Fed. Trade Comm'n v. Ideal Fin. Solutions, Inc., 2:13-cv-00143-JAD-GWF

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Writing for the CourtJennifer A. Dorsey United States District Judge
PartiesFederal Trade Commission, Plaintiff v. Ideal Financial Solutions, Inc., et al., Defendants
Docket Number2:13-cv-00143-JAD-GWF
Decision Date23 February 2016

Federal Trade Commission, Plaintiff
Ideal Financial Solutions, Inc., et al., Defendants



February 23, 2016

Order Granting in Part Motion for Summary Judgment and Motion for Default Judgment, Entering Final Judgment, and Closing Case

ECF 224, 225

The Federal Trade Commission sued Ideal Financial Solutions, Inc., its related entities, and the people who control them alleging a wide-ranging fraud scheme in which Ideal, through a host of shell entities, purchased consumer bank and credit card information from payday-loan vendors and charged unwitting consumers a fee for financial services never provided.1 Defaults have been entered against the corporate defendants,2 and on June 30, 2015, I granted summary judgment on liability against the individual defendants.3

The FTC now moves for summary judgment on relief against the individual defendants,4 and for default judgment against the corporate defendants.5 The FTC requests a final judgment of over $43 million in equitable damages and injunctive relief against all defendants. I find that the FTC has carried its burdens to establish the claimed damages and to show that injunctive relief is appropriate, but I decline to grant the entirety of the injunctive relief sought by the FTC. Accordingly, I grant the

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FTC's motion for summary judgment and motion for default judgment in part, enter final judgment consistent with my findings below, and close this case.6

Procedural History

The FTC filed this action against Ascot Crossing, LLC; Avanix, LLC; Bracknell Shore, Ltd.; Chandon Group, Inc.; Fiscal Fitness, LLC; and Ideal Financial Solutions, Inc. (corporate defendants); and the people who control them: Kent Brown, Jared Mosher,7 Christopher Sunyich, Melissa Sunyich Gardner, Michael Sunyich, Shawn Sunyich, and Steven Sunyich (individual defendants),8 alleging that they orchestrated a fraud scheme using unfair billing practices (count 1), deceptive billing practices (count 2), and deceptive statements that consumers authorized payment (count 3), all in violation of the FTC Act.9

Shortly after filing suit, the FTC successfully moved for a temporary restraining order—followed by a preliminary injunction—under which it seized defendants' financial assets,10 and the court appointed a receiver to oversee the operation of the corporate defendants.11 On June 5, 2014, a clerk's default was entered against all of the corporate defendants12 and consent judgments were entered against Kent Brown and Shawn Sunyich.13 On June 30, 2015, I granted the FTC's motion for summary judgment on liability14 against the remaining individual defendants. But I declined to enter judgment on relief at that time because the FTC had failed to sufficiently prove the

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requested damages.15 This was largely because I declined to consider the unsworn expert report of Lisa T. Wilhelm.16 I gave the FTC 30 days to file a motion for summary judgment on relief if it could produce sufficient admissible evidence to support its damages calculation.

The FTC now moves for summary and default judgments that would result in a final monetary judgment and permanent injunctive relief against all defendants except Kent Brown and Shawn Sunyich.17 In support, the FTC submits two attorney affidavits,18 the affidavit of an FTC data analyst,19 and Wilhelm's now properly-authenticated expert report.20 I thus consider whether—with the aid of Wilhelm's report—the FTC has now sufficiently demonstrated its entitlement to summary and default judgments. For the reasons discussed below, I find that the FTC has sufficiently established the defendants' monetary liability and that it is entitled to a narrowly-drawn injunction to prevent the defendants from committing future, similar violations of the FTC Act and to monitor their compliance.

