FTC v. Sandra Hanley

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 20, 2022
• Docket: 20-15143
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 20 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

FEDERAL TRADE COMMISSION, No. 20-15143

Plaintiff-Appellee, D.C. No. 2:18-cv-00030-JCM-BNW v.

SANDRA X. HANLEY, in her individual MEMORANDUM* and corporate capacity,

Defendant-Appellant,

and

CONSUMER DEFENSE, LLC, Nevada limited liability company; et al.,

Defendants.

FEDERAL TRADE COMMISSION, No. 20-15144

Plaintiff-Appellee, D.C. No. v. 2:18-cv-00030-JCM-BNW

JONATHAN P. HANLEY, in his individual and corporate capacity,

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. and

CONSUMER DEFENSE, LLC, Nevada limited liability company; et al.,

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Submitted January 13, 2022** Pasadena, California

Before: WALLACE and FRIEDLAND, Circuit Judges, and LASNIK,*** District Judge.

Sandra X. Hanley and Jonathan P. Hanley (“the Hanleys”) appeal from the

district court’s order granting a permanent injunction and monetary judgment

against them in an action brought by the Federal Trade Commission (“FTC”). We

have jurisdiction under 28 U.S.C. § 1291, and we vacate in part and remand.

At summary judgment, the district court found no genuine dispute that the

Hanleys had “preyed on financially distressed homeowners by luring them into

signing contracts for mortgage assistance relief services,” in violation of a rule

** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Robert S. Lasnik, United States District Judge for the Western District of Washington, sitting by designation.

2 promulgated by the Consumer Financial Protection Bureau (“CFPB”) known as

“Regulation O.” 12 C.F.R. § 1015. The district court enjoined the Hanleys from

engaging in various predatory practices and ordered them and their companies to

pay $18,428,370, the total revenues from their unlawful practices less refunds and

chargebacks.

The only issue on appeal is whether the district court’s monetary judgment

can survive the Supreme Court’s decision in AMG Capital Management, LLC v.

FTC, 141 S. Ct. 1341 (2021). AMG, decided during the pendency of this appeal,

held that the FTC may not obtain equitable monetary relief under section 13(b) of

the Federal Trade Commission Act (“FTC Act”). Id. at 1352. We must therefore

vacate the district court’s grant of monetary relief under section 13(b), 15 U.S.C.

§ 53(b). But the FTC may still obtain restitution on behalf of consumers under

section 19 of the FTC Act, which authorizes courts to order “such relief as the

court finds necessary to redress injury to consumers,” including monetary

damages, provided the FTC follows certain procedures. 15 U.S.C. § 57b(b); see

also AMG, 141 S. Ct. at 1352.

The parties’ essential dispute is factual, not legal. The Hanleys contend that,

in the district court, the FTC relied solely on section 13(b) to obtain monetary relief

and expressly waived any reliance on section 19. The FTC maintains that it

brought the action under both section 13(b) and section 19, that it never waived

3 reliance on section 19, and that the district court’s judgment rested on both

grounds. For the reasons that follow, we hold that the FTC did not waive reliance

on section 19.

The FTC brought this action under section 13(b) of the FTC Act, 15 U.S.C.

§ 53(b), and the Dodd-Frank Wall Street Reform and Consumer Protection

(“Dodd-Frank”) Act, 12 U.S.C. § 5538. The Dodd-Frank Act authorizes the CFPB

to issue rules with respect to mortgage lending, § 5538(a)(1), and authorizes the

FTC to enforce those rules “in the same manner, by the same means, and with the

same jurisdiction, as though all applicable terms and provisions of the Federal

Trade Commission Act were incorporated into and made part of this section,”

§ 5538(a)(3). Dodd-Frank therefore allows the FTC to enforce the CFPB’s

Regulation O through all the mechanisms available under the FTC Act—including

both section 13(b) and section 19. Although the FTC did not expressly invoke

section 19 in its Complaint, it preserved the option of pursuing a judgment under

that authority by expressly relying on the Dodd-Frank Act.1

The Hanleys contend that the FTC later waived its section 19 authority. In

its motion for summary judgment, the FTC argued that Defendants could not

1 Appellants do not argue in their opening brief that such incorporation by reference is impermissible, nor have they cited any authority to that effect. We do urge the FTC to make any reliance on section 19 more explicit in its complaints in the future.

4 “recast this [s]ection 13(b) action as an action under [s]ection 19(d) of the FTC

Act” to invoke the latter provision’s statute of limitations. But at the time of the

district court proceedings, circuit law permitted the FTC to obtain monetary

judgments under section 13(b), which contained no statute of limitations. FTC v.

AMG Cap. Mgmt., LLC, 910 F.3d 417, 426 (9th Cir. 2018), rev’d, 141 S. Ct. 1341

(2021). Section 19’s statute of limitations was therefore irrelevant to the pursuit of

a monetary judgment under section 13(b), and the FTC’s argument to that effect

was not a blanket waiver of its separate authority under section 19.

We conclude that the FTC has preserved the ability to seek a monetary

judgment against the Hanleys under section 19 of the FTC Act. Because the

district court awarded monetary relief under section 13(b) without discussing

section 19, we remand to the district court to consider in the first instance whether

an award is appropriate here under section 19 of the FTC Act.

Accordingly, we VACATE the district court’s monetary judgment and

REMAND for further proceedings. Each party shall bear its own costs.