Business That Ignored Red Flags Held Jointly and Severally Liable for the Unjust Gains of a Telemarketing Scheme
By Tali L. Katz, Greensfelder, Hemker & Gale, P.C.
In Fed. Trade Comm'n v. WV Universal Mgmt., LLC, 877 F.3d 1234 (11th Cir. 2017), the United States Court of Appeals for the Eleventh Circuit affirmed a district court’s decision to hold a credit card payment processing company jointly and severally liable for the total amount of unjust gains to all defendants in a fraudulent credit card scheme. After ruling that the processing company violated the Federal Trade Commission’s (FTC) Telemarketing Sales Rule, 16 C.F.R. § 310.3(b), because it “knew or consciously avoided knowing of the fraudulent activities” and “substantially assisted” a telemarketing company in its scheme to defraud victims, the district court held both defendants jointly and severally liable for the entire amount of unjust gains—despite the respective roles and profits of each party to the scam. In affirming this apportionment of damages, the appellate court reasoned that 15 U.S.C. § 53, which authorizes the FTC to seek injunctions against practices that violate its laws, “carries with it the full range of equitable remedies,” including disgorgement and restitution—which may be joint and several. This opinion demonstrates the extent of the potential consequences of doing business with a company engaged in illegal activity, and cautions lawyers to advise their clients not to ignore “red flags.”