Motion for Summary Judgment Against the Individual Defendants

A. Summary-judgment standards

Summary judgment is appropriate when the pleadings and admissible evidence "show there is no genuine issue [of] any material fact and that the movant is entitled to judgment as a matter of law."21 If the moving party satisfies Rule 56 by demonstrating the absence of any genuine issue of

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material fact, the burden shifts to the party resisting summary judgment to "set forth specific facts showing that there is a genuine issue for trial."22 The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts"; he "must produce specific evidence, through affidavits or admissible discovery material, to show that" there is a sufficient evidentiary basis on which a reasonable fact finder could find in his favor.23

B. Monetary liability under the FTC Act

The FTC Act was designed to protect consumers from economic injuries. Courts thus "have often awarded the full amount lost by consumers rather than limiting damages to defendant[s'] profits."24 The FTC need not prove that every consumer was injured; it must simply show that the defendants' unlawful practices impacted an overwhelming number of consumers and caused actual consumer injury.25 Once the FTC meets this burden, it must then "show that its calculations reasonably approximated the amount of customers' net loss."26 The burden then "shifts to the defendants to show that [the FTC's] figures [are] inaccurate."27

"An individual is personally liable for a corporation's FTC Act § 5 violations if he 'participated directly in the acts or practices or had authority to control them' and 'had actual knowledge of material misrepresentations, was recklessly indifferent to the truth or falsity of a

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misrepresentation, or had an awareness of a high probability of fraud along with an intentional avoidance of the truth.'"28 Having previously determined that the individual defendants are personally responsible for the damages caused by the defendant corporations,29 I now consider whether there are any genuine issues of material fact as to whether the FTC has carried its burden to reasonably approximate consumer losses.

C. The FTC is entitled to the equitable monetary relief it requests because the consumer-loss amount is not genuinely disputed.

The FTC submits three declarations with accompanying financial records30 and the expert report of Lisa T. Welham to support the amount of its damage request.31 The FTC contends that this undisputed evidence shows consumer losses in excess of $43 million.32 To calculate consumer injury, the FTC relies on records from Ideal's own "customer" database, OrangeCRM,33 and two of Ideal's payment processors, Litle & Co. and Payment Data Systems, Inc.34 These payment-processor records show that, in addition to the $27 million in charges recorded in the OrangeCRM database, defendants charged $5.2 million through Ideal shell company Debt Elimination Systems in 2009 and

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201035 and $10.6 million through Ideal shell company Zeal Money Solutions in 2012.36 These charges total $43,083,720 in net consumer losses.37 The FTC argues that defendants Christopher Sunyich, Melissa Sunyich Gardener, Michael Sunyich, and Steven Sunyich, all of whom played pivotal roles in the scheme from its inception, are jointly and severally liable for the full amount.38 Defendant Jared Mosher is jointly and severally liable for only $36,575,542—the losses that the scheme caused since he joined it in late 2010.39

I find that the FTC has reasonably approximated the consumer-loss amount attributable to defendants: they are jointly and severally liable for $43,083,720, except for Jared Mosher, who is jointly and severally liable for $36,575,542.40 The burden thus shifted to the individual defendants to raise genuine issues of fact as to the accuracy of these amounts.41

The individual defendants fail to rebut the FTC's calculations. Only Melissa Sunyich Gardner and Christopher Sunyich offered any response to the FTC's motion.42 Melissa Sunyich Gardner argues that she "did absolutely nothing wrong" and that the court should not order monetary

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or injunctive relief,43 but she points to no evidence to show that the FTC's calculations are inaccurate. In his response, Christopher Sunyich likewise disclaims liability for the underlying offenses and conclusorily argues that the requested relief is inappropriate.44 Also completely absent from his response is any evidence to show that the FTC's damages calculations are inaccurate.

The responding defendants dispute their liability for the underlying offenses rather than the FTC's damages calculations. I previously found that the evidence "overwhelmingly" demonstrated their liability:45 the lines between the corporate defendants were so blurred that they formed a "common enterprise," making each liable for the deceptive acts and practices of the others;46 and the individual defendants controlled the corporate defendants, making each individually liable for the violations.47 I decline to reconsider the individual defendants' liability at this stage in the litigation, and they have given me no legitimate reason to do so. Because no individual defendant has satisfied his or her burden to demonstrate that the FTC's damages calculations are genuinely disputed, the FTC is entitled to summary judgment on damages.

D. Standard for granting permanent injunctive relief under the FTC Act.

The FTC may seek a permanent injunction to prevent future violations of the FTC Act.48 The scope of the injunction depends on the facts of the particular case; and its goal is to prevent future, similar violations.49 Though the FTC "is not limited to prohibiting the illegal practice in the precise form" it existed in the past,50 the injunction must bear a reasonable relation to the defendants'

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unlawful practices.51 When fashioning injunctive relief, courts consider several factors, including the degree of scienter, frequency of violative acts, the defendants' abilities to commit future violations, the degree of harm to...

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