the complaint to alleged "the who, what, when, where, and how of the allegedly false statements." Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008).
In deciding a motion to dismiss, the Court's analysis is limited to the four corners of the plaintiff's complaint and the attached exhibits. Grossman v. Nationsbank, 225 F.3d 1228, 1231 (11th Cir. 2000) ; Milburn v. U.S., 734 F.2d 762, 765 (11th Cir. 1984) ("Consideration of matters beyond the complaint is improper in the context of a motion to dismiss ....").
On a motion to dismiss, the Court must also accept the plaintiff's well pled facts as true and construe the complaint in the light most favorable to the plaintiff. Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ; Caravello v. American Airlines, Inc., 315 F.Supp.2d 1346, 1348 (S.D. Fla. 2004) (citing United States v. Pemco Aeroplex, Inc., 195 F.3d 1234, 1236 (11th Cir. 1999) (en banc)); Beck v. Deloitte & Touche et al., 144 F.3d 732, 735 (11th Cir. 1998). The Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 2944, 92 L.Ed.2d 209 (1986) (citations omitted)). A motion to dismiss a complaint should not be granted if the factual allegations are "enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. A complaint will survive a motion to dismiss "even if it appears that a recovery is very remote and unlikely." Id. at 556, 127 S.Ct. 1955.
II. The Plaintiffs' Complaint Satisfies the Applicable Pleading Requirements
A. Rule 8 of the Federal Rules of Civil Procedure Governs
Rule 8 requires that the complaint contain "a short and plain statement of the claim showing the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). When a complaint, such as the present complaint, contains "factual content that allows the court to draw the reasonable inference that the defendant[s are] liable for the misconduct alleged," dismissal is not appropriate. Fed. R. Civ. P. 12(b)(6). The heightened pleading standard of pleading with particularity under Rule 9(b) applies to claims of fraud or mistake, neither of which are pled in this action. See, Fed. R. Civ. P. 9(b) ; see also, Leatherman, 507 U.S. at 168, 113 S.Ct. 1160.
The present action alleges claims based on violations of federal and Florida statutes. The complaint describes with particularity the many false or misleading representations made by the defendants to consumers through telemarketing practices, such as telling consumers that they were approved for student loan forgiveness. The plaintiff also described with specificity the illegal advanced fees requested and received by the defendants. The complaint contains screen shots of the digital misrepresentations and many examples of misleading or deceptive statements made on the their website and online advertising. The complaint satisfies the exceedingly low notice pleading standard of Rule 8.
The heightened particularity requirement of Rule 9(b) does not apply because the complaint does not assert claims based on fraud or mistake. Instead, the claims are based on statutory violations under federal and state law namely, the FTC Act, the Telemarketing Sales Rule ("TSR"), and FDUTPA. These statutory claims are distinct from common law fraud.
Although a split of authority exists, federal courts in the Eleventh Circuit have held that Rule 9(b) does not apply to claims under Section 5 of the FTC. See, FTC v. Sterling Precious Metals, LLC, No 12-80597-CIV, 2013 WL 595713, at *3 (S.D. Fla. Feb. 15, 2013) In Sterling Precious Metals, the district court found the Tenth Circuit's reasoning persuasive, which explained that " ‘[u]nlike the elements of common law fraud, the FTC need not prove scienter, reliance, or injury to establish a § 5 violation.’ " Id. (quoting FTC v. Freecom Communications, Inc., 401 F.3d 1192, 1203 n.7 (10th Cir. 2005) ).
In Sterling Precious Metals, the district court cited the following cases which reflect the split of authority. Cases that recognize that Rule 9(b) did not govern a § 5 claim include: FTC v. Consumer Health Benefits Ass'n, No. 10 Civ. 3551 (ILG)(RLM), 2012 WL 1890242, at *6–7 (E.D.N.Y. May 23, 2012) (stating in dicta that a § 5 claim is not a fraud claim subject to Rule 9(b)'s particularity requirements) and FTC v. Freecom Communications, Inc., 401 F.3d 1192, 1203 n.7 (10th Cir. 2005) (same). In contrast, FTC v. Lights of America, Inc., 760 F.Supp.2d 848, 854–55 (C.D. Cal. 2010) (finding "that Rule 9(b) applies to claims for violation of the FTC Act" because FTC claims are analogous to claims for fraud and negligent misrepresentation).
