Situated v. Puccio

• Decision Date: 27 July 2010
• Docket Number: No. 09-1416.,09-1416.
• Citation: 613 F.3d 60
• Court: U.S. Court of Appeals — First Circuit
• Parties: Andrew ZIMMERMAN; Kelly Zimmerman, On Behalf of Themselves and All Others Similarly Situated, Plaintiffs, Appellees, v. John PUCCIO; Richard Puccio, Defendants, Appellants, Cambridge Credit Counseling Corp.; Cambridge/Brighton Budget Planning Corp.; Debt Relief Clearinghouse, Ltd.; Cambridge Credit Corp.; Cypress Advertising and Promotions, Inc.; Brighton Credit Corp.; Brighton Debt Management Services, Ltd.; Brighton Credit Corp. of Massachusetts; Cambridge Consumer Credit Index, Inc.; Southfork Asset Management Corp.; Capital One Bank; Capital One Credit Card Services; Capital One F.S.B.; Chase Manhattan Bank U.S.A.N.A.; JPMorgan Chase & Co.; Providian Bancorp Services; Providian Bank; Providian Financial Corporation; USAA Federal Savings Bank; USAA Savings Bank; First Consumer CMC Corp., Defendants.

613 F.3d 60

Andrew ZIMMERMAN; Kelly Zimmerman, On Behalf of Themselves and All Others Similarly Situated, Plaintiffs, Appellees,

v.John PUCCIO; Richard Puccio, Defendants, Appellants,Cambridge Credit Counseling Corp.; Cambridge/Brighton Budget Planning Corp.; Debt Relief Clearinghouse, Ltd.; Cambridge Credit Corp.; Cypress Advertising and Promotions, Inc.; Brighton Credit Corp.; Brighton Debt Management Services, Ltd.; Brighton Credit Corp. of Massachusetts; Cambridge Consumer Credit Index, Inc.; Southfork Asset Management Corp.; Capital One Bank; Capital One Credit Card Services; Capital One F.S.B.; Chase Manhattan Bank U.S.A.N.A.; JPMorgan Chase & Co.; Providian Bancorp Services; Providian Bank; Providian Financial Corporation; USAA Federal Savings Bank; USAA Savings Bank; First Consumer CMC Corp., Defendants.

No. 09-1416.

United States Court of Appeals,First Circuit.

Heard Jan. 7, 2010.

Decided July 27, 2010.

Charles P. Kindregan, with whom Nancy L. Perlman and Looney & Grossman LLP were on brief, for appellants.

David J. Vendler, with whom Richard H. Nakamura, Jr., Maureen M. Home, Morris Polich & Purdy LLP, G. Oliver Koppell, John F. Duane, Daniel F. Schreck, Law Offices of G. Oliver Koppell, Stephen G. Hennessy, Gregory S. Duncan, Garrett Minor Smith, Michie Hamlett Lowry Rasmussen & Twell, Joseph Seth Tusa, and Whalen & Tusa, P.C., were on brief, for appellees.

Before LIPEZ, Circuit Judge, SOUTER, Associate Justice, ^* and SELYA, Circuit Judge.

LIPEZ, Circuit Judge.

Appellants John and Richard Puccio appeal from the district court's grant of summary judgment to the plaintiffs, Andrew and Kelly Zimmerman, on behalf of a class of clients of Cambridge Credit Counseling Corporation (“Cambridge”), one of the Puccios' business enterprises, pursuant to the Credit Repair Organizations Act (“CROA”), 15 U.S.C. §§ 1679-1679j. CROA was enacted by Congress in 1996 to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.

Although the district court entered summary judgment against the Puccios and multiple corporate defendants for violations of CROA, the corporate defendants have not appealed. Instead, the Puccios appeal the judgment against them personally for the violation of two provisions of CROA, the first making it unlawful to “make or use any untrue or misleading representation of the services of the credit repair organization,” id. § 1679b(a)(3), and the second making it unlawful to “engage ... [in a] course of business that constitutes or results in the commission of, or an attempt to commit, a fraud or deception on any person in connection with the offer or sale of the services of the credit repair organization,” id. § 1679b(a)(4).

The Puccios argue that they do not fall within the ambit of CROA because Cambridge, their credit counseling enterprise, does not qualify as a “credit repair organization” as defined by the Act. They also argue that the district court erred in piercing the corporate veil when it found them liable for violating Section 1679b(a)(4). Finally, in their primary argument directed at their substantive liability under Section 1679b(a)(3), the Puccios argue that the district court did not, in fact, find them liable under the “misleading representation” provision, id. § 1679b(a)(3). Alternatively, if the district court did find them liable under (a)(3), the Puccios argue (but only barely) that the district court again erred in piercing the corporate veil.

After careful consideration, we affirm the district court's grant of summary judgment for the plaintiffs. We conclude that Cambridge was a “credit repair organization” within the meaning of CROA. We also conclude that the district court unambiguously held the Puccios liable for misleading representations under Section 1679b(a)(3) of CROA, and we affirm that finding of liability based on the court's piercing the corporate veil analysis. We do not reach the Puccios' liability under Section 1679b(a)(4), and their attendant arguments about the summary judgment standard and corporate veil-piercing, because the Puccios' liability under Section 1679b(a)(3) fully supports the district court's grant of summary judgment.

