Federal Trade Commission v. Vylah Tec LLC

• Court: Court of Appeals for the Eleventh Circuit
• Decided: March 8, 2018
• Docket: 17-13481
• Status: Unpublished

Opinion

Case: 17-13481 Date Filed: 03/08/2018 Page: 1 of 8

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 17-13481 Non-Argument Calendar ________________________

D.C. Docket No. 2:17-cv-00228-UA-MRM

FEDERAL TRADE COMMISSION, STATE OF FLORIDA,

Plaintiffs - Appellees,

versus

VYLAH TEC LLC, a limited liability company, d.b.a. VTEC Support, EXPRESS TECH HELP LLC, a limited liability company, et al.,

Defendants - Appellants.

________________________

Appeal from the United States District Court for the Middle District of Florida ________________________

(March 8, 2018) Case: 17-13481 Date Filed: 03/08/2018 Page: 2 of 8

Before WILSON, JORDAN and BLACK, Circuit Judges.

PER CURIAM:

The Federal Trade Commission and the State of Florida (collectively,

Appellees) sued Vylah Tec LLC (Vtec), Express Tech Help LLC (Express Tech),

Tech Crew Support LLC (Tech Crew), Angelo Cupo, Robert Cupo, and Dennis

Cupo (collectively, Appellants), alleging violations of the Federal Trade

Commission Act (FTCA), 15 U.S.C. §§ 41–58, and the Florida Deceptive and

Unfair Trade Practices Act (FDUTPA), Fla. Stat. §§ 501.201–501.213. On appeal,

Appellants challenge the district court’s imposition of a preliminary injunction.

After review,1 we vacate the preliminary injunction to the extent it froze Dennis’s

assets and assets held jointly by Robert and his wife, Olga Cupo, remand for

further findings of fact and conclusions of law as to those issues, and affirm as to

the remainder.

I. BACKGROUND

Vtec, Express Tech, and Tech Crew are small businesses that provide

technical support and sell computer antivirus software. Angelo is the chief

executive officer of Vtec and a manager of Tech Crew. Robert is a manager of

Vtec, an owner, manager, director, and officer of Tech Crew, and a member of

1 We review for abuse of discretion the district court’s grant of a preliminary injunction. Cumulus Media, Inc. v. Clear Channel Commc’ns, Inc., 304 F.3d 1167, 1171 (11th Cir. 2002). We will not disturb the district court’s factual findings unless they are clearly erroneous. Id. 2 Case: 17-13481 Date Filed: 03/08/2018 Page: 3 of 8

Express Tech. Dennis was listed as a manager of Express Tech when it was first

organized, and he previously assisted with general operations for a technical

support business started by Robert and Angelo.

In 2017, Appellees filed a complaint alleging Appellants had deceptively

marketed and sold technical support services and software to consumers, in

violation of the FTCA and FDUTPA. Appellees also filed an ex parte motion for a

temporary restraining order (TRO). The district court granted Appellees’ motion

and entered a TRO freezing Appellants’ assets and assets held for their benefit.

About one month later, the district court granted a preliminary injunction. In

its order, the court noted the issue of whether Appellees had made the requisite

showing to obtain an injunction was not before it, as the parties had effectively

stipulated to an injunction. The court issued a preliminary injunction that, among

other things, continued the freeze of most of Appellants’ assets and assets held for

their benefit. This appeal followed. 2

II. DISCUSSION

As a preliminary matter, Appellants assert the motion for a TRO should have

been denied, citing alleged deficiencies in Appellees’ evidence. Appellants appear

to raise this argument as a reason why the preliminary injunction should be vacated

2 We have jurisdiction over this appeal. See McDonald’s Corp. v. Robertson, 147 F.3d 1301, 1310 n.7 (11th Cir. 1998).

3 Case: 17-13481 Date Filed: 03/08/2018 Page: 4 of 8

in its entirety, rather than as a challenge to the issuance of the TRO. We address

Appellants’ challenge to the preliminary injunction below. To the extent

Appellants intend to challenge the TRO itself, that order is not appealable.

