April 17, 2019
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division. No. 17 C 194
- Matthew F. Kennelly, Judge.
Manion, Sykes, and Brennan, Circuit Judges.
Brown is the sole owner and operator of Credit Bureau Center,
a credit-monitoring service. (We refer to both collectively
as "Brown.") Brown's websites used what's
known as a "negative option feature" to attract
customers. The websites offered a "free credit report
and score" while obscuring a key detail in much smaller
text: that applying for this "free" information
automatically enrolled customers in an unspecified $29.94
monthly "membership" subscription. The subscription
was for Brown's credit-monitoring service, but customers
learned this information only when he sent them a letter
after they were automatically enrolled. Brown's
most successful contractor capitalized on the confusion by
posting Craigslist advertisements for fake rental properties
and telling applicants to get a "free" credit score
from Brown's websites.
Federal Trade Commission eventually took notice. It sued
Brown under section 13(b) of the Federal Trade Commission Act
("FTCA"), 15 U.S.C. § 53(b), alleging that the
websites and referral system violated several
consumer-protection statutes. The Commission sought a
permanent injunction and restitution. Relevant here, the
district judge found that Brown was a principal for his
contractor's fraudulent scheme and that the websites
failed to meet certain disclosure requirements in the Restore
Online Shopper Confidence Act ("ROSCA").
Id. § 8403. The judge entered a permanent
injunction and ordered Brown to pay more than $5 million in
restitution to the Commission.
now concedes liability as a principal for his
contractor's Craigslist scam. And he doesn't dispute
that his own websites failed to meet some of ROSCA's
disclosure requirements. So we have no trouble affirming the
judge's decision to hold him liable for both. We also
affirm the issuance of a permanent injunction. Brown's
argument there rests on an erroneous understanding of the
Eighth Amendment's Excessive Fines Clause.
restitution award is a different matter. By its terms,
section 13(b) authorizes only restraining orders and
injunctions. But the Commission has long viewed it as also
authorizing awards of restitution. We endorsed that starkly
atextual interpretation three decades ago in FTC v. Amy
Travel Service, Inc., 875 F.2d 564, 571 (7th Cir. 1989).
Since Amy Travel, the Supreme Court has clarified
that courts must consider whether an implied equitable remedy
is compatible with a statute's express remedial scheme.
See Meghrig v. KFC W., Inc., 516 U.S. 479, 487-88
(1996). And it has specifically instructed us not to assume
that a statute with "elaborate enforcement
provisions" implicitly authorizes other remedies.
Id. at 487.
Meghrig's instructions, we conclude that section
13(b)'s grant of authority to order injunctive relief
does not implicitly authorize an award of restitution. Every
reason Meghrig gave for not finding an implied
monetary remedy applies here. Most notably, the FTCA has two
detailed remedial provisions that expressly authorize
restitution if the Commission follows certain
procedures. Our current reading of section 13(b) allows the
Commission to circumvent these elaborate enforcement
provisions and seek restitution directly through an implied
decisis cannot justify adherence to an approach that Supreme
Court precedent forecloses. Accordingly, we overrule Amy
Travel and hold that section 13(b) does not authorize
restitutionary relief. Because the Commission brought this case
under section 13(b), we vacate the restitution award.
January 2014 Brown contracted with Danny Pierce to direct
customers to his credit-monitoring service. Brown gave Pierce
several functionally identical websites with names like
"eFreeScore. com" and
"FreeCreditNation.com" to use for
referrals. As their names suggest, these websites invited
people to sign up for a "free credit report and
score." But signing up for the free score also
automatically enrolled applicants in Brown's
credit-monitoring service, which charged a monthly
didn't tell prospective customers about the
credit-monitoring service. His websites almost entirely
focused on the free credit score and report. Three
disclaimers, buried in much smaller font, told consumers that
applying for the free offer also enrolled them in an
unspecified "membership" subscription that cost
$29.94 each month. Customers later learned that this
subscription was for credit monitoring when Brown sent them a
letter after the automatic enrollment.
