16‐3811‐(L)
Federal Trade Commission v. Federal Check Processing, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2018
(Argued: October 3, 2018 Decided: January 11, 2019)
Docket No. 16‐3811‐cv, 16‐3805‐cv
FEDERAL TRADE COMMISSION,
Plaintiff‐Appellee,
v.
WILLIAM MOSES, individually and as an officer of one or more of the Corporate
Defendants, FEDERAL CHECK PROCESSING INC., a New York corporation, MARK
BRIANDI, individually and as an officer of one or more of the Corporate
Defendants.
Defendants‐Appellants,
FEDERAL RECOVERIES, LLC, et al.,
Defendants.
Before: CABRANES, SACK, AND PARKER, Circuit Judges.
The Federal Trade Commission brought this action in the United States
District Court for the Western District of New York alleging that the defendantsʹ
debt collection practices had violated several provisions of the Federal Trade
Commission Act and the Federal Fair Debt Collection Practices Act. The court
(William M. Skretny, Judge) adopted a report and recommendation of Magistrate
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
Judge Michael J. Roemer recommending that summary judgment be granted in
favor of the FTC.
The defendant‐appellant William Moses submitted no brief prior to the
deadline for submission set by this Court. We therefore dismiss his appeal
pursuant to Local Rule 31.2(d). The defendant‐appellant Mark Briandi asserts
that there are genuine issues of material fact as to whether he had knowledge of
the businessesʹ practices at the heart of this action. He also contends that the
disgorgement order against him is grossly excessive. The evidence before the
court on summary judgment established as a matter of law that Briandi had
control over the companiesʹ affairs, was aware of their illegal practices, and,
therefore, was liable for them. We conclude that the disgorgement assessed
jointly and severally against all defendants, including Briandi and Moses, was in
an appropriate amount because it was a reasonable approximation of the total
amounts received by the defendant companies from consumers as a result of
their unlawful acts. The judgment of the district court is therefore:
AFFIRMED.
HERBERT L. GREENMAN, Lipsitz Green
Scime Cambria, LLP, Buffalo, NY, for
Defendant‐Appellant Mark Briandi.
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MICHELE ARINGTON (David C. Shonka, Joel
Marcus, Katherine M. Worthman, Colin A.
Hector, on the brief), Federal Trade
Commission, Washington, D.C., for
Plaintiff‐Appellee.
SACK, Circuit Judge:
The Federal Trade Commission (the ʺFTCʺ or the ʺgovernmentʺ) brought
this action against thirteen corporate entities (the ʺCorporate Defendantsʺ) and
defendants‐appellants Mark Briandi (ʺBriandiʺ) and William Moses (ʺMosesʺ)
alleging that the defendants’ combined debt collection violated the Federal Trade
Commission Act (ʺFTCAʺ), 15 U.S.C. § 45(a), and the Fair Debt Collection
Practices Act (ʺFDCPAʺ), 15 U.S.C. § 1692 et seq. The United States District Court
for the Western District of New York (William M. Skretny, Judge) adopted the
report and recommendation of Magistrate Judge Michael J. Roemer,
recommending the grant of summary judgment to the FTC on the grounds that
the evidence before the court had established as a matter of law that the
Corporate Defendants violated the FTCA and FDCPA, and that Briandi and
Moses were personally liable for the amount of money that the defendants had
received because of the violations.
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Briandi and Moses appealed. Moses did not file a brief, and, there being
no valid excuse proffered therefor, we dismiss his appeal pursuant to our Local
Rule 31.2(d).1
Briandi does not contest the district court’s conclusion that the Corporate
Defendants violated the FTCA and FDCPA. He argues instead that the court
erred by concluding that he is personally liable for the violations. He also
contends that the district court erred by setting the measure of equitable
monetary relief as the total proceeds of the debt collection enterprise. For the
reasons set forth below, we agree with the district court on both issues, and,
therefore, affirm its judgment.
BACKGROUND
General Factual Background2
In 2009, Briandi and Moses founded, and thereafter co‐owned and co‐
directed, the first of the Corporate Defendants, Federal Recoveries, LLC. Over
Local Rule 31.2(d) provides: ʺFailure to File. The court may dismiss an appeal or
1
take other appropriate action for failure to timely file a brief or to meet a deadline under
this rule.ʺ
2 The following statement of facts is taken primarily from the FTCʹs ʺStatement of
Material Facts as to Which There is no Genuine Issue to be Tried,ʺ which is largely
undisputed, and, where relevant, evidence Briandi proffered in attempting to establish
the existence of a genuine dispute of material fact.
