Federal Trade Commission v. EDebitPay, LLC
2012 U.S. App. LEXIS 18206
| 9th Cir. | 2012Background
- FTC sued EDebitPay, Dale Cleveland, and William Wilson for allegedly violating the FTC Act through online marketing of prepaid debit cards and short‑term loans; the matter settled with a Final Order from the district court.
- The Final Order enjoined misrepresentations and required clear disclosure of costs/attributes for prepaid/debit/credit card products, including marketing claims that they could be obtained at no cost.
- Two years later, FTC sought contempt for marketing Century Platinum (a shopping club) and NetSpend “No Cost” prepaid card in violation of the Final Order; the district court found contempt and awarded full consumer losses of $3,778,315.04.
- Defendants admitted the Starter Credit Direct site violated the Final Order, but challenged only the contempt findings related to Century Platinum on Super Elite and the NetSpend card.
- The district court held Century Platinum ads on Super Elite and NetSpend card disclosures violated the Final Order; it ordered restitution for consumer losses, not disgorgement.
- Defendants appeal contending the scope of the Final Order is limited and that the sanctions were improper, particularly as to the NetSpend card and the amount of restitution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of I.B and I.E.5 beyond cards | FTC argued the language covers any product or service. | Defendants contended scope limited to cards. | Subsections I.B and I.E.5 apply to any product or service. |
| Use of extrinsic evidence | Plain language governs; extrinsic evidence improper. | Extrinsic evidence should be considered to interpret scope. | Court rejected extrinsic evidence; relied on clear text. |
| Century Platinum on Super Elite violated I.B/I.E.5 | Ads misrepresented Century Platinum and failed to disclose material attributes. | Marketing transparency or context could excuse, not show violation. | Yes, violated I.B and I.E.5; misleading net impression. |
| NetSpend card violation of I.D. | Failed to clearly disclose fees; monthly maintenance fee misrepresented. | Most likely minor/technical violation. | Violation established; not a mere technical violation; noncompliance found. |
| Sanctions—full consumer losses vs disgorgement | Restitution to consumers appropriate given extensive misrepresentations. | Disgorgement sufficient; not full losses. | District court did not abuse discretion; full consumer loss restitution affirmed. |
Key Cases Cited
- Thompson v. Enomoto, 915 F.2d 1383 (9th Cir. 1990) (contract-based interpretation of consent decrees; de novo review of decree language)
- FTC v. Cyberspace.com LLC, 453 F.3d 1196 (9th Cir. 2006) (proper view of misrepresentation and disclosure in online advertising)
- In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693 (9th Cir. 1993) (broad equitable power to sanction civil contempt; use of consumer losses)
- FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009) (FTC authority to order restitution to consumers; complete justice standard)
- United States v. Miller, 588 F.2d 1256 (9th Cir. 1978) (obey-the-law injunctions; scope of consent decree interpretation)