Fed. Trade Comm'n v. Credit Bureau Ctr.
| Decision Date | 13 September 2021 |
| Docket Number | 17 C 194 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | FEDERAL TRADE COMMISSION, Plaintiff, v. CREDIT BUREAU CENTER, LLC and MICHAEL BROWN, Defendants. |
In 2018, the Federal Trade Commission sued Credit Bureau Center and Michael Brown (collectively, CBC) under section 13(b) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 53(b), section 5 of the Restore Online Shoppers' Confidence Act (ROSCA), 15 U.S.C. § 8404, and section 621(a)(1) of the Fair Credit Reporting Act (FCRA), 15 U.S.C § 1681s(a)(1). See Compl. ¶ 1. The FTC alleged that CBC operated a deceptive marketing campaign that violated several consumer-protection statutes. This Court entered a permanent injunction and ordered CBC to pay more than $5 million in equitable monetary relief to the Commission-restitution, as the Seventh Circuit called it. See FTC v. Credit Bureau Ctr., LLC, 325 F.Supp.3d 852 (N.D. Ill. 2018) (Credit Bureau I) aff'd in part, vacated in part, 937 F.3d 764 (7th Cir. 2019).
On appeal, the Seventh Circuit vacated the restitution reward after holding that section 13(b) does not authorize restitution. See FTC v. Credit Bureau Ctr., LLC, 937 F.3d 764 (7th Cir. 2019) (Credit Bureau II) cert. granted, 141 S.Ct. 194 (2020), vacated, 141 S.Ct. 810 (2020), cert. denied, 141 S.Ct. 195 (2020), and cert. denied, 209 L.Ed.2d 743 (May 3, 2021). The Seventh Circuit affirmed all other portions of the Court's opinion. After the Seventh Circuit issued its mandate, the FTC filed a motion to amend this Court's judgment. The FTC asks that the Court reimpose the prior judgment pursuant to section 19 of the FTC Act, 15 U.S.C. § 57(b). CBC opposes the FTC's motion and has filed a countermotion to "enforce" the Seventh Circuit's mandate, which it reads as precluding the relief the FTC seeks.
For the reasons stated below, the Court grants the FTC's motion to alter or amend the judgment and denies CBC's motion.
CBC, along with affiliated marketers, schemed to bilk millions of dollars from consumers. Through a deceptive marketing campaign, consumers were directed to CBC websites where they believed they could receive a free credit report. Instead, the consumers were misled into enrolling in a monthly credit monitoring service in return for a monthly fee. From 2014 to 2017, CBC defrauded over 150, 000 consumers out of almost 7 million dollars.
In 2017, the FTC filed a complaint against CBC and its affiliated marketers in this court. Of the five counts, four are important for the consideration of the present motion: counts 1 and 2, which alleged the defendants violated section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and counts 3 and 4, which alleged CBC violated section 4 of ROSCA, 15 U.S.C. § 8403. Citing section 13(b) of the FTC Act and section 5(a) of ROSCA, the FTC requested injunctive relief and restitution.
After close of discovery, the FTC and CBC filed cross-motions for summary judgment. Citing section 13(b), the FTC asked for monetary relief totaling more than 5 million dollars-the amount consumers paid for CBC's credit monitoring service. CBC made numerous arguments for judgment in their favor, including that section 13(b) did not authorize monetary relief. The Court granted summary judgment on all five counts in favor of the FTC and denied summary judgment to CBC. See Credit Bureau I, 325 F.Supp.3d at 870. Later, the Court entered a permanent injunction and awarded monetary relief consisting of restitution. See generally dkt. no. 239. The Court also retained jurisdiction "for purposes of construction, modification, and enforcement" of the judgment order. Id. at 33.
CBC appealed. In 2019, the Seventh Circuit affirmed much of the Court's opinion but vacated the restitution reward after holding that section 13(b) does not authorize restitution. See Credit Bureau II, 937 F.3d at 771-86. In doing so, the Seventh Circuit overruled its prior decision in FTC v. Amy Travel Serv., Inc., 875 F.2d 564 (7th Cir. 1989), which authorized awards of restitution under section 13(b). See Credit Bureau II, 937 F.3d at 782-786. The Seventh Circuit stayed its mandate pending appeal to the Supreme Court.
The Supreme Court denied CBC's petition for writ of certiorari but granted the FTC's petition. See Credit Bureau Ctr., LLC v. FTC, 141 S.Ct. 195 (2020); FTC v. Credit Bureau Ctr., LLC, 141 S.Ct. 194 (2020). The case was meant to be consolidated with AMG Capital Management LLC v. FTC, but the Supreme Court vacated its grant later that year. FTC v. Credit Bureau Ctr., LLC, 141 S.Ct. 810 (2020). In 2021, a unanimous Supreme Court held that section 13(b) of the FTC Act does not authorize the FTC to seek equitable monetary relief such as restitution or disgorgement. AMG Cap. Mgmt., LLC v. FTC, 141 S.Ct. 1341, 1344 (2021). As such, courts across the country are no longer permitted to award monetary relief under section 13(b). See id.