The defendant Alvarez's reliance on the Eleventh Circuit's decision in Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194 (11th Cir. 2001) is misplaced. The plaintiffs in Ziemba were private investors who sued accountants and attorneys for claims of fraud based on Section 10(b) and Rule 10b–5. Rule 9(b) applied because the claims were based on fraud. The Ziemba court found that the plaintiffs failed to allege any misrepresentations that were made by the accountants or attorneys. Thus, Ziemba is factually and legally distinguishable. The defendant Alvarez also relies on FTC v. Lights of America, Inc., 760 F.Supp.2d 848 (C.D. Cal. 2010), which was implicitly rejected by the district court in Sterling Precious Metals and is neither persuasive nor binding on this Court. The undersigned finds that Rule 9(b) does not apply to the plaintiffs' FTC claims in this action.
Additionally, Rule 9(b) does not apply to a TSR claim, since the TSR is violated when a seller or telemarketer, directly or by implication, misrepresents or fails to disclose certain information clearly and conspicuously and before a consumer agrees to pay. Additionally, the TSR is violated when a seller or marketer accepts fees in advance for student loan debt relief services before proving the promised services. Intent to deceive and reliance are not elements of the cause of action. The particularity requirement of Rule 9(b) does not apply to TSR claims. See Golden v. Mobil Oil Corp., 882 F.2d 490, 494 (11th Cir. 1989).
Finally, courts in the Eleventh Circuit have held that Rule 9(b) does not apply to claims under Florida's Deceptive and Unfair Trade Practices Act ("FDUTPA"). See Hetrick v. Ideal Image Dev. Corp., 372 Fed.Appx. 985, 992 (11th Cir. 2010) (explaining that the proscription against unfair and deceptive acts and practices sweeps far more broadly than the doctrine of fraud or negligent misrepresentation and holding that the FDUTPA claim was not collaterally estopped by a jury verdict on the fraud and negligent misrepresentation claims). "FDUTPA was enacted to provide remedies for conduct outside the reach of traditional common law torts like fraud, ‘the plaintiff need not prove the elements of fraud to sustain an action under [FDUTPA].’ " State of Florida v. Tenet Healthcare Corp., 420 F.Supp.2d 1288, 1310 (S.D. Fla. 2005) (quoting Davis v. Powertel, Inc., 776 So.2d 971, 974 (Fla. 1st DCA 2000) ); Galstaldi v. Sunvest Communities USA, Inc., 637 F.Supp.2d 1045, 1056 (S.D. Fla. 2009) ; Toback v. GNC Holdings, Inc., 2013 WL 5206103, at * 2 (S.D. Fla. Sept. 13, 2013). The cases upon which the defendants rely are inapposite because they are factually and legally distinguishable because several of them actually included fraud claims. See Jovine v. Abbott Labs., Inc., 795 F.Supp.2d 1331 (S.D. Fla. 2011) (dismissing the complaint because it failed as a fraud claim); Blair v. Wachovia Mortgage Corp., No. 5:11-CV-566-OC-37TBS, 2012 WL 868878 (M.D. Fla. Mar. 14, 2012) (finding that the crux of the claim sounded in fraud). Unlike Jovine and Blair, the present action does not include a separate claim for fraud.
In Stires v. Carnival Corp., 243 F.Supp.2d 1313, 1322 (M.D. Fla. 2002), which is not binding on this Court, the district court held that the FDUTPA claim as well as the fraud claim must be plead with particularity under Rule 9(b). The Stires court explained that "[m]ost courts construing claims alleging violations of the Federal Deceptive Trade Practices Act or its state counterparts have required the heightened pleading standard requirements of Rule 9(b)." Id. (citing district court decisions from Texas and Minnesota as well as an intermediate Florida appellate court while contrasting district court decisions in Illinois). One of the cases that Stires cited, Steyr Daimler Puch of America v. A&A Bicycle Mart, Inc., 453 So.2d 1149 (Fla. 4th DCA 1984), did not expressly hold that Rule 9(b) applied to the allegations of a FUDTPA claim, which was eliminated on summary judgment. Instead, the A&A Bicycle Mart court found that the trial record lacked essential elements of common law fraud, that is, there was "insufficient evidence of either a knowing misrepresentation of specific material facts or justifiable reliance for this type of case." Id. at 1150. The undersigned is neither persuaded nor bound by Stires or A&A Bicycle Mart. The particularity requirements of Rule 9(b) do not apply to FDUTPA claims.
