Bureau of Consumer Financial Protection v. Consumer Advocacy Center Inc.
8:19-cv-01998
| C.D. Cal. | Aug 8, 2025Background
- Kaine Wen appealed a district court ruling awarding summary judgment, restitution, and civil penalties to the CFPB and the states of California, Minnesota, and North Carolina for his role in company violations of consumer protection laws.
- The underlying violations involved misrepresentations and unlawful acts connected to debt relief services, primarily through the Consumer Advocacy Center, Inc. (CAC), True Count Staffing, Inc., and Prime Consulting, LLC (“the Company”).
- Wen was an owner, founder, Chief Financial Officer, and General Counsel, holding significant control and authority over the Company during the alleged period of violations.
- The district court found Wen individually liable for violations of the Telemarketing Sales Rule (TSR), the Consumer Financial Protection Act (CFPA), and related state laws based on his control, knowledge, and reckless indifference.
- Wen was held jointly and severally liable for $95 million in restitution, and additional civil penalties were imposed based on the seriousness and continuity of the violations.
- Wen’s efforts to reopen discovery were denied on grounds of lack of diligence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Individual liability under CFPA/TSR for company acts | Wen participated and had authority/knowledge over Company misconduct | Disputed level of control/knowledge; denied liability | Wen had requisite control and knowledge; liable |
| Appropriateness of restitution and civil penalties | Harm was joint; Wen’s conduct egregious and reckless | Penalties excessive; restitution not individualized | Penalties proper, within statutory limits |
| Calculation of penalties by days—including weekends | Violations continuous; fee collection ongoing | Penalties overstated due to weekends/holidays | Daily calculation permissible and not excessive |
| Denial of motion to reopen discovery | Wen was not diligent in seeking further discovery | Wen claimed need to reopen for fair defense | No abuse of discretion; denial affirmed |
Key Cases Cited
- FTC v. Publishing Clearing House, Inc., 104 F.3d 1168 (9th Cir. 1997) (Requisite control for individual liability shown by officer status and authority over company)
- CFPB v. CashCall, Inc., 35 F.4th 734 (9th Cir. 2022) (Standard for individual liability for corporate violations: control, participation, knowledge/recklessness)
- CPFB v. Gordon, 819 F.3d 1179 (9th Cir. 2016) (Declarations alone do not defeat summary judgment without detailed factual support)
- SEC v. Murphy, 50 F.4th 832 (9th Cir. 2022) (Abuse of discretion standard for remedy calculation and penalty reasonableness)
- Pimentel v. City of Los Angeles, 974 F.3d 917 (9th Cir. 2020) (Culpability considered in assessing excessiveness of civil penalties)