United States District Court, D. Nevada
before the court is defendants Jonathan P. Hanley and Sandra
X. Hanley's (collectively “the Hanleys”)
motion for reconsideration. (ECF No. 184). Receiver Thomas W.
McNamara (“McNamara”) and plaintiff Federal Trade
Commission (“FTC”) filed separate responses. (ECF
Nos. 189, 190). The Hanleys did not reply and the time to do
so has passed.
before the court is Magistrate Judge Peggy A. Leen's
report and recommendation. (ECF No. 191). Defendants Consumer
Defense, LLC (Utah); Preferred Law, PLLC; American Home Loan
Counselors; Consumer Defense Group, LLC; American Home Loans,
LLC; AM Property Management, LLC; FMG Partners, LLC; Brown
Legal, Inc.; and Zinly, LLC (collectively “Utah
entities”) did not file an objection and the time to do
so has passed.
before the court Jonathan P. Hanley's (“Mr.
Hanley”) motion for leave to file supplemental
exhibits. (ECF No. 198). McNamara filed a response. (ECF No.
202). Mr. Hanley did not file a reply and the time to do so
instant case arises from the Utah entities; Consumer Defense,
LLC (Nevada); Consumer Link, LLC; the Hanleys; and Benjamin
Horton's (collectively “defendants”)
allegedly fraudulent mortgage assistance relief services
(“MARS”). (ECF No. 1). The FTC alleges the
began to perpetrate the MARS scheme in 2011, in which they
would collect advance fees from consumers and promise to
obtain mortgage loan modifications that would stop or prevent
foreclosure. Id. Once defendants initiated the loan
modification process, they would instruct consumers not to
pay their mortgages and not to contact or respond to their
typically failed to obtain mortgage loan modifications.
Id. As a result, consumers found themselves with
months of interest and missed payments added to their
mortgages and, in some cases, faced foreclosure and
bankruptcy. Id. Ultimately, defendants used the MARS
scheme to swindle consumers out of more than $11 million.
MARS scheme was a common enterprise of eleven interrelated
entities-the corporate defendants, controlled by the Hanleys
and Horton. (ECF No. 6). Most of the corporate defendants
interacted with consumers to provide MARS service
contracts. Id. The remaining entities
functioned as payment collectors and financial conduits that
paid for required services, such as websites and office
corporate defendants shared employees and commingled funds.
Id. When interacting with consumers, the corporate
defendants “blurred corporate distinctions” by
intermingling contacts, forms, and consumer payments.
Id. The FTC therefore contends that the corporate
defendants were a “maze of interrelated
companies” that “jointly participated in a
‘common venture' in which they benefitted from a
shared business scheme . . .” Id. (citations
Hanleys and Horton formed the pertinent business entities
together. (ECF No. 54). Mr. Hanley controlled and operated
the majority of the corporate defendants. (ECF No. 63).
Sandra X. Hanley (“Ms. Hanley”) managed nearly
all the corporate defendants, handled the payroll, and
responded to chargebacks on defendants' merchant
accounts. Id. Ms. Hanley was also a representative
who negotiated mortgage loan modifications pursuant to
consumer contracts. Id.
Horton, the only attorney who worked with the Hanleys,
allegedly “served as a front for [defendants' claim
that they [would] provide expert legal assistance to
consumers to negotiate mortgage loan modifications.”
(ECF No. 6). Horton was also the owner, manager, and attorney
for Preferred Law, PLLC, (“Preferred Law”), which
he dissolved after his Utah bar license was suspended. (ECF
Nos. 6, 54).
filed the underlying complaint on January 8, 2018, alleging
six causes of action pursuant to Section 5(a) of the Federal
Trade Commission Act (“FTC act”), 15 U.S.C.
§ 45(a) against all defendants. (ECF No. 1). The causes
of action in the complaint are as follows: (1) deceptive
representations regarding substantially more affordable loan
payments, substantially lower interest rates, or foreclosure
avoidance; (2) deceptive representations regarding loan
modification services; (3) advance payments for mortgage
assistance relief services; (4) prohibited representations;
(5) material misrepresentations; (6) failure to disclose.
February 20, 2018, the court granted the FTC's motion for
preliminary injunction, which maintained the asset freeze
that the court set in place with a temporary restraining
order on January 10, 2018. (ECF Nos. 12, 55). On January 18,
2019, the court granted McNamara's motion for
authorization to sell properties and vehicles that the court
enjoined with the preliminary injunction. (ECF No. 182). The
court also authorized the release of $57, 043.04 for
attorney's fees. Id.
Hanleys now request that the court vacate its January 18,
2019, order and prevent McNamara from selling the respective
real properties and vehicles. (ECF No. 184). The magistrate
judge recommends that the court enter default judgment
against the Utah entities for failing to comply with court
orders. (ECF No. 191). Lastly, Mr. Hanley requests leave to