In the present case, the plaintiffs' complaint thoroughly detailed the who, what, when, where and how of the defendants' illegal student loan debt-relief scheme. The plaintiffs listed the contents of the defendants' representations, where they appeared, and where available, the dates the representations were made. The complaint alleges that: "Since at least April 2013 through September 2015, Defendants operated an unlawful debt relief enterprise that preyed on consumers' anxiety about student loan debts by falsely promising to reduce or eliminate that debt." Complaint ¶ 13 (DE# 1). When citing the defendants' particular web and Instagram advertisements, the plaintiffs included the date the plaintiffs captured the screenshots in question. Complaint ¶ 21–25 (DE# 1). Additionally, the plaintiffs identified the medium where each of the defendants' misrepresentations were made, for example, through websites and online advertisements, telemarketing, radio, text message, and Instagram. Complaint ¶ 13 (DE# 21–37). The plaintiffs also provided the detailed contents of the defendants' representations. See Complaint ¶¶ 22, 25–27 (DE# 1). The plaintiffs summarized which of the defendants' statements were at issue for the specific violations of federal and Florida law. All claims are asserted against all defendants.
Counts I through V of the Complaint contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). The plaintiffs satisfy Rule 8(a)'s requirement because their Complaint contains "a short and plain statement of the claim showing that [the plaintiffs] are entitled to relief." Fed. R. Civ. P. 8(a). The Complaint contains detailed factual allegations, including the defendants' false and misleading representations, and quotes and screenshots of the defendants' advertisements. Thus, the plaintiffs have stated claims under the FTC Act, the TSR, and FDUTPA.
The State of Florida properly pled Count VI, which alleges that the defendants charged Florida consumers excessive fees and costs while engaging in credit counseling services or debt management services in violation of Section 817.802(1), Florida Statutes. Paragraphs 70 through 73 of the Complaint describe in detail which of the defendants' representations of services to consumers would be considered credit counseling services or debt management services. These allegations must be taken as true and construed in the light most favorable to the plaintiffs on a motion to dismiss. Accordingly, the undersigned finds that the State of Florida has stated a claim upon which relief can be granted in Count VI and the defendants' motion to dismiss should be denied.
Because the undersigned finds that the plaintiffs' federal and state statutory claims, which are designed to minimize the risk of injury to consumers, are not subject to the heightened pleading requirements of Rule 9(b), the undersigned will not analyze the plaintiffs' alternative argument that they have complied with Rule 9(b). Accordingly, the undersigned recommends that this Court deny the defendants' motion to dismiss because the plaintiffs' complaint satisfies the notice pleading requirements of Rule 8 and Rule 9(b) is inapplicable to the claims asserted.
B. Collective Reference to Defendants and Reverse Shotgun Pleading
The defendant Fernandez–Moris seeks dismissal on the ground that the Complaint is fails to satisfy the requirements of Rules 10(b) and 10(c) of the Federal Rules of Civil Procedure, that the Complaint is a shotgun pleading, and that the Complaint improperly lumps all defendants together. Fernandez–Moris Motion at 3, 5 (DE# 31, 8/19/16). The defendant Fernandez–Moris argues that Counts I through IV of the complaint fail to incorporate any of the prior or subsequent allegations of the complaint. The defendant Fernandez–Moris argues further that the complaint lacks clarity as to which of the general allegations apply to Counts I through IV of the Complaint. Additionally, the defendant Fernandez–Moris contends that the Complaint fails to comply with the requirements of Rule 8 because the plaintiffs lump the three defendants together throughout the Complaint. See Fernandez–Moris Motion at 4 (citing Joseph v. Bernstein, No. 13-24355-CIV, 2014 WL 4101392, at *3 (S.D. Fla. Aug. 19, 2014) ). The defendant Fernandez–Moris also argues that the Court should either dismiss the action or require the plaintiffs to file a more definite statement pursuant to Rule 12(e).
The defendant Fernandez–Moris relies upon Anderson v. District Board of Trustees of Central Florida Community College, 77 F.3d 364, 366 (11th Cir. 1997), which is factually distinguishable. The Eleventh Circuit found Anderson's complaint, which asserted claims based on civil rights violations under various constitutional amendments, to be "a perfect example of a ‘shotgun’ pleading ... in that it is virtually impossible to know which allegations of fact are intended to support which claim(s) for relief." Id. (citation omitted).