did nothing to clear up this confusion. Indeed, it's
undisputed that his method for drumming up referrals was
fraudulent. He subcontracted with Andrew Lloyd, who posted
Craigslist advertisements for nonexistent rental properties
at bargain prices. Lloyd invited prospective tenants to email
the landlord. Posing as the "landlord," he then
responded and instructed them to obtain a credit report and
score through one of Brown's websites. But once
applicants got this "free" information-and were
automatically enrolled in the credit-monitoring service-Lloyd
stopped replying to emails.
plan was effective. Pierce quickly became Brown's most
successful recruiter. Over the course of their relationship,
Pierce referred more than 2.7 million customers to Brown,
generating just over $6.8 million in revenue. Unsuspecting
customers were understandably upset. They flooded Brown's
customer-service operators, questioning the monthly
subscription charge. They complained that the Craigslist
advertisements were scams. And many were blindsided by the
fact that requesting a free credit score automatically
enrolled them in a costly credit-monitoring service. Brown
told his customer-service team to deny any involvement with
Pierce's operation. And although Brown typically agreed
to cancel future charges, he often refused to issue refunds.
He also instructed his representatives to offer reduced
prices to retain customers. Some customers accepted the
offer, but others told their credit-card companies to cancel
Brown's charges. Credit-card companies cancelled more
than 10, 000 of Brown's charges.
complained to the Commission, which opened an investigation.
In January 2017 it sued Brown under section 13(b) of the FTCA
seeking an injunction and restitution. The Commission alleged
that the Craigslist advertisements violated the FTCA's
prohibition on "unfair or deceptive acts or
practices." 15 U.S.C. § 45(a). The suit also
alleged that Brown's websites violated the same provision
of the FTCA, as well as ROSCA, id. § 8403; the
Fair Credit Reporting Act ("FCRA"), id.
§ 1681j(g); and the Free Credit Reports Rule, 12 C.F.R.
Commission's motion, the judge issued a temporary
injunction, froze Brown's assets, and appointed a
receiver to manage his company. Brown and the Commission
later filed cross-motions for summary judgment. In addition
to contesting liability, Brown argued that section 13(b)
doesn't authorize an award of restitution and,
alternatively, that it doesn't authorize penalties or
legal restitution (as opposed to equitable
restitution, which requires tracing a plaintiff's
entitlement to a particular account or fund).
judge ruled for the Commission across the board, holding that
Brown violated the FTCA as a principal for the Craigslist
scheme and that the websites violated the FTCA, ROSCA, the
FCRA, and the Free Credit Reports Rule. The judge issued a
permanent injunction that imposed extensive conditions on
Brown's continued involvement in the credit-monitoring
industry and ordered Brown to pay $5, 260, 671.36 in
restitution. He also denied Brown's motion to unfreeze
funds to pay his attorneys.
contests his liability, the permanent injunction, and the
restitution award. Different standards of review apply. For
liability, we review the summary judgment de novo, viewing
the evidence in the light most favorable to Brown and drawing
reasonable inferences in his favor. Holloway v. Soo Line
R.R. Co., 916 F.3d 641, 643 (7th Cir. 2019). We review
the judge's decision to enter a permanent injunction for
abuse of discretion. SEC v. Yang, 795 F.3d 674, 681
(7th Cir. 2015). Finally, Brown's challenge to the
restitution award raises legal questions, which we review de
novo. Breneisen v. Motorola, Inc., 656 F.3d 701, 704
(7th Cir. 2011).
Commission sued under section 13(b) of the FTCA, which by its
terms authorizes temporary restraining orders and permanent
injunctions to enjoin violations of federal trade law. §
53(b)(1). To impose individual liability on the basis of a
corporate practice, the Commission must prove (1) that the
practice violated the FTCA; (2) that the individual
"either participated directly in the deceptive acts or
practices or had authority to control them"; and (3)
that the individual "knew or should have known about the
deceptive practices." FTC v. World Media
Brokers, 415 F.3d 758, 764 (7th Cir. 2005).
on the summary-judgment record, the judge held that Brown
violated the FTCA as a principal for the Craigslist marketing
scheme contrived by Pierce and Lloyd. He also held that
Brown's websites violated the FTCA, ROSCA, the FCRA, and
the Free Credit Reports Rule. Finally, the judge concluded
that Brown was individually liable for the violations because
he owned and operated all aspects of his company.
