United States District Court, M.D. Florida, Orlando Division
REPORT AND RECOMMENDATION
R. HOFFMAN UNITED STATES MAGISTRATE JUDGE
THE UNITED STATES DISTRICT COURT:
cause came on for consideration without oral argument on the
following motion filed herein:
MOTION: PLAINTIFF'S MOTION FOR ENTRY OF DEFAULT
JUDGMENT AGAINST DEFENDANT HIGHER GOALS MARKETING LLC (Doc.
FILED: March 29, 2019
THEREON it is respectfully
RECOMMENDED that the motion be
Federal Trade Commission (FTC) filed this action alleging
that since July 2016 Defendants Brandun L. Anderson, Lea A.
Brownell, Melissa M. Deese, Gerald D. Starr, Jr., and Travis
L. Teel acted through Sunshine Freedom Services LLC (SFS),
and Higher Goals Marketing LLC (HGM) (collectively, the
Defendants) to engage in a telemarketing scheme that
defrauded financially distressed consumers throughout the
United States by selling them bogus credit-card
interest-rate-reduction services. (Doc. 1 at ¶¶ 2,
25). Specifically, the Defendants initiated or directed
others to initiate prerecorded telemarketing calls to
consumers throughout the United States, many of whom were on
the National Do Not Call Registry (Do-Not-Call-Registry),
offering them a chance to lower their credit card interest
rates. (Id. at ¶¶ 4, 26, 42). The
prerecorded message instructed interested consumers to press
a number on their keypad, which resulted in the consumer
being transferred to a live representative that worked for
the Defendants. (Id. at ¶¶ 4, 26). Once
connected to a live representative, the consumers were told
that the Defendants will substantially and permanently reduce
their credit card interest rates resulting in thousands of
dollars in savings. (Id. at ¶¶ 5, 27-28,
53). In order to obtain this service, the consumer had to pay
the Defendants an up-front fee, which ranged from $500.00 to
$5, 000.00. (Id. at ¶¶ 6, 29). However,
the Defendants did not inform the consumer prior to payment
of the up-front fee that the consumer would likely have to
pay additional fees for reduced interest rates. (Id.
at ¶¶ 6, 30, 57).
receiving the up-front fee, the Defendants, in some
instances, contacted the consumer's credit-card issuer
and asked it to lower the consumer's interest rate.
(Id. at ¶ 31). Some credit card issuers agreed
to a modest interest rate reduction (while others did not),
but the reduction rarely, if ever, resulted in a permanent or
substantially lower interest rate and/or in savings to the
consumer of thousands of dollars. (Id. at
other instances, the Defendants tried to make good on their
promises by obtaining a new credit card that had a low
introductory, promotional interest rate and then directing
the consumer to transfer the balance from their existing
credit card to the new credit card. (Id. at ¶
35). As part of this process, the consumer would often pay a
one-to-three percent balance transfer fee - which the
Defendants did not disclose prior to payment of the up-front
fee - to move their existing credit card balance to the
promotional credit card. (Id. at ¶¶ 6,
36-37). The reduced interest rate provided by the promotional
credit cards likewise rarely, if ever, resulted in
permanently lower interest rates and/or savings in the
thousands of dollars. (Id. at ¶¶ 38-39).
Instead, in most cases, the interest rates on the promotional
credit cards increased significantly at the end of the
promotional period. (Id. at ¶¶ 8, 38).
light of the foregoing, the FTC asserts that the
Defendants' claims that they could permanently and
substantially lower a consumer's credit card interest
rate and save the consumer thousands of dollars were false
and deceptive acts that violated Section 5(a) of the Federal
Trade Commission Act (FTC Act), 15 U.S.C. § 45(a)
(Counts I and II). (Id. at ¶¶ 40-41,
53-58). In addition, the FTC asserts that the Defendants'
actions and omissions also violated the following provisions
of Telemarketing Sales Rule (TSR), 16 C.F.R. Pt. 310: Count
III - misrepresenting material aspects of debt relief
services in violation of 16 C.F.R. § 310.3(a)(2)(x);
Count IV - failing to disclose the total cost of debt relief
services in violation of 16 C.F.R. § 310.3(a)(1)(i);
Count V - charging or receiving a fee in advance of providing
debt relief services in violation of 16 C.F.R. §
310.4(a)(5)(i); Count VI - calling consumers on the
Do-Not-Call Registry in violation of 16 C.F.R. §
310.4(b)(1)(iii)(B); Count VII - initiating unlawful
prerecorded messages in violation of 16 C.F.R. §
310.4(b)(1)(v)(A); and Count VIII - failing to pay fees for
access to telephone numbers included on the Do-Not-Call
Registry in violation of 16 C.F.R. § 310.8.
