FTC v. Credit Bureau Center, LLC
937 F.3d 764
| 7th Cir. | 2019Background
- Michael Brown owned and operated Credit Bureau Center; its websites advertised a “free credit report and score” but used a negative‑option feature that silently enrolled consumers in a $29.94/month subscription for credit‑monitoring.
- Brown contracted with a recruiter (Pierce) whose subcontractor posted fake Craigslist rental ads directing applicants to Brown’s sites; Pierce referred ~2.7 million customers, generating ~$6.8 million.
- FTC sued under 15 U.S.C. § 53(b) (section 13(b)) seeking injunction and restitution; district court entered a permanent injunction and ordered $5,260,671.36 in restitution, and found Brown individually liable as principal and operator.
- Brown conceded liability for the Craigslist scheme and did not dispute some ROSCA disclosure failures, but challenged personal liability for website violations, the injunction (Eighth Amendment Excessive Fines argument), and—principally—the authority of § 13(b) to authorize restitution.
- The Seventh Circuit affirmed liability and the permanent injunction, but vacated the restitution award, overruling FTC v. Amy Travel Service, Inc., and holding § 13(b) does not authorize restitutionary monetary relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Brown liable for deceptive Craigslist scheme and websites (ROSCA) | FTC: Brown controlled the websites and referral system and violated FTCA and ROSCA’s disclosure rules | Brown: disputed some website misrepresentation and compliance with ROSCA disclosures; contested personal liability | Liability affirmed: Brown conceded Craigslist liability; ROSCA violated because sites failed to disclose the subscription was for credit‑monitoring before billing; personal liability given control and knowledge |
| Whether district court properly issued permanent injunction; Excessive Fines Clause challenge | FTC: injunction appropriate to prevent future violations | Brown: injunction is punitive/excessive in violation of Eighth Amendment | Injunction affirmed: equitable injunction is not a “fine” under the Eighth Amendment; no abuse of discretion shown |
| Whether § 13(b) authorizes restitutionary monetary relief (restitution/disgorgement) | FTC: § 13(b) implicitly authorizes ancillary equitable relief including restitution (relies on Amy Travel and related precedent) | Brown: § 13(b) only mentions injunctions; restitution is a backward‑looking remedy authorized by other FTCA provisions with procedural safeguards; § 13(b) not a vehicle for restitution | Reversed Amy Travel; held § 13(b) authorizes injunctions only and does not authorize restitution; restitution award vacated |
| Whether stare decisis/other circuits require leaving Amy Travel intact | FTC: long line of circuit precedent and practical enforcement reasons support Amy Travel | Brown & majority: Supreme Court decisions (notably Meghrig) change implied‑remedies analysis and require statutory‑scheme inquiry; circuit precedent must yield | Majority: overrulings justified—Meghrig and statutory structure compel limiting §13(b); dissent argued en banc review warranted and cited contrary circuit consensus |
Key Cases Cited
- FTC v. Amy Travel Serv., Inc., 875 F.2d 564 (7th Cir. 1989) (previous Seventh Circuit holding that § 13(b) implicitly authorized restitution; overruled)
- Meghrig v. KFC W., Inc., 516 U.S. 479 (1996) (express remedial scheme and timing limitation preclude implying restitutionary remedy)
- Porter v. Warner Holding Co., 328 U.S. 395 (1946) (broad language allowing courts to use equitable powers unless statute indicates otherwise)
- Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960) (applying Porter to imply equitable remedies when consistent with statutory purpose)
- FTC v. Bronson Partners, LLC, 654 F.3d 359 (2d Cir. 2011) (Second Circuit upholding §13(b) ancillary equitable relief including monetary redress)
- California v. American Stores Co., 495 U.S. 271 (1990) (equitable divestiture may qualify as injunctive relief under analogous statute)
- Kokesh v. SEC, 137 S. Ct. 1635 (2017) (characterizing SEC disgorgement context as public‑law remedy; relevant to public enforcement discussion)