Federal Trade Commission v. Hope for Car Owners, LLC et al

Filing 17

TEMPORARY RESTRAINING ORDER signed by Judge Garland E. Burrell, Jr on 4/4/12 ORDERING the entry of this Temporary Restraining Order is in the public interest; a preliminary injunction hearing shall be scheduled on 4/16/12, at 11:00 a.m; Any opposition shall be filed no later than 4:00 p.m. on 4/9/12; any reply shall be filed no later than noon on 4/13/12. (Becknal, R)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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FEDERAL TRADE COMMISSION,
Plaintiff,

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v.

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HOPE FOR CAR OWNERS, LLC, and
PATRICK FREEMAN,

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Defendants.
________________________________

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2:12-cv-00778-GEB-EFB
ORDER

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Plaintiff, the Federal Trade Commission (“FTC”), filed a

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motion “under Section 13(b) of the [Federal Trade Commission Act (‘FTC

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Act’)], 15 U.S.C. § 53(b), [in which it seeks] issuance of a temporary

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restraining order (‘TRO’) with an order to show cause why a preliminary

19

injunction should not issue.” (Pl.’s Mot. 1:22-25.) The motion was

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scheduled for hearing on April 2, 2012, and Defendants were provided a

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time by which any opposition to the motion was to be filed. However,

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this hearing date was vacated since Plaintiff failed to file any

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document showing Plaintiff's efforts to serve Defendants with the motion

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documents and did not explain whether it gave Defendants notice of the

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motion,

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Plaintiff responded by filing its counsel’s declaration, in which

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counsel explained Plaintiff’s efforts to notify Defendants of the

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motion, and requested that the Court reconsider its decision vacating

hearing

date,

and

opportunity

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to

respond

to

the

motion.

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the hearing date. The Court then issued an order scheduling Plaintiff's

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motion on April 4, 2012, commencing at 11:00 a.m.; the order also

3

provided Defendants an opportunity to file a written response to the

4

motion.

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Defendant

Patrick

Freeman,

proceeding

pro

se,

filed

an

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opposition to the motion on April 2, 2012, on behalf of both Defendants.

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However, “[a] corporation may appear in federal court only through

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licensed counsel.” United States v. High Country Broad Co., 3 F.3d 1244,

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1245 (9th Cir. 2010). Therefore, Defendant’s opposition with respect to

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Defendant Hope for Car Owners is stricken. Employee Painters’ Trust v.

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Ethan Enters., Inc., 480 F.3d 993, 998 (9th Cir. 2007) (indicating when

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a corporation fails to retain counsel it risks losing a case by default

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judgment).

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Defendant argues “Plaintiff’s request should be denied due to

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the fact that Defendants, as of sometime during the first quarter of

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2011 have ceased any and all marketing, advertising, [and] solicitation

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via the website www.carloanmod.com.” (Def.’s Opp’n 2:5-8.) Concerning

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the website www.avoidrepo.org, Defendant argues “while it is accurate

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that Defendant paid for the domain registration, defendant does not now

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nor have they ever had electronic control of the information contained

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at the url and a recent review of the site shows details for a company

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that is in no way associated with the Defendants activities.” Id. 4:6-

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10.

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Defendant also contends the website www.carloanmod.com has

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been removed, the decision was made to dissolve the corporation, and

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both Defendants will likely file for bankruptcy. Id. 3:1-2, 3:18-19,

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4:1-4. Further, Defendants argue as follows:

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Pursuant to Defendants[’] decision to wind up
operations and dissolve the corporation[,] all
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physical client records have recently been shredded
and recycled. All electronic materials such as any
computers, printers, drives, monitors, or any other
materials used in conjunction with the Defendants
efforts have recently been donated and/or sold to
repay the outstanding debts of Hope for Car Owners.

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Id. 4:22-5:2.

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The motion is based upon Plaintiff’s complaint in which it

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alleges

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“prohibits, inter alia, unfair or deceptive practices in or affecting

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commerce.

Defendants

An

act

violated

or

Section

practice

is

5(a)

deceptive

of

if

the

FTC

first,

Act,

there

which

is

a

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representation, omission, or practice that, second, is likely to mislead

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consumers acting reasonably under the circumstances, and third, the

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representation,

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Stefanchik, 559 F.3d 924, 928 (9th Cir. 2009) (internal quotations and

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citation marks omitted). Specifically, Plaintiff alleges Defendants

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misrepresented that they would obtain auto loan modifications for their

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customers

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modification efforts were unsuccessful. (Complaint ¶¶ 25-30.)

and

omission,

that

they

or

would

practice

grant

is

full

material.”

refunds

if

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their

Section 13(b) prescribes:

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F.T.C.

