Corporate Receiver’s Production of Documents from Corp. Authenticates Them — Emails Authenticated by Being Found on Computer of Defendant-Officer of Corp. — Court Disregards Boilerplate Evidentiary Objections on SJ, Can’t Fully Address All Others
FTC v. Kutzner, 2017 U.S. Dist. LEXIS 174299 (C.D. Cal. Sept. 5, 2017): I. INTRODUCTION
Pending before the Court are Plaintiff Federal Trade Commission's ("Plaintiff" or "FTC") Motion for Summary Judgment against Defendants Jeremy Foti ("Foti") and Charles Marshall ("Marshall") (Dkt. No. 284 (hereinafter, "FTC Mot.")), and Defendant Foti's Motion for Summary Judgment or, in the alternative, Motion for Summary Adjudication (Dkt. No. 287 (hereinafter, "Foti Mot.")). After considering the papers filed in support of and in opposition to the instant Motions, as well as the oral argument of counsel, the Court GRANTS Plaintiff's Motion for Summary Judgment and DENIES Defendant Foti's Motion for Summary Judgment.
A. The Parties and Plaintiff's Allegations1
The FTC brings the instant action against several corporate entities, Brookstone Law P.C. (California), [*2] doing business as Brookstone Law Group, Brookstone Law P.C. (Nevada), Advantis Law P.C. and Advantis Law Group P.C.2 (See Dkt. No. 61 (hereinafter, "FAC") ¶¶ 6-7.) These companies are law firms that offer mortgage relief services to consumers. (FAC ¶ 7.) In addition, Plaintiff brings this action against several individual Defendants: Damian Kutzner, Vito Torchia, Jr., Jonathan Tarkowski, R. Geoffrey Broderick, Marshall, and Foti (collectively, the "Individual Defendants"). (See Dkt. Nos. 1, 61.) Plaintiff has reached resolutions with several of the Individual Defendants, and they have been dismissed from the action. (See Dkt. Nos. 170, 177, 193.) Plaintiff has not reached a resolution with Defendants Foti or Marshall.
Plaintiff alleges that Defendant Foti "is an owner and controlling person of Brookstone and a principal or controlling person of Advantis." (FAC ¶ 9.) According to Plaintiff, Foti was one of the co-founders of Brookstone in 2011." (FAC ¶ 9.) "Although not an attorney, Foti controls the marketing and sales at both Brookstone and Advantis." (FAC ¶ 9.) Plaintiff claims that "[a]t all times material . . . , acting alone or in concert with others, [Foti] formulated, directed, controlled, [*3] had the authority to control, or participated in the acts and practices set forth" in the FTC's FAC. (FAC ¶ 9.)
Plaintiff alleges that Defendant Marshall "is a director, Chief Executive Officer, and Secretary of Advantis." (FAC ¶ 13.) "Marshall has also appeared as counsel in Brookstone's Wright v. Bank of America mass joinder case." (FAC ¶ 13.) "In 2015, Marshall was disciplined by the California Bar for violations related to mortgage assistance relief services, receiving a 90-day suspension from the practice of law in November 2015 for his ethical violations." (FAC ¶ 13.) Plaintiff claims that "[a]t all times material . . . , acting alone or in concert with others, [Marshall] formulated, directed, controlled, had the authority to control, or participated in the acts and practices set forth" in the FTC's FAC. (FAC ¶ 13.)
The instant action arises from the Individual Defendants' alleged scheme to defraud "consumers out of thousands of dollars in upfront and recurring monthly fees" in violation of the FTC Act and the Mortgage Assistance Relief Services ("MARS") Rule, 12 C.F.R. 1015. (Dkt. No. 142 at 4.) Specifically, Plaintiff claims that the Individual Defendants, operating through the Corporate Defendants, [*4] "convince consumers that if added to a 'mass joinder' case against their lender, they can expect a significant recovery, typically at least $75,000." (Id.) Plaintiff also claims that, despite their representations to the contrary, the Individual Defendants "have never won a mass joinder case, do not have the experience or resources to litigate them, and never sue on behalf of many paying consumers." (Id.)
The purported scheme began with Defendant Kutzner's ULG, a law firm offering advance fee loan modifications. (Id. at 5.) However, after the FBI and the United States Postal Inspectors raided ULG due to claims that its two primary attorneys committed mortgage modification fraud, and with ULG "unraveling," Defendant Kutzner, along with Defendants Torchia and Foti, set out to market mass joinder litigation through Brookstone. (Id.)
To market the mass joinder litigation, the Individual Defendants allegedly sent a substantial amount of form mailers to the public, which included the following statements: "you may be a potential plaintiff against your lender[;]" "our team of experienced lawyers offers you a superior alternative for recovery[;]" and "[i]t may be necessary to litigate your claims against [*5] your lender to get the help you need and our lawyers know how to do so." (Id.) The mailers also included statements that consumers had "a very strong case" and that prevailing in the litigation was "basically a done deal." (Id.)
