Federal Trade Commission v. AMG Servs., Inc., 2016 U.S. Dist. LEXIS 135765 (D. Nev. Sept. 30, 2016):

Pending before the Court is a Motion for Summary Judgment, (ECF No. 900), filed by Defendants AMG Capital Management, LLC ("AMG Capital"); Level 5 Motorsports, LLC ("Level 5"); Black Creek Capital Corporation ("Black Creek"); Broadmoor Capital Partners ("Broadmoor"); and Scott A. Tucker ("Scott Tucker") (collectively "Tucker Defendants").¹ Plaintiff Federal Trade Commission ("FTC") filed a Response, (ECF No. 938), and the Tucker Defendants filed a Reply, (ECF No. 949).

1   As per the Court's Order of September 20, 2016, the instant Order does not implicate Defendants Nereyda Tucker, as Executor of the Estate of Blaine Tucker, or LeadFlash Consulting, LLC. (See Order, ECF No. 1054).

Also pending before the Court is a Motion for Summary Judgment, (ECF No. 907), filed by the FTC. Defendants Park 269, LLC ("Park 269") and Kim C. Tucker ("Kim Tucker") (collectively "Relief Defendants") filed a Response, (ECF No. 935), as did the Tucker Defendants, (ECF No. 941). The FTC filed a Reply, (ECF No. 952). [*4]

Also pending before the Court is a Motion for Summary Judgment, (ECF No. 913), filed by the Tucker Defendants. The FTC filed a Response, (ECF No. 940), and the Tucker Defendants filed a Reply, (ECF No. 950).

Because the Court GRANTS FTC's Motion, the Court DENIES as moot the motions filed by the Tucker Defendants and the Relief Defendants (collectively "Defendants").²

2   Also pending before the Court are three Motions to Reconsider filed by the Tucker Defendants. (See ECF Nos. 850, 963, 975). Two of these motions relate to orders entered by Magistrate Judge Cam Ferenbach. "A district judge may reconsider any pretrial matter referred to a magistrate judge in a civil . . . case . . . where it has been shown that the magistrate judge's ruling is clearly erroneous or contrary to law." LR IB 3-1. A magistrate judge's pretrial order issued under 28 U.S.C. § 636(b)(1)(A) is not subject to de novo review, and the reviewing court "may not simply substitute its judgment for that of the deciding court." Grimes v. City and County of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991). The Court may overturn the magistrate judge's decision if, upon review, the Court is left with a definite and firm conviction that a mistake has been made. See David H. Tedder & Assocs. v. United States, 77 F.3d 1166, 1169-70 (9th Cir. 1996).

The most recently filed Motion, (ECF No. 975), asks the Court [*5]  to reconsider its Asset Freeze Order, (ECF No. 960). Because the Court grants the FTC's request for equitable monetary relief, infra, the Court DENIES this Motion as moot. Similarly, Defendants' first Motion to Reconsider, (ECF No. 850), is DENIED as moot in light of the instant Order. In this Motion, Defendants raise a multitude of objections to Magistrate Judge Ferenbach's Order, (ECF No. 849), regarding discovery issues. Even if the Court were to grant this Motion, the result of the instant Order would remain unchanged given the wealth of evidence establishing Defendants' liability.

Finally, Regarding Defendants' remaining Motion to Reconsider, (ECF No. 963), the Court does not agree with Defendants that Judge Ferenbach exceeded his authority. First, Judge Ferenbach's Order, (ECF No. 956), denying Defendants' request for discovery sanctions did not constitute a dispositive order. See 28 U.S.C. § 636(b)(1)(A) (listing dispositive motions). Second, the Court does not endorse Defendants' interpretation of Judge Ferenbach's Order as indicative of double standard. The well-reasoned decision does not reflect Defendants' absolutist reading. In light of the acrimonious discovery process in this case, Judge Ferenbach's [*6]  Order is a clear attempt to move the discovery process forward. Accordingly, the Court DENIES this Motion.

I. BACKGROUND

This action was brought by the FTC, asserting that the "high-fee, short-term payday loans" offered by former Defendants AMG Services, Inc. ("AMG"), SFS, Inc. ("SFS"), Red Cedar Services, Inc. ("Red Cedar"), and MNE Services, Inc. ("MNE") (collectively "Lending Defendants") violated section 5 of the Federal Trade Commission Act of 1914, 15 § U.S.C. 45(a)(1), the Truth in Lending Act of 1968, 15 U.S.C. § 1601(a), and Regulation Z, 12 C.F.R. § 1026(a). (Am. Compl. 15:1-20:6, ECF No. 386).

The FTC has filed its Motion for Summary Judgment against the only remaining parties that did not settle the claims against them. The remaining defendants are AMG Capital, Level 5, Black Creek, and Broadmoor (collectively "Corporate Lending Defendants") as well as Scott Tucker. The FTC seeks injunctive relief against Scott Tucker and equitable monetary relief from the Corporate Lending Defendants and Scott Tucker. The FTC also seeks disgorgement from the Relief Defendants.

A. Factual History³

3   Given the lengthy history of this case, the Court provides a brief factual overview and discusses the remaining facts in further detail, infra [*7] , as they pertain to specific issues.

