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Federal Trade Commission v. American Tax Relief LLC

July 20, 2011

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
AMERICAN TAX RELIEF LLC, ALEXANDER SEUNG HAHN, JOO HYUN PARK, YOUNG SOON PARK, AND IL KON PARK, DEFENDANTS.



The opinion of the court was delivered by: Judge Ronald A. Guzman

MEMORANDUM OPINION AND ORDER

The Federal Trade Commission ("FTC") has sued defendants American Tax Relief LLC, Alexander Seung Hahn, Joo Hyun Park, Young Soon Park and Il Kon Park for violations of the Federal Trade Commission Act, 15 U.S.C. § 45(a). Before the Court is defendants' motion to transfer venue. For the reasons provided herein, the Court grants the motion.

Facts

Defendant American Tax Relief LLC ("ATR") is a California limited liability company with its principal place of business in Beverly Hills, California. (Compl. ¶ 6.) Defendants Alexander Seung Hahn and his wife, Joo Hyun Park, reside in California and are officers, directors and/or owners of ATR, who controlled and participated in the acts and practices of ATR. (Id. ¶¶ 7-8.) Defendants Young Soon Park (also known as Young S. Son) and Il Kon Park, both residents of California, are the mother and father of Joo Hyun Park and received funds or other property that can be traced directly to defendants' deceptive and unfair practices. (Id. ¶¶ 9-10.) Thus, all defendants reside in the Central District of California. The receiver appointed by the Court, Thomas Seaman, also resides in the Central District of California and is represented by attorneys located in that district, as well as local counsel located in the Northern District of Illinois.

The FTC's complaint alleges the following. Since October 1999, defendants have induced consumers to pay exorbitant fees for defendants' supposed tax relief services by making false claims and material misrepresentations to consumers about whether consumers qualify for particular tax relief programs and about defendants' abilities to reduce their tax debts significantly. (Id. ¶ 12.) Defendants advertised, offered for sale and sold their services to prospective purchasers throughout the United States using television, radio, direct mail, internet and Yellow Page advertisements. (Id. ¶ 13.) Defendants claim that they have helped thousands of consumers settle their delinquent tax debts with the Internal Revenue Service ("IRS"). (Id. ¶ 15.)

When consumers called defendants' toll-free numbers, they provided defendants' representatives with information such as their tax debts, and sometimes their income, assets and liabilities. (Id. ¶ 20.) Defendants' representatives told nearly all of the consumers who called that they qualified for tax relief services, including in some cases an "Offer in Compromise" that would settle their tax debt or a "Penalty Abatement" that would reduce their tax debt and allegedly remove penalties and interest. (Id.) In many cases, defendants' representatives told consumers that, by hiring defendants, their tax debts would be reduced by fifty percent or more. (Id.)

Defendants required consumers to give them their fax number and make payments over the phone, either through charges to their credit card or debits from the bank accounts, ranging from approximately $3,200.00 to $25,000.00 or more per consumer, which supposedly was for all services from start to finish. (Id. ¶ 21.) Defendants then faxed paying consumers two IRS forms, a Power of Attorney, a Declaration of Representative form (Form 2848) and a Tax Information Authorization form (Form 8821), to be filled out and returned to defendants. (Id. ¶ 22.)

Approximately four days after defendants sent the fax, they sent consumers two letters and some questionnaires. (Id. ¶ 23.) The first letter thanked the consumer for becoming a client, acknowledged payment and instructed the consumer to fill out the questionnaires. (Id.) The second letter appeared to be a receipt of the consumer's initial payment, a notification of any balance due and statement of defendants' cancellation policy in small print:

If you decide to cancel our services, you have 5 days from the date of this letter to notify us in writing. You will be refunded up to 50% of the fee only if the fee is paid in full. This pays for the preliminary work and advice you have already received. The finalized work will not be sent to you until the fee is paid in full. (Id.) That was the first time consumers were notified of defendants' cancellation policy, most consumers did not notice this statement, and often this cancellation period was about to expire, or already had expired, by the time consumers received notice of the policy. (Id.)

Consumers who paid for defendants' services did not receive the promised services or results. (Id. ¶ 24.) Defendants provided consumers with a series of excuses as to why they had not made progress in reducing consumers' tax liabilities or blamed consumers for defendants' lack of progress based on consumers' failure to: (1) provide paperwork or information necessary to settle their tax debts, (2) pay the balance owed or (3) provide truthful information to defendants about the extent of their tax liabilities or other information during their initial consultations with defendants' representatives. (Id.)

Defendants also demanded additional money from some consumers purportedly to enable them to continue working on their cases. (Id. ¶ 25.) Defendants claimed that they needed more money because the Powers of Attorney supposedly expired or because the consumers were somehow at fault. (Id.) In some instances, defendants charged consumers' credit cards or withdrew money from their bank accounts in amounts more than that initially authorized by the consumer. (Id. ¶ 26.)

In reality, very few of defendants' clients qualified for Offers in Compromise, Penalty Abatements or substantial reductions in their tax debts, which is contrary to what defendants promised them. (Id. ¶ 27.) Instead, the majority of defendants' clients qualified, at most, for installment agreements, which requires consumers to pay the full amount of their tax debts, but in smaller monthly payments until their entire tax debt is satisfied. (Id. ¶ 28.) Installment agreements are generally easy for consumers to arrange for themselves. (Id.)

The FTC filed this lawsuit, and the Court granted the FTC's motions for a temporary restraining order and a preliminary injunction. The Court appointed Thomas Seaman, who is located in the Central District of California, as receiver to operate and wind down ATR's business.

Discussion

As an initial matter, the FTC suggests that this motion is untimely. The Court disagrees and holds that defendants' motion to transfer pursuant to 28 U.S.C. § 1404(a) was timely filed. The statute provides no time limit for moving to transfer and courts have merely held that a party should act with reasonable promptness. Prokop v. Stonemor Partners LP, No. 09 C 4323, 2009 WL 3764103, at *2 (N.D. Ill. Nov. 9, 2009); Black & Decker (U.S.), Inc. v. Sunbeam Corp., No. 93 C 4695, 1994 WL 865386, at *2 (N.D. Ill. Feb. 2, 1994); see Blumenthal v. Mgmt. Assistance, Inc., 480 F. Supp. 470, 471 (N.D. Ill. 1979) (holding that three-year delay in filing motion to transfer does not prevent court from reaching its merits). Defendants filed the instant motion approximately 120 days after the complaint was filed. The case had not progressed significantly at that point, other than the entry of the preliminary injunction and asset freeze order, as well as various motions for legal fees and expenses by the defense counsel and the receiver. Although the FTC argues that defendants, at one point, were willing to concede to proceed before the magistrate judge, this does not indicate that defendants would not have also brought the instant motion before the magistrate judge. See Jaramillo v. DineEquity, Inc., 664 F. Supp. 2d 908, 917 (N.D. Ill. 2009) ("However, a defendant does not waive the ...


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