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the next few years, Briandi or Moses incorporated twelve other Corporate
Defendants, which were part of a single debt collection enterprise. The
Corporate Defendantsʹ business consisted largely of collecting payday loan
debts,3 which they bought from consumer‐debt creditors and compiled into debt
portfolios. These portfolios contained debtorsʹ names, addresses, and general
information about the debts allegedly owed.
At the Corporate Defendantsʹ behest, nearly all of their approximately
twenty‐five employee‐debt collectors would routinely contact debtors by
telephone and falsely identify themselves as ʺprocessors,ʺ ʺofficers,ʺ or
ʺinvestigatorsʺ from a ʺfraud unitʺ or ʺfraud division,ʺ then accuse debtors of
check fraud or a related crime and threaten them with criminal prosecution if
they did not pay their debts. On some occasions, collectors called friends, family
members, employers, or co‐workers of debtors, telling them that the debtors
owed a debt, had committed a crime in failing to pay it, and faced possible legal
ʺWhile there is no set definition of a payday loan, it is usually a short‐term, high cost
3
loan, generally for $500 or less, that is typically due on [the borrowerʹs] next payday.ʺ
U.S. Consumer Financial Protection Bureau, ʺWhat is a payday loan?,ʺ available at
https://www.consumerfinance.gov/ask‐cfpb/what‐is‐a‐payday‐loan‐en‐1567/ (last
visited December 16, 2018); see also Fed. Trade Commʹn v. Fed. Check Processing, Inc.,
No. 14‐CV‐122‐WMS‐MJR, 2016 WL 5956073, at *2 n.5, 2016 U.S. Dist. LEXIS
50589, at *7‐8 n.5 (W.D.N.Y. Apr. 13, 2016) (similar).
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repercussions. When debtors or other interested parties sought further
information about the debt, collectors typically refused to provide it.
After receiving a litany of consumer complaints about these activities, the
Office of the New York State Attorney General began investigating the Corporate
Defendantsʹ businesses. On February 3, 2013, in an attempt to terminate the
investigation, Briandi and Moses executed, on behalf of themselves and the
relevant Corporate Defendants, a written ʺAssurance of Discontinuanceʺ (the
ʺAODʺ) with the State Attorney General. While not admitting fault, Briandi and
Moses conceded in the AOD that the Corporate Defendants were subject to
specified federal and state laws, including the FDCPA. Additionally, they
agreed to dissolve some of the Corporate Defendants. And they stated that they
would advise the New York State Attorney Generalʹs Office if any of the
Corporate Defendants changed their principal place of business; if the individual
defendants incorporated a new corporation or business entity; or if any of the
Corporate Defendants did business under a new name. On May 8, 2013, Briandi
and Moses also executed an affidavit in which they represented that they had
implemented procedures — including the hiring of a ʺcompliance officerʺ — to
ensure that the Corporate Defendants met the requirements of the FDCPA.
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Shortly after the AOD became effective, though, and without informing
the Attorney Generalʹs Office, Briandi and Moses incorporated new Corporate
Defendants, some in other states. And the Corporate Defendants continued to
engage in the forsworn practices.
Briandiʹs Corporate Responsibilities
Briandi was a co‐founder, co‐owner, co‐director, and general manager of
all but perhaps one of the Corporate Defendants. He maintained a personal
office within the Corporate Defendantsʹ East Amherst, New York, office and a
desk in the ʺcollection callʺ area from which dunning calls were made by the
companiesʹ employees. Briandi had signature authority with respect to the
companiesʹ bank accounts, and in the more than four years between February 10,
2010, and February 26, 2014, received approximately $1.3 million in
compensation from the Corporate Defendants.
Briandiʹs principal responsibilities for the companies included signing
their checks; managing the banking side of their businesses; handling personnel
matters, such as hiring and firing employees; maintaining the companiesʹ phone
systems and websites; receiving consumer payments; and — along with Moses,
who was in charge of collections — operating the entity, bearing the mellifluous
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name ʺFlowing Streams,ʺ which purchased consumer debts. Prior to 2013,
Briandi would himself also occasionally make collection calls on behalf of the
Corporate Defendants.