Unlike the complaint in Anderson, the Complaint in the present case involves alleged violations of federal and state consumer protection laws by a corporation and two of its officers who had the authority to control the activities of the corporation. The plaintiffs rely on FTC v. Centro Natural Corp., No. 14-23879-CIV, 2014 WL 7525697, * (S.D. Fla. Dec. 10, 2014), which is factually similar to the present case. In Centro Natural, the District Court rejected the individual defendants' request for more definite statement notwithstanding that the complaint did not contain separate allegations of each individual defendant's respective conduct. In Centro Natural, the District Court relied on IAB Marketing Associates LP, No. 12–CV–61830, 2013 WL 12038957 [ECF No. 386] (S.D. Fla. Nov. 8, 2013), which held that "[t]he FTC's failure to separately allege the precise activities of the eleven defendants there did not compel dismissal under Rule 9(b) or a more definite statement under Rule 12(e)." Id. (citing IAB Marketing Associates, at *1 ).
The Centro Natural court also rejected the defendant's reverse "shotgun" pleading argument because the complaint failed to reference the preceding paragraphs and failed to indicate which factual allegations relate to which count. Id. Like the defendants in Centro Natural, the defendant Fernandez–Moris argues that the complaint in the present action "constitutes a sort of reverse shotgun pleading, where instead of all counts referencing all prior paragraphs, none of the counts reference them." Id. (citation omitted). The Centro Natural Court was "not persuaded that this technical deficiency warrants dismissal under the notice pleading standard, requiring a complaint to meet a minimum standard of plausibility to survive dismissal." Id. (citing Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 )).
Like the complaint in Centro Natural, the allegations in the present action all concern one overarching scheme regarding the defendants' student loan operation. The first thirty-six (36) paragraphs of the Complaint detail the defendants' conduct and are separated by titles that separate sections covering the defendants' student loan operation, the defendants' online advertising, the defendants' other advertising methods, and defendants' telemarketing sales pitch. This Court should likewise reject the defendant Fernandez–Moris' reverse shotgun pleading argument and deny his motion to dismiss and his alternative motion for more definite statement.
III. The Complaint Adequately Alleges Liability against Both Individual Defendants for Deceptive and Unfair Conduct
In the defendant Alvarez's motion, which is adopted by the defendant Fernandez–Moris, the defendants contend that the plaintiffs improperly seek to impose liability on them "simply for being the alleged President of Student Aid," which the defendants argue is not permitted under Florida law. The plaintiffs maintain that they have alleged that the individual defendants were direct participants in Student Aid Center's misconduct and the plaintiffs have not limited their theory of Alvarez's or Moris' liability to their official roles at the Student Aid Center.
To establish liability for FDUTPA violations based on deceptive acts or trade practices in an enforcement action, the Attorney General must show that: 1) there was a representation; 2) the representation was likely to mislead customers acting reasonably under the circumstances; and 3) the misrepresentation was material. FTC v. Sterling Precious Metals, LLC, No 12-80597-CIV, 2013 WL 595713, at *13 (S.D. Fla. Feb. 15, 2013) (quoting FTC v. USA Financial LLC, 415 Fed.Appx. 970, 973 (11th Cir. 2011) ); FTC v. Lalonde, 545 Fed.Appx. 825, 837 (11th Cir. 2013) ). To be individually liable for FTC and FDUTPA violations, the FTC must show that the individual (1) participated directly in the deceptive acts or practices; or (2) possessed the authority to control them; and (3) had some knowledge of the practices. FTC v. Gem Merch. Corp., 87 F.3d 466, 470 (11th Cir. 1996) (affirming finding of individual liability where district court found the individual had direct control over the corporation's activities and was aware of the corporation's illegal practices); USA Financial LLC, 415 Fed.Appx. at 974 ; FTC v. RCA Credit Services, LLC, 727 F.Supp.2d 1320, 1339 (M.D. Fla. 2010).
The plaintiffs allege that the defendants Alvarez and Fernandez–Moris, acting alone or in concert with others, formulated, directed, controlled, had the authority to control or participated in the acts and practices of Student Aid Center. The plaintiffs allege that the individual defendants, in their capacities as a president of the Student Aid Center, participated in or had direct control over, the misleading representations consumers experienced through misleading or deceptive telemarketing and advertising practices. Additionally, the complaint explains with specificity the illegal advanced fees requested or received by the defendants before providing the promised student loan debt relief services. The individual defendants also possessed the authority to control corporate websites and deceptive online advertising. All of these allegations support the plaintiffs' claims asserting the individual liability of the defendants Alvarez and Fernandez–Moris.