(Id. at 15-17). Based on the foregoing, the FTC
requested the Court enter a preliminary injunction and
appoint a receiver over the corporate defendants,
permanent injunction prohibiting future violations of the FTC
Act and TSR, an award of damages to redress the injuries
suffered by the consumers, and costs for bringing the action.
(Id. at 19).
and Defendants Anderson, Brownell, Deese, Starr, Teel,
Norris, and SFS (collectively, the Settling Defendants)
reached a settlement of their claims, and FTC moved for the
entry of an agreed upon Stipulated Order for Permanent
Injunction and Monetary Judgment (the Stipulated Order).
(Doc. 80). The Court granted the motion and entered the
Stipulated Order on March 18, 2019. (Doc. 82). Thus, the only
claims that remain outstanding in this case are those against
present motion by the FTC seeks to resolve those remaining
claims. The Clerk entered default against HGM on March 27,
2018. (Doc. 71). The FTC now moves for default judgment
against HGM seeking the entry of a multifaceted permanent
injunction and award of damages totaling $3, 149, 920.34.
(Doc. 84 (Motion for Default Judgment)). In support, the FTC
has attached a proposed order for the Court's
consideration, a declaration from Reeve Tyndall, an
investigator with the FTC, and the depositions of Defendants
Anderson, Brownell, Deese, Starr, and Teel. (Docs. 84-1;
84-2; 84-3; 84-4; 84-5; 84-6; 84-7). The receiver appointed
by the Court to oversee HGM while this case is pending and
HGM's sole manager, Defendant Anderson, do not oppose the
relief sought in the Motion for Default Judgment. (Doc. 84 at
6). The matter is now ripe for review.
Standard of Review
Federal Rules of Civil Procedure establish a two-step process
for obtaining default judgment. First, when a party against
whom a judgment for affirmative relief is sought fails to
plead or otherwise defend as provided by the Federal Rules of
Civil Procedure, and that fact is made to appear by affidavit
or otherwise, the Clerk enters default. Fed.R.Civ.P. 55(a).
Second, after obtaining clerk's default, the plaintiff
must move for default judgment. Fed.R.Civ.P. 55(b). Before
entering default judgment, the court must ensure that it has
jurisdiction over the claims and parties, and that the
well-pled factual allegations of the complaint, which are
assumed to be true, adequately state a claim for which relief
may be granted. See Nishimatsu Constr. Co. v. Houston
Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir.
complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). This standard does not
require detailed factual allegations, but does demand
“more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). Thus, the “complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.'”
Id. (quoting Twombly, 550 U.S. at 570). To
state a plausible claim for relief, a plaintiff must go
beyond merely pleading the “sheer possibility” of
unlawful activity by a defendant and offer “factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550
U.S. at 556). If a plaintiff fails to meet this pleading
standard, then the plaintiff will not be entitled to default
plaintiff is entitled to default judgment, then the court
must consider whether the plaintiff is entitled to the relief
requested. If the plaintiff seeks damages, the plaintiff
bears the burden of demonstrating entitlement to recover the
amount of damages sought in the motion for default judgment.
Wallace v. The Kiwi Grp., Inc., 247 F.R.D. 679, 681
(M.D. Fla. 2008). Unlike well-pled allegations of fact,
allegations relating to the amount of damages are not
admitted by virtue of default; rather, the court must
determine both the amount and character of damages.
Id. (citing Miller v. Paradise of Port Richey,
Inc., 75 F.Supp.2d 1342, 1346 (M.D. Fla. 1999)).
Therefore, even in the default judgment context, “[a]
court has an obligation to assure that there is a legitimate
basis for any damage award it enters[.]” Anheuser
Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir.
2003); see Adolph Coors Co. v. Movement Against Racism
and the Klan, 777 F.2d 1538, 1544 (11th Cir. 1985)
(explaining that damages may be awarded on default judgment
only if the record adequately reflects a basis for an award
of damages). Ordinarily, unless a plaintiff's claim
against a defaulting defendant is for a liquidated sum or one
capable of mathematical calculation, the law requires the
district court to hold an evidentiary hearing to fix the
amount of damages. See Adolph Coors, 777 F.2d at
1543-44. However, no hearing is needed “when the
district court already has a wealth of evidence from the
party requesting the hearing, such that any additional
evidence would be truly unnecessary to a fully informed
determination of damages.” See S.E.C. v.