After the instant litigation began, Briandi asserted in a deposition taken by
FTC counsel on April 15, 2015, that, beginning in March of 2013, he had a
diminished involvement with the Corporate Defendants. He testified that this
resulted from his decision to become a pastor, which led to his spending much of
his work days praying in his office and taking online bible classes. Although
Briandi acknowledged that he continued to review corporate bank accounts from
time to time, speak to managers, and occasionally take ʺhostileʺ consumer calls,
Briandi Dep., April 15, 2015, at 65‐66, 72; he denied having continued to visit his
desk on the collection floor more than ʺonceʺ or ʺtwiceʺ a day, id. at 134, 137, 143.
Procedural History
On February 24, 2014, the FTC filed a complaint against Briandi, Moses,
and the Corporate Defendants in the United States District Court for the Western
District of New York. It alleged two violations of Section 5(a) of the FTCA, 15
U.S.C. § 45(a) (ʺUnfair or Deceptive Acts or Practicesʺ), and four violations of the
FDCPA, 15 U.S.C § 1692 (ʺDebt Collection Practicesʺ). The FTC accused the
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defendants of violating the statutes, despite having executed the AOD, by
operating companies in which collectors continued to mask their identities,
falsely accuse consumers of various crimes, and refuse to reveal to debtors the
circumstances and nature of alleged debts. The FTC also sought and received
from the district court an ex parte temporary restraining order prohibiting the
defendants from using false representations or deceptive means to continue
collecting debts, freezing all of the defendantsʹ assets, and appointing a receiver
to oversee the Corporate Defendants.
On June 17, 2014, Briandi and Moses asked the district court for one year in
which to conduct discovery. A magistrate judge granted their request but noted
that ʺno extensions of this order will be entertained.ʺ Dkt. No. 67.
Meanwhile, the FTC subpoenaed and received copies of a variety of scripts
used by the Corporate Defendantsʹ employees to make demand telephone calls,
recordings of telephone calls between various collectors and consumers, and
many consumer complaints and declarations detailing and challenging the
companiesʹ practices. The FTC also submitted interrogatories to the defendants
and took oral depositions of Briandi and Moses. For their parts, though, Briandi,
Moses, and the Corporate Defendants engaged in no discovery. And Briandi
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failed to answer interrogatories propounded by the FTC until after the discovery
deadline had passed, and then only as part of his attempt to oppose the FTCʹs
motion for summary judgment.
The FTC moved for summary judgment on August 27, 2015. The motion
included a request for $10,852,396 in monetary relief, for which, the FTC
asserted, all of the defendants, include Briandi and Moses, should be jointly and
severally liable. That figure was based on ʺthe gross total of consumer funds
deposited by merchant processorsʺ found ʺin the [d]efendantsʹ settlement
accounts.ʺ Second Suppl. Decl. of FTC Investigator Michael B. Goldstein ¶ 26
(July 24, 2015).
Briandi did not dispute the allegations that the Corporate Defendants
engaged in wrongdoing. He denied, however, that he could be held individually
liable for the Corporate Defendantsʹ actions. He based that argument largely on
his contention that he did not control the Corporate Defendants, did not
participate in their activities, and lacked any knowledge of their alleged
wrongdoing. Briandi also asserted that the governmentʹs requested relief vastly
exceeded the Corporate Defendantsʹ unlawful gains.
The District Courtʹs Decision
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On April 13, 2016, Michael J. Roemer, the magistrate judge to whom the
matter had by then been referred by the district court ʺfor all pre‐trial matters,
including preparation of a report and recommendation on dispositive motions,ʺ
issued a report and recommendation concluding that the FTCʹs motion for
summary judgment should be granted. FTC v. Fed. Check Processing, Inc., No. 14‐
CV‐122‐WMS‐MJR, 2016 WL 5956073, at *1, 2016 U.S. Dist. LEXIS 50589, at *2
(W.D.N.Y. Apr. 13, 2016), adopted, No. 14‐CV‐122S, 2016 WL 5940485, 2016 U.S.
Dist. LEXIS 141998 (W.D.N.Y. Oct. 13, 2016). First, the magistrate judge
concluded that the FTC had proved that Briandi both had ʺthe authority to
control the [C]orporate [D]efendants and knew of their wrongdoing.ʺ Id. at *14,
2016 U.S. Dist. LEXIS 50589 at *41‐42. According to the magistrate judge, even if
Briandi somehow lacked detailed knowledge of the Corporate Defendantsʹ illicit
collection practices, he could not plead ignorance after expressly agreeing to the
2013 AOD. Id. at *13, 2016 U.S. Dist. LEXIS 50589 at *40. The existence of the
AOD executed by Briandi established that he had notice of the Corporate
Defendantsʹ illicit collection activities and was required to ensure that they
followed the FTCA and the FDCPA. Id., 2016 U.S. Dist. LEXIS 50589 at *40.