Whenever the Commission has reason to believe–

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(1)
that
any
person,
partnership,
or
corporation is violating, or is about to
violate, any provision of law enforced by the
Federal Trade Commission, and

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(2) that the enjoining thereof pending the
issuance of a complaint by the Commission and
until such complaint is dismissed by the
Commission or set aside by the court on
review, or until the order of the Commission
made thereon has become final, would be in the
interest of the public--

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the Commission by any of its attorneys designated
by it for such purpose may bring suit in a district
court of the United States to enjoin any such act
or practice. Upon a proper showing that, weighing
the equities and considering the Commission's
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v.

loan-

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likelihood of ultimate success, such action would
be in the public interest, and after notice to the
defendant, a temporary restraining order or a
preliminary injunction may be granted without bond
. . . Provided further, That in proper cases the
Commission may seek, and after proper proof, the
court may issue, a permanent injunction.

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15 U.S.C. § 53(b) (emphasis added). “Section 13(b), therefore, places a

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lighter burden on the Commission than that imposed on private litigants

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by

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irreparable harm to obtain a preliminary injunction. Under this more

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lenient standard, a court must 1) determine the likelihood that the

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Commission will ultimately succeed on the merits and 2) balance the

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equities.” F.T.C. v. Affordable Media, 179 F.3d 1228, 1233 (9th Cir.

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1999) (internal quotation marks and citations omitted).

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the

traditional

equity

“Individuals

are

standard;

personally

the

Commission

liable

for

need

not

restitution

show

for

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corporate misconduct if they had knowledge that the corporation or one

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of its agents engaged in dishonest or fraudulent conduct, that the

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misrepresentations were the type upon which a reasonable and prudent

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person would rely, and that consumer injury resulted.” Id. at 1234. “The

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knowledge requirement can be satisfied by showing that the individuals

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had actual knowledge of material misrepresentations, were recklessly

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indifferent to the truth or falsity of a misrepresentation, or had an

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awareness of a high probability of fraud along with an intentional

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avoidance of the truth.” Id.

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Plaintiff argues it will ultimately succeed on the merits of

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its claims against both Defendants and provides documents in support of

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the following arguments:

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Defendants represent that they will obtain an auto
loan modification that will reduce consumers’
monthly payments between 30% and 50%. Defendants
make this representation on their website, and then
reinforce the claim in their telephone sales
pitches. . . .
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Although Defendants promise refunds, in fact they
routinely
deny
their
clients’
requests
for
refunds. . . .

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Bank documents suggest that Defendants have taken
in gross revenue of at least $370,378 between March
20, 2009 and October 31, 2011. In a letter to the
Better Business Bureau of Northeast California in
January 2011, Defendant Freeman wrote ‘to date, we
have assisted more than 13,000 [consumers]. Thus,
the actual consumer injury could be much higher.

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(Pl.’s Mot. 4:3-5, 11:17-18, 12:14-18 (internal citations omitted).)

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Regarding Freeman’s involvement, Plaintiff argues as follows
and provides documents supporting these contentions:

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Defendant Patrick Freeman is the sole manager of
HCO and its registered agent. He also has signatory
authority over its bank accounts. Freeman is the
registrant as well as administrative contact,
technical, and billing contact for HCO’s Internet
websites. The domain registration and hosting fees
for HCO’s Internet website are paid for with
Freeman’s personal credit card. In additional
Freeman responds on behalf of HCO to Better
Business Bureau (“BBB”) complaints against it and
sends emails to consumers.

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Id. 2:25-3:5 (internal citations omitted). Defendant does not respond to

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these arguments. Plaintiffs have shown that it is likely to prevail on

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its claims that Defendants have engaged, and are likely to continue to

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engage, in acts or practices that violate Section 5.

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Concerning balancing the equities, “when a district court

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balances

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interest, the public interest should receive greater weight.” F.T.C. v.

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Affordable Media, 179 F.3d 1228, 1236 (9th Cir. 1999). Further, under

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the Section 13(b) standard,“[h]arm to the public interest is presumed.”

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F.T.C. v. World Wide Factors, Ltd., 882 F.2d 344, 346 (9th Cir. 1989).

