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Federal Trade Commission v. Christopher Mallett

October 13, 2011

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
CHRISTOPHER MALLETT, DEFENDANT.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiff, the Federal Trade Commission (the "FTC") brings this civil action against Defendant Christopher Mallett ("Mallett"), alleging that Mallett has engaged in deceptive practices in the course of marketing debt-, tax-, and mortgage-relief services to consumers through a series of websites. Currently before the Court is the FTC's [2] Motion for a Preliminary Injunction and Other Equitable Relief ("Motion for a Preliminary Injunction"), which Mallett has failed to oppose. Upon consideration of the FTC's uncontested submissions, the relevant authorities, and the record as a whole, the Court shall GRANT the FTC's [2] Motion for a Preliminary Injunction.*fn1

I. BACKGROUND

The FTC is an independent agency of the United States created by the Federal Trade Commission Act (the "FTC Act"), 15 U.S.C. §§ 41-58. Among other responsibilities, the FTC enforces Section 5(a) of the FTC Act, which prohibits "unfair or deceptive acts or practices in or affecting commerce." Id. § 45(a)(1). Mallett is an individual residing in San Antonio, Texas, though he has recently used addresses in both Texas and Tennessee. Decl. of Erin Feehan-Nelson ("FTC Decl."), ECF No. [2-1], ¶ 15 & Attach. H at 144, 448.

Earlier this year, the FTC commenced an investigation into certain websites operated by Mallett and others. Id. ¶ 2. During its investigation, the FTC learned that Mallett has registered a number of websites over the past two years that he has used to advertise purported debt-, tax-, and mortgage-relief services to consumers that are ultimately provided by third parties, a practice commonly referred to as "lead generation." Id. ¶¶ 15-17 & Attachs. H-J. The websites are accessible by residents of the District of Columbia and do not state that the advertised services are unavailable to District of Columbia residents. Id. ¶¶ 3-12 & Attachs. A-F. Indeed, an FTC investigator successfully accessed the websites from within the District of Columbia and used them to communicate with a third-party service provider. Id. ¶¶ 1-12.

Mallett's websites comprise a loosely organized network. The websites often refer to one another and Mallett has adopted a practice of cycling through websites, shutting down some while opening others. See, e.g., id. Attach. D at 80-81, Attach. H. at 145, 203-04, & Attach. E at 92-93. Many of the websites registered by Mallett are now inactive, including "govusdebtreform.net," "usdebtcare.net," "worldlawdebt.org," "fha-homeloan.info," "usstopforeclosurenow.com," "usstopforeclosuretoday.com," "usstopforeclosure.com," "usbankloanmodification-gov.info," "mortgagehelp-gov.us," "loanmods-gov.info," "loanmods-gov.us," "mortgagehelp-gov.info," "debtconsolidation-gov.info," "debtrelief-gov.info," "creditcard-assistance-gov.info," and "mycredithelp-gov.info." Id. Attach. H. at 145, 203-04.

One example of Mallett's websites is "gov-usdebtreform.net," which displayed a main page entitled "Welcome to the Department of Consumer Services Protection Commission" and included various links to putative services such as "Student Loan Relief," "Debt Relief Services," and "Tax Services." Id. Attach. B at 48. Clicking on the displayed links opened new pages advertising financial-related services, which would in turn direct visitors to advertised businesses provided by third parties. Id. ¶ 3 & Attach. B at 50-78. When an FTC investigator first visited the website, the main page displayed an image of the FTC's official seal in the body of the page. Id. ¶¶ 2-3 & Attach. A at 9. Subsequently, the website was changed so that the FTC's official seal was omitted from the body of the main page, but nonetheless appeared as the website's "shortcut" or website icon located in the browser bar next to the website address. Id. ¶¶ 4-5 & Attach. C at 79. The "gov-usdebtreform.net" website also displayed an online "Debt Assistance Request Form" and "Tax Assistance Request Form" that ostensibly could be submitted to receive more information about those topics. Id. Attach. B at 48. Using an alias, an FTC investigator located in the District of Columbia submitted a request using the first of these forms and was later contacted by a representative of Full Spectrum Debt Solutions, LLC, who offered to settle and negotiate the investigator's credit card debt balances and offered to enroll the investigator in the company's debt settlement program. Id. ¶¶ 19-20.

