Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

FEDERAL TRADE COMMISSION v. BAY AREA BUSINESS COUNCIL

April 8, 2004.

FEDERAL TRADE COMMISSION, Plaintiff
v.
BAY AREA BUSINESS COUNCIL, INC., a Florida corporation, et al., Defendants



The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, the Federal Trade Commission (the "FTC"), filed suit against Defendants, Bay Area Business Council, Inc.; Bay Area Business Council Customer Service Corporation; American Leisure Card Corporation; Bay Memberships, Inc.; Sr. Marketing Consultants, Inc.; Special Technologies, Inc.; Peter J. Porcelli, II; and Bonnie Harris. The FTC alleged Defendants violated the Federal Trade Commission Act, 15 U.S.C. § 45(a), and the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(4). Presently before the Court is the FTC's motion for summary judgment against the above-named Defendants. For the following reasons, that motion is granted.

LEGAL STANDARD

  Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir. 1994). "One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses. . . ." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (Celotex). Thus, although the moving party on a motion for summary judgment is responsible for demonstrating to the court why there is no genuine issue of material fact, the non-moving party must go beyond the face of the pleadings, affidavits, depositions, answers to interrogatories, and admissions on file to demonstrate, through specific evidence, that a genuine issue of material fact exists and to show that a rational jury could return a verdict in the non-moving party's favor. Celotex, 477 U.S. at 322-27; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254-56 (1986) (Anderson); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (Matsushita); Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 923 (7th Cir. 1994).

  Disputed facts are material when they might affect the outcome of the suit. First Ind. Bank v. Baker, 957 F.2d 506, 507-08 (7th Cir. 1992). When reviewing a motion for summary judgment, a court must view all inferences to be drawn from the facts in the light most favorable to the opposing party. Anderson, 477 U.S. at 247-48; Popovits v. Circuit City Stores, Inc., 185 F.3d 726, 731 (7th Cir. 1999). However, a metaphysical doubt will not suffice. Matsushita, 475 U.S. at 586. If the evidence is merely colorable or is not significantly probative or is no more than a scintilla, summary judgment may be granted. Anderson, 477 U.S. at 249-250.

  BACKGROUND

  Defendants failed to respond to the FTC's motion for summary judgment Rule 56.1(a) Statement of Facts. Instead, Defendants submitted a three-page response brief asking for "an evidentiary presentation at trial" with "affidavits" stating unsupported and irrelevant conclusions. Defendants' failure to comply with Rule 56.1(b) results in accepting as true all facts set out in a Rule 56.1(a) statement. See Smith v. Lamz, 321 F.3d 680, 682-83 (7th Cir. 2003). Even though Defendants failed to respond to the FTC's statement of material facts and such facts are deemed admitted, the FTC's motion for summary judgment will only be granted if it can demonstrate that there is no genuine issue of material fact and that they are entitled to judgment as a matter of law. See Johnson v. Gudmundson, 35 F.3d 1104, 1112 (7th Cir. 1994). Accordingly, the undisputed facts, for the purposes of this motion, taken from the FTC's Local Rule 56.1(a) statement of material facts (referred to herein as "Pl.'s 56.1") and exhibits, are as follows.

  The FTC is an independent agency of the United States created by statute, 15 U.S.C. § 41-58. The FTC is charged with enforcement of Section 5(a) of the Federal Trade Commission Act (the "FTC Act"), 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC also enforces the Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing acts or practices. The FTC is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the Telemarketing Sales Rule, and secure equitable relief as may be appropriate in each case, including restitution for injured consumers, pursuant to 15 U.S.C. § 53(b), 57b, 6102(c), and 6105(b). Pl.'s 56.1 ¶ 3.

  Defendants, Bay Area Business Council, Bay Area Customer Service, American Leisure Card, Bay Memberships, Sr. Marketing Consultants, and Special Technologies, are Florida corporations, with their principal place of business at 801 West Bay Drive, Largo, Florida 33770. Collectively, these Defendants are known as the "Corporate Defendants." Pl.'s 56.1 ¶ 4.

  Defendant Porcelli is the owner and Chief Executive Officer of the Corporate Defendants, and he actively participated in the Corporate Defendants' operations. Pl.'s 56.1 ¶ 5. Defendant Harris is the corporate Secretary and Treasurer of Defendants Bay Area Business Council and Sr. Marketing Consultants, and she also held herself out as the corporate Secretary and Treasurer of American Leisure Card. Harris actively participated in the Corporate Defendants* operations. Pl.'s 56.1 ¶ 6.

  Bay Area Business Corporation and American Leisure Card, through telemarketers, made sales to consumers all over the United States, including Illinois. Pl.'s 56.1 ¶ 7. Defendants are "sellers" or "telemarketers" engaged in "telemarketing" as those terms are defined in the Telemarketing Sales Rule, 16 C.F.R. § 310.2(r), (t), and (u). Pl.'s 56.1 ¶ 8, American Leisure Card did business as "First American Leisure Card" or "1st American Leisure Card." Pl.'s 56.1 ¶ 9.

  Bay Area Business Council sold "MasterCards" to at least 90,000 consumers from about June or August 2001 through about July 2002. Pl.'s 56.1 ¶ 10. American Leisure Card sold "MasterCards" to at least 32,000 consumers between June 1, 2003 and August 15, 2002. Pl.'s 56.1 ¶ 11.