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Second, the magistrate judge concluded that the FTCʹs disgorgement
request ʺreasonably approximate[d] the [C]orporate [D]efendantsʹ unjust gains.ʺ
Id. at *16, 2016 U.S. Dist. LEXIS 50589 at *48. As the magistrate judge observed,
this amount was based on bank account data compiled by the FTC showing that
ʺbetween May 2010 and March 2014 the [C]orporate [D]efendants collected
$10,852,396 from consumers.ʺ Id., 2016 U.S. Dist. LEXIS 50589 at *48. The FTC
had also demonstrated that ʺthe defendantsʹ misrepresentations were widely
disseminated,ʺ and that their operation was ʺpermeated with fraud.ʺ Id., 2016
U.S. Dist. LEXIS 50589 at *48. Finally, the magistrate judge noted that the
defendant had failed to produce any evidence that would serve to dispute the
recommended penalty. Id., 2016 U.S. Dist. LEXIS 50589 at *48.
On October 12, 2016, the district court adopted Magistrate Judge Roemerʹs
report and recommendation in its entirety and entered judgment in the
governmentʹs favor. Fed. Trade Commʹn v. Fed. Check Processing, Inc., No. 14‐CV‐
122S, 2016 WL 5940485, at *1, 2016 U.S. Dist. LEXIS 141998, at *4 (W.D.N.Y. Oct.
13, 2016).
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DISCUSSION
Briandi makes three principal arguments on appeal. First, he contends
that he should have been given time to conduct discovery. Second, he argues,
based on the information contained in his deposition, that there were material
facts at issue as to whether he could be held individually liable for the actions of
the Corporate Defendants. He contends that these factual issues rendered
summary judgment for the FTC improper. Finally, he asserts that the
disgorgement amount adopted by the district court was grossly excessive. For
the reasons that follow, we disagree with each of these contentions.
I. Standard of Review
A district courtʹs decision on a partyʹs request for ʺmore time to conduct
discovery . . . is subject to reversal only if [the district court] abused its
discretion.ʺ Paddington Partners v. Bouchard, 34 F.3d 1132, 1137 (2d Cir. 1994).
We review the ʺdistrict courtʹs decision to grant summary judgment de
novo, resolving all ambiguities and drawing all permissible factual inferences in
favor of the party against whom summary judgment is sought.ʺ Burg v. Gosselin,
591 F.3d 95, 97 (2d Cir. 2010) (internal quotation mark omitted). Summary
judgment is appropriate only when ʺthe movant shows that there is no genuine
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
dispute as to any material fact and the movant is entitled to judgment as a matter
of law.ʺ Fed. R. Civ. P. 56(a). However, ʺa party may not rely on mere
speculation or conjecture as to the true nature of the facts to overcome a motion
for summary judgment.ʺ Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995)
(internal quotation marks omitted). ʺ[C]onclusory allegations or denialsʺ
therefore ʺare not evidence and cannot by themselves create a genuine issue of
material fact where none would otherwise exist.ʺ Id. (internal quotation marks
omitted).
II. Additional Discovery
Briandi contends that the district court wrongly denied an extension to the
one‐year discovery period already provided. But Briandi has waived this
argument. Federal Rule of Civil Procedure 56(d) provides that a party opposing
summary judgment based on incomplete discovery must file an affidavit
explaining why such discovery is necessary. See id. (ʺIf a nonmovant shows by
affidavit or declaration that, for specified reasons, it cannot present facts essential
to justify its opposition, the court may . . . allow time to obtain affidavits or
declarations or to take discovery.ʺ) Briandi submitted no such affidavit to the
magistrate judge or the district court; nor does he contend otherwise.
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Also, it was Briandi and Moses who asked for the approximately one‐year
discovery period, and then chose, for unstated reasons, not to conduct any
discovery at all during that period. Briandi now asserts that he did not
understand the ʺcircumstances of [his] position.ʺ Briandi Br. 22. However, he
identifies no standard upon which to judge whether or not that is the case. Nor
does he explain how the ʺcircumstances of his positionʺ were unclear or
confusing, or provide any authority for the proposition that, if they were, he was
therefore entitled to an extension on the lengthy period the court provided for
discovery.
