Nos. 18-2847 and 18-3310 

IN THE UNITED STATES COURT OF 

APPEALS FOR THE SEVENTH CIRCUIT 

––––––––––––––––––––––––––––––––––––––––––––– 

FEDERAL TRADE COMMISSION, 

Plaintiff-Appellee, 

v. 

CREDIT BUREAU CENTER, LLC, et al., 

Defendants-Appellants. 

––––––––––––––––––––––––––––––––––––––––––––– 

Appeal from the United States District Court for

the Northern District of Illinois, Eastern Division 

No. 1:17-cv-00194 

Hon. Matthew F. Kennelly, District Court Judge 

––––––––––––––––––––––––––––––––––––––––––––– 

BRIEF OF THE FEDERAL TRADE COMMISSION 

––––––––––––––––––––––––––––––––––––––––––––– 

Of Counsel: 

GUY G. WARD 

Attorney 

FEDERAL TRADE COMMISSION 

Chicago, IL 60604 

ALDEN F. ABBOTT 

General Counsel 

JOEL MARCUS 

Deputy General Counsel 

MICHAEL BERGMAN 

Attorney 

FEDERAL TRADE COMMISSION 

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-3184

mbergman@ftc.gov 
 

TABLE OF CONTENTS 

TABLE OF AUTHORITIES......................................................................iii 

INTRODUCTION AND QUESTIONS PRESENTED .............................. 1 

JURISDICTIONAL STATEMENT............................................................ 3 

STATEMENT OF THE CASE .................................................................. 4 

A. Brown and CBC’s Deceptive Craigslist Scheme ......................... 4 

B. Brown’s Deceptive Websites......................................................... 6 

C. Consumer Complaints and Chargebacks .................................. 11 

D. Brown’s Knowledge of, and Control over, the Deceptive 

Conduct..........................................................................13 

E. Revenue from the Scheme.......................................................... 16 

F. The FTC’s Enforcement Lawsuit............................................... 17 

STANDARD OF REVIEW ........................................................................ 21 

SUMMARY OF THE ARGUMENT ......................................................... 21 

ARGUMENT............................................................................................. 26 

I. SECTION 13(b) OF THE FTC ACT EMPOWERED THE AGENCY 

TO SEEK AND THE COURT TO GRANT EQUITABLE 

MONETARY REMEDIES ......................................................................... 26 

A. This Court Held Decades Ago That Section 13(b)

Authorizes Equitable Monetary Relief, And That 

Ruling Remains Good Law......................................................... 27 

B. Section 13(b) Does Not Require The FTC To Pursue 

Administrative Proceedings Before Seeking A 

Permanent Injunction ................................................................ 34 

C. Section 19 Does Not Limit The Remedies Separately 

Authorized Under Section 13(b)................................................. 35 
D. Tracing Is Not Required For Equitable Monetary 

Relief Under Section 13(b) ......................................................... 37 

II. UNDISPUTED RECORD FACTS SHOWED THAT BROWN’S 

WEBSITES MISLED CONSUMERS IN VIOLATION OF SECTION 5 

OF THE FTC ACT AND ROSCA ............................................................. 40 

A. Uncontroverted Evidence Showed That Brown’s 

Websites Deceived Consumers ................................................... 40 

B. Brown’s Websites Violated ROSCA ........................................... 46 

III. BROWN’S WEBSITES VIOLATED THE FREE REPORTS RULE, 

AND THE FTC CAN ENFORCE THE VIOLATION IN FEDERAL 

COURT.................................................................................................. 49 

IV. BROWN IS PERSONALLY LIABLE FOR CBC’S DECEPTIONS.................... 53 

V. THE DISTRICT COURT’S REMEDIES WERE APPROPRIATE ...................... 55 

A. The District Court Properly Ordered Monetary 

Relief............................................................................................ 55 

B. The District Court Properly Ordered Injunctive 

Relief............................................................................................ 58 

