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Federal Trade Commission v. Good Ebusiness, LLC

United States District Court, C.D. California

July 12, 2016

FEDERAL TRADE COMISSION, Plaintiff,
v.
GOOD EBUSINESS, LLC, also d/b/a AAP FIRM, STUDENT LOAN HELP DIRECT, and SELECT STUDENT LOAN; SELECT STUDENT LOAN HELP, LLC; SELECT DOCUMENT PREPARATION, INC.; TOBIAS WEST; and KOMAL WEST, Defendants, and BEVERLY HILLS TAX GROUP, LLC, Relief Defendant.

          ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT [45]

          OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         On March 8, 2016, Plaintiff Federal Trade Commission filed its First Amended Complaint against Defendants Good Ebusiness, LLC (doing business as AAP Firm, Student Loan Help Direct, and Select Student Loan), Select Student Loan Help, LLC, Select Document Preparation, Inc., Tobias West, and Komal West ("Defendants"), as well as Relief Defendant Beverly Hills Tax Group, LLC ("Relief Defendant").

         Plaintiff alleges Defendants violated the Federal Trade Commission Act ("FTC Act"), the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), and the 2009 Omnibus Appropriations Act ("2009 Omnibus Act") by preying on financially struggling consumers and promising to make their mortgage or student loan payments substantially lower by renegotiating with their lender-but without ever having any intention of actually doing so. (First Am. Compl. ("FAC"), ECF No. 31.) The Clerk of Court entered default against Defendants Good Ebusiness, Student Loan Help Direct, Select Student Loan, Select Student Loan Help, and Select Document Preparation ("Defaulting Defendants") and Relief Defendant on March 29, 2016. (ECF No. 40.) Plaintiff subsequently moved for default judgment against Defaulting Defendants, in which Plaintiff seeks monetary relief equal to revenues less chargebacks between August 2013 and the end of February 2016 (totalling $2, 329, 456), disgorgement of all funds in Beverley Hills Tax Group's accounts, and an injunction banning Defaulting Defendants from selling unsecured or secured debt relief products or services, making material misrepresentations in connection with any product or service, or making claims in connection with any product or service without possessing competent and reliable substantiation. (Mot. Default J. ("Mot.") 8-13, ECF No. 45.) For the reasons discussed below, the Court GRANTS Plaintiff's Motion.[1]

         II. FACTUAL BACKGROUND

         Plaintiff Federal Trade Commission ("FTC") is an independent agency of the United States Government created by 15 U.S.C. §§ 41-58. (FAC ¶ 4.) Defendant Good Ebusiness, LLC ("GEB") is incorporated in Nevada and has also done business as The AAP Firm ("AAP"), Student Loan Help Direct ("SLHD"), and Select Student Loan ("SSL"). (Id. ¶ 6.) Defendant Select Student Loan Help, LLC ("SSLH") is incorporated in Florida. (Id.¶ 7.) Defendant Select Document Preparation, Inc. ("SDP") is also incorporated in Nevada. (Id. ¶ 8.) Each corporation is controlled by Defendants Tobias West and his wife, Komal West. (Id. ¶¶ 9-10.) Relief Defendant Beverly Hills Tax Group has received funds or assets that can be traced to Defendants' fraudulent business practices as alleged in the FAC. (Id. ¶ 11.)

         From at least January 2014 to August 2014, Defendants GEB (d/b/a AAP) and Tobias West engaged in a course of conduct to market and sell mortgage assistance relief services ("MARS"). (Id. ¶ 14.) These "MARS Defendants" marketed their services primarily via unsolicited outbound telemarketing calls, inbound telemarketing calls from consumers responding to online advertising at their website, and direct mail advertising. (Id. ¶ 15.) To induce consumers, MARS Defendants promised consumers that they would lower the consumer's monthly mortgage payment, mortgage interest rate, or obtain loan forbearance, a loan modification, or other loan restructuring. (Id. ¶ 16.) Furthermore, MARS Defendants purported to be a law firm that would provide forensic loan audits and other services to identify errors in consumers' mortgage loan documents, ferret out predatory lending practices, gather information to defend against foreclosure, and win concessions from lenders. (Id. ¶ 17.) MARS Defendants charged an initial up-front fee, ranging from $1, 000 to $5, 000, and represented that, if they were unable to secure the promised relief, they would fully refund all fees paid by the consumers. (Id. ¶ 18.) However, in numerous instances, MARS Defendants failed to obtain the promised relief for their customers and have not provided the promised refund. (Id. ¶ 19.)

