F.T.C. v. National Business Consultants, Inc.

• Decision Date: 25 June 2004
• Docket Number: No. 03-30282.,03-30282.
• Citation: 376 F.3d 317
• Parties: FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. NATIONAL BUSINESS CONSULTANTS, INC.; Robert Namer; Voice of America, Inc.; America First Communications, Inc.; Namer, Inc.; Friends of Robert Namer, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 317

376 F.3d 317

FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. NATIONAL BUSINESS CONSULTANTS, INC.; Robert Namer; Voice of America, Inc.; America First Communications, Inc.; Namer, Inc.; Friends of Robert Namer, Defendants-Appellants.

No. 03-30282.

United States Court of Appeals, Fifth Circuit.

June 25, 2004.

Rehearing Denied August 2, 2004.

Scott Ramsey McIntosh (argued), U.S. Dept. of Justice, Civ. Div.-App. Staff, Washington, DC, for Plaintiff-Appellee.

Edward J. Castaing, Jr. (argued), Crull, Castaing, Lilly & Herman, New Orleans, LA, for Defendants-Appellants.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before DAVIS, BENAVIDES and PRADO, Circuit Judges.

BENAVIDES, Circuit Judge:

Defendants-Appellants appeal from the district court's Amended Judgment of April 8, 2003 that amended a 1991 Judgment in favor of Plaintiff-Appellee Federal Trade Commission ("FTC") against Defendants-Appellants National Business Consultants, Inc. ("NBC") and Robert Namer. The Amended Judgment added: (1) Namer, Inc.; (2) America First Communications, Inc.; (3) Voice of America, Inc.; and (4) Friends of Robert Namer (collectively, the "Additional Parties") as additional defendants and judgment debtors. Finding no error, we affirm.¹

I. BACKGROUND

In 1989, the FTC sued Defendants-Appellants Robert Namer and NBC, a corporation wholly-owned by Namer, under the Federal Trade Commission Act ("FTCA"), specifically the sections codified at 15 U.S.C. §§ 45(a), 53(b), and 57b, and the FTC's Franchise Rule, 16 C.F.R. § 436.1. At the time, Namer and NBC were engaged in the nation-wide sale of business franchises. The FTC alleged that Namer and NBC made numerous material misrepresentations to potential franchisees, made unsupported earnings claims, failed to provide required supporting documentation, and failed to make required disclosures. The FTC sought injunctive and monetary relief to redress the losses suffered by defrauded franchisees. Following a bench trial on the issue of liability, the district court found in favor of the FTC. In November 1991, the district court entered a judgment rendering Namer and NBC jointly and severally liable to the FTC for three million dollars, which represented the relief and damages awarded for consumer redress. In addition, the district court awarded pre-judgment interest, attorneys' fees and costs.

In July 2002, the FTC filed a motion to conduct a judgment debtor examination of Namer pursuant to the Federal Debt Collection Procedure Act ("FDCPA"), 28 U.S.C.A. §§ 3001-3308 (West 2004), and Rule 69(a) of the Federal Rules of Civil Procedure. The FTC sought to determine whether Namer had any assets that could be obtained to satisfy the judgment. Based upon evidence presented during the January 2003 examination, the district court found that Namer made use of three closely held entities — Namer, Inc., America First Communications, Inc., and Voice of America, Inc. — "for the calculated purpose of frustrating the Federal Trade Commission from enforcing the judgment in its favor." Federal Trade Comm'n v. Namer, No. 89-1740, 2003 WL 193503, at *3 (E.D.La. January 27, 2003). Concluding that the unpaid judgment owed to the FTC constituted a "debt" owed to the United States, the district court also found that Namer violated the FDCPA "by purposefully transferring income and assets" to those entities "and by incurring debt and making loans" to a fourth entity — Friends of Robert Namer — that were "calculated to hinder, delay and avoid collection of the judgment against him." Id.

Based upon these findings, the district court ordered the Additional Parties to show cause why they should not be named as parties and as judgment debtors under the FDCPA, Louisiana law, or both. Representatives from the prospective defendants did not appear at the show cause hearing. Counsel for the Additional Parties submitted affidavits on behalf of America First Communications, Inc., Voice of America, Inc., and Namer, Inc. Finding that neither Namer nor the Additional Parties showed cause as to why the judgment should not be amended to include them, the district court issued an Amended Judgment joining the Additional Parties as defendants and finding them jointly and severally liable, along with Namer and NBC, to the FTC for the judgment. Appellants timely appealed.