The defendants rely on Aboujaoude v. Poinciana Development Co. II, 509 F.Supp.2d 1266, 1277 (S.D. Fla. 2007) for the general rule that a director or officer of a corporation does not incur personal liability for its torts merely because of his official character. In the present case, the plaintiffs allege personal liability on the individual defendants for their active participation in the violations of state and federal law. The Complaint alleges that the defendants acted individually or in concert and formulated, directed, controlled or participated in the improper conduct. As the court in Aboujaoude acknowledged, "[i]n order to proceed against an individual for a violation of FDUTPA, a plaintiff must allege that the individual was a direct participant in the dealings." Id. Dismissal on this ground is not warranted because the plaintiffs' allege the individual defendants' direct participation and power to control the corporate defendant's conduct.
In Toback v. GNC Holdings, Inc., the court explained that because Rule 9(b) does not apply and sufficient factual details were alleged, the plaintiff's collective reference to the defendants throughout the complaint satisfied Rule 8. Toback v. GNC Holdings, Inc., No. 13-80526-CIV, 2013 WL 5206103, at *2 (S.D. Fla. Sept. 13, 2013). Similarly, in Sterling Precious Metals, the Court explained that the defendant's "argument misses the mark because ‘the [FTC's] allegations pertaining to the Defendants as a whole provide the context that allows the Court to understand and weigh the significance of the claims specifically relating to [him].’ " Sterling Precious Metals, 2013 WL 595713, at *4 (quoting F.T.C. v. Innovative Mktg., Inc., 654 F.Supp.2d 378, 388, n. 3 (D. Md. 2009) ).
This Court should likewise reject the individual defendants' arguments for dismissal based on the contention that each allegation should be specifically pled and that the collective allegations were insufficient to establish his individual liability as a corporate officer of the defendant. The motion to dismiss on this ground should be denied.
IV. The Plaintiffs' Claims Are Not Moot Simply Because the Corporate Defendant Ceased Doing Business
The parties agree that mootness is properly reviewed as a subject matter jurisdiction challenge under Rule 12(b)(1). See Response at 16 (DE# 22, 8/1/16); Alvarez's Reply at 7, n. 6 (DE# 24, 8/10/16). The defendants contend that the plaintiffs cannot seek injunctive relief because they cannot plausibly assert a substantial likelihood that any alleged consumers will suffer injury in the future since the corporate defendant Student Aid Center ceased doing business on or about February 8, 2016, without an intention to resume. Alvarez Motion at 6 (DE# 17, 7/15 16). The defendants argue further that the plaintiffs lack standing to seek a permanent injunction or other equitable relief in this action.
The defendants' reliance on Malowney v. Federal Collection Deposit Group, 193 F.3d 1342 (11th Cir. 1999) is factually and legally inapposite. In Malowney, the Eleventh Circuit affirmed the dismissal of the Malowneys' claim for declaratory judgment because there was no "case or controversy" under Article III or "actual controversy" as required by 28 U.S.C. § 2201 since the Malowneys' bank was on notice that their checking account funds were exempt from attachment or garnishment. Id. at 1348.
In the present case, the plaintiffs argue that the defendant Alvarez has failed to meet " ‘the extremely heavy burden of showing that it is absolutely clear that he will not revert to his old ways.’ " Plaintiffs' Response at 17 (DE# 22, 8/1/16) (quoting Sheely, 505 F.3d 1173, 1182 (11th Cir. 2007) ). "[V]oluntary cessation of allegedly illegal conduct ... does not make the case moot." United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 97 L.Ed. 1303 (1953). Under the voluntary-cessation doctrine, when a party asserts mootness because the conduct at issue has ceased, the court considers three factors:
1) whether the challenged conduct was isolated or unintentional, as opposed to a continuing and deliberate practice;
2) whether the defendant's cessation of the offending conduct was motivated by a genuine change of heart or timed to anticipate suit; and
3) whether, in ceasing the conduct, the defendant has acknowledged liability.