A party seeking to alter or amend judgment under Federal Rule of Civil Procedure 59(e) must "clearly establish a manifest error of law or an intervening change in the controlling law or present newly discovered evidence." Romo v. Gulf Stream Coach, Inc., 250 F.3d 1119, 1122 n. 3 (7th Cir. 2001); see also Cosgrove v. Bartolotta, 150 F.3d 729, 732 (7th Cir. 1998). Rule 59(e) is not an appropriate vehicle for advancing arguments that could have been raised previously, introducing evidence that could have been introduced earlier, or rehashing old arguments. Small v Chao, 377 F.Supp.2d 665, 666 (C.D. Ill. 2003) (citing cases).
At bottom, the FTC asserts that it may seek monetary relief in this case pursuant to section 19 of the FTC Act (15 U.S.C. § 57(b))-a provision it did not cite in its complaint. To understand why the FTC makes this assertion, one must start with a provision the FTC did cite: section 5(a) of ROSCA. See Compl. at 22. Section 5(a) empowers the FTC to enforce ROSCA by treating violations of ROSCA as violations "of a rule under section 18 of the Federal Trade Commission Act (15 U.S.C. 57a) regarding unfair or deceptive acts or practices." 15 U.S.C. § 8404. Section 18 of the FTC Act is one of the "enforcement mechanisms" at the FTC's disposal. Credit Bureau II, 937 F.3d at 771. Section 18 empowers the FTC to "promulgate rules that 'define with specificity acts or practices which are unfair or deceptive.'" Id. (quoting 15 U.S.C. § 57(a)(1)(B)).
In short, section 5(a) of ROSCA treats a violation of ROSCA as a violation of a rule promulgated under section 18 of the FTC Act. Section 5(a) goes on to say that the FTC "shall enforce this chapter in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this chapter." 15 U.S.C. § 8404(a). In other words, a violation of ROSCA-like a violation of a rule promulgated under section 18 of the FTC Act-may be enforced in the same manner, by the same means, and with the same powers enumerated in the FTC Act. If a rule promulgated under Section 18 is violated, the FTC "can seek legal and equitable remedies, including restitution, from violators," under section 19 of the FTC Act. See Credit Bureau II, 937 F.3d at 771 (citing 15 U.S.C. § 57b(a)(1), (b)).
With that statutory background in mind, the Court agrees with the FTC that section 5(a) of ROSCA plainly authorizes it to seek monetary relief for ROSCA violations via sections 18 and 19 of the FTC Act. This, however, is not the end of the FTC's contentions. The FTC also contends that because section 5(a) of ROSCA incorporates all of its enforcement authority under the FTC Act, by citing section 5(a) in its complaint, the FTC not only put CBC on notice about the factual basis for its ROSCA claim and the remedy sought (restitution), but also implicated an alternative avenue for seeking that remedy. In its view then, the FTC is entitled to the same redress as awarded in the prior judgment, but under ROSCA and section 19 of the FTC Act rather than section 13(b).
CBC asserts a number of counterarguments and urges the Court to deny the FTC's motion to alter the judgment. The Court addresses CBC's counterarguments in turn.
1. Mandate rule and the law of the case doctrine
In response to the FTC's motion, CBC argues that the Court cannot amend its prior judgment because the Seventh Circuit's mandate does not "permit any further proceedings or motions by the parties." CBC Resp. Br. at 1. It contends that because the Seventh Circuit did not remand this case, it must have "conclusively decided the issue of whether the FTC had authority to pursue monetary damages against" CBC- irrespective of the statutory basis for such an award. Id. at 7. CBC also asserts that the FTC may not pursue its relief under an alternative statute because the "law of the case doctrine" precludes it. Id. at 10.
The FTC responds that the mandate rule only requires the Court to comply with the Seventh Circuit's expressed or implied rulings. FTC Reply Br. at 8-9. It is clear, the FTC says, that Seventh Circuit's mandate changed only one part of the Court's decision: it vacated the restitution award under section 13(b) because monetary relief is not available under that provision. Id. at 9. Because the Seventh Circuit did not expressly or impliedly address relief under section 19, the FTC contends, the Court is not precluded from granting it the same relief under that statutory provision. Id.
The Court agrees with the FTC. "The mandate rule requires a lower court to adhere to the commands of a higher cour...
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