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

Filing 29

ORDER and FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Edmund F. Brennan on 6/6/2012 ORDERING that the 7/18/2012 status (pretrial scheduling) conference is VACATED. On or before 7/31/2012, plaintiff shall file a motion for default judgment against HCO. IT IS FURTHER RECOMMENDED that Plaintiff's 6 , 23 motion for a preliminary injunction against HCO be granted. Plaintiff's proposed preliminary injunction against HCO be signed. Motion referred to Judge Garland E. Burrell, Jr. Objections to F&R due within 14 days. (Zignago, K.)

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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,

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Plaintiff,

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No. 2:12-cv-778 GEB EFB PS

vs.
HOPE FOR CAR OWNERS, LLC;
PATRICK FREEMAN,

ORDER AND
FINDINGS AND RECOMMENDATIONS

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Defendants.
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This action was referred to the undersigned pursuant to Local Rule 302(c)(21). See Dckt.

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No. 22 at 11; see also 28 U.S.C. § 636(c). On April 18, 2012, plaintiff filed a request for a

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preliminary injunction against defendant Hope for Car Owners LLC (“HCO”), arguing that HCO

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has been properly served but has not appeared or opposed plaintiff’s request for relief, and that

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the other defendant, Patrick Freeman, has already stipulated with plaintiff to the entry of a

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preliminary injunction that was filed and entered by the court on April 16, 2012. Dckt. No. 23 at

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1; see also Dckt. No. 6 (plaintiff’s motion for a temporary restraining order with an order to

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show cause why a preliminary injunction should not issue); Dckt. No. 17 (order granting

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plaintiff’s motion for a temporary restraining order and setting a hearing on plaintiff’s motion for

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a preliminary injunction). Plaintiff’s proposed preliminary injunction as to HCO is very similar

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to the April 16, 2012 stipulated preliminary injunction, and the finding of facts in the proposed
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preliminary injunction reflect those set forth in the temporary restraining order issued on April 4,

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2012. See Dckt. No. 23-1; see also Dckt. Nos. 17, 22. Plaintiff contends that because HCO has

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not properly opposed plaintiff’s request for a preliminary injunction, that request should be

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granted. Dckt. No. 23 at 2.

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As noted by the district judge, see Dckt. No. 17 at 2, HCO may not appear in this action

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without counsel. See E.D. Cal. L.R. 183(a) (“A corporation or other entity may appear only by

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an attorney.”); see also United States v. High Country Broad Co., 3 F.3d 1244, 1245 (9th Cir.

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2010) (“A corporation may appear in federal court only through licensed counsel.”). Therefore,

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HCO’s purported opposition to plaintiff’s request for a preliminary injunction, which was filed

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by defendant Patrick Freeman on behalf of HCO, was stricken. Dckt. No. 17 at 2 (citing

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Employee Painters’ Trust v. Ethan Enters., Inc., 480 F.3d 993, 998 (9th Cir. 2007) (indicating

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when a corporation fails to retain counsel it risks losing a case by default judgment)).

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Although plaintiff argued that HCO’s failure to file an opposition should result in the

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granting of plaintiff’s requested preliminary injunction, the undersigned issued an order on April

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19, 2012 stating that before any preliminary injunction would issue against HCO, HCO would be

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given an opportunity to obtain counsel and to file an opposition to the requested injunction.

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Dckt. No. 24. The order directed HCO to obtain counsel and notify the court that counsel had

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been obtained by May 21, 2012, and to file an opposition or a statement of non-opposition to

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plaintiff’s motion for a preliminary injunction, Dckt. Nos. 6 and 23, by May 28, 2012. Id. at 2.

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HCO was admonished that a “[f]ailure of HCO to obtain counsel and/or to file an opposition to

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the motion for a preliminary injunction may result in the granting of that motion and/or a

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recommendation that HCO be held in default.” Id. at 3. Finally, the order provided that if HCO

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failed to obtain counsel and/or to file an opposition to the motion for a preliminary injunction, on

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or before June 4, 2012, plaintiff was to file a brief explaining how it intends to proceed in this

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action against HCO. Id. at 2.

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The May 21 and 28 deadlines have passed, and HCO neither obtained counsel nor filed

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an opposition or a statement of non-opposition to plaintiff’s motion for a preliminary injunction.

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On May 31, 2012, plaintiff filed a request for entry of HCO’s default and a brief explaining that

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once plaintiff conducts limited discovery in order to establish the amount of consumer injury

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caused by HCO, plaintiff will file a motion for default judgment against HCO. Dckt. Nos. 26,

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27. Plaintiff anticipates that it will be prepared to file its motion for default judgment no later

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than July 31, 2012. Dckt. No. 26 at 3. Plaintiff’s brief also once again requested that plaintiff’s

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motion for a preliminary injunction be granted. Id. at 2. The clerk entered HCO’s default on

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June 5, 2012. Dckt. No. 28.

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In light of HCO’s default and failure to comply with the April 19, 2012 order, and for the

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reasons provided in plaintiff’s motion for a preliminary injunction against HCO, Dckt. Nos. 6

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and 23, the undersigned will recommend that the motion for a preliminary injunction be granted.

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In order to be entitled to preliminary injunctive relief, a party must demonstrate “that he is likely

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to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary

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relief, that the balance of equities tips in his favor, and that an injunction is in the public

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interest.” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (citing Winter v.

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Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). The Ninth Circuit has also held that

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“sliding scale” approach it applies to preliminary injunctions—that is, balancing the elements of

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the preliminary injunction test, so that a stronger showing of one element may offset a weaker

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showing of another—survives Winter and continues to be valid. Alliance for Wild Rockies v.

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Cottrell, 622 F.3d 1045, 1050 (9th Cir. 2010). “In other words, ‘serious questions going to the

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merits,’ and a hardship balance that tips sharply toward the plaintiff can support the issuance of

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an injunction, assuming the other two elements of the Winter test are also met.’” Id. Here,

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plaintiff has demonstrated that it is likely to succeed on the merits of its claims against HCO, that

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the balance of the equities strongly tips in plaintiff’s favor, and that a preliminary injunction is in

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the public interest. Therefore, even though plaintiff concedes that HCO “may have shut down,”
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thus minimizing the chance of irreparable harm, the undersigned finds that plaintiff’s requested

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preliminary injunction should nonetheless issue.

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Accordingly, IT IS HEREBY ORDERED that:

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1. The July 18, 2012 status (pretrial scheduling) conference, Dckt. No. 25, is vacated;

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and

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2. On or before July 31, 2012, plaintiff shall file a motion for default judgment against
HCO.

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IT IS FURTHER RECOMMENDED that:

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1. Plaintiff’s motion for a preliminary injunction against HCO, Dckt. Nos. 6 and 23, be

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granted; and

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2. Plaintiff’s proposed preliminary injunction against HCO, Dckt. No. 23-1, be signed.

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These findings and recommendations are submitted to the United States District Judge

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assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days

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after being served with these findings and recommendations, any party may file written

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objections with the court and serve a copy on all parties. Such a document should be captioned

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“Objections to Magistrate Judge’s Findings and Recommendations.” Failure to file objections

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within the specified time may waive the right to appeal the District Court’s order. Turner v.

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Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

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DATED: June 6, 2012.

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