DAVID C. SHONKA SARAH SCHROEDER, Cal. Bar No. 221528

Case 4:18-cv-00806-SBA Document 22 Filed 03/02/18 Page 1 of 30

1 DAVID C. SHONKA 2 Acting General Counsel

3 SARAH SCHROEDER, Cal. Bar No. 221528

4

ROBERTA TONELLI, Cal. Bar No. 278738 EVAN ROSE, Cal. Bar No. 253478

5 Federal Trade Commission 901 Market Street, Suite 570

6 San Francisco, CA 94103

7

sschroeder@, rtonelli@, erose@ Tel: (415) 848-5100; Fax: (415) 848-5184

8

9

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

10

OAKLAND DIVISION

11

12 FEDERAL TRADE COMMISSION,

13

Plaintiff,

Case No. 18-cv-00806-SBA

14 vs.

15

FEDERAL TRADE COMMISSION'S

AMERICAN FINANCIAL BENEFITS CENTER, MOTION FOR PRELIMINARY 16 a corporation, also d/b/a AFB and AF STUDENT INJUNCTION, AND

17 SERVICES;

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

18 AMERITECH FINANCIAL, a corporation;

THEREOF

19 FINANCIAL EDUCATION BENEFITS CENTER,

20 a corporation; and

Date: May 9, 2018

21 BRANDON DEMOND FRERE, individually and as an officer of AMERICAN FINANCIAL

22 BENEFITS CENTER, AMERITECH

Time: 1:00 p.m. Location: Courtroom 210

1301 Clay Street, 2nd Floor

23

FINANCIAL, and FINANCIAL EDUCATION BENEFITS CENTER,

24

Defendants.

25

Judge:

Oakland, CA 94612

Hon. Saundra Brown Armstrong

26

27

28

Motion for Preliminary Injunction 4:18-CV-00806-SBA

Case 4:18-cv-00806-SBA Document 22 Filed 03/02/18 Page 2 of 30

1

TABLE OF CONTENTS

2

3 4 TABLE OF AUTHORITIES ...................................................................................................... iii

5 I. NOTICE OF MOTION AND MOTION ............................................................................ 1

6 II. INTRODUCTION................................................................................................................. 1

7

III. THE PARTIES................................................................................................................... 2 8

9

A. Plaintiff............................................................................................................................ 2

10 B. Defendants....................................................................................................................... 2

11 IV. DEFENDANTS' UNLAWFUL BUSINESS PRACTICES ............................................ 3

12 A. Defendants Falsely Promise Fixed Monthly Loan Payments, Loan Forgiveness,

13 and Eligibility for Government Programs.............................................................................. 4

14 1. Defendants' Mailers Falsely Promise Student Loan Payment Reduction and

15 Loan Forgiveness .................................................................................................................. 5

16

17

2. Defendants' Sales Calls Reinforce False Promises .................................................. 5

18

3. Defendants Misrepresent Consumers' Eligibility for IDR Programs ................... 7

19 B. Defendants Mislead Consumers to Extract Monthly Charges and Illegal Advance

20 Fees .........................................................................................................9

21 1. Illegal Advance Fees ................................................................................................... 9

22

23

2. Deceptive Monthly Charges..................................................................................... 10

24 C. Defendants' High-Pressure Tactics Prevent Consumers from Discovering

25 Misrepresentations.................................................................................................................. 12

26 D. Defendants Cut Off Consumers' Communications with Loan Servicers and the 27 Department of Education to Prevent Discovery of the Scam ............................................. 14 28

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1 V. THE FTC HAS SHOWN A LIKELIHOOD OF SUCCESS AND THE EQUITIES

2 WEIGH IN FAVOR OF THE REQUESTED RELIEF.......................................................... 15

3

A. This Court Has the Authority to Grant the Requested Relief ................................. 15

4 B. Legal Standard for Issuing a Preliminary Injunction .............................................. 16

5

6

C. The FTC Has Demonstrated a Likelihood of Success on the Merits....................... 16

7

1. Defendants' Misrepresentations Violate the FTC Act .......................................... 16

8

2. Defendants' Misrepresentations and Upfront Fees Violate the TSR................... 18

9

D. The Equities Favor Granting the Preliminary Injunction ....................................... 20

10

VI. THE LIABILITY OF DEFENDANTS .......................................................................... 21 11

12 A. Corporate Defendants Are Liable as a Common Enterprise................................... 21

13 B. Defendant Frere Is Liable for Monetary and Injunctive Relief............................... 22

14 VII. A PRELIMINARY INJUNCTION WITH EQUITABLE RELIEF IS

15 NECESSARY ............................................................................................... 24

16 A. Preliminary Injunction ................................................................................................ 24

17 B. Appointment of a Temporary Receiver ..................................................................... 24

18

19 VIII. CONCLUSION............................................................................................................. 25

