Plaintiff Federal Trade Commission's Motion for an Order to Show ...

More documents

Recommendations

Info

eported as unauthorized, and total returns also evidence the defendants’ unlawful debiting practices. Indeed, the defendants’ NSF rate of 40% exceeds the rate that a Florida federal court has found probative of unauthorized debiting practices. Capital Choice Consumer Credit, Inc., 2004 WL 5149998, at *19 (“the undersigned is particularly persuaded that the 30% rate of transactions returned for insufficient funds reflects that individuals were not knowingly authorizing the debiting of their bank accounts”). Moreover, MS LLC’s own business records show that over 24,000 of its debits were reported as unauthorized, and each unauthorized debit violates the Order. PX1 III. Lastly, MS LLC’s total return rate of 77% exceeds the rate that the Middle District of Florida has found to be “extraordinarily high” and supportive of summary judgment under the FTC Act and TSR. 14 The evidence conclusively establishes that the defendants caused consumers to be debited without their express, informed consent. 5. The Contempt Defendants Have Misrepresented that Consumers Consented to be Debited, in Violation of Permanent Injunction I. Paragraph I.A of the Order expressly bars the defendants from falsely asserting “that a [c]onsumer purchased or agreed to purchase a product or service, or that a transaction has been authorized by a [c]onsumer.” PX1 I.A.9. The defendants have violated this provision by repeatedly telling consumers they agreed to enroll in the program, when they did not. The defendants’ modus operandi is to debit consumers without authorization, and then, when consumers complain, lie and tell them that they agreed to be debited. Indeed, an 14 FTC v. Global Mkt’g Group, Inc., 594 F. Supp. 2d 1281, 1285, 1288-89 (M.D. Fla. 2008) (holding that defendant’s role in telemarketing scheme and receipt of reports showing “extraordinarily high” return rates as high as 71.5% showed knowledge of deception or awareness of probability of fraud and conscious avoidance of truth, justifying summary judgment); FTC v. Windward Mkt’g, Ltd., 1997 WL 33642380, at *6, 12 (N.D. Ga. Sept. 30, 1997) (concluding from 40% return rate that defendant knew debits were unauthorized or had notice of high probability of fraud). 21
MS LLC operator falsely told an FTC Investigator — after FTC staff had refused the offer to enroll in the defendants’ program — that he had agreed to be debited for the program. PX10L at 4:11-6:21. Similarly, the defendants’ operators have told consumers who denied authorizing debits that they agreed to enroll in the program, stating, “this was an application you submitted online,” PX9I at 3:25-4:5, and other words to the same effect. See PX9C at 4:25-5:5; PX9D at 4:1-5; PX9E at 3:19-25; PX9F at 4:5-11; PX9J at 7:4-8:3. A former MS LLC representative affirms it was the firm’s common practice to claim that consumers had agreed to join the program, even when consumers denied having ever heard of it. PX11 7- 8. For the many reasons detailed above, the claim that consumers consented to buy the defendants’ program is false. This misrepresentation violates the Order. C. The Contempt Defendants Should Be Ordered to Redress Consumers. The defendants should be held in civil contempt and ordered to redress consumers for the millions of dollars of harm they have inflicted through their scheme. A court may impose civil contempt sanctions “to coerce the defendant into compliance with the court’s order, and to compensate the complainant for losses sustained.” U.S. v. United Mine Workers, 330 U.S. 258, 303-04 (1947); see McGregor v. Chierico, 206 F.3d 1378, 1385 n.5 (11th Cir. 2000) (FTC action). Consumers injured by the defendants’ conduct are entitled to full remedial relief. McComb v. Jacksonville Paper Co., 336 U.S. 187, 193 (1949). In FTC contempt actions, the remedy for contumacious conduct is akin to the remedy for violation of the underlying statute, namely, consumer redress. Chierico, 206 F.3d at 1387-88. Civil contempt damages need be proven only by a preponderance of the evidence. Id. 22
Page 1 and 2: UNITED STATES DISTRICT COURT MIDDLE
Page 3 and 4: 3. The Contempt Defendants Have Not
Page 5 and 6: Shultz v. Applica, Inc., 488 F. Sup
Page 7 and 8: clearly and promptly disclose in te
Page 9 and 10: overseeing its “customer service,
Page 11 and 12: The defendants do not conspicuously
Page 13 and 14: features of the program as well as
Page 15 and 16: complaints. Id. 5-7; PX10 23; PX1
Page 17 and 18: debit card with “rewards points
Page 19 and 20: Eliasson. See FTC v. Neiswonger, 49
Page 21 and 22: The startlingly low rates at which
Page 23 and 24: $2,500 line of credit.” PX10 89-
Page 25: efore asking consumers for their ba
Page 29 and 30: According to the defendants’ inte
Page 31 and 32: Certification of Conference with Op

Plaintiff Federal Trade Commission's Motion for an Order to Show ...

Create successful ePaper yourself

Delete template?

Save as template?