During its investigation, the FTC collected evidence showing that Mallett is personally involved in the maintenance and operation of the network of websites. Payment for registration was frequently made by using Mallett's credit card and Mallett would periodically call his internet service providers to address matters concerning the maintenance of the websites. Id. Attach. H at 162, 304, 406-43. One of Mallett's websites included an online "Debt Assistance Request Form" that, when used, directed visitors to a "thank you" page displaying "cmallett" as part of the website address. Id. ¶ 19 & Attach. K at 459. In addition, an FTC investigator using an alias placed four telephone calls to a toll free phone number listed on two of Mallett's websites-specifically, "USDebtCare.net" and "WorldLawDebt.org"-and on each occasion the investigator was directed to a voicemail account with the following outgoing message: "You have reached the voicemail of Christopher Mallett [], senior financial consultant for World Law Debt, Legal Advocate Financial Assistance branch." Id. ¶¶ 21-22 & Attach. L at 463-64.

The FTC commenced this action on September 14, 2011, asserting seven causes of action and claiming that Mallett has engaged in deceptive practices in the course of marketing debt-, tax-, and mortgage-relief services to consumers through his websites. See Compl. for Permanent Inj. & Other Equitable Relief ("Compl."), ECF No. [1]. On September 19, 2011, the FTC filed the pending Motion for a Preliminary Injunction. See Pl.'s Mem. in Supp. of its Mot. for Issuance of a Prelim. Inj., ECF No. [2].*fn2 Subsequently, the FTC submitted proof of service indicating that a copy of its Motion for a Preliminary Injunction, as well as a copy of the Summons and Complaint, were served on Mallett by hand delivery in San Antonio, Texas, on September 20, 2011. See Proof of Service, ECF No. [4], at 1. Because this Court requires any opposition to a motion for a preliminary injunction to be served and filed within seven days of service of the motion, see LCVR 65.1(c), Mallett had until and including September 27, 2011, to serve and file his opposition to the FTC's Motion for a Preliminary Injunction. Mallett, however, did not file a timely opposition.

On September 30, 2011, three days after Mallett's time to respond to the FTC's Motion for a Preliminary Injunction had expired, the FTC filed its reply. See Pl.'s Reply in Supp. of its Mot. for a Prelim. Inj. & Other Equitable Relief, ECF No. [5]. That same day, noting Mallett's failure to file an opposition, the Court ordered the FTC to show cause why "expedition" on its motion was "essential," LCVR 65.1(d), if in fact the FTC was seeking an expedited hearing. See Order (Sept. 30, 2011), ECF No. [6]. On October 3, 2011, the FTC responded by "clarif[ying] that it [was] not seeking an expedited hearing pursuant to Local Civil Rule 65.1(d)." Pl.'s Resp. to Order & Certificate of Service, ECF No. [7], at 1.

Even though Mallett executed a form confirming that he received a copy of the Court's Order, see Acceptance of Service, ECF No. [7-1], he still did not file an opposition to the FTC's Motion for a Preliminary Injunction or seek leave to file an opposition out-of-time. Indeed, even though a total of 23 days have elapsed since the FTC first served a copy of its motion on Mallett, the public docket reflects that Mallett still has not filed an opposition or otherwise appeared in this action. Therefore, the Court considers the FTC's Motion for a Preliminary Injunction without the benefit of an opposition.

II. LEGAL STANDARD

The FTC grounds its Motion for a Preliminary Injunction in Section 13(b) of the FTC Act, the final proviso of which provides "[t]hat in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction." 15 U.S.C. § 53(b). Courts are in agreement that the authority to grant permanent injunctive relief under this proviso includes the authority to grant preliminary injunctive relief. See, e.g., FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1026 (7th Cir. 1988); FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1434 (11th Cir. 1984) (per curiam); FTC v. H. N. Singer, Inc., 668 F.2d 1107, 1113 (9th Cir. 1982).

When presented with a motion for a preliminary injunction, courts in this Circuit ordinarily apply a four-prong test, requiring the moving party to show (1) a substantial likelihood of success on the merits, (2) that it would suffer irreparable injury if the injunctive relief were not granted, (3) that an injunction would not substantially injure other interested parties, and (4) that the public interest would be furthered by the injunction. Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006). However, when the FTC seeks to enforce a matter entrusted to it by Congress, it operates not as an "ordinary litigant," but as a "statutory guardian" charged with safeguarding the public interest in enforcing federal law. SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801, 808 (2d Cir. 1975). In recognition of this special statutory role, the FTC generally is not held to the same "high thresholds" that apply to private parties seeking preliminary relief. FTC v. Weyerhaeuser Co., 665 F.2d 1072, 1082 (D.C. Cir. 1981); cf. FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028, 1034 (D.C. Cir. 2008) ("Congress recognized the traditional four-part equity standard for obtaining an injunction was not appropriate for the implementation of a Federal statute by an independent regulatory agency.") (internal quotation marks and citation omitted). Instead, when seeking a preliminary injunction under the final proviso of Section 13(b), the FTC bears the lesser burden of satisfying a "public interest" standard, requiring only a showing of (1) a likelihood of success ...


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