Brown concedes liability for the Craigslist scheme, he
challenges his liability for the website violations. He
asserts that his websites contained no misrepresentations in
violation of the FTCA and satisfied ROSCA's disclosure
requirements. He also argues that the Commission must enforce
the FCRA and the Free Credit Reports Rule through an internal
adjudication. See 15 U.S.C. § 1681s(a)(1)
(stating that FCRA violations "shall be subject to
enforcement by the Federal Trade Commission under section
5(b) of the Federal Trade Commission Act").
unnecessary to consider every theory of liability.
Brown's challenges to the injunction and restitution
award do not turn on which statute his websites violated. And
section 13(b) permits the Commission to seek relief against
Brown for violating "any provision of law" it
enforces. § 53(b).
start and end with ROSCA, which restricts the use of a
"negative option feature" to sell goods or services
on the Internet. § 8403. A negative-option feature is
"a provision [in an offer] under which the
customer's silence or failure to take an affirmative
action to reject goods or services or to cancel the agreement
is interpreted by the seller as acceptance of the
offer." 16 C.F.R. § 310.2(w); see also
§ 8403 (incorporating this definition by reference).
ROSCA prohibits this feature unless the seller "(1)
provides text that clearly and conspicuously discloses all
material terms of the transaction before obtaining the
consumer's billing information; (2) obtains a
consumer's express informed consent before charging the
consumer ...; and (3) provides simple mechanisms for a
consumer to stop recurring charges." § 8403. ROSCA
violations are "unfair or deceptive acts or
practices" under the FTCA, so the Commission can use the
FTCA's enforcement regime against violators. Id.
no dispute that Brown used a negative-option feature to
enroll customers in his credit-monitoring service. The only
question is whether he complied with ROSCA's disclosure
requirements. In the apt words of the district judge,
Brown's websites were "virtually devoid of
any mention of the [credit-monitoring] service aside
from the statement that the customer is to be billed for
it." Moreover, Brown concealed this incomplete
disclosure behind more prominent language offering a free
credit score and report. The judge determined that these
partial and obscure disclosures did not "clearly and
conspicuously disclose all material terms of the
transaction" or ensure that customers gave "express
informed consent." § 8403(1)-(2).
focuses on the conclusion that the disclosures weren't
conspicuous. He parses font sizes, details his websites'
color schemes, and takes a microscope to the Commission's
affidavits in an effort to highlight evidence that consumers
read and understood the disclosures. But he gives only
passing attention to the decisive point: His websites
didn't provide certain information that ROSCA
requires-namely, that the subscription was for a
oversight is fatal to Brown's defense. Setting aside
whether his disclosures satisfied the "clear and
conspicuous" standard (and on that point we see nothing
unsound in the judge's ruling that they did not), Brown
violated ROSCA if the disclosures failed to provide "all
material terms of the transaction." § 8403(1). The
service Brown provided in exchange for the subscription is
clearly a material term. See Material Term,
Black's Law Dictionary (10th ed. 2014) ("A
contractual provision dealing with a significant issue such
as subject matter ... or the work to be done."). And the
websites did not tell consumers that they were enrolling in a
credit-monitoring service. Brown seeks refuge in the form
letter that he delivered to new subscribers, which did
provide this information. But ROSCA required Brown to
disclose the material terms "before obtaining the
consumer's billing information." § 8403. Brown
protests that he sent the letter "almost
instantaneously" upon subscription. But almost
instantaneously is still too late under ROSCA.
next contends that even if corporate liability is
established, he should not be held personally liable. But
it's undisputed that he controlled the websites and was
aware of their content. That's enough to establish
personal liability for the ROSCA violations.