VI. THE DISTRICT COURT PROPERLY DENIED BROWN’S 

CERTIFICATE OF COMPLIANCE 

CERTIFICATE OF SERVICE 

PETITION FOR ATTORNEYS’ FEES ......................................................... 62 

CONCLUSION ......................................................................................... 65 

ii 
TABLE OF AUTHORITIES 

CASES PAGE 

Beckel v. Wal-Mart Assocs., 301 F.3d 621 (7th Cir. 2002) ...................... 13 

Beneficial Corp. v. FTC, 542 F.2d 611 (3d Cir. 1976) ............................. 45 

CFTC v. Hunt, 591 F.2d 1211 (7th Cir. 1979) ......................................... 59 

Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004) ................... 48, 49 

Cracco v. Vitran Exp., Inc., 559 F.3d 625 (7th Cir. 2009) ....................... 21 

FTC v. AMG Capital Mgmt., LLC, 910 F.3d 417 (9th Cir. 2018) ........... 31 

FTC v. Amy Travel Serv., Inc., 875 F.2d 564 

(7th Cir. 1989) ..................................................................... 27, 53, 54, 55 

FTC v. Bay Area Bus. Council, 423 F.3d 627 

(7th Cir. 2005) ............................................................... 21, 27, 40, 54, 58 

FTC v. Bronson Partners, LLC, 654 F.3d 359 

(2d Cir. 2011) ................................................................. 28, 36, 37, 38, 39 

FTC v. Colgate-Palmolive Co., 380 U.S. 374 (1965) ................................ 41 

FTC v. Commerce Planet, Inc., 815 F.3d 593 

(9th Cir. 2016) ............................................................... 28, 37, 38, 49, 56 

FTC v. Cyberspace.com LLC, 453 F.3d 1196 (9th Cir. 2006) ............ 41, 43 

FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1 (1st Cir. 2010) .............. 28 

FTC v. Febre, 128 F.3d 530 (7th Cir. 1997) ............... 21, 27, 40, 55, 57, 59 

FTC v. Freecom Commc’ms, Inc., 401 F.3d 1192 (10th Cir. 2005) ......... 28 

iii 
 

FTC v. Gem Merch. Corp., 87 F.3d 466 (11th Cir. 1996) ........................28 

FTC v. H.N. Singer, Inc., 668 F.2d 1107 (9th Cir. 1982) ........................35 

FTC v. Magazine Sols., LLC, 432 F. App’x 155 (3d Cir. 2011)...............28 

FTC v. Ross, 743 F.3d 886 (4th Cir. 2014) ..............................................28 

FTC v. Security Rare Coin & Bullion Corp., 

931 F.2d 1312 (8th Cir. 1991)...............................................................28 

FTC v. Think Achievement Corp., 

312 F.3d 259 (7th Cir. 2002) ............................................... 21, 27, 63, 64 

FTC v. Trudeau, 579 F.3d 754 (7th Cir. 2009)........................................27 

FTC v. Universal Mgmt, LLC, 877 F.3d 1234 (11th Cir. 2017) ..............56 

FTC v. World Media Brokers, 415 F.3d 758 (7th Cir. 2005)...................53 

FTC v. World Travel Vacation Brokers, Inc., 

861 F.2d 1020 (7th Cir. 1988)................................................... 27, 35, 45 

Great-West Life & Annuity Ins. Co. v. Knudson,

534 U.S. 204 (2002) ...............................................................................38 

Honeycutt v. United States, 137 S. Ct. 1626 (2017) ................................56 

Kansas v. Nebraska, 135 S. Ct. 1042 (2015)............................................29 

Kokesh v. SEC, 137 S. Ct. 1635 (2017) .................................. 22, 29, 30, 31 

Kraft, Inc. v. FTC, 970 F.2d 311 (7th Cir. 1992) .....................................41 

Meghrig v. KFC Western, Inc., 516 U.S. 479 (1996).......................... 31, 32 

