Federal Trade Commission v. Affiliate Strategies, Inc.
849 F. Supp. 2d 1085
D. Kan.2011Background
- This consumer protection action involves the FTC and several States alleging deceptive grant-marketing by Kansas, North Carolina, Illinois, and Minnesota defendants.
- A TRO and a preliminary injunction were entered against Kansas-based defendants, with a Receiver appointed and assets frozen.
- Counts I, VI, and XVI were deemed moot due to settlements and removals; Counts VIII and XII were not separately discussed.
- The remaining defendants include Affiliate Strategies, LPG, GWI, REBFN, WPS, Aria, and Chapman, with a default and settlements affecting several parties.
- The Court granted summary judgment against REBFN and Martin Nossov on most counts, denied Chapman’s summary judgment, and granted permanent injunctive relief as to REBFN and Nossov; the Utah defendants’ motions were denied as moot.
- The case proceeded under FTC Act §5, TSR, and various state consumer-protection laws controlling misrepresentations about guaranteed or likely grant money.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 70% grant-success claim was deceptive under FTC Act §5 | REBFN’s 70%/80M claim was false and unsubstantiated | The sales script attributed the claim to a third party and not the defendants themselves | Summary judgment for FTC on Counts II and III against REBFN |
| Whether REBFN’s representations guaranteed or likely grant money violated KCPA | Representations were deceptive and unsubstantiated under Kansas law | REBFN argues no Kansas marketing controlled the statements | Summary judgment for Kansas on Counts VII and X against Martin Nossov and REBFN (partial), with denial as to Alicia Nossov |
| Whether REBFN and Chapman violated the TSR | Defendants provided substantial assistance or engaged in deceptive telemarketing | Chapman argues no direct involvement in marketing | Summary judgment denied on Chapman’s TSR liability; REBFN found liable on TSR Count IV |
| Whether state-law claims against REBFN and Nossov support injunctive relief and remedies | State-law violations align with FTC findings and justify injunctions | Arguments about control and scope of authority create factual disputes | Permanent injunction granted against REBFN and Martin Nossov; Alicia Nossov remained contested on some claims |
| Whether monetary penalties/restoration are appropriate for REBFN and Nossov | Consumers relied on misrepresentations and suffered losses | Arguments about offsets and proportionality | Restitution awarded based on consumer losses; disgorgement not accepted; relief against REBFN and Martin Nossov sustained |
Key Cases Cited
- FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020 (7th Cir. 1988) (deceptive travel-related misrepresentations under §5 and TSR guidance)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (facts must show genuine issue of material fact; summary judgment standard)
- United States v. W.T. Grant Co., 345 U.S. 629 (U.S. 1953) (reliance and proof concerns in summary judgments)