The Permanent Injunction
judge held that Brown's conduct warranted a permanent
injunction, applying our standard under the Securities and
Exchange Act. See Yang, 795 F.3d at 681 (asking
whether "there is a reasonable likelihood of future
violations in order to obtain [injunctive] relief")
(quotation marks omitted). The ensuing injunction imposes
extensive requirements on Brown if he ever operates a
credit-monitoring business again.
don't need to decide whether our standard for an
injunction under the Securities and Exchange Act also applies
to section 13(b) because Brown's challenge doesn't
turn on that question. His attack on the injunction rests
largely on the Excessive Fines Clause. U.S. CONST, amend.
VIII. He contends that the injunction is unconstitutionally
harsh and disproportionate. But he skips a necessary step in
the analysis-whether the injunction is a "fine" at
all. It's not. The Supreme Court has limited
"fines" to "cash [or] in-kind payments]
imposed by and payable to the government." Dep't
of Hous. & Urban Dev. v. Rucker, 535 U.S. 125, 136
n.6 (2002) (quotation marks omitted); see also
Zamora-Mallari v. Mukasey, 514 F.3d 679, 695 (7th Cir.
2008) ("The Board's removal order ... is not a
'fine,' and thus the Excessive Fine Clause of the
Eighth Amendment does not apply"). Because an injunction
isn't a fine, the permanent injunction doesn't
implicate the Excessive Fines Clause.
also offers an assortment of drive-by arguments, all of which
are too undeveloped to establish an abuse of discretion.
See Roger Whitmore's Auto. Serv., Inc. v. Lake
County, 424 F.3d 659, 664 n.2 (7th Cir. 2005) ("It
is the parties' duty to package, present, and support
their arguments ... ."). We affirm the permanent
The Restitution Award
bulk of Brown's appeal challenges the restitution order.
His primary argument is that section 13(b) does not authorize
an award of restitution. This is fundamentally a question of
statutory interpretation, but it's obscured by layers of
caselaw, so bear with us while we untangle the knot. A brief
overview of the FTCA's remedial structure is helpful to a
proper understanding of section 13(b), so we begin there.
FTCA gives the Commission several tools to enforce the
Act's prohibition on unfair or deceptive trade practices.
Under its "cease and desist" power, the Commission
adjudicates a case before an administrative law judge, who
can issue an order prohibiting the respondent from engaging
in the illegal conduct at issue. See 15 U.S.C.
§ 45(b). This order becomes final if it survives
administrative appeal and judicial review. Id.
cease-and-desist order empowers the Commission to sue the
violator for legal and equitable relief, but only if "a
reasonable man would have known under the circumstances [that
the conduct] was dishonest or fraudulent." Id.
§ 57b(a)(2), (b). After it becomes final, the order also
draws a line in the sand for both the respondent and anyone
else who engages in the prohibited conduct. If the respondent
later violates the order, the Commission can sue for civil
penalties and any equitable relief "the court finds
necessary." Id. § 45(/). If anyone else
engages in the prohibited conduct after the order becomes
final, the Commission can seek civil penalties if it can
prove that the violator acted with "actual
knowledge" that his conduct was unlawful. Id.
Commission has two other enforcement mechanisms at its
disposal. First, it can promulgate rules that "define
with specificity acts or practices which are unfair or
deceptive." Id. § 57a(a)(1)(B). By
preemptively resolving whether certain conduct violates the
FTCA, rulemaking permits the Commission to pursue "quick
enforcement" actions against violators. Nicholas R.
Parrillo, Federal Agency Guidance and the Power to Bind:
An Empirical Study of Agencies and Industries, 36 Yale
J. on Reg. 165, 225-26 (2019). Once the Commission
promulgates a rule, it can seek legal and equitable remedies,
including restitution, from violators. See 15 U.S.C.