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Plaintiff argues as follows:

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the

The

hardships

public

of

the

interest
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public

in

interest

halting

against

Defendants’

a

private

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misrepresentations and deceptive claims about their
vehicle loan modification services far outweighs
any interest Defendants may have in continuing to
deceptively market their services. . . . Granting
such relief is also necessary because Defendants’
conduct indicates that they will likely continue to
deceive the public. . . . In contrast, the private
equities
in
this
case
are
not
compelling.
Compliance with the law is hardly an unreasonable
burden. . . . Because the injunction will preclude
only harmful, illegal behavior, the public equities
supporting the proposed injunctive relief outweigh
any burden imposed by such relief on Defendants.

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(Pl.’s Mot. 20:12-21:15.) Defendant Freeman rejoins, arguing Defendants
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“have ceased any and all marketing, advertising, [and] solicitation via
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the website www.carloanmod.com.” (Def.’s Opp’n 2:6-8.) However, since
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Defendant has not provided any sworn evidence supporting this argument
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and the FTC has provided evidence showing hardship to the public
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interest, the balance of equities favors granting the TRO.
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Therefore, balancing the equities and considering the FTC’s
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likelihood of success on the merits, the entry of this TRO is in the
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public interest.
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DEFINITIONS OF TERMS USED IN ORDER WHICH FOLLOWS
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1.

“Assisting others” includes, but is not limited to, providing any

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of the following goods or services to another person:
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A.

performing customer service functions, including, but not

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limited to, receiving or responding to consumer complaints;
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B.

formulating or providing, or arranging for the formulation or

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provision

of,

any

telephone

sales

script

or

any

other

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marketing material, including but not limited to, the text of
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any

Internet

website,

email,

or

assisting

in

other

electronic

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communication;
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C.

providing

names

of,

or

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the

generation

of,

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potential customers;

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D.

performing marketing services of any kind; or

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E.

acting or serving as an owner, officer, director, manager, or

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principal of any entity.
2.

“Defendants” means the Individual Defendant and the Corporate

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Defendant,

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“Corporate

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successors and assigns.

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Freeman.

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3.

individually,

collectively,

or

in

any

combination.

Defendant” means Hope for Car Owners, LLC, and its
“Individual Defendant” means Patrick

“Document” is equal in scope and synonymous in meaning to the usage

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of the term in Federal Rule of Civil Procedure 34(a), and includes

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writings, drawings, graphs, charts, photographs, audio and video

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recordings, computer records, and any other data compilations from

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which information can be obtained.

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is a separate document within the meaning of the term.

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4.

A draft or non-identical copy

“Motor vehicle” means (a) any self-propelled vehicle designed for

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transporting persons or property on a street, highway, or other

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road; (b) recreational boats and marine equipment; (c) motorcycles;

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(d)

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campers; and (e) other vehicles that are titled and sold through

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dealers.

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5.

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motor

homes,

recreational

vehicle

trailers,

and

slide-in

“Motor vehicle loan” means any loan secured by title to a motor
vehicle or otherwise secured by the motor vehicle as collateral.

6.

“Motor vehicle loan assistance relief product or service” means any

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product, service, plan, or program, offered or provided to the

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consumer

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expressly or by implication, to assist or attempt to assist the

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consumer with any of the following:

in

exchange

for

consideration,

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that

is

represented,

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A.

stopping, preventing, or postponing any repossession of the

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consumer’s motor vehicle, or otherwise saving the consumer’s

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motor vehicle from repossession;

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B.

negotiating, obtaining, or arranging a modification of any

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term of a motor vehicle loan, including a reduction in the

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amount of interest, principal balance, monthly payments, or

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fees;

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C.

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obtaining any forbearance or modification in the timing of
payments from any motor vehicle loan holder or servicer on any

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motor vehicle loan;

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D.

negotiating, obtaining, or arranging any extension of the

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period of time within which the consumer may (i) cure his or

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her default on a motor vehicle loan, (ii) reinstate his or her

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motor vehicle loan, (iii) redeem a motor vehicle, or (iv)

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exercise any right to reinstate a motor vehicle loan or redeem

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a motor vehicle;

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E.

obtaining any waiver of an acceleration clause or balloon

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payment contained in any promissory note or contract secured

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by any motor vehicle; or

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F.

negotiating, obtaining, or arranging a sale of a motor vehicle

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or any other disposition of a motor vehicle loan other than a

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sale to a third party that is not the motor vehicle loan

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holder.

