United States District Court, D. Maryland
J. MESSITTE UNITED STATES DISTRICT JUDGE
Michael Santos has moved to dismiss the Federal Trade
Commission's (“FTC”) Amended Complaint (ECF
No. 114) for failure to state a claim, ECF No. 322, which the
FTC opposes. ECF No. 381. For the following reasons, the
Court will DENY Santos's Motion.
Factual and Procedural History
first named Santos as a defendant in its Amended Complaint
filed on January 15, 2019. Amended Complaint
(“AC”) at ¶ 29, ECF No. 114. Santos has
allegedly worked as the Director of Communications for
Defendant Global Property Alliance, Inc. (“GPA”)
and as the Director of Business Development for Defendants
GPA, Buy Belize, LLC (“Buy Belize”), and Buy
International, Inc. (“Buy International”). AC at
¶ 29. Co-Defendant Andris Pukke allegedly controlled
these three corporate Defendants, which purportedly marketed
lots and tours of those lots located at the real estate
development known as “Sanctuary Belize.”
Id. at ¶¶ 8, 11, 13-14. Santos became
acquainted with Pukke while both were imprisoned, and after
Santos was released from custody, Pukke purportedly offered
him a position with GPA. ECF No. 322-1 at 2-3. In his
positions at GPA, Buy Belize, and Buy International, Santos
is alleged to have “formulated, controlled, had the
authority to control, or participated in” the allegedly
deceptive marketing scheme that promoted Sanctuary Belize
lots and tours, notably by making videos promoting the
Sanctuary Belize development to potential consumers. AC at
¶ 29. In the Amended Complaint, the FTC charges Santos
with one Count of violating the Federal Trade Commission Act
(“FTC Act”), 15 U.S.C. § 45(a), by reason of
allegedly deceptive marketing practices, as well as two
Counts of violating the Telemarketing Sales Rule
(“TSR”), 16 C.F.R. § 310.3(b), based on
misrepresentations and misleading investment opportunities.
AC at ¶¶ 110- 127.
stipulated to the entry of a Preliminary Injunction with the
FTC that the Court approved on February 9, 2019. ECF No. 164.
He filed his Motion to Dismiss on March 18, 2019, pursuant to
the terms of the Stipulated Preliminary Injunction. ECF No.
322. The FTC filed its Opposition on April 1, 2019, ECF No.
381, and Santos filed his Reply on April 15, 2019. ECF No.
Rule of Civil Procedure 8(a) prescribes “liberal
pleading standards” that require a plaintiff to submit
only a “short and plain statement of the claim showing
that [he] is entitled to relief.” Erickson v. Pardus,
551 U.S. 89, 93-94 (2007) (citing Fed.R.Civ.P. 8(a)(2)). The
plaintiff's statement must contain facts sufficient to
“state a claim to relief that is plausible on its
face” in order to survive a motion to dismiss under
Federal Rule of Civil Procedure 12(b)(6). Bell Atl. Corp.
v. Twombly, 550 U.S. 554, 570 (2007). The plausibility
standard requires that the plaintiff plead facts sufficient
to show by “more than a sheer possibility that a
defendant has acted unlawfully.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). Although, for purposes
of judging a motion to dismiss, a court will accept the
plaintiff's factual allegations as true,
“[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Id. Legal conclusions couched as
factual allegations or “unwarranted inferences,
unreasonable conclusions, or arguments” do not satisfy
the plausibility pleading standard. E. Shore Markets,
Inc. v. J.D. Associates Ltd. P'ship, 213 F.3d 175,
180 (4th Cir. 2000). The complaint must contain factual
allegations sufficient to apprise a defendant of “what
the . . . claim is and the grounds upon which it
rests.” Twombly, 550 U.S. at 555 (internal quotations
and citations omitted).
states that while the pleadings need not contain
“detailed factual allegations, ” they must
contain must contain “more than labels and
conclusions” or a “formulaic recitation of the
elements of a cause of action.” 550 U.S. at 555. Iqbal
refined the heightened pleading standard of Twombly, advising
that “the plausibility standard is not akin to a
‘probability requirement, '” and that 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.” 556 U.S. at 678.
