United States District Court, M.D. Florida, Orlando Division
DALTON JR., United States District Judge.
the Court are Synovus Bank's
(“Synovus”) Motion to Intervene
(Doc. 219) and Receiver's Amended Motion to Approve
Settlement with Matthew Lloyd McPhee and Related Entities
(Doc. 222 (“Settlement
Motion”)). The Federal Trade Commission
(“FTC”) and the Special Receiver
both oppose Synovus' Motion to Intervene. (Docs. 224,
225.) The Settlement Motion is unopposed. United States
Magistrate Judge Daniel C. Irick prepared reports and
recommendations (“R&Rs”) for
both motions. (Docs. 228, 229.) Synovus objected to the
R&R on the Motion to Intervene (Doc. 232
(“Objection”)); the FTC and the
Special Receiver both responded (Docs. 235, 236). No.
objections were filed to the R&R on the Settlement
Motion. All motions ripe, the Court denies the Motion to
Intervene and grants the Settlement Motion. In so doing, the
Court adopts both R&Rs in full and overrules the
sued MOBE Ltd. and its related entities (collectively,
“MOBE”), Matthew Lloyd McPhee
and a related entity, Susan Zanghi, and Ingrid Whitney
(collectively, “Defendants”) for
alleged violations of Section 5(a) of the Federal Trade
Commission Act, 15 U.S.C. § 45(a). (Doc. 1
(“Complaint”).) The Complaint
alleged Defendants operated a fraudulent internet business
education program called “My Online Business
Education” or “MOBE” for short.
(Id.) Defendants claimed the MOBE program would
“reveal a simple 21-step system that will show
consumers how to quickly and easily start their own online
business and make substantial income.” (Id. at
2.) Alas, like most get rich quick schemes, MOBE failed to
deliver on its promises. (See Id. at 3.) According
to the FTC, “the vast majority of consumers who join
the MOBE program and purchase the costly MOBE memberships
lose money.” (Id.) The FTC claimed Defendants
defrauded thousands of consumers who collectively paid
Defendants over $125, 000, 000 . (Id. at 3-4.)
the Complaint, the FTC moved for a temporary restraining
order (“TRO”) and a temporary
receiver. (Docs. 3, 6.) The Court granted the motions and
appointed Mark J. Benet as temporary receiver
(“Receiver”). (Doc. 13.) The
TRO: (i) enjoined the Defendants from violating Section 5(a)
of the FTC Act; (ii) imposed an asset freeze on Defendants
and certain third parties; and (iii) appointed the Receiver
as temporary receiver of the “Receivership
third parties, Qualpay and Synovus (“Proposed
Intervenors”), were unhappy with the TRO.
Qualpay is the credit card processing company that processed
MOBE's transactions. (Doc. 38, p. 3.) Synovus is the bank
where Qualpay maintains accounts on behalf of merchants
during credit card processing. (See id.) They
claimed an ownership interest in a portion of the frozen
assets (“Reserve Fund”). (Doc.
32, pp. 1-4; Doc. 57, pp. 7-8, 14.).
dispute over the Reserve Fund arises from the convoluted
structure credit card companies employ to avoid direct
interaction with consumers and merchants.(Doc. 83, pp.
4-5.) The ownership of the MOBE Reserve Fund, held in
Qualpay's Reserve Account at Synovus Bank, was hotly
contested during the TRO. And the stakes weren't
small-the Reserve Fund contained about $ 6. 3 million. (Doc.
57, pp. 6-7.) So who did that money belong to?
and Qualpay claimed the money belonged to them, while the FTC
insisted it was MOBE's. (Id.) Synovus and
Qualpay filed motions for relief from the TRO and, “to
the extent necessary, ” to intervene to obtain the
release of the Reserve Fund. (Doc. 32, pp. 1-4; Doc. 57, pp.
7-8, 14.) The Court allowed them to appear and argue the
merits of their objections to the TRO (see Docs. 32,
42, 60, 89, 98), then denied both motions in full (Doc. 83
(“August 2018 Order”)). The
Court concluded “MOBE is the rightful owner of the
reserve account” and Qualpay and Synovus were merely
“'middleman' processors without additional
entitlement to the funds.” (Id. at 9.) The
undersigned ordered the funds turned over to the Receiver and
placed in a constructive trust. (Id. at p. 13-14.)
nine months after Synovus was ordered to turn over the
Reserve Fund, the Receiver moved for appointment of a special
receiver regarding potential claims against Qualpay and
Synovus. (Doc. 181.) The Receiver explained Synovus had
threatened to move to disqualify the Receiver, alleging he
was in a position of conflict. (Id. at 1.) The Court
appointed Burton Wiand (“Special
Receiver”) to handle the receivership
estate's potential claims against Qualpay and Synovus.
