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Federal Trade Commission v. AMG Services, Inc.

United States District Court, D. Nevada

July 16, 2014

FEDERAL TRADE COMMISSION, Plaintiff,
v.
AMG SERVICES, INC., et al., Defendants.

ORDER

GLORIA M. NAVARRO, Chief District Judge.

Pending before the Court are two Objections (ECF Nos. 544, 543) filed by the Lending Defendants[1] objecting to orders entered by Magistrate Judge Ferenbach. Also before the Court are numerous motions (ECF Nos. 589, 591, 593, 594, 601, 602, 603, 622, 625) filed by both parties seeking clarification from the Court regarding the effects of its May 28, 2014 Order (ECF No. 584) and whether Phase II of litigation has begun in this case. Also before the Court is a Motion to Strike (ECF No. 588) a letter sent by the FTC to the Court (ECF No. 620) regarding the Defendants' two outstanding objections and asking for a clarification from the Court that Phase II of the litigation had begun.

For the reasons discussed below, the Court Denies the Defendants' Objections (ECF No. 544, 543) and Grants Defendants' Motion to Strike (ECF No. 588). In this Order, the Court will also clarify the issues regarding the effects of the May 28, 2014 Order and find as Moot the other outstanding motions (ECF Nos. 589, 591, 593, 594, 601, 602, 603, 622, 625.)

I. BACKGROUND

The FTC filed its Complaint on April 2, 2012, alleging claims for deceptive acts and practices and deceptive collection practices in violation of the FTC Act (Counts I & II), for failing to properly disclose certain loan information in violation of the Truth in Lending Act ("TILA") and its implementing Regulation Z (Count III), for conditioning the extension of credit on the preauthorization of recurring loans in violation of EFTA (Count IV), and for disgorgement as provided under section 13(b) of the FTC Act (Count V). (Complaint 15:1-20:8, ECF No. 1.)[2]

On December 27, 2012, the Court signed an Order entering the parties' joint stipulation for preliminary injunction and bifurcation. (ECF No. 296.) The Bifurcation Order divided the litigation into two phases: a liability phase and a relief phase. ( Id. 9:1-10:23.) During Phase I of the proceedings, the Court would adjudicate the merits of the FTC's claims for violations of the FTC Act, TILA, and EFTA. ( Id. 9:1-24.) During Phase II of the proceedings, the Court would adjudicate the remaining issues, including the individual liability of the Defendants and whether the various Defendants constitute a common enterprise. ( Id. 10:1-19.)

On July 18, 2013, the Lending Defendants as well as Defendants AMG Capital Management, Level 5 Motorsports, LeadFlash Consulting, Black Creek Capital Corporation, Broadmoor Capital Partners, Scott A. Tucker, Blaine A. Tucker, Don E. Brady, Troy LittleAxe, and Robert D. Campbell (collectively the "Settling Defendants") stipulated to settle Counts II & IV with the FTC. (Joint Motion for Stipulated Order, ECF No. 446.) However, the Muir Defendants, [3] whose liability in this action largely depends upon the FTC's common enterprise theory, were notably absent from the settlement. ( Id.; Complaint ¶¶ 16, 19, 25, ECF No. 1; Muir Objection 2:1-16, ECF No. 541.)

On September 30, 2013, the FTC moved for summary judgment on Counts I-IV, [4] and the Lending Defendants filed their own motion seeking summary judgment on Count III. (FTC's Mot. Summary Judgment p. 1, ECF No. 454; Lending Defendants' Mot. Summary Judgment, ECF No. 461.) However, following a Court Order (ECF No. 478) approving the stipulated settlement, the FTC withdrew its summary judgment motion on Counts II & IV against the Settling Defendants, but not the Muir Defendants. (Withdrawal Motion p. 2, ECF No. 487.)

The summary judgment motions were referred to Magistrate Judge Ferenbach pursuant to 28 U.S.C. § 636(b)(1)(B) and District of Nevada Local Rule IB 1-4. On January 28, 2014, Judge Ferenbach recommended that this Court enter an order granting the FTC's Motion for Summary Judgment on Counts I & III against the Defendants and denying without prejudice the motion on Counts II & IV against the Muir Defendants as well as denying the Lending Defendants' Motion for Summary Judgment on Count III. (Report & Recommendation, ECF No. 539.) Judge Ferenbach further recommended that the Bifurcation Order be amended to permit Counts II & IV to proceed against the Muir Defendants during Phase II. ( Id. )

On May 28, 2014, the Court entered an Order (ECF No. 584) accepting and adopting Judge Ferenbach's Report & Recommendation. In that Order, the Court found that the Loan Note Disclosure document used by the Lending Defendants in providing their loans violated the FTC Act and TILA. (May 28, 2014 Order 11:7-21:20, ECF No. 584.) The Court also found that because the timing of the Bifurcation Order and the Order Approving Settlement effectively prevented the Muir Defendants from conducting necessary discovery, the FTC's Motion for Summary Judgment should be denied on Counts II & IV against the Muir Defendants. ( Id. 22:1-24:15.) The Court, therefore, granted the FTC's Motion for Summary Judgment in so far as that motion sought a determination against all Defendants that the FTC Act and TILA had been violated, but denied the motion without prejudice regarding Counts II & IV against the Muir Defendants. ( Id. 24:16-25:1.)

II. DISCUSSION

A. Previous Objections of the Defendants

At the time of the May 28, 2014 Order, there were two outstanding Objections (ECF Nos. 543, 544) filed by the Defendants asking this Court to reconsider two previous Orders entered by Magistrate Judge Ferenbach (ECF Nos. 538, 540.) The pendency of these two objections has led to a dispute among the parties regarding whether the litigation has now entered Phase II or is still in Phase I. Therefore, to resolve this dispute, the Court will now rule on these two objections.

Magistrate judges are authorized to resolve pretrial matters subject to district court review under a "clearly erroneous or contrary to law" standard. 28 U.S.C. § 636(b)(1)(A); see also FED. R. CIV. P. 72(a); L.R. IB 3-1(a) ("A district judge may reconsider any pretrial matter referred to a magistrate judge in a civil or criminal case pursuant to LR IB 1-3, where it has been shown that the magistrate judge's ruling is clearly erroneous or contrary to law."). A magistrate judge's order is "clearly erroneous" if the court has "a definite and firm conviction that a mistake has been committed." See David H. Tedder & Assocs. v. United States, 77 F.3d 1166, 1169-70 (9th Cir. 1996). The district judge, however, "may not simply substitute its judgment" for that of the magistrate judge. Grimes v. City and County of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991) ( citing United States v. BNS, Inc., 858 F.2d 456, 464 (9th Cir. 1988)).

1. Objection to Order on Motion to Enforce

In the First Objection (ECF No. 543), the Lending Defendants ask this Court to reconsider an Order (ECF No. 540) entered by Judge Ferenbach denying as moot the Lending Defendants' Motion to Enforce (EFC No. 501) the stipulated agreement. In their Motion to Enforce, the Lending Defendants sought a court order that denied the FTC's Motion for Summary Judgment on Counts II & IV against the Muir Defendants and a declaration that the FTC could not seek to establish liability for the conduct alleged in Count II & IV against the Settling Defendants. (Mot. to Enforce 2:9-15, ECF No. 501.) However, after Judge Ferenbach recommended that the FTC's Motion for Summary Judgment on Counts II & IV against the Muir Defendants be denied-a recommendation that has ...


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