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Federal Trade Commission v. Ideal Financial Solutions, Inc.

United States District Court, D. Nevada

September 9, 2014

Federal Trade Commission, Plaintiff,
v.
Ideal Financial Solutions, Inc., et al., Defendants.

ORDER RE: REQUESTS FOR RELEASE OF FROZEN FUNDS [DOCS. 94, 130, 131]

JENNIFER A. DORSEY, District Judge.

This case centers around the Federal Trade Commission's ("FTC's") allegations that defendants -corporate entities and the individuals who controlled them-have taken money from consumers' bank accounts or billed consumers' credit cards without their knowledge, consent, or prior adequate notice since 2009. Doc. 32. The court entered a preliminary injunction order freezing assets and appointed a receiver to marshal and manage them. Doc. 18. Defendants Michael Sunyich, Steven Sunyich, and Christopher Sunyich have filed three motions[1] with varied titles but a shared primary goal: to obtain the release of frozen funds. Docs. 94, 130, 131. Having confirmed that the order does not outline a procedure for seeking the release of these frozen funds, I use this opportunity to now establish one. To the extent the defendants' motions seek a release of the frozen funds or other relief, they are denied for lack of demonstration of good cause.

Discussion

The FTC filed this action on January 28, 2013, asserting claims for unfair billing practices, deceptive billing practices, and deceptive statements. Doc. 32 at 18-20. At the February 14, 2013, hearing on the FTC's motion for a preliminary injunction, Judge Miranda Du[2] indicated her belief that the proposed order would allow defendants the ability to request the receiver to release reasonable living expenses to the defendants from the frozen funds. Doc. 65 at 27. But the order that was ultimately issued contains no provision permitting any of the individual defendants to move the receiver for a release of funds. Doc. 18.

Defendants Michael, Steven, and Christopher Sunyich now move separately for the release of funds frozen by the preliminary injunction order, contending that they need these funds for their living expenses and attorneys' fees. Docs. 94, 130, 131; see also Doc. 65 at 27. As the order does not expressly afford this relief, in essence, defendants seek to modify the preliminary injunction order to expressly permit such disbursements. A preliminary injunction is an interlocutory order that the district court may modify "at any time before entry of a final judgment"[3] "to relieve inequities that arise after the original order."[4] "A party seeking modification or dissolution of an injunction bears the burden of establishing that a significant change in facts or law warrants revision or dissolution of the injunction."[5] I consider each defendant's request in turn.

A. Michael Sunyich's Motion for Release of Funds [Doc. 94]

Michael Sunyich cuts right to the chase and simply asks the court to release frozen funds. Doc. 94. He identifies various frozen accounts he contends belong to individuals (primarily his children) who he states are unconnected to the alleged scheme. See id. Michael asserts that he contacted the receiver multiple times for release of living expenses and attorney's fees "only to be ignored and avoided." Id. at 4. He requests release of "all" funds without specification and without demonstrating a need. Id. He states baldly that he has been "denied Due Process in this case" because he has "been prevented from using his own resources acquired separately to hire an attorney and defend himself." Id. at 4.

B. Chris and Steven Sunyich's Requests for Clarification [Docs. 130, 131]

Pro se defendants Steven Sunyich and Chris Sunyich approach the issue from a different angle: they ask the court to modify the preliminary injunction order to allow them to make their requests to release frozen assets to use as living expenses and legal fees directly to the receiver. Docs. 130, 131.

C. The FTC's Responses

To all of these requests, the FTC responds that the requested funds are "ill-gotten gains that the Court should preserve to compensate" defendants' victims. See, e.g., Docs. 111 at 4; and 144 at 5. The FTC stresses that these civil-action defendants are not entitled to appointed counsel, and emphasize that defendants' "open-ended" requests have not given the court justification "to ignore its prior findings and the needs of defendants' victims." Doc. 144 at 5, 6; see also Doc. 111 at 4-6. The FTC further notes that the receiver has only collected "a net of $946, 898, a mere fraction of the total harm" estimated at more than $24 million, and a release of these limited, frozen funds will further deplete the potential recovery for victims of defendants' scheme. Doc. 111 at 3. The FTC requests that it be permitted to conduct discovery into Michael's finances so that it can determine "whether the release of funds is necessary and how much is reasonable" before the court authorizes any such release of funds to him. Id. at 6-7. And as to Chris and Steven, the FTC adds that "nothing prevented" them "from finding honest employment or seeking alternative means of financial assistance" since the asset freeze. Doc. 144 at 5.

D. The Receiver's Response

Receiver Thomas McNamara filed a statement in response to Steven and Chris Sunyich's requests. Doc. 149. He offers his concern that there is no procedure in place to permit him to consider-and submit to the court for ultimate approval-a disbursement request. Id. at 2. And he represents that he has never received "any type of detailed ...


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