Mendez v. Perla Dental, 646 F.3d 420 (7th Cir. 2011)............................50 

iv 
Mitchell v. Robert De Mario Jewelry, Inc., 361 U.S. 288 (1960)....... 29, 31 

Montanile v. Bd. of Trustees of the Nat’l Elevator Industry Health 

Benefit Plan, 136 S. Ct. 651 (2016) ................................................ 38, 39 

Murray v. New Cingular Wireless Services, Inc., 

523 F.3d 719 (7th Cir. 2008)........................................................... 48, 49 

Porter & Dietsch v. FTC, 605 F.2d 294 (7th Cir. 1979) ...........................41 

Porter v. Warner Holding Co., 328 U.S. 395 (1946) .............. 28, 29, 31, 40 

Removatron Int’l Corp. v. FTC, 884 F.2d 1489 (1st Cir. 1989)...............41 

SEC v. Banner Fund Int'l, 211 F.3d 602 (D.C. Cir. 2000)......................39 

SEC v. Holschuh, 694 F.2d 130 (7th Cir. 1982) ......................................59 

SEC v. Liu, No. 17-55849, 

2018 WL 5308171 (9th Cir. Oct. 25, 2018) ...........................................31 

Sierra Club v. Whitman, 268 F.3d 898 (9th Cir. 2001) ...........................52 

Solis v. Current Dev. Corp., 557 F.3d 772 (7th Cir. 2009) ........................4 

Sterling Drug, Inc. v. FTC, 741 F.2d 1146 (9th Cir. 1984) .....................40 

Texas Dep’t of Housing & Comm. Affairs v. 

Inclusive Comm. Project, Inc., 135 S. Ct. 2507 (2015).........................33 

United States v. Bajakajian, 524 U.S. 321 (1998)...................................62 

United States v. JS & A Group, Inc., 716 F.2d 451 

(7th Cir. 1984) ................................................................................. 22, 34 

v 
STATUTES AND PUBLIC LAWS 

Fair Credit Reporting Act 

15 U.S.C. § 1681j(g)...............................................................................17 

15 U.S.C. § 1681j(g)(1) .................................................................... 10, 50 

15 U.S.C. § 1681s(a)(1)................................................................ 3, 50, 51 

Pub. L. 91-508, 84 Stat. 1127 (1970) ....................................................52 

Federal Trade Commission Act 

15 U.S.C. § 45(a).................................................... 2, 3, 17, 23, 24, 40, 51 

15 U.S.C. § 45(a)(4)(B) ..........................................................................34 

15 U.S.C. § 45(b).............................................................................. 34, 50 

15 U.S.C. § 53(b).............1, 2, 3, 21, 22, 24, 26, 27, 31, 32, 33 34, 35, 37 

.................................................................................. 38, 39, 51, 52, 56, 59 

15 U.S.C. § 57b ...................................................................... 2, 22, 26, 35 

15 U.S.C. § 57b(a)..................................................................................36 

15 U.S.C. § 57b(b)..................................................................................36 

15 U.S.C. § 57b(e)..................................................................................36 

 FTC Act Amendments of 1994, Pub. L. No. 103-312, § 10, 

 108 Stat. 1691 (Aug. 26, 1994) .....................................................32-33 

vi 
Restore Online Shoppers' Confidence Act 

15 U.S.C. § 8403 ....................................................................................17 

15 U.S.C. § 8403(1)................................................................................47 

15 U.S.C. § 8403(2)................................................................................47 

15 U.S.C. § 8404(a)..................................................................................3 

28 U.S.C. § 1291..........................................................................................4 

28 U.S.C. § 1331..........................................................................................3 

28 U.S.C. § 1337(a) .....................................................................................3 

28 U.S.C. § 1345..........................................................................................3 

28 U.S.C. § 2462........................................................................................29 

U.S. Safe Web Act of 2006, Pub. L. 109-455, 

120 Stat. 3372 (Dec. 22, 2006) ..............................................................33 

RULES AND REGULATIONS 

12 C.F.R. §§ 1022.130-1022.138...............................................................17 

Free Annual File Disclosures; Final Rule, 75 Fed. Reg. 9726, 

2010 WL 710308 (Mar. 3, 2010) (codified at 12 C.F.R. §1022.130)....52 

12 C.F.R. § 1022.138.................................................................................50 

16 C.F.R. § 310.2(w)..................................................................................47 

16 C.F.R. § 642.3.......................................................................................48 

vii 
 

 