         From at least June 2014 to the present, Defendants GEB (d/b/a SLHD and SSL), SSLH, SDP, Tobias West, and Komal West ("Student Debt Relief Defendants") have engaged in a similar course of conduct to market and sell a program that aims to renegotiate, settle, or otherwise alter the terms of payment for a customer's student loan debt. (Id. ¶¶ 37, 40-41.) Student Debt Relief Defendants represent that, if they are unable to secure the promised debt relief, they will refund the fees paid by consumers (Id. ¶ 38.) However, in numerous instances Student Debt Relief Defendants have failed to obtain the promised relief and have not provided the promised refund. (Id.) Relief Defendant Beverly Hills Tax Group has received, directly or indirectly, funds or other assets from Defendants that are traceable to funds obtained from Defendants' customers through these mortgage and student loan relief practices. (Id. ¶ 84.)

         On February 16, 2016, Plaintiff filed its initial Complaint against Defendants seeking a permanent injunction and other equitable relief. (ECF No. 1.) Plaintiff also requested an Ex Parte Temporary Restraining Order ("TRO") and sought asset relief and the appointment of a receiver. (ECF No. 3.) The Court granted the TRO. (ECF No. 12.) On February 29, 2016, the Court entered a preliminary injunction against Defendants Tobias and Komal West, and against Defaulting Defendants on March 1, 2016. (ECF Nos. 26-27.) On March 8, 2016, Plaintiff filed its First Amended Complaint, adding Beverley Hills Tax Group, LLC, as a relief defendant. (ECF No. 31.) On March 29, 2016, after Defendants failed to timely respond to Plaintiff's FAC, the Clerk of Court entered a default against Defaulting Defendants GEB (d/b/a AAP, SLHD, and SSL), SSLH, and SDP, and Relief Defendant Beverley Hills Tax Group. (ECF No. 40.) Plaintiff subsequently filed the present Motion for Default Judgment. (ECF No. 45.) Plaintiff's Motion is now before the Court for decision.

         III. LEGAL STANDARD

         Federal Rule of Civil Procedure 55(b) authorizes a district court to enter a default judgment after the Clerk enters a default under Rule 55(a). District courts have discretion over whether to enter default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). When a party moves for a default judgment, the Court accepts the well-pleaded factual allegations in the complaint as true, with the exception that the moving party must submit evidence establishing the amount of damages sought. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-19 (9th Cir. 1987) (per curiam); Fed.R.Civ.P. 54(c) ("[a] judgment by default shall not be different in kind or exceed in amount that prayed for in the [complaint]").

         In exercising its discretion, a court must consider several factors (the Eitel factors), which include: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake; (5) the possibility of a dispute concerning material facts; (6) whether the defendant's default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

         IV. DISCUSSION

         A. Procedural Requirements

         Before a court can enter a default judgment against a defendant, the plaintiff must satisfy the procedural requirements set forth in Federal Rules of Civil Procedure 54(c) and 55, as well as Local Rule 55-1. Local Rule 55-1 requires that the movant submit a declaration establishing: (1) when and against which party the default was entered; (2) identification of the pleading on which the default was entered; (3) whether the defaulting party is a minor, incompetent person, or active service member; and (4) that the defaulting party was properly served with notice if required. Vogel v. Rite Aid Corp., 992 F.Supp.2d 998, 1006 (C.D. Cal. 2014).

         Here, Plaintiff has satisfied these requirements. Plaintiff's counsel submitted a declaration stating that the Clerk entered a default against Defendants on the First Amended Complaint on March 29, 2016. (Durham Decl. ¶ 2, ECF No. 45-1; see also ECF No. 40.) Plaintiff's counsel also declares that Defaulting Defendants are not infants, incompetent, or active service members, and that they were properly served with written notice via email on May 13, 2016. (Durham Decl. ¶¶ 4-6.) Plaintiffs have thus complied with the procedural prerequisites for default judgment.

         B. E ...


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