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21

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1

TABLE OF AUTHORITIES

2 Cases 3 CFPB v. Irvine Webworks, No. 14-1967 (C.D. Cal. Feb. 2, 2016) (order) .................................. 18 4 CFPB v. Morgan Drexen, 60 F. Supp. 3d 1082 (C.D. Cal. 2014)................................................ 20 5 Delaware Watch Co. v. FTC, 332 F.2d 745 (2d Cir. 1964).......................................................... 21 6 FTC v. A1 DOCPREP, No. 17-cv-07044 (C.D. Cal. Sept. 28, 2017)..................................... 19, 24 7 FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999)....................................... 16, 20, 23 8 FTC v. Alliance Document Prep., No. 17-7048 (C.D. Cal. Nov. 2, 2017) ............................. 16, 24 9 FTC v. Am. Standard Credit Sys., Inc., 874 F. Supp. 1080 (C.D. Cal. 1994)............................... 23 10 FTC v. Am. Student Loan Consolidators, No. 17-cv-61862 (S.D. Fla. Sept. 26, 2017) ............... 19 11 FTC v. Amy Travel Service, Inc., 875 F.2d 564 (7th Cir. 1989) ............................................. 15, 22 12 FTC v. LLC, 453 F.3d 1196 (9th Cir. 2006)................................................ 16, 18 13 FTC v. Figgie Int'l, Inc., 994 F.2d 595 (9th Cir. 1993)................................................................ 17 14 FTC v. Gill, 71 F. Supp. 2d 1030, 1043 (C.D. Cal. 1999) ............................................................ 17 15 FTC v. H.N. Singer, Inc., 668 F.2d 1107 (9th Cir. 1982) ....................................................... 15, 16 16 FTC v. John Beck Amazing Profits, LLC, 865 F. Supp. 2d 1052 (C.D. Cal. 2012)...................... 21 17 FTC v. Johnson, 96 F. Supp. 3d 1110 (D. Nev. 2015) ................................................................. 18 18 FTC v. M&T Fin. Grp., No. 17-cv-06855 (C.D. Cal. Sept. 19, 2017).......................................... 19 19 FTC v. Network Servs. Depot, Inc., 617 F.3d 1127 (9th Cir. 2010) ............................................. 22 20 FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994)........................................................... 15, 17 21 FTC v. Publ'g Clearing House, Inc., 104 F.3d 924 (9th Cir. 1997))...................................... 22, 23 22 FTC v. Southwest Sunsites, Inc., 665 F.2d 711 (5th Cir. 1982).................................................... 20 23 FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009).......................................................................... 23 24 FTC v. Student Debt Doctor LLC, No. 17-cv-61937 (S.D. Fla. Oct. 3, 2017) ............................. 19 25 FTC v. Think Achievement Corp., 144 F. Supp. 2d 993 (N.D. Ind. 2000) ................................... 21 26 FTC v. U.S. Oil & Gas, 748 F.2d 1431 (11th Cir. 1984).............................................................. 24 27 FTC v. Warner Commc'ns, Inc., 742 F.2d 1156 (9th Cir. 1984).................................................. 20 28

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1 FTC v. World Wide Factors, Ltd., 882 F.2d 344 (9th Cir. 1989) ............................... 15, 16, 20, 21 2 In re Cliffdale Assocs., 103 F.T.C. 110 (1984) ....................................................................... 16, 17 3 In re Pfizer, Inc., 81 F.T.C. 23 (1972) .......................................................................................... 16 4 Kraft, Inc. v. FTC, 970 F.2d 311, 322 (7th Cir. 1992).................................................................. 17 5 New Mexico ex rel. King v. CreditArbitrators, LLC, No. CV 12-16, 2014 WL 12581756 (D.N.M. 6 Mar. 26, 2014)........................................................................................................................... 19 7 SEC v. Keller Corp., 323 F.2d 397 (7th Cir. 1963) ...................................................................... 24 8 Simeon Mgmt. Corp. v. FTC, 579 F.2d 1137 ................................................................................ 16 9 Southwest Sunsites, Inc., 105 F.T.C. 7 (1985) .............................................................................. 17 10 Thompson Medical Co., 104 F.T.C. 648 (1984) ........................................................................... 16 11 U.S. v. Odessa Union Warehouse Co-op, 833 F.2d 172 (9th Cir. 1987) ...................................... 16 12 Statutes 13 15 U.S.C. ? 45................................................................................................................................. 1 14 15 U.S.C. ? 45(a), ..................................................................................................................... 2, 16 15 15 U.S.C. ? 53(b) .......................................................................................................................... 15 16 15 U.S.C. ?? 41-58 ......................................................................................................................... 2 17 16 C.F.R. ? 310 ............................................................................................................................... 1 18 16 C.F.R. ? 310.4 .......................................................................................................................... 19 19 16 C.F.R. ? 310.6(5) ..................................................................................................................... 18 20 16 C.F.R. ?? 310.2 ........................................................................................................................ 18 21 Federal Rules of Civil Procedure R. 65 ........................................................................................ 15 22 23 24 25 26 27 28

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