3, 2019, almost a year after intervention was first
attempted, Synovus moved for return of the $6.3 million
Synovus had “conditionally paid” to the Receiver.
(Doc. 189 (“Claims and
Defenses”).) Synovus asserted
“defenses” to the FTC and the Receiver and a
“claim” for affirmative relief against Qualpay
and the Special Receiver. (Id. at 1.) Qualpay filed
its “answer” to Synovus' Claims and Defenses.
(Doc. 196 (“Qualpay's
Reply”).) No. less than four motions were
filed attacking the propriety of these pleadings. The FTC
moved to limit Synovus's intervention (Doc. 194) and a
motion to set a side Qualpay's Reply (Doc. 208). The
Special Receiver moved to dismiss the Claims and Defenses
(Doc. 195) and a motion to strike or dismiss Qualpay's
Reply (Doc. 210).
hearing on a separate matter,  U.S. Magistrate Judge Irick,
sua sponte, turned his attention to Qualpay's
and Synovus' appearance. Both Proposed Intervenors had
filed motions with the Court and appeared at the hearing-but
compliance with Rule 24 for intervention was questionable.
See Fed. R. Civ. P. 24. The Proposed Intervenors had
moved for a “special appearance” and, “to
the extent necessary, to intervene” to challenge the
TRO (see Docs. 32, 57) but (1) after allowing
Qualpay and Synovus to appear to argue, the motions were
denied (see Doc. 83); and (2) these latest
filings and appearances far exceeded the scope of challenging
the TRO. (See Doc. 219; Doc. 219-1 .)
U.S. Magistrate Judge Irick pressed the Proposed Intervenors,
neither contended they complied with Rule 24. (Doc. 214, p.
3.) Neither had obtained leave to intervene to file their
latest pleadings (Docs. 189, 196) nor filed a “motion
accompanied by a pleading that sets out the claim or defense
for which intervention is sought.” (Doc. 214, p. 3
(quoting Fed.R.Civ.P. 24(c)).) U.S. Magistrate Judge Irick
struck the Claims and Defenses and Qualpay's Reply with
leave to file motions to intervene. (Id. at 3-4.)
September 3, 2019, almost one year and three months after the
Complaint had been filed, Synovus moved to intervene, arguing
both intervention as of right and for permissive joinder.
(Doc. 219 (“Motion to
Intervene”).) Both the FTC and the Special
Receiver oppose intervention. (Docs. 224, 225.)
the parties made great strides towards resolution. On
September 6, 2019, the Receiver moved for the approval of a
settlement between the FTC and Defendants Matthew Lloyd
McPhee and related entities. (Doc. 222.) And on December 6,
2019, the FTC filed a Consent Motion for Approval and Entry
of Stipulated Order for Monetary Judgment as to Russell W.
Whitney's Estate. (Doc. 239.) U.S. Magistrate Judge Irick
recommends denying the Motion to Intervene and granting the
Settlement Motion. (Docs. 228, 229.) The Court agrees.
party objects to a magistrate judge's findings, the
district court must “make a de novo
determination of those portions of the report . . . to which
objection is made.” 28 U.S.C. § 636(b)(1).
“Parties filing objections to a magistrate's report
and recommendation must specifically identify those findings
objected to. Frivolous, conclusive, or general objections
need not be considered by the district court.”
Marsden v. Moore, 847 F.2d 1536, 1548 (11th Cir.
1988) (citation omitted). The district court “may
accept, reject, or modify, in whole or in part, the findings
or recommendations made by the magistrate judge.” 28
U.S.C. § 636(b)(1). The district court must consider the
record and factual issues based on the record independent of
the magistrate judge's report. Ernest S. ex rel.
Jeffrey S. v. State Bd. of Educ., 896 F.2d 507, 513
(11th Cir. 1990).
objected-to R&R on the Motion to Intervene is reviewed
de novo. The R&R on the Settlement Motion is
reviewed only for clear error.
R&R on Motion to Intervene
claims the right to intervene or requests permission to
intervene under Federal Rule of Civil Procedure 24(a), (b).
(Doc. 219, pp. 1-2.) Synovus argues it has a legal interest
in the Reserve Fund and disposing of this action “may,
as a practical matter, impair or impede Synovus's ability
to protect that interest.” (Id.) Synovus also
argues permissive intervention is appropriate because it
seeks to assert a claim and defense that shares common
questions of law or facts with the action, namely who is
entitled to the Reserve Fund. (Id. at 2.) The FTC
opposes the motion, arguing the sole purpose of Synovus's
present intervention “is to retrieve the $6.3 million .
. . -the same funds this Court already ordered be frozen and
held by the Receiver until resolution of the FTC's
underlying lawsuit against the MOBE defendants.” (Doc.
224, p. 2.) And Synovus' claim should be “assessed
through a claims process that can determine the validity and