Smyth, 420 F.3d 1225, 1232 n.13 (11th Cir. 2005);
see also Wallace, 247 F.R.D. at 681 (“a
hearing is not necessary if sufficient evidence is submitted
to support the request for damages”).
Subject Matter and Personal Jurisdiction
Court has subject matter jurisdiction over this action
pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345,
and personal jurisdiction over HGM, which is a Florida
limited liability company with its principle place of
business in Florida (Doc. 1 at ¶ 15).
The Entry of Default
registered agent was served with process on December 4, 2017.
(Doc. 47); Fed.R.Civ.P. 4(h); Fla. Stat. § 48.081(3)(a).
HGM had twenty-one days from the date of service to respond
to the Complaint. Fed.R.Civ.P. 12(a)(1)(A)(i). HGM did not
timely respond to the Complaint, and the FTC moved for and
the Clerk properly entered default against HGM. (Docs. 68;
Section 5(a) of the FTC ACT
Counts I and II of the Complaint, the FTC claims that HGM
violated Section 5(a) of the FTC Act, which prohibits
“unfair or deceptive acts or practices in or affecting
commerce.” 15 U.S.C. § 45(a)(1). The FTC alleges
that HGM engaged in a telemarketing scheme that defrauded
financially distressed consumers throughout the United States
by selling them bogus credit-card interest-rate-reduction
services. (Doc. 1 at ¶¶ 4, 24-25). By its default,
HGM has admitted to the foregoing well-pleaded factual
allegations, which are sufficient to establish that HGM
engaged in acts or practices in or affecting commerce.
to establish that HGM committed an act or engaged in a
practice that violates Section 5(a) of the FTC Act, the FTC
must establish that: 1) there was a representation; 2) the
representation was likely to mislead consumers acting
reasonably under the circumstances; and 3) the
misrepresentation was material. FTC v. Tashman, 318
F.3d 1273, 1277 (11th Cir. 2003) (citations omitted).
“A representation is material if it is of a kind
usually relied upon by a reasonably prudent person.”
FTC v. Transnet Wireless Corp., 506 F.Supp.2d 1247,
1266 (S.D. Fla. 2007) (citations omitted). In addition,
expressly false claims or deliberately-made implied claims
used to induce the purchase of a product or service are
presumed to be material. FTC v. SlimAmerica, Inc.,
77 F.Supp.2d 1263, 1272 (S.D. Fla. 1999) (citations omitted).
the FTC alleges that HGM represented to consumers that it
could substantially and permanently reduce their credit card
interest rates resulting in thousands of dollars in savings.
(Doc. 1 at ¶¶ 5, 27-28, 53). In doing so, HGM also
allegedly failed to disclose to consumers that its
rate-reduction services may result in the consumer having to
pay a variety of fees to the credit-card issuers, such as a
balance transfer fee. (Id. at ¶¶ 6, 30,
57). These representations and omissions were likely to
mislead consumers into purchasing HGM's services.
Further, HGM's representations were false since, in most
cases, consumers never received a substantially and
permanently reduced interest rate that resulted in thousands
of dollars in savings. (Id. at ¶¶ 32-34,
38-39, 54). Given the falsity of HGM's representations,
they are presumed to be material. SlimAmerica, 77
F.Supp.2d at 1272. Moreover, HGM's failure to disclose
the possibility that consumers may have to pay additional,
undisclosed fees as a result of HGM's services is also
material, since it is likely that if a reasonably prudent
consumer was made aware of that possibility they would not
have paid for HGM's services. By its default, HGM has
admitted to these well-pleaded factual allegations, which are
sufficient to establish that HGM's representations and
omissions in connection with the sale of credit-card
interest-rate-reduction services violated Section 5(a) of the
FTC Act. The undersigned therefore finds that the FTC is
entitled to default judgment on Counts I and II of the
The Telemarketing Sales Rule
Counts III through VIII of the Complaint, the FTC claims that
HGM violated various provisions of the TSR. The undersigned
will address each alleged violation in turn.
16 C.F.R. § 310.3
Counts III and IV of the Complaint, the FTC claims that HGM
violated 16 C.F.R. § 310.3(a)(1)(i) and (a)(2)(x)
(Id. at ¶¶ 72-75), ...