CHICAGO — A federal judge will let the Federal Trade Commission reimpose more than $5 million in fines levied against a company it accused of violating consumer protection laws.
The company called the move unfair, after the U.S. Supreme Court had ruled the FTC and a federal judge had improperly imposed the original fines.
U.S. District Judge Matthew Kennelly issued an opinion Sept. 13, restoring financial penalties initially imposed as a result of the FTC’s 2017 lawsuit against Credit Bureau Center for alleged violations of the FTC Act, the Restore Online Shoppers’ Confidence Act and the Fair Credit Reporting Act.
Although Kennelly initially entered a permanent injunction and order more than $5 million in financial relief, the U.S. Seventh Circuit Court of Appeals later vacated the restitution, saying the applicable FTC law doesn’t authorize such an award. In response, the FTC went back to Kennelly seeking to have the penalty reimposed under a different section of the same law. CBC filed a countermotion, arguing the Seventh Circuit’s ruling precludes such a shift.
In vacating the restitution, the Seventh Circuit affirmed the remainder of Kennelly’s opinion, which centered on a finding that CBC and affiliated markets “schemed to bilk” almost $7 million form more than 150,000 people through a deceptive marketing campaign directing users to CBC websites under the promise of a free credit report, when in actuality they were enrolled into fee-based monthly credit monitoring.
Kennelly said the Seventh Circuit’s determination that FTC Act section 13(b) didn’t authorize restitution overruled its own 1989 opinion in FTC v. Amy Travel Services. The U.S. Supreme Court took up the issue, and in a unanimous opinion earlier this year agreed 13(b) doesn’t let the FTC seek restitution or disgorgement.
Coming back before Kennelly, the FTC asked to seek monetary relief under FTC Act section 19, although it didn’t cite that provision in its initial complaint. But Kennelly noted the complaint did cite the Restore Online Shoppers’ Confidence Act, which treats violations concerning unfair or deceptive acts or practices as section 18 FTC Act violations.
“If a rule promulgated under Section 18 is violated,” Kennelly wrote, “the FTC ‘can seek legal and equitable remedies, including restitution, from violators,’ under section 19.”
Although agreeing with the FTC on the main point, Kennelly also analyzed CBC’s multiple counterarguments against his decision to amend the initial opinion. The first contention was that the Seventh Circuit’s mandate doesn’t allow further proceedings, but Kennelly said the panel didn’t “expressly or impliedly address relief under section 19.”
He also rejected CBC’s position the FTC waived its right to pursue alternative relief by first invoking section 13, writing it “was under no obligation to assert every conceivable ground for restitution” and noting court rules allow a judge to grant appropriate relief even when not specifically requested.
Kennelly further agreed with FTC that its motion to reimpose the penalty was proper because the relevant law changed with the Seventh Circuit’s opinion, as it overturned its own 1989 precedent. He also said CBC’s argument the FTC knowingly and intentionally misused section 13(b) ignored key facts and was unpersuasive. He said CBC made no showing for how its defense would change had the FTC’s new strategy for relief been in place throughout the proceedings.
CBC also aisd a 2020 U.S. Supreme Court opinion in Liu v. SEC limits damages such as those the FTC seeks, but Kennelly said “that conclusion can be drawn only by extrapolating.” He further rejected CBC’s statutory interpretations as “only a little more than cursory” as well as its arguments about whether the initial complaint was sufficient.
“The court is unmoved by CBC's claims of unfair prejudice,” Kennelly wrote. “Aside from the particular route to an award of restitution, nothing will materially change. The FTC seeks the same remedy, for the same reasons, and for the same victims under section 5(a) via section 19 as it did under section 13(b). And though CBC says it would have presented its case differently, as discussed earlier it does not explain how this is so.”
Defendants have been represented by attorney Stephen R. Cochell, of Houston.