from the United States District Court for the Middle District
of Florida D.C. Docket No. 6:12-cv-01618-ACC-KRS
ED CARNES, Chief Judge, BLACK, Circuit Judge, and MAY,
Telemarketing Sales Rule (TSR), 16 C.F.R. § 310.1 et
seq., promulgated by the Federal Trade Commission (FTC),
prohibits certain deceptive and abusive telemarketing
practices. It also makes assisting and facilitating a TSR
violation unlawful. Id. § 310.3(b). In 2011 and
2012, a number of individuals and closely held corporations
known as Treasure Your Success (TYS) operated a fraudulent
credit card interest reduction scheme. Universal Processing
Services of Wisconsin, LLC (Universal) violated the TSR by
providing substantial assistance to the TYS schemers. At this
stage in the litigation, only the extent-but not the fact-of
Universal's liability is in dispute. The district court
held Universal jointly and severally liable with the members
of the TYS scheme; Universal contests that judgment, and the
FTC defends it. The sole issue before us is whether joint and
several liability was available as a matter of law, and we
hold that it was. Accordingly, we affirm.
brief but active existence began in November
2011. Operating out of Winter Park, Florida,
Willy Plancher, Valbona Toska, and Jonathon Warren, together
with a handful of corporate entities they controlled,
conceived and operated TYS to extract payments from consumers
in exchange for fraudulent credit card interest reduction
services. The scheme operated roughly as follows. TYS would
cause automated calls to be made to consumers informing them
that they could lower their credit card interest rates by
dialing the number one. Any call recipient who did so would
be transferred to a series of live TYS representatives. The
sales agents would "promis[e] . . . the world, "
albeit in an intentionally confusing manner, in order to
persuade the consumer to divulge his or her credit card
number. Agents were instructed to represent that by
authorizing TYS to charge between $600 and $1000 to the
consumer's credit card, the consumer would be entitled to
receive $2500 or more in credit card interest rate
reductions. Of course, TYS did not have the ability to make
good on these promises. It did, however, manage to
fraudulently amass more than $2.5 million by means of them.
Universal is a payment processor. Its involvement began when
it approved TYS as one of its merchant customers. Like many
merchants, TYS used a payment processor to charge
customers' credit cards and deposit the funds in its bank
account. Hal Smith, an independent sales agent who had worked
with Universal for roughly a decade, was also involved in the
TYS scheme. Smith referred TYS to Universal and procured a
merchant account on TYS's behalf. Because Smith's
referrals to Universal over the prior ten years had been so
profitable, the merchant applications Smith brought to
Universal were personally reviewed by Universal's
then-president, Derek DePuydt.
Smith's referral, DePuydt approved TYS's first
merchant account with Universal, despite several glaring red
flags indicating TYS might be a fraud risk. In particular,
both Plancher and Toska, proprietors of TYS, had serious
credit delinquencies. After the first account was
established, TYS began to experience an unusually high number
of chargebacks, or instances in which a credit card provider
demands a refund of a disputed transaction on behalf of its
customer. The chargeback levels were so significant that
MasterCard took notice of TYS as a potential fraud risk. But,
despite mounting evidence of fraud, DePuydt approved a second
TYS merchant account.
not take long for the FTC to expose the TYS schemers. In
October 2012, the FTC filed this suit against Plancher and
Toska and their related corporate entities, alleging
violations of the Federal Trade Commission Act (the FTC Act),
15 U.S.C. § 41 et seq., the Telemarketing and
Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §
6101 et seq., and the TSR. After discovery had
commenced, the FTC added eight additional defendants,
including Smith, DePuydt, and Universal. Only the final count
of the amended complaint averred any wrongdoing on the part
of DePuydt and Universal. That count, Count Twelve, alleged
that Universal and DePuydt provided substantial assistance or
support to the members of the TYS scheme, who Universal and
DePuydt knew, or consciously avoided knowing, were engaged in
violations of the TSR.
2014, the FTC moved for summary judgment against the
defendants. After numerous settlements, only Universal,
Smith, and HES Merchant Services Company (HES), Smith's
wholly-owned personal corporation, remained to oppose the
motion. The district court granted summary judgment to the
FTC on all counts, including Counts One through Eleven
against Smith and HES and Count Twelve against Universal and
DePuydt. With respect to Count Twelve, the court found the
FTC had established that Universal, through DePuydt, knew or
consciously avoided knowing of the fraudulent activities TYS
conducted, and that Universal substantially assisted TYS in
perpetrating the scheme by providing the merchant accounts.
FTC subsequently filed a Motion for Equitable Monetary Relief
Judgment against Smith, HES, and Universal seeking
disgorgement in the amount of $1, 734, 972; that is, the
amount of the unjust gains that accrued to the TYS scheme
less chargebacks and refunds already remitted. The district
court found the defendants were jointly and severally liable
for the entire amount of restitution.
defendants appealed to this Court. Smith and HES appealed
both the merits of summary judgment and the court's
imposition of joint and several liability. Brief of
Appellants HES Merchant Services Co. & Hal E. Smith at 3,
FTC v. HES Merch. Servs. Co., 652 Fed.Appx. 837
(11th Cir. 2016) (Nos. 15-11500, 15-13380). Universal, on the
other hand, challenged joint and several liability only.
Opening Brief of Defendant-Appellant Universal Processing
Services of Wisconsin, LLC at 1, HES Merch. Servs.,
652 Fed.Appx. 837. We affirmed with respect to Smith and HES.
HES Merch. Servs., 652 Fed.Appx. at 838. In
particular, we agreed with the district court's
conclusion that Smith and HES could be held jointly and
severally liable because they had operated together with the
other TYS defendants as a common enterprise in perpetrating
the fraud. Id.
we vacated the district court's award of equitable
monetary relief against Universal. Id. We held the
district court had not explained why Universal's conduct
warranted joint and several liability, since its common
enterprise finding did not extend to Universal. Id.
We remanded the case and instructed the district court to
state whether Universal was a part of the common enterprise
or, if not, what other grounds there were for imposing joint
and several liability. Id.
remand, the district court reasoned that a violation of the
TSR constitutes an "unfair or deceptive act or
practice" in violation of the FTC Act. As such, the
district court was authorized to order restitution and
disgorgement under the Act. Furthermore, the court clarified
that Universal's liability was premised on substantial
assistance rather than on a common enterprise theory.
Observing the dearth of cases involving substantial
assistance under the TSR, the district court looked to tort
and securities law for guidance. Both sources of law
suggested that joint and several liability is appropriate
where a defendant substantially assists the primary violator.
In short, the district court clarified that substantial
assistance under the TSR was itself sufficient to justify
joint and several liability. The court reaffirmed its order
holding Universal jointly and severally liable, and Universal
filed the instant appeal.
STANDARD OF REVIEW
review a district court's order granting equitable
monetary relief for abuse of discretion." FTC v.
Wash. Data Res., Inc., 704 F.3d 1323, 1325 (11th Cir.
2013). "An abuse of discretion occurs if the judge fails
to apply the proper legal standard or to follow proper
procedures in making the determination, or bases an award
upon findings of fact that are clearly erroneous."
Id. at 1326 ...