Fed. R. Civ. P. 56(c)(2)..............................................................................46 

Fed. R. Civ. P. 56(c)(4)..............................................................................46 

Fed. R. Evid. 602.......................................................................................46 

Fed. R. Evid. 701.......................................................................................46 

Fed. R. Evid. 801(c)...................................................................................46 

Fed. R. Evid. 802.......................................................................................46 

LEGISLATIVE HISTORY 

S. Rep. No. 103-130 (1993) .......................................................................33 

S. Rep. No. 93-151, 93d Cong., 1st Sess. 30-31 (1973)............................35 

OTHER AUTHORITIES 

Federal Trade Commission, Office of Claims and Refunds, 

2018 FTC Annual Report on Refunds to Consumers...........................31 

Federal Trade Commission, Office of Claims and Refunds, 

Annual Report 2017 ..............................................................................31 

J. Howard Beales III & Timothy J. Muris, Striking the Proper Balance: 

Redress Under Section 13(b) of the FTC Act, 

79 Antitrust L.J. 1 (2013) .....................................................................37 

viii 
INTRODUCTION AND QUESTIONS PRESENTED 

Undisputed evidence showed that Michael Brown and his 

company, Credit Bureau Center, deceived consumers into enrolling in a 

costly credit monitoring service. Brown and his confederates posted fake 

apartment rental listings on Craigslist and impersonated landlords in 

emails to lure consumers into getting a credit report from Brown’s 

website. The website led consumers to believe that they would get a free 

credit report and score, but in reality they unwittingly signed up for an 

ongoing credit monitoring service with recurring monthly fees. Brown 

and his company reaped more than $6 million from the scheme. The 

district court held that they had violated the FTC Act and other 

consumer protection laws, entered summary judgment in favor of the 

Federal Trade Commission, and ordered Brown and his company to pay 

equitable monetary relief to consumers. 

Brown and his company challenge the judgment on a large 

number of legal and factual grounds. The questions presented are: 

1. Whether a district court may order equitable monetary relief 

under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b); 

1 
2. Whether the FTC may seek a permanent injunction under 

Section 13(b) without first conducting an administrative proceeding; 

3. Whether Section 19 of the FTC Act, 15 U.S.C. § 57b, bars 

monetary remedies under Section 13(b); 

4. Whether equitable monetary relief under Section 13(b) 

requires the FTC to trace specific funds to the wrongful conduct; 

5. Whether Brown violated Section 5(a) of the FTC Act and 

ROSCA by misrepresenting that consumers would receive a free credit 

score and report, but instead enrolling them into a credit monitoring 

program with monthly charges without their consent; 

6. Whether Brown’s websites, which offered a free credit report 

and score product without disclosing consumers’ right to a free annual 

credit report, violated the Free Report Rule, 12 C.F.R. § 1022.138, and 

whether the FTC can sue for an infraction of the rule in court under 

Section 13(b); 

7. Whether the district court properly rejected Brown’s 

testimony that his customers did not accurately report their experiences 

with his websites; 

2 
8. Whether the district court properly set equitable monetary 

relief equal to consumer loss; 

9. Whether the district court’s behavioral injunction was within 

its discretion; and 

10. Whether the district court acted within its discretion when it 

declined to order that Brown’s legal fees be paid out of the assets set 

aside for consumer redress. 

JURISDICTIONAL STATEMENT 

Appellants’ recitation of jurisdiction is not complete or correct. The 

district court had jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), 

and 1345, and 15 U.S.C. §§ 45(a), 53(b), 1681s(a)(1) and 8404(a). 