individual may be found liable under the FTC Act if he
“(1) participated directly in the deceptive practices
or had authority to control those practices, and (2) had or
should have had knowledge of the deceptive practices. The
second prong of the analysis may be established by showing
that the individual had actual knowledge of the deceptive
conduct, was recklessly indifferent to its deceptiveness, or
had an awareness of a high probability of deceptiveness and
intentionally avoided learning the truth.” F.T.C.
v. Ross, 743 F.3d 886, 892 (4th Cir. 2014). The standard
for individual liability under the TSR is the same as the
standard for individual liability under the FTC Act. See,
e.g., F.T.C. v. WV Universal Mgmt., LLC, 877 F.3d
1234, 1240 (11th Cir. 2017) (holding that “by violating
the TSR, [the defendant] violated the FTC Act and is subject
to its penalties.”).
the first prong of the liability test, the core allegations
in the Amended Complaint against Santos are that he directly
participated in the allegedly deceptive Sanctuary Belize
marketing scheme. AC at ¶ 29. As the FTC frames it, in
that scheme the SBE Defendants allegedly enticed consumers to
tour the Sanctuary Belize development and purchase lots there
by claiming (a) that Sanctuary Belize would be constructed on
a “no debt” model in which all money from lot
sales would be reinvested in development, (b) that the
development would be completed within two to five years, (c)
that the finished development would include luxurious
amenities such as a hospital, golf course, marina village,
and airport, and (d) that lots in the development would
double or triple in value within two to three years.
Id. at ¶¶ 110-114; 122- 127. Santos
allegedly promoted these claims directly to consumers, for
example, “through various marketing videos.”
Id. at ¶ 29. He also allegedly
“formulated, controlled, [and] had the authority to
control” other employees engaged in marketing Sanctuary
Belize in his capacity as Director of Communications for GPA
and as Director of Business Development for GPA, Buy Belize,
and Buy International. Id.
allegations clearly suffice to state a plausible claim that
Santos directly participated in or had the authority to
control the allegedly deceptive marketing practices at the
heart of the Amended Complaint. Whether or not, as Santos
claims, there is insufficient evidence of his authority to
control Sanctuary Belize's marketing efforts, by
appearing in videos promoting the development, at a minimum
there are plausible allegations that he “participated
directly” in the allegedly deceptive practices. Cf.
F.T.C. v. Stefanchik, 559 F.3d 924, 930-31 (9th Cir.
2009) (holding a director of a corporation liable for
participating in a deceptive marketing scheme where, among
other allegations, his “picture and signature appeared
on much of the marketing materials”). Merely because
there are other cases in which the FTC may have made
allegations against a defendant more detailed than those it
makes against Santos in the present case, see ECF No. 322-1
at 11-13, it does not follow that the allegations it does
make against Santos in the Amended Complaint fail to satisfy
the plausibility standard.
second prong of the liability test depends on whether Santos
“had actual knowledge of the deceptive conduct, was
recklessly indifferent to its deceptiveness, or had an
awareness of a high probability of deceptiveness and
intentionally avoided learning the truth.” Ross, 743
F.3d at 892. To be sure, “the degree of participation
in business affairs is probative of knowledge.”
F.T.C. v. Innovative Mktg., Inc., 654 F.Supp.2d 378,
387 (D. Md. 2009) (quoting F.T.C. v. Amy Travel Serv.,
Inc., 875 F.2d 564, 574 (7th Cir. 1989)) (internal
quotation marks omitted).
stage in the proceedings, it would clearly be plausible to
infer that Santos knew or should have known of Sanctuary
Belize's allegedly deceptive marketing practices, given
his involvement with GPA, Buy Belize, and Buy International.
From all that appears, Santos may well have extensively
participated in the business affairs of the three entities
that marketed Sanctuary Belize to consumers, since he served
as Director of Communications for one and as Director of
Business Development for all three, senior positions
presumably requiring significant involvement in their
marketing efforts. At the very least, Santos would have had
to be familiar with the progress of the Sanctuary Belize
development as part of his job responsibilities, so that he
could have a reasonable basis for the representations he was
supposedly making to consumers. At the same time, if it is
determined that Santos was not aware of the state of affairs
at Sanctuary Belize while he was actively ...