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Law360 (March 20, 2020, 10:50 PM EDT) -- A Georgia federal court refused to stay discovery Friday because of the coronavirus "national emergency" in a Federal Trade Commission suit accusing marketers of bilking consumers out of $43 million by secretly signing them up for bogus discount club memberships.
U.S. District Judge William M. Ray denied the parties' joint request to stay discovery "until such time that the instant threat to public health posed by the virus has lessened," stating that written discovery must proceed as usual and that an extension can be sought later on if they can't complete depositions.
"The parties are ordered to continue with any discovery that can be completed taking appropriate precautions with regard to the coronavirus situation.
"Close to the end of the discovery period, if the parties have not been able to complete discovery depositions, they are free at that point and time to contact the court to ask for an extension, however, the extension should not be related to things that can be accomplished in the interim," Judge Ray said.
The Federal Trade Commission and several marketing companies asked Judge Batten Thursday for a stay in the suit, saying that "the use of telepresence technologies to facilitate the third party depositions is not feasible given the document-intensive nature of the proposed depositions, the widely dispersed locations of the deponents, the number of parties and counsel, and the logistics required for remote depositions."
The parties said the remote depositions "pose particular difficulties here given that many parties and their counsel are working away from their normal places of business due to the pandemic."
The parties told the court Thursday that social distancing guidelines and other restrictions implemented by their employers and by governments "have made it impracticable for the parties to complete discovery in accordance with the current scheduling order."
The FTC, which originally filed suit in 2017, accused 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 allegations were brought against EDebitPay LLP and its principals, Hornbeam Special Situations LLC and its principals, and related companies and individuals.
The suit also names iStream Financial Services Inc. and its leaders, alleging that they processed unauthorized withdrawals from consumer accounts.
The FTC alleges that dating back to 2010, the EDP parties targeted consumers with websites and telemarketing calls that claimed to offer payday or cash advance loans, secured their financial information and used that data to enroll consumers in purported discount clubs.
Each program charged initial fees ranging from $48.89 to $99.49, along with recurring monthly fees of $14 to $19.95, which the defendants withdrew from unwitting consumers' accounts using electronic remotely created checks, the FTC claimed.
After being sued by the FTC and private plaintiffs for deceptive practices, the EDP parties wound down their businesses and sold assets to Hornbeam, which continued the scheme, according to the agency.
From July 2010 through June 2016, the marketers collectively attempted to debit more than $176 million from consumers' accounts, but because of the high rate of banks returning checks, they only succeeded in withdrawing $43 million, the FTC alleged.
Just before the filing of the FTC's amended complaint, one of the defendants, Keith Merrill, a former EDP and Hornbeam executive, agreed to a nearly $13.4 million settlement with the federal government and was released from the case, according to court filings.
The court has previously denied the marketers' motions to dismiss, finding that the agency had sufficiently alleged the purported scheme and the suit isn't barred by previous litigation.
Representatives for the parties did not immediately return requests for comment Friday.
The FTC is represented by its own Anna M. Burns, Korin Ewing Felix, Hong Park and Philip Z. Brown.
The EDP parties are represented Colin K. Kelly and Michael L. Mallow of Shook Hardy & Bacon LLP.
The iStream parties are represented by Michael A. Caplan and Julia Blackburn Stone of Caplan Cobb LLP; and Leonard L. Gordon and Mary M. Gardner of Venable LLP.
James McCarter is represented by Bryan B. Lavine, Keith J. Barnett, and Tiffany N. Bracewell of Troutman Sanders LLP.
Patricia Robinson, as executor of the estate of Jerry L. Robinson, is represented by Edward J. Dovin and Allison S. H. Ficken of Dovin Ficken LLC.
Mark Ward is representing himself pro se.
Earl G. Robinson is also represented 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 Peter Rozovsky.
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