Federal Trade Commission v. Damian Kutzner
8:16-cv-00999
C.D. Cal.Sep 8, 2017Background
- FTC sued Brookstone Law P.C. (CA), Brookstone Law P.C. (NV), Advantis Law P.C., and Advantis Law Group P.C. (the Corporate Defendants) under Section 13(b) of the FTC Act and consumer‑protection statutes/regulations for mortgage‑assistance relief services (MARS) violations.
- The Corporate Defendants defaulted by failing to respond; the Court entered default judgment and directed the FTC to submit a proposed final judgment.
- Alleged scheme: defendants marketed litigation and mortgage‑relief services to distressed homeowners while making numerous material misrepresentations (e.g., likelihood of success, receipt of large payments, voiding mortgages, availability of legal representation, adding consumers to lawsuits, and improper $5,000 demands).
- The Complaint alleged the defendants charged unlawful advance fees, failed to make required MARS disclosures, and operated as a common enterprise sharing employees, control, and revenues.
- The Court found liability on the pleaded facts, imposed a permanent injunction banning debt‑relief and deceptive representations, required consumer‑data preservation/destruction and compliance reporting, and entered an equitable monetary judgment of $18,146,866.34 jointly and severally against the Corporate Defendants.
- The order also addressed receivership completion, asset freeze modification to permit payment, recordkeeping, compliance monitoring, and retained jurisdiction for enforcement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Liability for deceptive acts under Section 5 and MARS Rule | Corporate Defendants marketed MARS, made material misrepresentations and charged advance fees, violating Section 5 and MARS | No responsive defense (default) | Court found pleaded facts sufficient to establish liability and entered default final judgment |
| Existence of a common enterprise | Defendants shared control, offices, employees, assets and revenues; conduct was interdependent | No responsive defense (default) | Court concluded defendants formed a common enterprise for liability purposes |
| Advance fees and disclosure violations under MARS (12 C.F.R. §1015) | Defendants took advance fees and failed to provide required disclosures to consumers | No responsive defense (default) | Court held defendants violated the MARS Rule by taking advance fees and failing to disclose required information |
| Proper relief: permanent injunction and monetary judgment | Injunctive relief and disgorgement are necessary because of high likelihood of recurrence and unjust gains of ~$18.15M | No responsive defense (default) | Court issued permanent injunctions (broad bans on debt‑relief advertising and misrepresentations), ordered customer‑data controls, monitoring, and entered $18,146,866.34 monetary judgment joint and several |
Key Cases Cited
- Delaware Watch Co. v. FTC, 332 F.2d 745 (2d Cir. 1964) (common‑enterprise inquiry supports attributing liability across related entities)
- FTC v. Network Servs. Depot, 617 F.3d 1127 (9th Cir. 2010) (interdependence and pooling of assets/revenues can establish a common enterprise)
- FTC v. J.K. Publications, Inc., 99 F. Supp. 2d 1176 (C.D. Cal. 2000) (common enterprise where entities share control, office space, employees, and officers)
- FTC v. Gill, 71 F. Supp. 2d 1030 (C.D. Cal. 1999) (likelihood of recurrence warrants permanent injunction; affirmed on appeal)
- United States v. W.T. Grant Co., 345 U.S. 629 (U.S. 1953) (recurring violations standard supports injunctive relief)