In order to participate in the mass joinder litigation, the Individual Defendants would require consumers to pay upfront fees, including a large initial fee and subsequent monthly fees. (Id.) According to Plaintiff, the Individual Defendants failed to keep these fees in client trust accounts. (Id.) Plaintiff also claims that the mailers and fee agreements failed to include disclosures required by law. (Id.) Plaintiff avers that the Individual Defendants failed to provide the promised services, as many consumers were never added to a mass joinder case and the attorneys working for Brookstone and Advantis did not have sufficient experience to competently litigate the mass joinders. (Id.)
B. Procedural History
On May 31, 2016, Plaintiff filed its Original Complaint under seal. (Dkt. No. 1.) Plaintiff alleged two causes of action in its Original Complaint: (1) a violation of the FTC Act, 15 U.S.C. § 45(a); and, (2) a violation of the MARS Rule, 16 C.F.R. Part 322, recodified as 12 C.F.R. Part 1015 against Defendant Marshall [*6] and others, but not Defendant Foti. (Dkt. No. 1.) On July 5, 2016, Plaintiff filed a First Amended Complaint, adding Foti as a defendant, and alleging the same causes of action as its Original Complaint. (See FAC.)
On July 10, 2017, Plaintiff filed its Motion for Summary Judgment against Defendants Foti and Marshall. (FTC Mot.) Also on July 10, 2017, Defendant Foti filed his Motion for Summary Judgment or, in the alternative, Summary Adjudication. (Foti Mot.) On August 7, 2017, Defendant Foti (Dkt. No. 304 (hereinafter, "Foti Opp'n")) and Defendant Marshall (Dkt. No. 313 (hereinafter, "Marshall Opp'n")) opposed the FTC's Motion. Also on August 7, 2017, Plaintiff opposed Foti's Motion. (Dkt. No. 303 (hereinafter, "FTC Opp'n").) On August 14, 2017, Plaintiff filed its reply in support of its Motion (Dkt. No. 315 (hereinafter, "FTC Reply")), and Foti filed his reply in support of his Motion (Dkt. No. 319 ("hereinafter, "Foti Reply")).
On August 20, 2017, Defendant Marshall filed a Notice of Errata, attaching a corrected version of his response to Plaintiff's Separate Statement of Undisputed Facts. (Dkt. No. 338.) On August 21, 2017, the Court ordered Plaintiff to file any response to Defendant [*7] Marshall's corrected Statement Disputing Plaintiff's Undisputed Facts and Conclusions of Law in Support of Summary Judgment by August 24, 2017. (Dkt. No. 339.) Plaintiff complied with the Court's order and filed its Undisputed Statement of facts and Conclusions of Law on Reply in Support of its Summary Judgment Motion on August 24, 2017. (Dkt. No. 341 (hereinafter, "FTC Mot. USF").)
The Court held a hearing on these Motions on August 28, 2017.
III. EVIDENTIARY OBJECTIONS
"In motions for summary judgment with numerous objections, it is often unnecessary and impractical for a court to methodically scrutinize each objection and give a full analysis of each argument raised." Doe v. Starbucks, Inc., No. 08-0582, 2009 WL 5183773, at *1 (C.D. Cal. Dec. 18, 2009). "This is especially true when many of the objections are boilerplate recitations of evidentiary principles or blanket objections without analysis applied to specific items of evidence." Id.; see also Stonefire Grill, Inc. v. FGF Brands, Inc., 987 F. Supp. 2d 1023, 1033 (C.D. Cal. 2013) (explaining that "the Court will not scrutinize each objection and give a full analysis of identical objections raised as to each fact"). Per this Court's Standing Order, the parties are not to "submit blanket or boilerplate objections to the opponent's statements of undisputed fact." (Standing Order Regarding Newly Assigned [*8] Cases Rule 8(c)(iii).) "The boilerplate objections will be overruled and disregarded." (Standing Order Regarding Newly Assigned Cases Rule 8(c)(iii).)
Defendant Foti makes a variety of boilerplate objections to Plaintiff's evidence included in support of Plaintiff's Motion for Summary Judgment as well as Plaintiff's evidence included in opposition to Defendant Foti's Motion for Summary Judgment. (See Foti Reply at 1; FTC Mot. USF.) Defendant Marshall has joined in Foti's objections.3 The Court will not consider Defendants' blanket or boilerplate objections. See Starbucks, Inc., 2009 WL 5183773, at *1; (Standing Order Regarding Newly Assigned Cases Rule 8(c)(iii)). Defendant Foti makes a few specific objections that the Court discusses below. First, Foti argues that the emails, scripts, and mailers that the Receiver collected from the Corporate Defendants' offices are inadmissible because they have not been authenticated, they lack foundation, and/or they are not relevant. (Foti Reply at 1; Dkt. No. 304-2.) Second, Foti argues that the FTC relies on a flawed expert report in support of its Motion for Summary Judgment. (Foti Reply at 1; Dkt. No. 304-3.)