II. DISCUSSION

A. Debt owing to the United States under the FDCPA

Appellants argue that the FTC cannot rely on the FDCPA enforcement provisions because the money judgment does not constitute a "debt," as defined by the Act. In addressing this claim, we review a district court's statutory construction de novo. United States v. Phillips, 303 F.3d 548, 550 (5th Cir.2002).

The FDCPA applies only to amounts owing as debts. 28 U.S.C. § 3001(c). The FDCPA defines "debt" as:

an amount that is owing to the United States on account of a fee, duty, lease, rent, service, sale of real or personal property, overpayment, fine, assessment, penalty, restitution, damages, interest, tax, bail bond forfeiture, reimbursement, recovery of a cost incurred by the United States, or other source of indebtedness to the United States, but that is not owing under the terms of a contract originally entered into by only persons other than the United States.

Id. § 3002(3)(B). Appellants assert that the money judgment is not "owing to the United States" because it represents relief and damages awarded for consumer redress that the FTC must pass on to the defrauded franchisees.²

We agree with the district court that the FDCPA applies in this action because the unpaid judgment owed to the FTC constitutes a debt owing to the United States.³ "When interpreting a statute, we look first and foremost to its text." United States v. Alvarez-Sanchez, 511 U.S. 350, 356, 114 S.Ct. 1599, 128 L.Ed.2d 319 (1994). The relevant text is clear and unambiguous. The FDCPA applies to "an amount that is owing to the United States." 28 U.S.C. § 3002(3)(B). The terms of the judgment render Appellants jointly and severally liable to the FTC, not to private individuals, for the entire amount of the judgment.⁴ The FTC is considered the United States for purposes of the FDCPA. See id. § 3002(15)(B). Therefore, the United States, not any individual or group of individuals, is the formal owner of the judgment.

Although a portion of the judgment representing the damages awarded for consumer redress may ultimately be paid by the government to the defrauded franchisees, nothing in the statutory text requires that the government be the exclusive beneficiary of the judgment for the statute to apply.⁵

B. Authority to join the Additional Parties as judgment debtors

Appellants alternatively assert that, even if this case involves a "debt" for purposes of the FDCPA, the district court lacked authority to join the additional entities as defendants and judgment debtors absent a motion by the United States or the debtor. Appellants concede that the addition of parties as judgment debtors is permitted under section 3012 of the FDCPA upon motion of the "the United States or the debtor." 28 U.S.C. § 3012.⁶ Appellants overlook the import and language of section 3013 of the FDCPA.

Although section 3012 speaks only to the ability of the United States or the debtor to join additional defendants, section 3013 of the FDCPA provides: "The court may at any time on its own initiative or the motion of any interested person, and after such notice as it may require, make an order denying, limiting, conditioning, regulating, extending, or modifying the use of any enforcement procedure under this chapter." 28 U.S.C. § 3013. Because section 3013 grants the district court broad discretion to, among other things, modify the use of any enforcement procedure under the FDCPA, we review for abuse of discretion. Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988) (indicating that matters of discretion are reviewable for abuse of discretion). "A district court abuses its discretion if it bases its decision on an error of law or a clearly erroneous assessment of the evidence." United States v. Mann, 161 F.3d 840, 860 (5th Cir.1998). Because section 3013 authorizes the district court to extend or amend the use of any enforcement procedure under the statute, the district court's modification, taken upon its own initiative and with notice to the interested parties, did not exceed the discretion contemplated by the statute. We find no abuse of discretion in the exercise of the district court's authority to join additional defendants.

C. The finding that Appellants engaged in a fraudulent transfer of assets

Having determined that the district court could allow joinder of additional parties on its own motion, we address Appellants' challenge to the district court's factual finding that Namer engaged in the transfer of income and assets "calculated to hinder, delay, and avoid collection of the judgment against him" in violation of the FDCPA.⁷

"We review a district court's findings of fact for clear error and will not reverse a finding of fact unless a review of the entire record leaves us with the definite and firm conviction that a mistake has been committed." Couch v. Cro-Marine Transp., 44 F.3d 319, 327 (5th Cir.1995) (internal quotation and citation omitted). The evidence in the record adequately supports the district court's finding. There was evidence that assets were transferred directly or indirectly to Voice of America, Inc., America First Communications, Inc., and Namer, Inc. in lieu of payments to Namer for his services. Not only is it apparent from the record that these transfers were made to the various corporate entities on Namer's behalf, it is also readily apparent that this was done in an effort to frustrate the satisfaction of the judgment at issue.⁸ There was also sufficient evidence in the record to show that Namer made loans and contributions to Friends of ...