Harty v. N. Lauderdale Supermarket, Inc., No. 14-CIV-62945-BLOOM, 2015 WL 4638590, at *4 (S.D. Fla. Aug. 4, 2015) ; see also, Sheely, 505 F.3d at 1184. The plaintiffs argue further that "as long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot." Cook v. Bennett, 792 F.3d 1294, 1299 (11th Cir. 2015). The plaintiffs cite the Supreme Court's decision in City of Erie v. Pap's A.M., 529 U.S. 277, 120 S.Ct. 1382, 146 L.Ed.2d 265 (2000), which held that the case was not moot despite a nude club's affidavit that averred that it closed the business, sold the property and stopped operating a nude dancing establishment. Id. at 287–88, 120 S.Ct. 1382. The Supreme Court explained that the company "could again decide to operate a nude dancing establishment ...." Id. at 287, 120 S.Ct. 1382. The three factors listed above favor the plaintiff. First, the alleged illegal conduct was deliberate and continual, not isolated and unintentional. Second, the plaintiffs contend that the defendant corporation ceased operating only after it was sued by the State of Minnesota over its business practices and subsequently declared bankruptcy after being presented with allegations from the FTC and Florida in the present case. Pls.' Response at 19. Finally, the defendant Alvarez has not acknowledged liability for his conduct.
The FTC and Florida are governmental entities that are seeking to obtain injunctions to protect consumers from deceptive student loan debt relief advertising and equitable restitution for the consumer injury caused by the defendants' scheme. This Court has subject matter jurisdiction and should deny the defendant's motion to dismiss based on the arguments that the action is moot and the plaintiffs lack standing.
V. External Documents That Allegedly Contradict Allegations Are Not Proper for Consideration on a Motion to Dismiss and the Presence of Alleged Disclaimers Does Not Avoid Violations of Consumer Protection Laws (Defendant Fernandez–Moris)
On a motion to dismiss, the plaintiffs' well-pled allegations are accepted as true. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000). At this stage of the proceedings, the court is limited to the allegations within the four corners of the complaint and any exhibits attached thereto. Grossman, 225 F.3d at 1231 (citation omitted); Milburn, 734 F.2d 762, 765 (11th Cir. 1984) ("Consideration of matters beyond the complaint is improper in the context of a motion to dismiss ....") (citing Fed. Ru. Civ. P. 12(b)).
The defendant Fernandez–Moris improperly attempts to refute the plaintiffs' allegations in his motion to dismiss. The defendant's contradiction argument is based on documents outside the Complaint. The adequacy of any of the defendants' disclaimers presents a fact question that is not proper on a motion to dismiss for failure to state a claim upon which relief can be granted.
The defendant Fernandez–Moris' reliance on Century Land Development v. FFL Development, L.L.C., 2008 WL 1850753, at *4 (S.D. Fla. 2008) (dismissing FDUTPA claim by private party whose contractual terms contradicted the alleged misrepresentations and where the contract stated that the parcel of property was being sold "as is" and it was the plaintiff's contractual responsibility to determine whether the property was suitable), and other cases that involved FDUTPA claims between private contracting parties is misplaced. The present case is brought by the FTC and the State of Florida, neither of which are in contractual privity with the defendants, and both of which are attempting to protect consumer rights. Accordingly, this Court should deny the motion to dismiss that is based on the position that the documents contradict the factual allegations regarding the alleged misrepresentations. See Fernandez–Moris' Motion at 8–9 (DE# 31, 8/19/16).
Additionally, the defendant Fernandez–Moris' reliance on case law analyzing FTC unfairness law, which is not alleged in this action, is misplaced. Claims under FTC deception law have different elements than claims under FTC unfairness law. FTC unfairness law is irrelevant and inapplicable to the claims of deception alleged in this action. The Court should deny the defendants' motion to dismiss on this ground.
RECOMMENDATION
In accordance with the foregoing, the undersigned respectfully recommends the Defendant Damien Alvarez's Motion to Dismiss Complaint and Incorporated Memorandum of Law (DE# 17, 7/15/16) be DENIED and Defendant, Ramiro Fernandez–Moris' Motion to Dismiss Complaint [DE# 1] (DE# 31, 8/19/16) be DENIED.
The parties will have fourteen (14) days from the date of being served with a copy of this Report and Recommendation within which to file written objections, if any, with the Honorable Federico A. Moreno, United States District Judge. Failure to file objections timely shall bar the parties from a de novo determination by the District Judge of an issue covered in the Report and shall bar the parties from attacking on appeal unobjected-to factual and legal conclusions contained in this Report except upon grounds of plain error if necessary in the interest of justice. See 28 U.S.C. § 636(b)(1) ; Thomas v. Arn, 474 U.S. 140, 149, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985) ; Henley v. Johnson, 885 F.2d 790, 794 (1989) ; 11th Cir. R. 3–1 (2016).
RESPECTFULLY SUBMITTED at the United States Courthouse, Miami, Florida this 14th day of December, 2016.