CBC and Brown timely filed on August 22, 2018, their first notice 

of appeal (No. 18-2847) to review three orders of the district court: 1) its 

January 14, 2018, interlocutory order on defendants’ motion to modify 

the preliminary injunction and seeking other relief (Doc.183) [A001]; 

2) its June 26, 2018, opinion and order granting the FTC’s motion for 

summary judgment and denying appellants’ cross-motion (Doc.238) 

[A006]; and 3) its June 26, 2018, final judgment issued against CBC 

3 
 

and Brown (Doc.239) [A040].1

 The final judgment disposed of all 

remaining claims on the merits. 

CBC and Brown timely filed their second notice of appeal (No. 18-

3310) on October 26, 2018, to review the district court’s postjudgment 

October 23, 2018, order denying petitions for attorneys’ fees and costs 

(Doc.268) [A073]. This order was final for purposes of 28 U.S.C. § 1291 

because it resolved all issues raised in the postjudgment petitions. See 

Solis v. Current Dev. Corp., 557 F.3d 772, 776 (7th Cir. 2009). 

This Court has jurisdiction over both appeals pursuant to Section 

1291. 

STATEMENT OF THE CASE 

A. Brown and CBC’s Deceptive Craigslist Scheme 

Michael Brown, the sole owner of Credit Bureau Center (we refer 

to them collectively as Brown), operated websites that offered 

consumers a “free” credit report and score but as described in more 

1 “Doc.xxx” refers to entries in the district court’s docket; page cites 

are to ECF-generated page numbers; “Br.” refers to Appellants’ 

December 5, 2018 corrected Brief; “A[#]” refers to pages in the 

Appellants’ Short Appendix; “SA[#] refers to pages in the FTC’s 

Supplemental Appendix; “Tr.” refers to pages in a hearing or deposition 

transcript; and “Op.” refers to the district court’s June 26, 2018 

Memorandum Opinion and Order (Doc.238). 

4 
 

detail below actually enrolled them in an ongoing program with 

monthly bills. Op. 9-13, 19 [A014-18, A024]; Doc.215 ¶¶2, 4, 5, 41, 61 

[SA169-70, SA188, SA205-07].2

 To get consumers to visit the sites, 

Brown paid independent contractors known as “affiliate marketers” to 

lure them there. Doc.215 ¶2 [SA169]. Brown’s principal affiliate 

marketer between 2014 and 2017, who accounted for 92% of his 

commission payments and to whom he paid $2.3 million, was Danny 

Pierce. Doc.215 ¶¶19, 20 [SA175]; Doc.36 at 10; Doc. 36-1 at 2. Pierce in 

turn delegated some of his marketing functions to Andrew Lloyd. Op. 3-

4 [A008-09]; Doc.215 ¶23 [SA176]; Doc.194-10 ¶2 [SA128]. 

2 The facts set out in this statement were mostly adopted as 

undisputed by the district court. These facts, cited in Doc.215, Brown’s 

Corrected Responses to Plaintiff’s Statement of Material Facts as to 

Which There is No Genuine Issue (PSMF), Doc.194, were either 

admitted by Brown, deemed admitted by the district court, or not 

contested with admissible probative evidence. The district court deemed 

some facts admitted due to Brown’s failure to adhere to the local rules. 

Op. 2. As adjusted for a numbering error in defendants’ original 

response (Doc. 207), the paragraphs deemed admitted are: 57-61, 72-73, 

81-83, 90 and 101. Where Brown denied a fact in the PSMF without 

providing admissible probative evidence, and that fact was not deemed

admitted, facts in this statement also cite to undisputed record cites. 

This Court has consistently required strict compliance with local 

summary judgment rules and required parties to rebut statements of 

undisputed facts with relevant admissible evidence to create a genuine 

fact issue. FTC v. Bay Area Bus. Council, 423 F.3d 627, 633-34 (7th Cir.

2005). 

5 
 

 

As described in his uncontested declaration (Doc.194-10), Lloyd 

used Craigslist to advertise desirable rental properties at attractive 

prices to drive consumers to CBC’s websites. The ads were bogus and 

Lloyd was not the landlord, but interested consumers were directed to 

email Lloyd, who pretended to be the landlord, for more information. 