  Bay Area Business Council and American Leisure Card entered into contracts with Assail, Inc., a company located in St. George, Utah. Under these contracts, Assail performed or hired others to perform telemarketing for Bay Area Business Council and American Leisure Card. Pl.'s 56.1 ¶ 12. Telemarketers representing Bay Area Business Council and American Leisure Card told consumers or led consumers to believe they would receive credit cards with substantial credit limits for an advance fee. Pl.'s 56.1 ¶ 13.

  On January 30, 2002, a Bay Area Business Council telemarketer called a consumer, identified herself as "Jacky" from Bay Area Business Council in Largo, Florida, and offered the consumer a MasterCard with a fixed interest rate of 6.5% and a limit of $20,000.00 for an advance fee of $399.00. "Jacky" gave the consumer Bay Area Business Council's customer service number, 1-800-339-1392. The conversation was tape recorded. Pl.'s 56.1 ¶ 14.

  Bay Area Business Council and American Leisure Card provided their telemarketers with Training Manuals that included telemarketing scripts. Pl.'s 56.1 ¶ 15. Bay Area Business Council's telemarketing scripts open by saying, "Hello, is (Customer Name) home? My name is (Rep Name) and I'm calling from Florida's Bay Area Business Council. Our records indicate that within the past 12 months, you filed an application for a credit card and you are now eligible to receive your MasterCard." Pl.'s 56.1 ¶ 16. American Leisure Card's telemarketing scripts open by saying, "Hello, is (Customer Name) home? My name is (Rep Name) and I'm calling from Florida's American Leisure. Our records indicate that within the past 12 months, you filed an application for a credit card and you are now eligible to receive your MasterCard." Pl.'s 56.1 ¶ 17.

  Both scripts then ask a series of questions to "verify" personal information about consumers, then state, "Mr./Mrs. (Customer Name) based on your information you are guaranteed to receive a MasterCard that does not require a security deposit with an initial pay as you go limit of $2000." Pl.'s 56.1 ¶ 18. The scripts further state, "And nothing Mr. _____ looks better on your Equifax credit report than a MasterCard. Pl.'s 56.1 ¶ 19 (emphasis in original). The scripts identify Bay Area Business Council and American Leisure Card as "credit card reseller[s]." Pl.'s 56.1 ¶ 20.

  Bay Area Business Council and American Leisure Card charged consumers a "one-time processing" fee, typically $174.95 or more, plus up to $24.95 for "shipping and handling." Pl.'s 56.1 ¶ 21. Some Bay Area Business Council customers were charged an advance fee of $399.00. Pl.'s 56.1 ¶ 22. The scripts state that the advance fee "covers the cost of processing the MasterCard order" and "once your fee clears your card is mailed guaranteed." Pl.'s 56.1 ¶ 23. Bay Area Business Council and American Leisure Card also charged consumers an additional $10.00 or more per month. Pl.'s 56.1 ¶ 24.

  Bay Area Business Council and American Leisure Card received payments from consumers by having funds debited from consumers' bank accounts. Pl.'s 56.1 ¶ 25. From about July 2001 through November 2001, Bay Area Business Council collected payments from consumers by using checks created by Bay Area Business Council or its agents in Bay Area Business Council's bank account, number 01113 599449, at Huntington National Bank. Pl.'s 56.1 ¶ 26. From about September 2001 through August 12, 2002, Bay Area Business Council and, subsequently, American Leisure Card and Bay Memberships collected payments from consumers by withdrawing funds directly from consumers' bank accounts through automated clearing house processing. The automated clearing house processor was Global eTelecom, located in Destin, Florida. Pl.'s 56.1 ¶ 27.

  After debiting consumers' bank accounts, Bay Area Business Council and American Leisure Card sent out packages to consumers. Both companies' packages were substantially the same except for company logos and letterhead. Pl.'s 56.1 ¶ 28. These packages sent to consumers did not contain a MasterCard credit card or any other functional card. Pl.'s 56.1 ¶ 29. The only "card" in the packages sent to consumers was a non-functional "facsimile card" with a MaseterCard logo and the name "Bay Area Business Council" or "1st American Leisure Card" on the front and a painted-on, non-magnetic black strip on the back. Pl.'s 56.1 ¶ 30. The packages Bay Area Business Council and American Leisure Card sent to consumers also contained an application for a "stored value" card. Pl.'s 56.1 ¶ 31. A "stored value" card is a type of debit card that cannot be used until the consumer "loads" funds onto the card by depositing those funds in a bank account. The consumer can only spend the amount of funds that the consumer already had deposited in the account. No credit was extended by use of the card. Pl.'s 56. ¶ 32.

  In order to receive a stored value card, Bay Area Business Council and American Leisure Card customers had to send additional funds, typically $15.00, $25.00, or more, to Bay Area Business Council or Sr. Marketing Consultants. Pl.'s 56.1 ¶ 33. Most or all of the Bay Area Business Council customers who sent the additional funds to Bay Area Business Council prior to December 2001 did not receive stored value cards, which were supposed to be provided through Mark Filipo of Apex Bank Card Services ("Apex"). Pl.'s 56.1 ¶ 34.

  From about December 2001 onwards, the only stored value card available to Bay Area Business Card and American Leisure Card customers was the "ChexCard" issued by Merchant Bankcard Services Corporation, 724 Bank of America Tower, 6300 Ridglea Place, Fort Worth, Texas 76116 and Stonebridge Bank. Pl.'s 56.1 ¶ 35. To obtain a ChexCard, Bay Area Business Council, and American Leisure Card customers had to fill out and send to Sr. Marketing Consultants a "MasterCard Acceptance Form" that ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.