Federal Trade Commission v. Roomster Corp.

Background

The Federal Trade Commission and the People of the State of California, the State of Colorado, the State of Florida, the People of the State of Illinois, the Commonwealth of Massachusetts, and the People of the State of New York sued Roomster Corp., John Shriber, Roman Zaks, and Jonathan Martinez, individually and doing business as AppWinn. The complaint asserted claims under Section 5 of the Federal Trade Commission Act and several state consumer-protection statutes.

The complaint alleged that the settling defendants—Roomster Corp., Shriber, and Zaks—engaged in deceptive acts involving Roomster’s room and roommate-finder platform. Specifically, it alleged misrepresentations that endorsements were truthful reviews by actual users and that Roomster’s listings were verified, authentic, or available. The settling defendants stipulated to the order but neither admitted nor denied the allegations, except for facts necessary to establish jurisdiction.

Permanent Injunction

The order permanently restrains the settling defendants from paying or providing incentives for consumer reviews and from using reviews or endorsements involving a relationship that could materially affect their credibility. It also prohibits misrepresentations that a review is truthful or written by an actual user, as well as misrepresentations made through reviews or endorsements.

The order separately prohibits misrepresentations that a living-arrangement listing is verified, authentic, or available. It also bars misrepresentations about other facts material to consumers, including total costs, material restrictions, performance, nature, central characteristics, and whether the platform is a safe community with real members worldwide.

Affiliate Monitoring and Consumer Relief

The order requires the settling defendants to provide marketing affiliates with the order, obtain written compliance acknowledgments, disclose that violations can result in termination and forfeiture of payments, and monitor affiliate marketing materials at least monthly. They must investigate consumer complaints, stop payments connected to affiliates that violate the order, and fully refund consumers whose purchases originated from affiliates known or reasonably expected to have engaged in prohibited practices.

Failure to create and maintain records showing compliance with the affiliate-monitoring requirements creates a rebuttable presumption of a violation in an action brought by a plaintiff alleging noncompliance.

Monetary Judgments

The order enters a $36,260,899.84 equitable monetary judgment in favor of the plaintiff states against the settling defendants jointly and severally. The settling defendants must pay $1.6 million to the plaintiff states: $1.1 million within seven days of entry and $500,000 within nine months. The payment is to be used for restitution and administration of restitution to consumers on behalf of the plaintiff states. The remaining amount is suspended, subject to being reinstated if the court finds specified financial misstatements, omissions, or violations of the order.

The order also enters separate civil-penalty judgments in favor of California, Colorado, Florida, Illinois, Massachusetts, and New York. Those penalties are suspended upon payment of the equitable relief and may become due if the specified conditions are violated. The order states that the civil penalties are owed to governmental units and are not compensation for actual financial loss.

Additional Obligations

The settling defendants must provide customer information needed to administer consumer redress, cooperate with the plaintiffs’ investigations and proceedings, provide truthful and complete information, and appear for requested interviews, discovery, hearings, trials, and other proceedings without a subpoena when the order’s notice requirements are met.

For five years, the individual settling defendants and corporate defendant must distribute the order to specified business personnel and obtain acknowledgments of receipt. The settling defendants must submit a sworn compliance report one year after entry. For twenty years, they must report specified changes, including changes in business structure, ownership, contact information, and—in the case of the individual settling defendants—business roles and residence information. They must also create records for twenty years and retain each required record for five years.

Disposition

Judge Colleen McMahon entered the stipulated order for permanent injunction, monetary judgment, and other relief. The settling defendants waived challenges to the order and agreed to bear their own costs and attorney fees. The court retained jurisdiction to construe, modify, and enforce the order. The opinion text does not show a completed signature date, but the supplied case metadata identifies September 5, 2023, as the filing date.