Lloyd then directed the would-be renter to obtain a credit report and 

provided a link to a CBC website. Doc.194-10 at 2-22 (¶¶3-9 & Att. A) 

[SA128-48].3 

Pierce, who had hired Lloyd, testified that he knew Lloyd was 

posting “phony ads,” because Lloyd was “not renting these places out,” 

he was “not a realtor,” “doesn’t own the place,” and “has no connection 

to” the properties. Doc.199 at 20-21 (Tr. 73, 76) [SA162-63]. 

B. Brown’s Deceptive Websites 

As screenshots confirm, once a consumer reached Brown’s website 

using the link in the fake landlord letter, the banner headline she saw 

on the first page (known as the “landing page”) stated, in large bold 

3 Brown’s assertion (Br. 4-5, 9) that Pierce and Lloyd used legitimate 

real estate services to drive consumers to CBC’s websites lacks any

support. Lloyd testified, to the contrary, that he only used postings on 

Craigslist and phony “landlord” emails. See Doc.194-10 at 2-22 (¶¶3-9 &

Att. A) [SA128-48]. 

6 
 

lettering, “Get Your Free Credit Score and Report as of [date],” 

with the words “Free Credit Score” in orange. Below that are three 

panels, marked “Sample Score,” “Start Here,” and “Benefits,” an orange 

button labelled “Your Score – Now,” and the bold statement “Why do I 

need to check my Credit Score?” Op. 9-10, 31 [A014-15, A036]; Doc.215 

¶¶41, 42 [SA188-90]; e.g., Doc. 11-4 at 24-25; 62-63 [SA050-51, SA060-

61].4

 The landing page, attached to the district court’s opinion (Op. 31), 

looked like this: 

4 The pages at issue were reachable only through the link in the fake 

landlord email. Doc.61 at 28 (Tr. 79). Brown also had publicly-accessible 

versions of efreescore.com and creditupdates.com which had different 

content, and did not promise a “free” credit report and score. Doc.11-3 at 

51-52 (¶¶30-31); Doc.11-4 at 68-89 (Att. L, M). 

7 
 

8 
As shown, below the headline, in much smaller light grey text, 

and without any explanation, were the statements “7 day trial ends 

[date],” and “Monthly membership of $29.94 automatically charged 

after trial.” Op. 31 [A036]; Doc.215 ¶45 [SA191]; e.g., Doc. 11-4 at 24-25; 

62-63 [SA050-51, SA060-61]. Those two statements did not appear on 

mobile devices, which were used by thousands of consumers. Doc.215 

¶46 [SA191-92]; e.g., Doc.11-4 at 1-3, 51-54 [SA039-41, SA055-58]. The 

term “monitoring services” was separately mentioned in a block of small 

text at the bottom of the page (which the consumer would need to scroll 

down to see), but the term and its purported benefits were undefined. 

Op. 10, 31 [A015, A036]; Doc.215 ¶47 [SA192]; e.g., Doc. 11-4 at 12, 25 

[SA044, SA051]. 

Each of the next three pages of the website contains text boxes 

posing and answering the questions “What is a good Credit Score” and 

“Will I find errors on my credit report?” Op. 32-34 [A037-39]; e.g., 

Doc.11-4 at 13-16 [SA045-48]. The second page boldly stated in large 

type “Your credit score is ready once we confirm your identity!” with a 

checkmark next to “Located Credit File.” Beneath that, the consumer 

entered her credit card information to pay her “$1.00 refundable 

9 
 

processing fee and membership.” Op. 33 [A038]; e.g., Doc. 11-4 at 43, 65 

[SA053, SA063]. 

Hidden below the payment section, in a block of small print, was 

the statement that once the order was placed, the consumer would 

“begin your membership” in the CBC website, that the $1 fee would 

“start your trial membership,” and that “[a]fter your 7-day trial period 

you will be charged $29.94 every month” unless the consumer took steps 

to affirmatively cancel. Id. But nowhere do the sign-up pages explain 

what the consumer is purportedly getting for a monthly “membership.” 

