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Federal Trade Commission v. Elite IT Partners, Inc.

United States District Court, D. Utah

February 27, 2019

FEDERAL TRADE COMMISSION, Plaintiff,
v.
ELITE IT PARTNERS, INC., a Utah corporation doing business as ELITE IT HOME, and JAMES MICHAEL MARTINOS, individually and as an officer of ELITE IT PARTNERS, INC., Defendants.

          EX PARTE TEMPORARY RESTRAINING ORDER, WITH ASSET FREEZE, APPOINTMENT OF A TEMPORARY RECEIVER, AND OTHER EQUITABLE RELIEF

          ROBERT J. SHELBY, UNITED STATES CHIEF DISTRICT JUDGE

         Chief District Judge Robert J. Shelby Plaintiff, the Federal Trade Commission (“FTC”), has filed its Complaint for Permanent Injunction and Other Equitable Relief pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b), and has moved, pursuant to Fed.R.Civ.P. 65(b), for a temporary restraining order, asset freeze, other equitable relief, and an order to show cause why a preliminary injunction should not issue against Elite IT Partners, Inc. and James Michael Martinos (“Defendants”).

         FINDINGS OF FACT

         The Court, having considered the Complaint, the ex parte Motion for a Temporary Restraining Order, declarations, exhibits, and the memorandum of points and authorities filed in support thereof, and being otherwise advised, finds that:

         A. This Court has jurisdiction over the subject matter of this case, and there is good cause to believe that it will have jurisdiction over all parties hereto and that venue in this district is proper.

         B. In numerous instances, Defendants, in selling technical support services and relying on both internet and telephone communication, have falsely represented to consumers that their computers are infected with viruses and infections that threaten the security of consumers' personal information and prevent them from accessing their email and other accounts, and that they are part of, affiliated with, or authorized to provide services for well-known U.S. technology companies. Based on these misrepresentations, Defendants have convinced consumers to pay large sums of money for a “cleaning” of their computers and ongoing technical support services. Defendants have failed to disclose, or to disclose adequately, prior to purchase, material terms, including that consumers who sign up for ongoing technical support services for a monthly rate are enrolled for 12 months; the 12-month term automatically renews for another year if the consumer fails to cancel, by written letter, at least 30 days before the end of the 12-month term; and that consumers who cancel within the first 12 months must pay a $150 cancellation fee.

         C. There is good cause to believe that Defendants have engaged in and are likely to engage in acts or practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Telemarketing Sales Rule (“TSR”), 16 C.F.R. Part 310, and the Restore Online Shoppers' Confidence Act (“ROSCA”), 15 U.S.C. § 8403, and that the FTC is therefore likely to prevail on the merits of this action. As demonstrated by the declarations of consumers and former employees of Defendants, records of undercover calls, summaries of complaints, a report by a computer forensic expert, and the additional documentation filed by the FTC, the FTC has established a likelihood of success in showing that Defendants have deceived customers by: (1) misrepresenting that their computers are infected with and unprotected against viruses, and (2) failing to disclose adequately material terms of transactions, including terms relating to Defendants' ongoing technical support services.

         D. There is good cause to believe that immediate and irreparable harm will result from Defendants' ongoing violations of the FTC Act, the TSR, and ROSCA unless Defendants are restrained and enjoined by order of this Court.

         E. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers-including monetary restitution, rescission, disgorgement, or refunds-will occur from the sale, transfer, destruction, or other disposition or concealment by Defendants of their assets or records, unless Defendants are immediately restrained and enjoined by order of this Court; and that, in accordance with Fed.R.Civ.P. 65(b), the interests of justice require that this Order be granted without prior notice to Defendants. Thus, there is good cause for relieving the FTC of the duty to provide Defendants with prior notice of its Motion for a Temporary Restraining Order.

         F. Good cause exists for appointing a temporary receiver over the Receivership Entities, freezing Defendants' assets, permitting the FTC and the Receiver immediate access to the Defendants' business premises, and permitting the FTC and the Receiver to take expedited discovery.

         G. Weighing the equities and considering the FTC's likelihood of ultimate success on the merits, a temporary restraining order with an asset freeze, the appointment of a temporary receiver, immediate access to business premises, expedited discovery, and other equitable relief is in the public interest.

         H. This Court has authority to issue this Order pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), Federal Rule of Civil Procedure 65, and the All Writs Act, 28 U.S.C. § 1651.

         I. No security is required of any agency of the United States for issuance of a temporary restraining order. Fed.R.Civ.P. 65(c).

         DEFINITIONS

         For the purpose of this Order, the following definitions shall apply:

         A. “Asset” means any legal or equitable interest in, right to, or claim to, any property, wherever located and by whomever held.

         B. “Billing Information” means any data that enables any person to access a customer's account, such as a credit card, debit card, checking, savings, share or similar account, utility bill, or mortgage loan account.

         C. “Charge, ” “Charged, ” or “Charging” means any attempt to collect money or other consideration from a consumer, including but not limited to, causing Billing Information to be submitted for payment, including against the consumer's credit card, debit card, bank account, telephone bill, or other account.

         D. “Corporate Defendant” means Elite IT Partners, Inc., and each of its subsidiaries, affiliates, successors, and assigns.

         E. “Defendant(s)” means Corporate Defendant and James Michael Martinos, individually, collectively, or in any combination.