Fernandez-Roque v. Smith, 671 F.2d 426, 429 (11th Cir. 1982) (“[A]s a general

rule a temporary restraining order is not appealable.”).

Appellants contend vacatur of the entire preliminary injunction is warranted

because Appellees did not meet their burden of proof and the district court failed to

analyze whether Appellees made the requisite showing. Appellants waived this

argument by effectively stipulating to the imposition of a preliminary injunction.

In the district court, Appellants stated they were “agreeable” to an injunction, that

they did not “overtly object[ ]” to an injunction, and that they were not arguing no

injunction should issue. In fact, Appellants asked—twice—that the district court

grant an injunction. By requesting terms different from those the district court

actually imposed, Appellants preserved a challenge to the scope of the injunction.

But Appellants cannot, having asked the district court for an injunction, assert on

appeal that the district court erred by imposing one. 3 See SEC v. Smyth, 420 F.3d

3 This case is distinguishable from Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr, S.A., 320 F.3d 1205 (11th Cir. 2003). In Four Seasons, the defendants told the district court that if the court chose to prohibit them from “attempting to or gaining unauthorized access to the plaintiff’s network, frankly, [they] would have no problem with that because [they were] not doing it . . . .” Id. at 1209 n.2 (quotation omitted). We determined the defendants had not waived their challenge to the subsequently imposed injunction because their statements “constitute[d] substantive denials of wrongdoing, rather than acquiescence to the injunction.” Id. Here, by contrast, Appellants asked the district court to impose an injunction. It is one thing to 4 Case: 17-13481 Date Filed: 03/08/2018 Page: 5 of 8

1225, 1233 n.14 (11th Cir. 2005) (noting a defendant could not challenge the

provisions of an injunction because he waived his right to appeal the injunction’s

terms).

Next, Appellants assert the district court failed to hold an evidentiary

hearing and, therefore, lacked a sufficient basis upon which to make factual

findings. This argument is belied by the record. On May 30, 2017, the district

court conducted a hearing during which both parties had the opportunity to present

arguments and educate the court regarding the complex issues involved in the case.

See Four Seasons Hotels & Resorts, B.V. v. Consorcio Barr, S.A., 320 F.3d 1205,

1212 (11th Cir. 2003) (requiring such a hearing “where . . . the material facts

underlying the complaint and the injunction are disputed”). Appellants had ample

opportunity to present evidence before, during, and after the hearing. Indeed,

Appellants electronically filed 184 pages of exhibits between May 21, 2017, and

June 1, 2017, and they submitted additional evidence at the hearing. In its order,

entered June 4, 2017, the district court indicated it had reviewed and considered all

of the evidence and the parties’ subsequent filings. Thus, Appellants’ assertion

that the district court failed to hold an evidentiary hearing is baseless. To the

extent Appellants contend the district court should have required Appellees to

indicate you have “no problem with” an injunction prohibiting you from engaging in activity you deny doing. It is another to repeatedly request such an injunction. 5 Case: 17-13481 Date Filed: 03/08/2018 Page: 6 of 8

present live testimony, they have not provided, nor have we found, any binding

authority to that effect. 4

Finally, Appellants challenge several elements of the asset freeze included in

the injunction. Appellants first contend the district court erred by freezing an

account belonging to Dennis’s employer, who is not a party in this case, as

Appellees did not establish any nexus between the alleged consumer harm and the

employer’s accounts or operations. Likewise, Appellants challenge the freeze on

Dennis’s assets, alleging he is entirely uninvolved in the companies’ business, and

that Appellees did not meet their burden to show a connection between Dennis’s

assets and the alleged harm to consumers. Appellants also assert the freeze on

assets held jointly by Robert and Olga, a non-party to the case, is improper because

it is punitive as to Olga.

