Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—11th Cir.: Telemarketing recovery services operation owner personally liable for company’s deceptive practices, (Aug 25, 2016)

By Linda O’Brien, J.D., LL.M.

The owner of a telemarketing operation—that pitched its ability to collect funds that consumers had previously lost in fraudulent telemarketing schemes—was personally liable for the company’s deceptive practices of receiving illegal up-front fees from consumers and misrepresenting the amount, timeliness, and likelihood of recovery, the U.S. Court of Appeals in Atlanta has ruled in an unpublished opinion. The district court’s grant of summary judgment in favor of the FTC was affirmed (FTC v. Consumer Collection Advocates, Corp., August 23, 2016, per curiam).

Consumer Collection Advocates (CCA) and its sole officer, Michael Ettus, engaged in a telemarketing operation designed to induce consumers through unsolicited telephone calls to purchase recovery services represented to collect funds previously lost in fraudulent telemarketing schemes. In November 2014, the FTC filed suit seeking to halt the operation, alleging violations of Section 5(a) of the FTC Act and Telemarketing Sales Rule.

The FTC claimed that, although CCA did not engage in legal action on behalf of consumers, CCA represented to consumers that it was able to utilize legal actions to recover a substantial portion of the lost monies typically within 30 to 180 days. For its services, CCA required an up-front retainer as well as a commission on any funds actually recovered. However, once a consumer agreed to purchase CCA’s services, all communications with CCA would cease and no funds were recovered as promised.

In September 2015, the district court granted the FTC’s motion for summary judgment, deeming admitted the FTC’s statement of facts on the ground that those facts were well supported and the defendants failed to present supported facts to controvert the FTC’s statement of facts. The defendants only challenged that questions of fact existed as to whether Ettus was personally liable for CCA’s violations.

No genuine issues of material fact precluded the district court’s grant of summary judgment since the defendants failed to negate the FTC’s assertions or present any evidence in support of their arguments, the appellate court determined. Here, in compliance with Federal Rule of Civil Procedure 56 and the Southern District of Florida’s local Rule 56, the FTC supported its summary judgment motion with a statement of undisputed facts containing citations to parts of the record. However, the defendants’ response to the summary judgment motion contained many factual assertions that were unsupported by citations to the record. The defendants also failed to file their own statement of material facts in opposition to the FTC’s statement of facts as required by local Rule 56. Therefore, the district court properly determined that the facts supported by evidence contained in the record were deemed admitted for purposes of the instant motion, the appellate court explained.

Furthermore, it was undisputed that Ettus participated directly in, and had authority to control, CCA’s deceptive practices and that he had knowledge of those deceptive practices. The district court found that Ettus was the sole owner and officer of CCA and was responsible for the company’s day-to-day operations. He exclusively made all managerial decisions, was the lone signatory on company bank accounts, and handled any customer complaints. Additionally, Ettus created the sales scripts used by CCA employees, obtained telemarketing licenses for himself and CCA, and controlled the domain and webhosting for CCA’s website. The evidence also showed that Ettus regularly used CCA’s financial accounts for his personal benefit. Thus, the district court did not err in finding that Ettus had the "requisite knowledge, awareness, and involvement to impose individual liability," the appellate court concluded.

The case is No. 15-14437.

Attorneys: Barbara E. Bolton for the Federal Trade Commission. Barry Ethan Witlin (Barry E. Witlin P.A.) for Consumer Collection Advocates, Corp.

Companies: Consumer Collection Advocates, Corp.

Cases: ConsumerProtection AlabamaNews FloridaNews GeorgiaNews FederalTradeCommissionNews