Federal Trade Commission v. Tucker et al

Filing 33

MEMORANDUM AND ORDER - Granting in part 23 MOTION to Enforce Preliminary Injunction. In Court Hearing set for 3/16/2017 at 09:00 AM in KC Courtroom 427 (JAR)before District Judge Julie A. Robinson. SEE ORDER FOR ADDITIONAL DETAILS/DEADLINES. Signed by District Judge Julie A. Robinson on 2/23/17. (kao)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
FEDERAL TRADE COMMISSION,
Plaintiff,
v.

Case No. 16-2816-JAR-JPO

JOEL JEROME TUCKER, individually and as
an officer of SQ Capital, LLC, JT Holdings, Inc.,
and HPD, LLC,
SQ CAPITAL, LLC,
JT HOLDINGS, INC., and
HPD LLC,
Defendants.

MEMORANDUM AND ORDER
This matter comes before the Court on Plaintiff Federal Trade Commission’s Motion to
Enforce Preliminary Injunction (Doc. 23) and the Court’s Order to Show Cause (Doc. 25) why
Defendants should not be held in contempt for failure to comply with the Preliminary Injunction.
The Court held a hearing on Plaintiff’s motion and the Court’s Order to Show Cause on February
22, 2017. For the reasons explained below, the Court finds Defendants in civil contempt of court
and imposes additional deadlines to compel Defendant Joel Tucker’s compliance with the
previously issued Preliminary Injunction (Doc. 21). The Court further finds that unless
Defendant Tucker fully complies with the deadlines set forth below, he shall be confined until
such time as he comes into compliance.
I.

Procedural Background
On December 22, 2017, the Court entered a Temporary Restraining Order (“TRO”) that

prohibited Defendants from marketing, distributing, or selling counterfeit debt portfolios.1 The
1

Doc. 18.

1

TRO also required Defendants and third parties in possession of Defendants’ accounts and data
to preserve records and electronic data that could show the extent of Defendants’ distribution of
fake debt.2 The TRO also directed Defendants to provide both (a) an accounting that listed
details on each of Defendants’ debt portfolio sales since June 1, 2014; and (b) an affidavit
showing that Defendants had distributed the TRO to directors, officers, employees, managers,
and entities with records regarding Defendants’ debt portfolio sales.3 The TRO ordered
Defendants to provide the accounting and distribution affidavit before the hearing on whether the
Court should enter a preliminary injunction, set for January 6, 2017.
Defendants provided neither the accounting nor the distribution affidavit. On January 6,
2017, Defendant Tucker was the only Defendant to appear at the preliminary hearing, and he
appeared pro se.4 He stated he did not oppose entry of a preliminary injunction after the FTC
agreed to relax its proposed deadline—until January 13—for Defendants to comply with
production of the accounting and distribution affidavit.5 Defendant Tucker also reported that he
was seeking an attorney to represent Defendants SQ Capital, LLC, JT Holding, Inc., and HPD,
LLC.6 The Court granted the Preliminary Injunction against Defendant Tucker and the three
business entities.
The Preliminary Injunction requires that Defendants provide the accounting they failed to
deliver in response to the TRO.7 The Preliminary Injunction states that the accounting must

2

Id.

3

Id.

4

Doc. 20.

5

Doc. 21 at 1.

6

Id.

7

Id. at 7.

2

cover all Debt Portfolios that Defendants, their subsidiaries, officers, agents or employees have
distributed, sold or acquired since June 1, 2014, and report the following details:
A. The filenames, titles or other descriptions of each Debt Portfolio;
B. The location(s) where each Debt Portfolio is stored and any username or
password required to access any computer or electronic files, including but not
limited to information stored, hosted or otherwise maintained by an Electronic
Data Host;
C. Any compensation related to the distribution, sale or acquisition of each Debt
Portfolio;
D. The full names, addresses and telephone numbers of the purchasers of each Debt
Portfolio;
E. The full names, addresses and telephone numbers of the Person(s) that provided
all or part of the records in each Debt Portfolio;
F. The full names, addresses and telephone numbers of the Person(s) that issued or
originated debts described in each Debt Portfolio;
G. The full names, addresses and telephone numbers of any Person(s) that ever held or
transferred title to the debts described in each Debt Portfolio;
H. The full names, addresses and telephone numbers of any Electronic Data Host that was
used to store, host, or otherwise maintain each Debt Portfolio; and
I. The full names, addresses and telephone numbers of any Financial Institution that
processed payments related to the sale or acquisition of each Debt Portfolio.8
The Preliminary Injunction also requires that Defendants and third parties preserve
records and electronically stored data. To implement this preservation, the Preliminary
Injunction requires Defendants to provide an affidavit regarding distribution of the order in
which they identify, by name, the individuals and entities that are subject to these obligations and
attest that Defendants have notified the individuals and entities of the Preliminary injunction.
On January 27, 2017, Plaintiff filed a Motion to Enforce Preliminary Injunction and a
Motion to Expedite Hearing on Plaintiff’s Motion to Enforce the Preliminary Injunction.9 On
January 30, 2017, the Court issued a Notice and Order to Show Cause why Defendants should

8

Id.

9

Docs. 22 & 23.