Scott Tucker controlled, founded, or was president of a host of short-term payday loan marketing and servicing companies, including, inter alia, National Money Service, Inc. ("NMS"), CLK Management LLC ("CLK"), and Universal Management Services, Inc. ("UMS") (collectively "Scott Tucker Loan Servicing Companies"). (Exs. 1-2, 4-5, 14 to Singhvi Decl., ECF Nos. 908-1-2, 4-5, 14). Between 2003 and 2008, the Scott Tucker Loan Servicing Companies entered into agreements with the Santee Sioux Tribe of Nebraska, the Miami Tribe of Oklahoma, and the Modoc Tribe of Oklahoma to allow the tribes to become "authorized lenders" for CLK. (See Exs. 14-15, 18 to Singhvi Decl., ECF Nos. 908-14-15, 18). The tribes subsequently formed SFS, Red Cedar, and MNE. (Exs. 17, 19-20 to Singhvi Decl., ECF Nos. 908-17, 19-20). In 2006, CLK transferred its trademarks for 500 FastCash, OneClickCash, Ameriloan, USFastCash, and UnitedCashLoans ("Loan Portfolios") to the new tribal entities. (Ex. 6 to Singhvi Decl., ECF No. 908-6). Following these transfers, SFS, Red Cedar, and MNE became the lenders for the Loan Portfolios. (Dempsey Dep. at 15-19, ECF No. 908-7). In 2008, CLK was [*8]  acquired by AMG Services, Inc., a tribal corporation created by the Miami Tribe. (Ex. 46 to Singvhi Decl., ECF No. 908-46).

B. Procedural History

On December 27, 2012, the Court signed an Order, (ECF No. 296), entering the parties' joint stipulation for preliminary injunction and bifurcation. The Bifurcation Order divided the litigation into two phases: Phase I, a liability phase, and Phase II, a relief phase. (Id. 9:1-10:23). During Phase I of the proceedings, the Court would adjudicate the merits of the FTC's claims for violations of the FTC Act, TILA, and EFTA. (Id. 9:1-24). During Phase II of the proceedings, the Court would adjudicate the remaining issues, including the individual liability of the various Defendants. (Id. 10:119). On January 28, 2014, Magistrate Judge Cam Ferenbach entered a Report and Recommendation ("R&R"), (ECF No. 539), granting summary judgment in favor of the FTC on two of its four causes of action. In his R&R, Magistrate Judge Ferenbach reviewed the websites through which the Lending Defendants sold their loans as well as the Loan Note Disclosures contained therein. (See, e.g., R&R 2:12-16).

On May 28, 2014, this Court entered an Order, (ECF No. 584), adopting [*9]  the R&R. Specifically, the Court agreed that "the net impression of the Loan Note Disclosure is likely to mislead borrowers acting reasonably under the circumstances because the large prominent print in the TILA Box implies that borrowers will incur one finance charge while the fine print creates a process under which multiple finance charges will be automatically incurred unless borrowers take affirmative action." (Order 15:8-12, ECF No. 584). Subsequently, the Lending Defendants stipulated to settle all of the FTC's claims against them resulting in monetary judgments in the aggregate amount of $25,496,677. (See generally Orders, ECF Nos. 727, 760-762, 888-889).

In the instant Motion, the FTC seeks summary judgment on the Defendants' remaining affirmative defenses as well as the issues of individual liability, common enterprise liability, liability of the Relief Defendants, and remedies. (Pl.s' MSJ 14:22-23, ECF No. 907). The Court addresses each of these issues in turn, after first addressing several of Defendants' evidentiary objections.

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A. Evidentiary Objections

The Tucker Defendants object to nearly all of the evidence relied upon by the FTC in its Motion for Summary Judgment. (See Obj., ECF No. 943). While the Court addresses some of those objections that pertain to the Court's Order below, the Tucker Defendants' remaining objections do not merit further discussion.

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2. Emails

The Tucker Defendants argue that the emails relied upon by the FTC "must be excluded as unauthenticated and inadmissible hearsay." (Obj. 11:25-26). However, all but one of the emails are presumptively authentic because they were produced by a party opponent. Haack v. City of Carson City, No. 3:11-CV-00353-RAM, 2012 WL 3638767, at *7 (D. Nev. Aug. 22, 2012) (noting that exhibits produced by a party opponent are "deemed authentic"). In addition, all of the emails are authentic per Federal Rule of Evidence 901(b)(4) because of their distinctive characteristics. See, e.g., Brown v. Wireless Networks, Inc., No. C 07-4301 EDL, 2008 WL 4937827, at *4 (N.D. Cal. Nov. 17, 2008).

Regarding the hearsay issue, many of the emails are admissible non-hearsay as they were sent by Scott Tucker or an employee of the Corporate Lending Defendants. See Fed. R. Evid. 801(d)(2)(D). Further, other emails are admissible pursuant to Federal Rule of Evidence 801(c)(2) because they are not offered for the truth of the matter asserted. See Fed. R. Evid. 801(c)(2). The FTC relies on one [*15]  such email, for example, to show Scott Tucker was "aware that the loan repayment model was problematic and confusing to consumers," (Resp. to Obj. 18:13-15) (emphasis added), not that "90% of the issues [the Tucker Defendants] have with customers stems from them not understanding [the Tucker Defendants'] process of renewal and paydowns," (Ex. 75 to Singhvi Decl., ECF No. 908-75). The Court therefore overrules the Tucker Defendants' objections regarding emails.