Antitrust Law Daily Wrap Up, TOP STORY—11thCir: $2.6 Million Judgment Against Mortgage Relief Marketers Upheld, (Jan 17, 2013)

By Jeffrey May, J.D.

The FTC was entitled under Sec. 13(b) of the FTC Act to the amount of net revenues, received by marketers of mortgage loan modification services during the period that they controlled the mortgage loan modification enterprise that engaged in deceptive conduct in violation of the FTC Act and the Telemarketing Sales Rule (TSR), the U.S. Court of Appeals in Atlanta has ruled. The appellate court rejected the individual defendants' argument that the district court abused its discretion in awarding monetary relief based on net revenues (gross receipts minus refunds), rather than on profit (net revenue minus expenses) (FTC v. Washington Data Resources, Inc., January 16, 2013, per curiam).

The FTC filed its action challenging the practices of the mortgage loan modification enterprise in November 2009, part of “Operation Stolen Hope”—a federal-state crackdown on mortgage foreclosure rescue and loan modification scams. In April 2012, the federal district court in Tampa, following a bench trial, entered a $2.6 million judgment against three individuals and ordered them to refrain from telemarketing financial products or services and from similar services for 10 years (856 F. Supp. 2d 1247, 2012-1 Trade Cases ¶77,956). Separately, the court approved settlements with other defendants in the case and entered a default judgment against defendant Washington Data Resources, Inc.

On appeal, the three non-settling defendants contended that the relief was improper. In addition to challenging the monetary relief on the ground that it should have been based on the defendants’ profit, the defendants suggested that the remedy was improperly based on consumer loss. The appellate court acknowledged that a damages award based on consumer losses would be improper. However, it rejected the suggestion that the district court’s award was based on consumer losses simply because the total net revenue and the total consumer loss was the same. It was of no consequence that the measure of the unjust gains happened to equal the amount of consumer loss, the appellate court explained.

The district court’s order, which held two defendants jointly and severally liable for $1,974,270, and a third defendant liable for $664,704, was upheld.

The Case is No. 12-13392.

Attorneys: Michael Daniel Bergman, FTC, for plaintiff-appellee. Marlow Vincent White (Lewis & White, PLC) for defendants-appellants.

Companies: Washington Data Resources, Inc.

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