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The foregoing shall include any manner of claimed assistance,

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including, but not limited to, auditing or examining a consumer’s

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motor vehicle loan application.

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7.

“Person” means a natural person, organization, or other legal
entity,

including

a

corporation,
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partnership,

proprietorship,

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association, cooperative, or any other group or combination acting

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as an entity.

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ORDER

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PROHIBITED REPRESENTATIONS

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I.

IT IS THEREFORE ORDERED that Defendants and their successors,

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assigns, officers, agents, servants, employees, and attorneys, and

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those persons or entities in active concert or participation with

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any of them who receive actual notice of this Order by personal

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service,

facsimile

transmission,

email,

or

otherwise,

whether

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acting directly or through any corporation, subsidiary, division,

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or other device, in connection with the advertising, marketing,

12

promotion, offering for sale, sale, or provision of any motor

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vehicle loan assistance relief product or service, are hereby

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temporarily restrained and enjoined from:

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A.

Misrepresenting,

or

from

assisting

others

who

are

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misrepresenting, expressly or by implication, any of the

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following:

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1.

That any Defendant or any other person generally will

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obtain

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modification, or other alteration of the terms of any

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motor vehicle loan that will make consumers’ payments

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substantially more affordable;

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2.

for

consumers

a

renegotiation,

settlement,

The degree of success that any Defendant or any other

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person has had in performing any motor vehicle loan

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assistance relief product or service;

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3

The nature of any Defendant’s or any other person’s

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relationship

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servicer, or other secured or unsecured lender;

with

any

9

motor

vehicle

loan

holder

or

1

4.

The amount of time it will take or is likely to take to

2

obtain

3

modification, or other alteration of the terms of any

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motor vehicle loan; or

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5.

or

arrange

a

renegotiation,

settlement,

The refund policy of any Defendant or any other person,

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including but not limited to the likelihood of a consumer

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obtaining a full or partial refund, or the circumstances

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in which a full or partial refund will be granted to the

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consumer; or

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B.

Representing,

or

assisting

others

who

are

representing,

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expressly or by implication, any degree or rate of success

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that any Defendant or any other person has had in performing

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any motor vehicle loan assistance relief product or service,

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unless, at the time of making the representation, Defendants

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have a reasonable basis supporting such a representation.

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RESTRICTION ON COLLECTION OF ADVANCE FEES
II.

IT

IS

FURTHER

ORDERED

that

Defendants

and

their

successors,

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assigns, officers, agents, servants, employees, and attorneys, and

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those persons or entities in active concert or participation with

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any of them who receive actual notice of this Order by personal

21

service,

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acting directly or through any corporation, subsidiary, division,

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or other device, in connection with the advertising, marketing,

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promotion, offering for sale, sale, or provision of any motor

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vehicle loan assistance relief product or service, are hereby

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temporarily restrained and enjoined from requesting or accepting

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payment of any fee or consideration in advance of performing each

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and every motor vehicle loan assistance relief product or service

facsimile

transmission,

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email,

or

otherwise,

whether

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that Defendants contracted to perform or represented would be

2

performed.

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DISABLEMENT OF WEB SITES

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III. IT IS FURTHER ORDERED that, immediately upon service of the Order

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upon them and pending determination of the FTC’s request for a

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preliminary injunction, (1) any person hosting any Internet website

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for, or on behalf of, any Defendant, and (2) Defendants and their

8

successors, assigns, officers, agents, servants, employees, and

9

attorneys, and those persons or entities in active concert or

10

participation with any of them who receive actual notice of this

11

Order

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otherwise, whether acting directly or through any corporation,

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subsidiary, division, or other device, shall:

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A.

by

personal

service,

facsimile

transmission,

email,

or

Immediately do whatever is necessary to ensure that any

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Internet website used by Defendants for the advertising,

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marketing, promotion, offering for sale, sale, or provision of

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any motor vehicle loan assistance relief product or service,

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and containing statements or representations prohibited by

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Section

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carloanmod.com,

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hope4carowners.org, and avoidrepo.org, cannot be accessed by

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the public;

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B.