§ 57b(a)(1), (b). And if it establishes that a violator
had "actual knowledge or knowledge fairly implied on the
basis of objective circumstances" that his conduct
violated a rule, the Commission can also pursue civil
penalties. Id. § 45(m)(1)(A).
Commission's remaining enforcement mechanism is
different. Under section 13(b) of the FTCA, the Commission
can forego any administrative adjudication or rulemaking and
directly pursue a temporary restraining order and a
preliminary or permanent injunction in federal court. §
53(b). As noted, the Commission sued Brown under this
restitution order against Brown rests on section 13(b)'s
permanent-injunction provision, which states that "in
proper cases the Commission may seek, and after proper proof,
the court may issue, a permanent injunction."
Id. Brown's straightforward argument is that
section 13(b) doesn't authorize restitution because it
doesn't mention restitution.
start with the obvious: Restitution isn't an injunction.
"Injunction" is of course a broad term. See
Injunction, Black's Law Dictionary (10th ed. 2014)
("A court order commanding or preventing an
action."). But statutory authorizations for injunctions
don't encompass other discrete forms of equitable relief
like restitution. See, e.g., Meghrig, 516 U.S. at
484 ("[N]either [a mandatory or prohibitory injunction]
contemplates ... equitable restitution.") (quotation
marks omitted); Owner-Operator Indep. Drivers Ass'n
v. Landstar Sys., Inc., 622 F.3d 1307, 1324 (11th Cir.
2010) ("Injunctive relief constitutes a distinct type of
equitable relief; it is not an umbrella term that encompasses
restitution or disgorgement."); see also Wal-Mart
Stores, Inc. v. Dukes, 564 U.S. 338, 365 (2011) (holding
that an equitable order for backpay isn't an injunction);
Nken v. Holder, 556 U.S. 418, 430 (2009)
("Whether [a deportation stay] might technically be
called an injunction is beside the point; that is not the
label by which it is generally known.").
Commission doesn't seriously argue otherwise. It instead
contends that section 13(b) implicitly authorizes
restitution. We endorsed that reading in Amy Travel,
875 F.2d at 571, which Brown asks us to overturn. We'll
discuss Amy Travel in a moment, but we begin with a
closer look at the FTCA itself. If the Commission's
reading is correct, there's no need to reconsider our
Whenever the Commission has reason to believe-
(1) that any person, partnership, or corporation is
violating, or is about to violate, any provision of law
enforced by the Federal Trade Commission, and
(2) that the enjoining thereof pending the issuance of a
complaint by the Commission and until such complaint is
dismissed by the Commission or set aside by the court on
review, or until the order of the Commission made thereon has
become final, would be in the interest of the public-
the Commission ... may bring suit in a district court of the
United States to enjoin any such act or practice. Upon a
proper showing that, weighing the equities and considering
the Commission's likelihood of ultimate success, such
action would be in the public interest, and after notice to
the defendant, a temporary restraining order or a preliminary
injunction may be granted without bond: Provided,
however, That if a complaint is not filed within such
period (not exceeding 20 days) as may be specified by the
court after issuance of the temporary restraining order or
preliminary injunction, the order or injunction shall be
dis-solved by the court and be of no further force and
effect: Provided further, That in proper cases the
Commission may seek, and after proper proof, the court may
issue, a permanent injunction. ...
implied restitution remedy doesn't sit comfortably with
the text of section 13(b). Consider its requirement that the
defendant must be "violating" or "about to
violate" the law. Requiring ongoing or imminent harm
matches the forward-facing nature of injunctions.
See 11A Charles Alan Wright et al., Federal Practice
and Procedure § 2942, at 47 (3d ed. 2013)
("[I]njunctive relief looks to the future and is
designed to deter ... ."). Conversely, restitution is a
remedy for past actions. See 1 Dan. B. Dobbs, Law of
Remedies §4.1(1), at 551 (2d ed. 1993)
("Restitution is a return or restoration of what the
defendant has gained in a transaction."). Beyond the
conceptual tension, this requirement raises an ...