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Law360 (February 9, 2021, 10:24 PM EST) -- The Federal Trade Commission on Tuesday argued a group of marketers has failed to offer any factual or legal defense to allegations that they bilked thousands of consumers out of more than $43 million by covertly signing them up for a bogus discount club.
In motions and briefs for summary judgment filed Tuesday, the FTC said there is no question that nine officers who ran Hornbeam Special Situations LLC — including Mark Ward, Jerry L. Robinson, Earl G. Robinson and James McCarter — the companies EDebitPayLLC and iStream Financial Services, their principals and related companies illicitly billed customers for memberships.
"The undisputed facts in this case — the numerous complaints about unauthorized charges, the extraordinarily high return rates, the non-existent usage rates, among other facts — demonstrate that the Discount Club scheme debited consumers' bank accounts without authorization," the FTC argued in support of its summary judgment bid.
The FTC filed suit in the Northern District of Georgia in 2017, accusing marketing companies, individuals and others of scamming consumers seeking payday or cash advance loans by signing them up for online coupon services that charged recurring fees. The FTC says the loan information was used to enroll consumers in purported discount clubs with initial fees of $48.98 to $99.49 and recurring monthly fees of up to $19.95 taken using remotely created electronic checks.
Hornbeam's officers and partners violated the Restore Online Shoppers Confidence Act and the Telemarketing Sales Rule, two measures designed to stop businesses from charging the bank accounts of customers without the express consent of the consumer, the FTC alleges.
The suit also names iStream Financial Services Inc. and its leaders, alleging that they processed unauthorized withdrawals from consumer accounts.
The FTC said the scheme started in 2010, when Hornbeam Special Situations, EDebitPay and the other marketers targeted consumers with websites and telemarketing calls claiming to offer payday or cash advance loans.
EDebitPay and its partners sold assets to Hornbeam after being sued by the FTC, the agency said. Hornbeam then continued running the scam, according to the court filings.
The companies have not shown any proof to contradict the evidence that bank accounts were illicitly tapped, entitling the government to summary judgment in the case, the FTC argued.
Hornbeam and its partners did not address thousands of complaints about the charges or the discount club, the FTC said.
"What little action they did take revealed that the discount club scheme was nothing more than a common scam," the FTC argued in its brief.
According to court records, the clerk of court entered a default judgment in December 2017 against Hornbeam and five affiliates for failing to respond to the lawsuit.
Each of the executives, in motions and briefs to dismiss, said the FTC failed to make out a case that they did anything wrong. U.S. District Judge Timothy Batten rejected those motions in December 2017 but ordered the FTC to file an amended complaint.
In January 2018, former EDebitPay and Hornbeam executive Keith Merrill reached a deal with the FTC, agreeing to a nearly $13.4 million settlement with the federal government, according to court filings. He was released from the case.
Counsel for all the parties did not immediately return messages seeking comment on Tuesday.
The Federal Trade Commission is represented in-house by Korin Ewing Felix, Hong Park and Phillip Z. Brown.
The iStreamServices parties are represented by Leonard L. Gordon, Elliot Kelly and Mary M. Gardner of Venable LLP.
Patricia Robinson, as executor of the estate of defendant Jerry L. Robinson, is represented by Edward J. Dovin and Allison S.H. Ficken of Dovin Ficken LLC.
The EDebitPay parties are represented by Michael L. Mallow, Colin K. Kelly and Caroline Gieser of Shook Hardy & Bacon LLP.
Defendants Mark Ward, Earl G. Robinson and James McCarter are each representing themselves pro se.
The case is Federal Trade Commission v. Hornbeam Special Situations LLC et al., case number 1:17-cv-03094, in the U.S. District Court for the Northern District of Georgia.
--Editing by Jay Jackson Jr.
For a reprint of this article, please contact reprints@law360.com.
