Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-01952/USCOURTS-casd-3_06-cv-01952-4/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:0045 Federal Trade Commission Act

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06cv1952

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

NEOVI, INC., d/b/a NEOVI DATA

CORPORATION and QCHEX.COM; et al.,

Defendants.

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Civil No. 06-CV-1952-JLS (JMA)

ORDER: (1) GRANTING PLAINTIFF’S

RULE 56(f) MOTION; (2) DENYING

DEFENDANTS’ MOTION FOR

SUMMARY JUDGMENT WITHOUT

PREJUDICE 

[Doc. Nos. 46, 41]

Currently pending before the Court is a Motion for Summary Judgment [Doc. No. 41] filed by

Defendants Neovi, Inc., G7 Productivity Systems, Inc., James M. Danforth, and Thomas Villwock

(collectively “Defendants”) and a Motion to Deny or Stay Defendants’ Motion for Summary Judgment

pursuant to Fed. R. Civ. P. 56(f) [Doc. No. 46] filed by Plaintiff Federal Trade Commission (“FTC”). 

For the following reasons, this Court GRANTS Plaintiff’s 56(f) motion and DENIES Defendants’

motion for summary judgment without prejudice. 

Case 3:06-cv-01952-JLS-JMA Document 71 Filed 01/11/08 Page 1 of 3
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1

 See Williams v. Deutsche Bank Secs., Inc., 2005 U.S. Dist. LEXIS 12121, *30 (S.D. N.Y.

2005) (“Section 17200 is viewed as California’s ‘little FTC Act,’ as it mirrors language in the Federal

Trade Commission (‘FTC’) Act.”); Perera v. Chiron Corp., 1996 U.S. Dist. LEXIS 22503, * 16 (N.D.

Cal. 1996) (stating same).

2 06cv1952

DISCUSSION

The Court incorporates by reference the background facts forth in Judge Hayes’ January 18,

2007 Order denying Plaintiff’s motion for a preliminary injunction. [Doc. No. 32; Judge Hayes’

January 18, 2007 Order at 7.] In that order, Judge Hayes noted that: 

In order to establish an unfair act, the FTC must first show that a defendant’s act causes

or is likely to cause injury . . . If it is established that a defendant’s act causes injury, the

complained-of act or practice can be deemed ‘unfair’ if the injury it causes is (1)

substantial, (2) not outweighed by countervailing benefits to consumers or competition,

and (3) one consumers could not reasonably have avoided. 

Id. (citations omitted) (emphasis added). In denying the preliminary injunction, Judge Hayes in part

reasoned that: 

[I]t is the Qchex customers who are responsible for creating and delivering Qchex checks

through the use of Qchex software and the resources available on Qchex.com. Qchex

customers access the system, enter check and bank account information, and designate

the third-party recipient. Aside from creating the website, the evidence establishes that

Defendants have nothing to do with creating any of the checks. While it is true that

Qchex offers a mailing service, which, if elected by the customer, includes the printing of

Qchex checks on special check paper, and the placement of the checks in the mail to a

recipient identified by the customer, the Qchex customer must request and authorize any

check’s delivery. After consideration of the facts presented, the Court concludes that

Qchex customers create and deliver Qchex checks, and in fact “cause” the injuries

sustained by the fraudulent use of Qchex. See e.g. In re Firearms Cases, 126 Cal. App.

4th 959 (2005); Emery v. Visa Int’l. Serv. Assoc., 95 Cal. App. 4th 952 (2002). 

Id. (emphasis added). 

Judge Hayes’ finding was supported by federal case law and California case law that discusses

causation under a related statute–Section 17200 of the California Business & Professions Code.1

Defendants’ motion for summary judgment is primarily based on these fundamental causation

deficiencies in Plaintiff’s cause of action. [See Defs.’ Motion for Summary Judgment.] Defendants

note in their opposition, and this Court agrees, that the summary judgment motion:

asks the Court to determine the limited (but dispositive) issues of (1) whether Defendants

‘caused’ the injuries of which the FTC claims [in the complaint], namely the creation and

the delivery of the checks and (2) whether Defendants ‘caused’ the injuries of which the

FTC complains.

Case 3:06-cv-01952-JLS-JMA Document 71 Filed 01/11/08 Page 2 of 3
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3 06cv1952

[Defs.’ Opp. at 2.] Nevertheless, it appears that Plaintiff has filed the instant 56(f) motion to

have more time to discover evidence related to the cost-benefit aspect of the unfairness test and

Defendants’ alleged destruction of evidence. [See Plaintiffs’ 56(f) Motion.] These efforts may

likely be futile since they do not seem to be aimed at the crucial causation issues. 

However, the Court recognizes that Rule 56(f) motions “are generally favored, and

should be liberally granted,” that the parties have recently stipulated to extend the discovery

deadline to March 4, 2008, and that denying a 56(f) motion is “especially inappropriate where

the material sought is also the subject of outstanding discovery requests.” Stearns Airport Equip.

Co. v. FMC Corp., 170 F.3d 518, 534 (5th Cir. 1999); VISA Int’l Serv. Ass’n v. Bankcard

Holders of Am., 784 F.2d 1472, 1475 (9th Cir. 1986). Therefore, the Court GRANTS Plaintiffs

Rule 56(f) motion and DENIES Defendants’ motion for summary judgment without prejudice. 

At the end of the discovery deadline, Defendants may re-file a motion for summary judgment. 

IT IS SO ORDERED.

DATED: January 11, 2008

Honorable Janis L. Sammartino

United States District Judge

Case 3:06-cv-01952-JLS-JMA Document 71 Filed 01/11/08 Page 3 of 3