III. Briandiʹs Personal Liability
Briandi argues that the district court erred in granting summary judgment
against him because genuine disputes of material fact exist regarding his control
of the debt collection agencies, and therefore his personal liability for their
actions. We disagree. In light of the undisputed evidence regarding the
Corporate Defendants’ operations and Briandi’s relationship with them, we
conclude that he had both sufficient authority over the Corporate Defendants,
and knowledge of their practices, to be held individually liable for their
misconduct as a matter of law.
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A. Standard for Individual Liability Under the FTCA and FDCPA
Section 5(a)(1) of the FTCA, 15 U.S.C. § 45(a)(1), prohibits ʺ[u]nfair or
deceptive acts or practices in or affecting commerce.ʺ The FTC must show three
elements to prove a deceptive act or practice in violation of § 5(a)(1): ʺ[1] a
representation, omission, or practice, that [2] is likely to mislead consumers
acting reasonably under the circumstances, and [3], the representation, omission,
or practice is material.ʺ FTC v. Verity Intʹl, Ltd., 443 F.3d 48, 63 (2d Cir. 2006)
(brackets in the original; internal quotation marks omitted). ʺThe deception need
not be made with intent to deceive; it is enough that the representations or
practices were likely to mislead consumers acting reasonably.ʺ Id.
An individual may be held liable under the FTCA for a corporation’s
deceptive acts or practices ʺif, with knowledge of the deceptive nature of the
scheme, he either ʹparticipate[s] directly in the practices or acts or ha[s] authority
to control them.ʹʺ FTC v. LeadClick Media, LLC, 838 F.3d 158, 169 (2d Cir. 2016)
(quoting FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 573 (7th Cir. 1989)).4 To
prevail on the issue, the FTC must therefore establish that
The First, Fourth, Seventh, Ninth, Tenth, and Eleventh Circuits have also adopted
4
this standard. See FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 12 (1st Cir. 2010); FTC v.
Ross, 743 F.3d 886, 892 (4th Cir. 2014); FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 573‐74
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the corporate practices were misrepresentations or
omissions of a kind usually relied on by reasonably
prudent persons and that consumer injury resulted.
Once corporate liability is established, the FTC must
show that the individual defendants participated
directly in the practices or acts or had authority to
control them. Authority to control the company can be
evidenced by active involvement in business affairs and
the making of corporate policy, including assuming the
duties of a corporate officer.
Amy Travel, 875 F.2d at 573 (citations omitted). ʺThe FTC is [also] required to
establish the defendants had or should have had knowledge or awareness of the
misrepresentations.ʺ Id. at 574 (citation omitted).
The FTC need not establish in this context that the defendant had actual
and explicit knowledge of the particular deception at issue. We agree with our
sister circuits that ʺknowledge ʹmay be established by showing that the
individual [defendant] had actual knowledge of the deceptive conduct, [or] was
recklessly indifferent to its deceptiveness, or had an awareness of a high
probability of deceptiveness and intentionally avoided learning of the truth.ʹʺ
FTC v. Primary Grp., Inc., 713 F. Appʹx 805, 807 (11th Cir. 2017) (per curiam)
(quoting FTC v. Ross, 743 F.3d 886, 892 (4th Cir. 2014)); accord FTC v. World Media
(7th Cir. 1989); FTC v. Grant Connect, LLC, 763 F.3d 1094, 1101 (9th Cir. 2014); FTC v.
Freecom Commcʹns, Inc., 401 F.3d 1192, 1204, 1207 (10th Cir. 2005); FTC v. IAB Mktg.
Assocs., LP, 746 F.3d 1228, 1233 (11th Cir. 2014).
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Brokers, 415 F.3d 758, 764 (7th Cir. 2005).5 And we agree with the Eleventh
Circuit that ʺthis standard correctly describes the breadth of individual liability
under the FTC[A].ʺ Primary Grp., 713 F. App’x at 807. Imposing a more rigid
knowledge requirement ʺwould be inconsistent with the policies behind the
FTCA and place too great a burden on the FTC.ʺ Amy Travel, 875 F.2d at 574.
Finally on this score, we conclude that the same standard applies when the
FTC brings an action to enforce the FDCPA. ʺ[V]iolations of the FDCPA are
deemed to be unfair or deceptive acts or practices under the [FTCA].ʺ Jerman v.
Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577, (2010); see also 15
U.S.C. § 1692l(a) (ʺ[A] violation of [the FDCPA] shall be deemed an unfair or
deceptive act or practice in violation ofʺ the FTCA and is subject to enforcement
ʺin the same manner as if the violation had been a violation of a[n] [FTC] trade
regulation rule.ʺ) The FTC, then, is enforcing the FDCPA pursuant to its
authority under the FTCA. And because the FTC can enforce compliance with
the FDCPA only by employing the FTCA, and ʺin the same manner as a
violationʺ of the FTCA, 15 U.S.C. § 1692l(a), it follows, we conclude, that the
FTCA individual liability standard applies.
Under Eleventh Circuit Local Rule 36‐2, “[u]npublished opinions are not considered
5
binding precedent, but they may be cited as persuasive authority,” as we do here.
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B. Briandiʹs Authority to Control the Corporate Defendants
Briandi was a founder of all but perhaps one of the Corporate Defendants,
held a 50 percent ownership stake in them, had signatory authority over their
bank accounts, and served as their co‐director and general manager. In these
various roles, Briandi had the authority to control the Corporate Defendants’
deceptive actions. For example, in his deposition, Briandi admitted to having the
power to hire and reprimand employees including those responsible for the
Corporate Defendantsʹ violations of the FTCA and FDCPA.
Briandi retained this authority after signing the AOD. From March 2013
until the time of the FTCʹs complaint, he remained a co‐owner, co‐director, and
general manager of the Corporate Defendants, fielded hostile calls from
consumers, continued to review the Corporate Defendantsʹ financial activities,
and, once or twice a day, would visit the collection floor, where he would speak
to other managers about the corporationsʹ business.
Briandi’s deposition testimony that he contends was to the contrary was
directed to the question of whether he exercised authority to control the Corporate
Defendantsʹ conduct, not whether he possessed authority to control it, which is the
dispositive issue. Viewed in light of all the evidence properly before the district
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court on the motion for summary judgment, then, Briandiʹs denial of
involvement in, rather than the authority to control the actions of, the Corporate
Defendants did not create a dispute of material fact requiring the district court to
deny the motion.
C. Briandiʹs Knowledge of the Corporate Defendantsʹ Activities
The defendants were ordered to disgorge $10,852,396, an amount equal to
all profits ʺresulting from [d]efendantsʹ unlawful acts or practices,ʺ Fed. Check
Processing, Inc., 2016 WL 5940485, at *4, 2016 U.S. Dist. LEXIS 50589, at *40
(adopting magistrate judgeʹs April 13 ,2016 report and recommendation). This
amount was calculated by the magistrate judge based on the Corporate
Defendantsʹ bank account data between May 2010 and March 2014. The FTC
therefore was required to establish that Briandi had knowledge of the Corporate
Defendantsʹ wrongdoing during that entire period — both prior to and after his
execution of the 2013 AOD — to hold him individually liable for the unlawful
receipts of the Corporate Defendants during the same period. We conclude that
the FTC did so.
We agree with the magistrate judgeʹs report and recommendation that
after the AOD was executed by Briandi in 2013, Briandi was at least aware ʺof a
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high probability of fraud and intentionally avoided learning the truth.ʺ Fed.
Check Processing, Inc., 2016 WL 5956073, at *13, 2016 U.S. Dist. LEXIS 50589, at *36.
The AOD explicitly accused the Corporate Defendants of violating the FTC and
FDCPA.
After executing the document, Briandi nonetheless continued to oversee
the Corporate Defendantsʹ collection activities. As the magistrate judge pointed
out, the FTC found ʺnumerous consumer complaints in Briandiʹs personal office.ʺ
Id; 2016 U.S. Dist. LEXIS 50589, at *40. Briandi was thus aware of consumer
complaints against the Corporate Defendants made to the New York Attorney
General, the Better Business Bureau, and the FTC, complaints that numbered
well into the hundreds.
To be sure, Briandi testified, as noted above, that beginning in March 2013,
he neglected his managerial duties in favor of prayer and other spiritual pursuits.