A. Defendant's Evidentiary Objections Regarding the Admissibility of the Emails, Scripts, and Mailers Collected by [*9] the Receiver from the Corporate Defendants
The Court OVERRULES Defendant's objections that the emails, scripts, and mailers the Receiver obtained from the Corporate Defendants have not been authenticated. The Receiver found the documents in question on the Defendants' premises, copied them, and produced them to the FTC. (See Dkt. Nos. 57 at 22 (detailing that the Receiver was made the custodian of all the Receivership's documents and assets), 284-8 at 1-2 ¶¶ 2-4.) These documents are, therefore, authentic, as business records certified by the Receiver. MGM Studios Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966, 972 (C.D. Cal. 2006) (emails of individual employees authenticated through production by corporate defendant); Burgess v. Premier, 727 F.2d 826, 835-36 (9th Cir. 1984) (documents found on the defendants' premises were authentic). Further, many of the emails are also authenticated by having been found on one of Foti's computers. (See Dkt. No. 284-8 at 1-2 ¶¶ 2-4.) As shown in Burgess, to overcome this prima facie showing of authenticity, Foti would need to prove there was a "motive . . . to store false documents" at the Corporate Defendants' offices. See Burgess, 727 F.2d 826 at 835; see also E.W. French & Sons, Inc. v. Gen. Portland, Inc., 885 F.2d 1392, 1298 (9th Cir. 1988) (explaining that the FTC need only establish a prima facie case of authenticity). Foti has not done so, and thus, the Court overrules Defendant's [*10] objections with respect to the objection that the emails, scripts, and mailers obtained from the Corporate Defendants have not been authenticated.
The Court also finds that Defendant Foti's objection as to the relevance of the emails, mailers, and scripts that the Receiver obtained from the Corporate Defendants is also OVERRULED. Foti argues that these documents are irrelevant. (See Dkt. No. 304-2 at 5.) However, these documents are relevant in that they tend to prove or disprove that the Corporate Defendants and the Individual Defendants engaged in the illegal conduct in question, and these facts are thus of consequence in determining the action. See Fed. R. Evid. 401. Defendant Foti's arguments on this point are therefore rejected.
B. Defendant's Evidentiary Objections Regarding the FTC's Expert Report Prepared by Dr. Isaacson
The Court OVERRULES Defendant's objection that Dr. Isaacson's report is inadmissible. Dr. Isaacson conducted a survey measuring the experience of consumers who retained the Corporate Defendants for their services. (See Dkt. No. 284-6.) Contrary to Defendant Foti's arguments, Dr. Isaacson's report does not violate Federal Rule of Evidence 702. As Dr. Isaacson testifies in his supporting declarations, his [*11] procedure for conducting the consumer survey is in accordance with generally accepted procedures, he appropriately blinded the study to hide the purpose of the study from the respondents while giving the respondents comfort in the legitimacy of the survey, determined that the response rate was more than sufficient, and determined there were no inherent biases. (See Dkt. Nos. 284-6, 315-5.) After considering the declarations of Dr. Isaacson, it appears that the survey he conducted does not suffer from the alleged defects discussed in In re Autozone, Inc., No. 3:10-md-02159-CRB, 2016 U.S. Dist. LEXIS 105746 (N.D. Cal. Aug. 10, 2016). Here, Dr. Isaacson's survey did not disclose the nature or purpose of the survey and has a much higher response rate than that in Autozone, greater than 20%. (See Dkt. No. 315-3 ¶ 4); In re Autozone, Inc., 2016 U.S. Dist. LEXIS 105746 at *56 ("Plaintiffs' survey had a woefully low response rate[—] . . . a response rate of 3.43% . . . ."). Further, the Court finds that the FTC has put forward competent expert testimony on the nature and sufficiency of the survey, but neither Marshall nor Foti have countered with any contrary expert testimony, either in the form of their own survey or expert critique of Dr. Isaacson's survey. Therefore, the Court has uncontroverted testimony [*12] supporting the legitimacy of the survey, and there is no reason to doubt its reliability. See FTC v. Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009) (criticizing survey was not sufficient to defeat summary judgment).
1 The Court's description of the background of this case does not constitute this Court's findings of undisputed facts for these Motions.
2 Brookstone Law P.C. (California), Brookstone Law P.C. (Nevada), Advantis Law P.C., and Advantis Law Group P.C. are collectively referred to as the "Corporate Defendants." Brookstone Law P.C. (California) and Brookstone Law P.C. (Nevada) are collectively referred to as "Brookstone." Advantis Law P.C. ("Advantis Law") and Advantis Law Group P.C. ("Advantis Law Group") are collectively referred to as "Advantis." According to Plaintiff, Brookstone and Advantis "are under common control, with common employees and a common address while marketing the same product." (FAC ¶ 14.) Plaintiff also avers that "Defendants have used the names Brookstone and Advantis interchangeably." (FAC ¶ 14.)
3 In his opposition, Defendant Marshall states that he "joins in Defendant Foti's evidentiary objections to the Plaintiff's evidence in support of its motion for summary judgment." (Marshall Opp'n at 2 n.2.)
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