I.

In this appeal from the district court's grant of summary judgment for the plaintiffs, we must recite the material facts in the light most favorable to the party opposing summary judgment, in this case, the defendants. Torres Vargas v. Santiago Cummings, 149 F.3d 29, 30 (1st Cir.1998). Nonetheless, that requirement has less significance here because we draw much of our recitation of the facts from the plaintiffs' statement of material facts, which forms part of the undisputed record on appeal. It is undisputed because the district court deemed the plaintiffs' statement of facts admitted in the absence of proper opposition by the defendants pursuant to the District of Massachusetts Local Rule 56.1. Zimmerman v. Puccio, 529 F.Supp.2d 254, 258 n. 3 (D.Mass.2008) (“It must be noted that Defendants failed properly to dispute many of Plaintiffs' proffered facts.... In such instances, the court has taken the Plaintiffs' account as true.”). The rule requires that a party's opposition to a motion for summary judgment include a “concise statement of the material facts of record as to which it is contended that there exists a genuine issue to be tried, with page references to affidavits, depositions and other documentation.” D. Mass. Local R. 56.1. In the absence of such a statement, “[m]aterial facts of record set forth in the statement required to be served by the moving party will be deemed for purposes of the motion to be admitted by opposing parties.” Id.

We have reiterated the importance of such rules to the district courts in preventing litigants from shifting the burden of organizing evidence to the district court, and “we treat the district court's decision to apply [them] with deference.” Carreras v. Sajo, Garcia & Partners, 596 F.3d 25, 31 (1st Cir.2010). In this case, the defendants' failure to provide any citations whatsoever in their opposition statement leaves no doubt as to their noncompliance. That the parties filed cross motions for summary judgment does not affect either party's obligation to comply with the local rule. See P.R. Am. Ins. Co. v. Rivera-Vázquez, 603 F.3d 125, 132 (1st Cir.2010) (“A party cannot circumvent the requirements imposed by an anti-ferret rule simply by filing a cross-motion for summary judgment and expecting the district court to do its homework.”). The defendants offer no other reason why we should revisit the district court's decision to deem the facts in the plaintiffs' statement to be admitted and we decline to do so. ¹

A. The Puccio Companies1. Corporate Structure

In the early 1990s, John Puccio controlled several entities doing business in the arena of debt management. ² He started Cambridge Credit Corp. (“CCC”), a New York corporation, in 1993. Later that year, he founded Brighton Credit Corp. (“BCC”), also in New York. He served as president of both for-profit corporations. The companies shared office space and employed almost identical client contracts.

After CCC and BCC were ordered to cease operating by the New York Banking Department in 1996, ³ John Puccio decided to move his operations to Massachusetts and start a non-profit organization. He and his brother Richard co-founded Cambridge, which adopted the Service Agreements used previously by for-profits BCC and CCC. It provided the same debt management service as did those companies and employed their staff. As he had for BCC and CCC, John Puccio served as president of the company. Richard Puccio was Cambridge's Vice President and strategic planner. He was also a board member of the company. In 1996, John Puccio filed papers to register Cambridge as a nonprofit entity under Massachusetts law and as a 26 U.S.C. § 501(c)(3) non-profit entity under federal law.

Shortly after the formation of Cambridge, John Puccio arranged to have the new company purchase the “intangible assets” of BCC and CCC for $14.1 million. Although the Intangible Asset Sale Agreement purported to convey to Cambridge the goodwill in the trademarks and copyrights of BCC and CCC, neither company had been issued any trademarks or copyrights at the time of the purchase. Moreover, the sale was concluded without negotiation and in the absence of independent representation for Cambridge.

Around the same time, John Puccio also founded Cambridge/Brighton Budget Planning Corporation (“CBBPC”) in New York as a “credit counseling” agency and another “credit counseling agency,” Brighton Credit Management Corp. (“BCMC”), a Florida entity. Both were controlled by John Puccio, who handled day-to-day operations and hiring and oversaw the general operations of the businesses. They used service agreements virtually identical to the Puccios' other concerns and advertised their affiliation with each other and with Cambridge.

All three companies, Cambridge, CBBPC, and BCMC, got “back office support” for their operations from yet another Puccio entity, Brighton Credit Corp. of Massachusetts (“BC Mass”). ⁴ BC Mass worked exclusively for the three Puccio companies. It did not have clients of its own, but performed all mailing, correspondence, ongoing customer services, and record-keeping services in connection with the debt management service being sold by the other Puccio companies. It also handled Cambridge's “Good Payer” program and took care of all other matters related to client accounting, including the central function of communicating with creditors in order to achieve the re-aging ⁵ of client accounts. If a client called the phone number provided by Cambridge, a BC Mass employee would answer.

John and Richard Puccio created and controlled several additional companies. For example, Debt Relief Clearinghouse Ltd., was the marketing arm of the Puccio organization, while Cypress Advertising and...