But he alleged that he began to neglect these managerial duties only after
personally executing the AOD, in which he agreed to take measures to address
the Corporate Defendantsʹ deceptive conduct; and he did so after executing an
affidavit in which he represented that he had implemented procedures —
including the hiring of a ʺcompliance officerʺ — to ensure that the Corporate
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Defendants met the requirements of the FDCPA. Therefore, when, according to
Briandi, he retreated into spiritual pursuits at the expense of his managerial
duties, he was not only on notice that the Corporate Defendants had been
violating the FDCPA; he had taken on a personal duty to correct the Corporate
Defendantsʹ misbehavior. Briandiʹs withdrawal under these circumstances is at
least evidence of reckless indifference to the Corporate Defendantsʹ deceptive
conduct after the 2013 AOD. See Primary Grp., 713 F. Appʹx at 807.
We also agree with the district court that Briandi had knowledge of the
Corporate Defendantsʹ unlawful conduct prior to the 2013 AOD. Fed. Check
Processing, Inc., 2016 WL 5940485, at *1, 2016 U.S. Dist. LEXIS 141998 at *6 (ʺAt all
times material to the Complaint . . . Defendant Mark Briandi . . . had actual or
constructive knowledge of the violative acts and practicesʺ (emphasis added)).
ʺ[T]he degree of participation in business affairsʺ is a relevant factor in
determining whether Briandi had knowledge of the Corporate Defendantsʹ
wrongful actions. Amy Travel, 875 F.2d at 574. Here, that factor is dispositive.
Briandi served as the Corporate Defendantsʹ co‐director and general manager. In
performing that role, Briandi was intimately involved with the unlawful
activities at issue: the collection calls. The evidence before the magistrate judge
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
and district court established that Briandi maintained a personal desk in the call
center itself, which, he conceded, he visited at least daily. Adrian Fronczak, a
former employee of the Corporate Defendants, testified in a deposition that
Briandi sat at the desk ʺprobably half the day.ʺ Fronczak Dep. 44. Fronczak also
testified that Briandi and Moses would take over calls if asked to do so by one of
the debt collectors. Id. at 44‐45.
Far from demonstrating that the testimony was false, Briandi essentially
corroborated it in his own deposition. There he admitted that he would take
over from employees calls with hostile debtors, but said that he did so less
frequently after he signed the AOD and became more engaged in his religious
practices. According to his testimony, then, he was even more involved with the
debt collection calls prior to the 2013 AOD. Indeed, Briandi made some of the
more offensive collection calls himself; they were mentioned in nine consumer
complaints filed before the AOD was executed. The magistrate judge and district
court thus had ample evidence upon which to conclude that Brandi had
knowledge of the Corporate Defendantsʹ violations both before and after he
executed the AOD.
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
IV. FTC Disgorgement
Finally, Briandi argues that the FTCʹs request that he be ordered to
disgorge $10,852,396, which was adopted by the magistrate judge and confirmed
by the district court, was grossly excessive. Briandi asserts that the FTCʹs
calculation was predicated on ʺapproximately 45 calls where it claimed that
fraudulent claims were made,ʺ which is ʺa far cry from the courtʹs finding that
the entire operation was ʹpermeated with fraud.ʹʺ Briandi Br. 30‐31 (quoting Fed.
Check Processing, Inc., 2016 WL 5956073, at *12, 2016 U.S. Dist. LEXIS 50589, at
*48). Therefore, Briandi contends, ʺthere was no basis to find that [he] should be
[held] responsible for the entire amount of all the debt collected over [the]
approximately four year period.ʺ Briandi Br. 34.
Section 13(b) of the FTCA provides that ʺin proper cases the [FTC] may
seek, and after proper proof, the court may issue, a permanent injunction.ʺ 15
U.S.C. § 53(b). Although we have acknowledged that ʺthe provisionʹs express
text refers only to injunctive relief,ʺ we have also held that the ʺunqualified grant
of statutory authority to issue an injunction under [S]ection 13(b) carries with it
the full range of equitable remedies, including the power to grant consumer
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
redress and compel disgorgement of profits.ʺ FTC v. Bronson Partners, LLC, 654
F.3d 359, 365 (2d Cir. 2011) (internal quotation marks omitted).
We have adopted a ʺtwo‐step burden‐shifting framework for calculating
equitable monetary relief. That framework requires a court to look first to the
FTC to ʹshow that its calculations reasonably approximated the amount of the
defendant[sʹ] unjust gainsʹ and then shift the burden ʹto the defendants to show
that those figures were inaccurate.ʹʺ Id. at 364 (quoting Verity Intʹl, 443 F.3d at
67).
