United States Sues Telehealth Providers and Executives

On June 10, 2024, the U.S. Justice Department announced that together with the Federal Trade Commission, it filed an amended complaint against telehealth company Cerebral Inc., Cerebral’s founder and former Chief Executive Officer, Kyle Robertson; former Cerebral executive Alex Martelli; telehealth companies Zealthy Inc., Gronk Inc. and Bruno Health P.A. and an executive of those companies, German Echeverry.

According to the announcement, the government has settled its claims against Cerebral, Inc.  The proposed stipulated order pending approval by the U.S. District Court for the Southern District of Florida would require the company to cease misusing and improperly disclosing patient information, misrepresenting its data privacy or security practices and misrepresenting its cancellation practices.  Upon issuance of the order, Cerebral will also be required to pay approximately $5 million in consumer redress in addition to a civil penalty judgment of $10 million, which is suspended to $2 million based on its limited ability to pay.

The Justice Department continues to pursue relief arising from its claims against Robertson and Martelli, as well as telehealth companies Zealthy Inc., Gronk Inc. and Bruno Health P.A. and their executive German Echeverry.

The Alleged Unlawful Conduct of Cerebral and Its Executives

The United States alleges that Cerebral and Robertson violated the Federal Trade Commission Act, the Opioid Addiction Recovery Fraud Prevention Act of 2018 and the Restore Online Shoppers’ Confidence Act in connection with their misuse of patients’ sensitive personal health information, failure to keep that information private and secure and use of deceptive, burdensome and convoluted cancellation practices.

According to the amended complaint, which was filed on May 31, Cerebral and Robertson violated the FTC Act in two primary ways.  The company allegedly failed to protect consumers’ sensitive health information when — at Robertson’s purported direction — it intentionally deployed online tracking technologies across its website.  These tracking technologies allegedly collected and transmitted users’ information, without users’ informed consent, to third parties for business purposes such as targeted advertisements.  In doing so, the company may have contravened its own express claims that its services were “private” or “confidential,” and that it would not disclose user data to third parties without the users’ consent.

Also, Cerebral and Robertson allegedly failed to safeguard consumers’ sensitive data from unauthorized disclosure, despite claiming that the company’s website offered “secure” services.  Cerebral’s purported deficient practices allegedly led to data security breaches and unauthorized disclosures of users’ sensitive health information.

The amended complaint also alleges that Robertson and Martelli violated the FTC Act by causing Cerebral employees to falsely impersonate patients on online review sites, post fictitious reviews praising the company’s services and suppress authentic, negative reviews of the company.

The amended complaint further alleges that Cerebral and Robertson violated ROSCA by failing to clearly disclose material terms related to data privacy, data security and cancellation before obtaining patients’ billing information, by failing to obtain patients’ informed consent before billing them, and by failing to provide consumers with simple mechanisms to cancel their Cerebral subscriptions.  As a result, Cerebral allegedly obtained millions of dollars from consumers who unsuccessfully attempted to cancel their subscriptions.

Finally, the amended complaint alleges that Cerebral, Robertson and Martelli violated the Opioid Act by engaging in deceptive acts or practices with respect to substance use disorder treatment services.

The Alleged Unlawful Conduct of Zealthy Inc. and Its Executives

The amended complaint further alleges that Robertson continued to violate the FTC Act and ROSCA after he left Cerebral.

In May 2022, Robertson founded another telehealth company, Zealthy Inc. (later renamed Gronk Inc.), which he purportedly heads alongside German Echeverry, its Medical Director.  According to the Amended Complaint, through Zealthy and its affiliated medical corporation, Bruno Health, Robertson and Echeverry violated ROSCA by failing to clearly disclose material terms of online subscriptions before obtaining consumers’ billing information, by failing to obtain consumers’ express informed consent to those terms before charging their credit cards and by failing to provide consumers with a simple cancellation process to stop recurring charges.

The government also alleges that Zealthy and its executives violated the FTC Act by committing unfair and deceptive business practices.  Such practices purportedly include billing consumers for costs they did not knowingly agree to; misleading consumers about the terms of their telehealth subscriptions; disregarding consumers’ cancellation requests and making it challenging for consumers to cancel; and tracking, collecting, disclosing and using consumers’ sensitive, personal data in ways that were not fully disclosed to consumers and that consumers did not knowingly authorize.

The department announced that it will continue to pursue civil penalties, injunctive relief and monetary relief against Robertson, Martelli, Echeverry, Bruno Health and Zealthy.

“The Justice Department is committed to stopping companies and their executives from mishandling and misusing individuals’ sensitive personal health information, and from implementing predatory billing practices,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division.  “Consumers who turn to telehealth companies for treatment expect that their sensitive health information will be handled with great care and that companies will abide by the representations they have made rather than flouting their stated policies for the sake of profits and growth.  This case reflects the department’s commitment to making sure that telehealth companies follow the law and safeguard the rights of those who seek treatment from them.  We will continue to work with the FTC to vigorously enforce the FTC Act, the Opioid Act and ROSCA.”

“Companies shouldn’t take shortcuts on privacy or security, or hinder patients from cancelling services they no longer want,” said FTC attorney Director Samuel Levine of the FTC’s Bureau of Consumer Protection.  “By continuing this case against the company’s former CEO, the government demonstrates its commitment to seeing that executives are held accountable for their misconduct.”

The claims made in the amended complaint are allegations that, if the case were to proceed to trial, the government must prove by a preponderance of the evidence.

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP.  Follow FTC defense attorney on X.

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