Appellants waived their challenge to the freeze on the employer’s account.

Before the district court, Appellants stated they were agreeable to a preliminary

injunction that provided the necessary funds to account for Robert’s, Angelo’s, and

Dennis’s personal expenses, among other things. At the preliminary injunction

hearing, Appellants noted that their proposed injunction released $100,000 to

restart operations and provide for their personal expenses. Appellants contended it

4 Notably, the district court stated four weeks prior to the hearing that live testimony would be heard “only on further order of this [c]ourt or on motion filed with the [c]ourt . . . .” Appellants did not move for leave to question Appellees’ witnesses at the hearing, nor did they assert Appellees should be required to present live testimony. 6 Case: 17-13481 Date Filed: 03/08/2018 Page: 7 of 8

would be inequitable to force Robert, Angelo, and Dennis into bankruptcy due to

the asset freeze, and they particularly urged the court to unfreeze Dennis’s assets.

Because Appellants failed to assert before the district court that Dennis’s

employer’s account should be unfrozen, we decline to consider this argument on

appeal. See Ramirez v. Sec’y, U.S. Dep’t of Transp., 686 F.3d 1239, 1249 (11th

Cir. 2012) (“[W]e will generally refuse to consider arguments raised for the first

time on appeal.”).

Appellants did, however, preserve their challenges to the freezes on

Dennis’s assets and Olga’s and Robert’s jointly held assets. The district court did

not make sufficient factual findings to support freezing these assets. While the

court stated in the TRO that Appellees had “sufficiently shown that . . . Dennis . . .

[has] engaged in and [is] likely to engage in acts and practices that violate [the

FTCA and FDUTPA],” the court did not find that Dennis gained anything from the

allegedly unlawful practices. See SEC v. Contorinis, 743 F.3d 296, 301 (11th Cir.

2014) (“Because disgorgement does not serve a punitive function, the

disgorgement amount [in a securities law violation proceeding] may not exceed the

amount obtained through the wrongdoing.”); SEC v. ETS Payphones, Inc., 408

F.3d 727, 734 (11th Cir. 2005) (noting an asset freeze may be “justified as a means

of preserving funds for . . . disgorg[e]ment”). Similarly, the district court made no

findings as to Olga’s involvement, if any, in the alleged scheme, nor did it explain

7 Case: 17-13481 Date Filed: 03/08/2018 Page: 8 of 8

why assets she holds jointly with Robert are subject to a freeze regardless of

whether she was involved. See ETS Payphones, 408 F.3d at 735 (stating that the

funds subject to a freeze must be “a reasonable approximation of a defendant’s ill-

gotten gains” (quotation omitted)). Such factual findings were needed to justify

including the freezes on Dennis’s assets and the jointly held assets within the scope

of the injunction. Given the dearth of factual findings on these issues, we vacate

the order granting the preliminary injunction to the extent it froze Dennis’s assets

and assets held jointly by Robert and Olga. 5 See Doe v. Dekalb Cty. Sch. Dist.,

145 F.3d 1441, 1446 (11th Cir. 1998) (vacating an injunction because the district

court’s factual findings were incomplete and its reasoning was unclear).

III. CONCLUSION

In light of the foregoing, the district court’s order granting a preliminary

injunction is VACATED to the extent it froze Dennis’s assets and assets held

jointly by Robert and Olga, the case is REMANDED to the district court for

further factual findings and conclusions of law regarding these freezes, and the

remainder of the the district court’s order is AFFIRMED.

AFFIRMED IN PART, VACATED IN PART and REMANDED.

5 In their reply brief, Appellants state their intention to challenge the asset freeze in its entirety on appeal. We do not consider whether the district court properly froze any assets other than those discussed above because Appellants failed to raise on appeal any specific arguments regarding the freeze of other assets. See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681 (11th Cir. 2014). 8