To obtain equitable monetary relief, the FTC must also demonstrate that
consumers relied on the misrepresentations at issue. Because ʺrequir[ing] proof
of each individual consumerʹs reliance on a defendantʹs misrepresentations
would be an onerous task with the potential to frustrate the purpose of the FTCʹs
statutory mandate,ʺ we concluded in FTC v. BlueHippo Funding, LLC, 762 F.3d
238, 244 (2d Cir. 2014), that ʺthe FTC is entitled to a presumption of consumer
reliance upon showing that (1) the defendant made material misrepresentations
or omissions that were of a kind usually relied upon by reasonable prudent
persons; (2) the misrepresentations or omissions were widely disseminated; and
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
(3) consumers actually purchased the defendantsʹ products.ʺ Id. (alteration in
original; internal quotation marks omitted).
Here, in support of its motion for summary judgment, the FTC submitted
more than five hundred consumer complaints regarding the defendantsʹ debt
collection practices, aggressive collection telephone scripts located in fifteen of
the twenty‐six Corporate Defendantsʹ collection cubicles, and audio recordings of
twenty‐one of the twenty‐five employee debt‐collectors falsely telling consumers
that the employees were law enforcement personnel or ʺprocessors.ʺ There is
thus ample proof that the misrepresentations at issue were widely disseminated.
Briandi argues that those consumer complaints are inadmissible at the
summary judgment stage. But he explicitly waived that challenge in the district
court. As the magistrate judge correctly noted:
The defendants do not argue that the FTCʹs evidence (e.g.,
telephone calls, scripts, consumer complaints) is inadmissible,
and their failure to do so may be construed as a waiver of any
such argument. DeCintio v. Westchester Cnty. Med. Ctr., 821 F.2d
111, 114 (2d Cir. 1987).
Fed. Check Processing, Inc., 2016 WL 5956073, at *2 n.6, 2016 U.S. Dist. LEXIS
50589, at *8‐9 n.6.
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
Moreover, the case that Briandi relies on for the proposition that it is
inappropriate to admit consumer complaints in support of a motion for
summary judgment, FTC v. Washington Data Resources, No. 8:09‐cv‐2309, 2011 WL
2669661, 2011 U.S. Dist. LEXIS 72886 (M.D. Fla. July 7, 2011), was a district court
decision without precedential effect that rejected the use of consumer complaints
as a substitute for trial testimony, rather than in summary judgment proceedings.
Finally, even excluding consideration of these complaints, it is clear from
the voluminous audio recordings and collection scripts submitted to the
magistrate judge by the FTC that the magistrate judge did not err in concluding –
nor did the district court in adopting the conclusion – that the defendantsʹ
operation was ʺpermeated with fraud.ʺ Fed. Check Processing, Inc., 2016 WL
5956073 at *12, 2016 U.S. Dist. LEXIS 50589, at *37.
The FTC has thus shown that it was entitled to a presumption of reliance.
And when the FTC establishes such a presumption, it can ʺuse[] the defendantsʹ
gross receipts as a baseline for calculating damagesʺ at the first step of the
burden‐shifting framework. BlueHippo Funding, LLC, 762 F.3d at 245. That is
exactly what the FTC did here. If the defendant wanted to attempt to refute the
FTCʹs calculation, he had the burden to do so before the magistrate judge or the
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Federal Trade Commission v. Federal Check Processing, Inc, et al.
district court. See Verity Intʹl, 443 F.3d at 67 (noting that burden‐shifting
framework requires ʺthe FTC to first show that its calculations reasonably
approximated the amount of the defendantʹs unjust gains, after which the burden
shifts to the defendants to show that those figures were inaccurateʺ (internal
quotation marks omitted)). The defendant chose not to submit any proof that the
debt corporations earned ʺall or some of their revenue through lawful means.ʺ
Fed. Check Processing, Inc., 2016 WL 5956073, at *16, 2016 U.S. Dist. LEXIS 50589,
at *48; see also id., 2016 U.S. Dist. LEXIS 50589, at *49 (ʺHad [the defendants
challenged the accuracy of the FTCʹs figures] a hearing may have been required
to determine the amount of disgorgement.ʺ) Accordingly, we conclude that it
was appropriate for the district court to award the disgorgement in the amount
sought by the FTC.
CONCLUSION
We have considered the appellantsʹ remaining arguments on appeal and
conclude that they are without merit. For the foregoing reasons, we DISMISS
Mosesʹs appeal, and AFFIRM the remainder of the judgment of the district court.
28