3

not be held in contempt for failure to comply with the Preliminary Injunction.10 The Court set a
show cause hearing for February 9, 2017.11 At the February 9 show cause hearing, Defendant
Tucker again appeared pro se and acknowledged that he had not fully complied with the
production requirements outlined in the Preliminary Injunction. The Court explained it would
give Defendants one more chance to comply with the Preliminary Injunction before finding
Defendants in contempt. Thus, the Court continued the show cause hearing to February 22,
2017. At the February 22 hearing, Defendant Tucker again appeared pro se as the lone
Defendant, and acknowledged that he had not fully complied with the production requirements
outlined in the Preliminary Injunction.
II.

Discussion
28 U.S.C. § 1826(a) provides, in part,
whenever a witness in any proceeding before or ancillary to any court or grand
jury of the United States refuses without just cause shown to comply with an
order of the court to testify or provide other information, including any book,
paper, document, record, recording or other material, the court, upon such refusal,
or when such refusal is duly brought to its attention, may summarily order his
confinement at a suitable place until such time as the witness is willing to give
such testimony or provide such information.

18 U.S.C. § 401 further provides, “[a] court of the United States shall have power to punish by
fine or imprisonment, or both, at its discretion, such contempt of its authority . . . as . . .
[d]isobedience or resistence to its lawful writ, order, rule, decree, or command.” The Tenth
Circuit has explained that
in the civil contempt context, a plaintiff must prove liability by clear and
convincing evidence. This means the FTC “has the burden of proving, by clear
and convincing evidence, [1] that a valid order existed, [2] that the defendant[s]
had knowledge of the order, and [3] that the defendant[s] disobeyed the order.”12
10

Doc. 25.

11

Id.

12

F.T.C. v. Kuykendall, 371 F.3d 745, 756–57 (10th Cir. 2004) (internal citations omitted).

4

The Court finds that Plaintiff has presented clear and convincing evidence that the
Preliminary Injunction is a valid order, that Defendants had knowledge of the order, and that
Defendants disobeyed the order. Indeed, Defendant Tucker has acknowledged multiple times the
existence of the Preliminary Injunction and his non-compliance with the same. Accordingly, the
Court finds Defendants in civil contempt of the Preliminary Injunction.
As explained at the February 22, 2017, hearing, the Court sets the following deadlines for
Defendants’ compliance:
1) Defendant Tucker shall provide to the Court by no later than 4 p.m. on Friday,
February 24, 2017, a flash drive containing all information stored on the email server
located in Kansas City, which Defendant Tucker described at the February 22, 2017
hearing.
2) Defendant Tucker shall provide to the Court by no later than 4 p.m. on Monday,
March 13, 2017, a flash drive containing all information stored on the email server
located in Louisville, Colorado, which Defendant Tucker described at the February
22, 2017 hearing.
3) Defendant Tucker shall provide to Plaintiff’s counsel Michael Tankersley, by no later
than March 13, 2017, a report that fully complies with the requirements set forth in
the Accounting for Debt Portfolios and Chains of Title Section of the Preliminary
Injunction.13
The Court will hold a hearing on March 16, 2017, at 9:00 a.m. to determine whether Defendants
have complied with the requirements and deadlines set forth above, unless the Court receives

13

Doc. 21 at 7–8.

5

notice at an earlier time from Plaintiff that Defendants have fully complied with these
requirements.
The Court further finds that monetary penalties will not sufficiently compel Defendants’
compliance with the Preliminary Injunction, as Plaintiffs already seek monetary penalties as final
relief in this case.14 Instead, if the Court determines at the March 16, 2017 hearing that
Defendants have not fully complied with the Preliminary Injunction and the requirements set
forth above, the Court will direct the United States Marshals Service to take custody of
Defendant Tucker and place him in confinement pursuant to 28 U.S.C. § 1826(a) and 18 U.S.C.
§ 401, and refer this matter to the United States Attorney’s Office for the District of Kansas for
determination whether to initiate criminal contempt proceedings.
IT IS THEREFORE ORDERED BY THE COURT that Plaintiff Federal Trade
Commission’s Motion to Enforce Preliminary Injunction (Doc. 23) is granted in part.
Defendants are held in contempt of the Court for their failure to comply with the Preliminary
Injunction (Doc. 21).
IT IS FURTHER ORDERED BY THE COURT that Defendant Joel Tucker shall
(1) provide to the Court by no later than 4 p.m. on Friday, February 24, 2017, a flash drive
containing all information stored on the email server located in Kansas City, which was
described by Defendant Tucker at the February 22, 2017 hearing; (2) provide to the Court by
no later than 4 p.m. on Monday, March 13, 2017, a flash drive containing all information
stored on the email server located in Louisville, Colorado, which was described by Defendant
Tucker at the February 22, 2017 hearing; and (3) provide to Plaintiff’s counsel Michael
Tankersley, by no later than March 13, 2017, a report that fully complies with the

14

Doc. 1 at 7–8.

6

requirements set forth in the Accounting for Debt Portfolios and Chains of Title Section of the
Preliminary Injunction.
IT IS FURTHER ORDERED BY THE COURT that the Court will hold a hearing on
March 16, 2017, at 9:00 a.m. to determine whether Defendant Joel Tucker has complied with
the requirements and deadlines set forth in the paragraph above. If the Court determines that
Defendant has not fully complied with the Preliminary Injunction and the requirements set forth
above, the Court will direct the United States Marshals Service to take custody of Defendant
Tucker and place him in confinement pursuant to 28 U.S.C. § 1826(a) and 18 U.S.C. § 401, and
refer this matter to the United States Attorney’s Office for the District of Kansas for a
determination whether to bring criminal contempt proceedings.
IT IS SO ORDERED.
Dated: February 23, 2017
S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

7