         F. “Document” is synonymous in meaning and equal in scope to the usage of “document” and “electronically stored information” in Federal Rule of Civil Procedure 34(a), Fed.R.Civ.P. 34(a), and includes writings, drawings, graphs, charts, photographs, sound and video recordings, images, Internet sites, web pages, websites, electronic correspondence, including e-mail and instant messages, contracts, accounting data, advertisements, FTP Logs, Server Access Logs, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, computer records, customer or sales databases, and any other electronically stored information, including Documents located on remote servers or cloud computing systems, and other data or data compilations from which information can be obtained directly or, if necessary, after translation into a reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

         G. “Electronic Data Host” means any person or entity in the business of storing, hosting, or otherwise maintaining electronically stored information. This includes, but is not limited to, any entity hosting a website or server, and any entity providing “cloud based” electronic storage.

         H. “Individual Defendant” means Individual Defendant James Michael Martinos.

         I. “Receiver” means the temporary receiver appointed in Section XIII of this Order and any deputy receivers that shall be named by the temporary receiver.

         J. “Receivership Entities” means Corporate Defendant as well as any other entity that has conducted any business related to the marketing or sale of Technical Support Products and Services, including receipt of Assets derived from any activity that is the subject of the Complaint in this matter, and that the Receiver determines is controlled or owned by any Defendant.

         K. “Technical Support Product(s) or Service(s)” means any product, service, plan, program, software, or hardware, marketed to consumers under the name “Elite IT Home, ” to clean, repair, or maintain a computer, or improve its performance or security, including computer or software diagnostic, maintenance, cleaning, or repair services; or antivirus programs or registry cleaners.

         L. “Telemarketer” means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer or donor.

         M. “Telemarketing” means a plan, program, or campaign, which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones.

         ORDER

         I. PROHIBITED BUSINESS ACTIVITIES

         IT IS THEREFORE ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, in connection with the advertising, marketing, promoting, or offering for sale of any goods or services, are temporarily restrained and enjoined from misrepresenting or assisting others in misrepresenting, expressly or by implication, any material fact, including, but not limited to:

         A. That Defendants have detected viruses or infections on consumers' computers that affect the security of consumers' computers and prevent access to consumers' email and other accounts;

         B. That they are part of, affiliated with, or authorized to provide services for well-known technology companies; and

         C. Any other fact material to consumers concerning any good or service, such as: the total costs; any material restrictions, limitations, or conditions; or any material aspect of its performance, efficacy, nature, or central characteristics.

         II. CONDUCT PROHIBITIONS REGARDING MARKETING

         IT IS THEREFORE ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, in connection with the advertising, marketing, promoting, or offering for sale of any goods or services, are temporarily restrained and enjoined from:

         A. Using any false or misleading statement to induce any person to pay for goods or services;

         B. Violating the TSR, 16 C.F.R. Part 310, appended as Attachment A; and

         C. Violating ROSCA, 15 U.S.C. § 8403, appended as Attachment B.

         III. PROHIBITION AGAINST CHARGING OR BILLING CONSUMERS

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or indirectly, unless expressly authorized by the Receiver, are temporarily restrained and enjoined from Charging any person or entity for the purchase of Defendants' Technical Support Products or Services.

         IV. PROHIBITION ON RELEASE OF CUSTOMER INFORMATION

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are hereby temporarily restrained and enjoined from:

         A. Selling, renting, leasing, transferring, or otherwise disclosing, the name, address, birth date, telephone number, email address, credit card number, bank account number, Social Security number, or other financial or identifying information of any person that any Defendant obtained in connection with any activity that pertains to the subject matter of this Order; and

         B. Benefitting from or using the name, address, birth date, telephone number, email address, credit card number, bank account number, Social Security number, or other financial or identifying information of any person that any Defendant obtained in connection with any activity that pertains to the subject matter of this Order.

         Provided, however, that Defendants may disclose such identifying information to a law enforcement agency, to their attorneys as required for their defense, as required by any law, regulation, or court order, or in any filings, pleadings or discovery in this action in the manner required by the Federal Rules of Civil Procedure and by any protective order in the case.

         V. ASSET FREEZE

         IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are hereby temporarily restrained and enjoined from:

         A. Transferring, liquidating, converting, encumbering, pledging, loaning, selling, concealing, dissipating, disbursing, assigning, relinquishing, spending, withdrawing, granting a lien or security interest or other interest in, or otherwise disposing of any Assets that are:

         1. owned or controlled, directly or indirectly, by any Defendant;

         2. held, in part or in whole, for the benefit of any Defendant;

         3. in the actual or constructive possession of any Defendant; or

         4. owned or controlled by, in the actual or constructive possession of, or otherwise held for the benefit of, any corporation, partnership, asset protection trust, or other entity that is directly or indirectly owned, managed or controlled by any Defendant.

         B. Opening or causing to be opened any safe deposit boxes, commercial mail boxes, or storage facilities titled in the name of any Defendant or subject to access by any Defendant, except as necessary to comply with written requests from the Receiver acting pursuant to its authority under this Order;

         C. Incurring charges or cash advances on any credit, debit, or ATM card issued in the name, individually or jointly, of any Corporate Defendant or any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by any Defendant or of which any Defendant is an officer, director, member, or manager. This includes any corporate bankcard or corporate credit card account for which any Defendant is, or was on the date that this Order was signed, an authorized signor; or

         D. Cashing any checks or depositing any money orders or cash received from consumers, clients, or customers of any Defendant.

         The Assets affected by this Section shall include: (1) all Assets of Defendants at the time this Order is entered, including, but not limited to, any Assets held by Wells Fargo Bank N.A. in accounts with numbers ending in 3608, 2026, and 3361, and held by Think Mutual Bank in an account with a number ending in 7384; and (2) Assets obtained by Defendants after this Order is entered if those Assets are derived from any activity that is the subject of the Complaint in this matter or that is prohibited by this Order. This Section does not prohibit any transfers to the Receiver or repatriation of foreign Assets specifically required by this order.

         VI. DUTIES OF ASSET HOLDERS AND ...


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