I

of

this

Order,

including,

hopeforcarowners.com,

but

not

limited

to

hope4carowners.com,

Prevent the destruction or erasure of any Internet website

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used by Defendants for the advertising, marketing, promotion,

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offering for sale, sale, or provision of any motor vehicle

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loan assistance relief product or service, including, but not

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limited

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hope4carowners.com, hope4carowners.org, and avoidrepo.org by

to

carloanmod.com,

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hopeforcarowners.com,

1

preserving such website in the format in which they are

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maintained currently; and

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C.

Immediately notify in writing counsel for the FTC of any other

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Internet website operated or controlled by any Defendant not

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listed in Section III.A or B above.

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SUSPENSION OF INTERNET DOMAIN NAME REGISTRATIONS
IV.

IT IS FURTHER ORDERED that, pending determination of the FTC’s

8

request for a preliminary injunction, any domain name registrar

9

shall suspend the registration of any Internet website used by

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Defendants for the advertising, marketing, promotion, offering for

11

sale, sale, or provision of any motor vehicle loan assistance

12

relief

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representations prohibited by Section I of this Order, including,

14

but

15

hope4carowners.com,

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provide immediate notice to counsel for the FTC of any other

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Internet domain names registered by Defendants or their officers,

18

agents, servants, employees, and attorneys, and those persons in

19

active concert or participation with Defendants who receive actual

20

notice of this Order by personal service or otherwise.

product

not

or

limited

service,

to

and

containing

carloanmod.com,

hope4carowners.org,

statements

or

hopeforcarowners.com,
and

avoidrepo.org,

and

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PROHIBITION ON RELEASE OF CUSTOMER INFORMATION OR CUSTOMER LISTS
22
V.

IT

IS

FURTHER

ORDERED

that

Defendants

and

their

successors,

23
assigns, officers, agents, servants, employees, and attorneys, and
24
those persons or entities in active concert or participation with
25
any of them who receive actual notice of this Order by personal
26
service,

facsimile

transmission,

email,

or

otherwise,

whether

27
acting directly or through any corporation, subsidiary, division,
28
12

1

or other device, are temporarily restrained and enjoined from

2

disclosing,

3

including the name, address, telephone number, email address,

4

social security number, other identifying information, or any data

5

that enables access to a customer's account (including a credit

6

card, bank account, or other financial account), of any person

7

which any Defendant obtained prior to entry of this Order in

8

connection with any vehicle loan assistance relief product or

9

service; provided, however, that Defendants may disclose such

10

information to a law enforcement agency or as required by law,

11

regulation,

using,

benefitting

from

customer

information,

or court order.

12
13

or

PRESERVATION OF RECORDS
VI.

IT

IS

FURTHER

ORDERED

that

Defendants

and

their

successors,

14

assigns, officers, agents, servants, employees, and attorneys, and

15

those persons or entities in active concert or participation with

16

any of them who receive actual notice of this Order by personal

17

service,

18

acting directly or through any corporation, subsidiary, division,

19

or other device, are hereby temporarily restrained and enjoined

20

from

21

transferring, or otherwise disposing of, in any manner, directly or

22

indirectly, any documents that relate to the business practices, or

23

business or personal finances, of any Defendant.

facsimile

destroying,

24
25

transmission,

erasing,

email,

mutilating,

or

otherwise,

concealing,

whether

altering,

EXPEDITED DISCOVERY
VII.

IT

IS

FURTHER

ORDERED

that,

Plaintiff

may

conduct

expedited

26

discovery in advance of the pending hearing on its request for

27

preliminary

28

identifying possible additional defendants, locating documents

injunction.

Such

13

discovery

shall

be

limited

to

1

pertaining to defendants’ businesses, and locating defendants,

2

should they attempt to evade service.

3

PRELIMINARY INJUNCTION HEARING

4

VIII. IT IS FURTHER ORDERED that, a preliminary injunction hearing shall

5

be scheduled on April 16, 2012, at 11:00 a.m. Any opposition shall

6

be filed no later than 4:00 p.m. on April 9, 2012; any reply shall

7

be filed no later than noon on April 13, 2012.

8

SERVICE OF THIS ORDER

9

IX. IT IS FURTHER ORDERED that copies of this Order may be served by

10

facsimile transmission, personal or overnight delivery, or U.S.

11

Express Mail, by agents and employees of the FTC or any state or

12

federal law enforcement agency or by private process server, on

13

Defendants or any other person or entity that may be subject to any

14

provision of this Order.

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Dated:

April 4, 2012

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18

GARLAND E. BURRELL, JR.
United States District Judge

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