Op. 11 [A016].5

 Nor do those pages disclose that the consumer has a 

statutory right to a free credit report annually, 15 U.S.C. § 1681j(g)(1). 

Op. 16-17 [A021-22]; Doc.215 ¶44 [SA190]; e.g., Doc.11-4 at 11-16 

[SA043-048]. 

5

 Brown speculates that the consumer declarants chose not to read the 

complete “negative option disclaimer” before providing their payment 

information (Br. 8), but provides no support beyond conjecture. 

10 
 

Meanwhile, consumers who obtained their credit report and 

followed up with the “landlord” never heard back. Op. 7 [A012]; Doc.215 

¶39 [SA187]; Doc.11-1 at 30-35 [SA006-11].6 

C. Consumer Complaints and Chargebacks 

Unsurprisingly, many consumers complained to Brown about the 

fake Craigslist ads and landlord emails that brought them to Brown’s 

website. Doc.215 ¶¶57-58 (deemed admitted) [SA198-202]. One noted 

that he was “pretty pissed off that you guys charged us for this thing 

and it was a total scam from a fake ad on Craigslist.” Doc.194-11 at 86 

[SA159]. When consumers learned about the recurring charges from 

their account statements, sometimes after several billing cycles, many 

demanded a refund (and explanation). Doc.215 ¶61 (deemed admitted) 

[SA205-06]. As one irate victim put it, “I don’t want to be a member. I 

never consented to that and I want my $90 back.” Doc.194-5 at 59 

[SA068]. 

Between 2014 and January 2017, more than 500 people 

complained about Brown to the FTC, other law enforcement agencies, or 

6 Brown does not show otherwise. The consumer declarations he cited 

in Doc.215 ¶39 allegedly showing that “[s]ome consumers were able to 

contact the landlord,” refer to Lloyd’s fake landlord responses. 

11 
 

the Better Business Bureau, nearly all about the fake Craigslist 

scheme. Doc.215 ¶53 [SA195-96]; e.g., Doc.11-3 at 69-71 (¶¶74-76) 

[SA035-37]. Brown routinely disclaimed any connection to the fake 

Craigslist postings, principally to retain customers complaining about 

the postings and unauthorized charges. Doc.215 ¶¶59, 60 (deemed 

admitted) [SA203-04]. 

On receiving a complaint, Brown typically agreed to cancel the 

charges going forward, but often refused to give refunds. Doc.215 ¶62 

[SA207-08]; e.g., Doc.11-1 at 79 (¶11) [SA020]; Doc 194-7 at 144 (Ex. 32) 

[SA106].7 Many customers directed their credit card issuers to reverse 

the charges, known as a “chargeback.” Op. 12 [A017]; Doc.215 ¶63 

[SA209-10]. Brown had so many chargebacks that at least three 

payment processors closed his accounts. Doc.215 ¶¶65, 68, 69 [SA211-

13]; e.g., Doc.11-3 at 63-65 (¶¶59-62) [SA032-34]. The overwhelming 

majority of the chargebacks—nearly 90% in 2016—were initiated by 

consumers who got to Brown’s websites via the Craigslist scheme. 

Doc.215 ¶¶71-73 (deemed admitted) [SA214-15]. 

7 Brown claims that nearly all consumers who asked for a refund after 

7 days were given a refund (Br. 9), but the statement is unsupported. 

See Doc.211 ¶64 [SA167]. 

12 
 

 

D. Brown’s Knowledge of, and Control over, the 

Deceptive Conduct 

The undisputed record showed that Brown knew about and 

exercised control over both the deceptive Craigslist scheme and the 

CBC websites. He knew Pierce was posting thousands of Craigslist ads 

per day and sending the landlord emails to drive consumers to CBC’s 

websites. He even reviewed many of the ads and emails. Doc.215 ¶¶77-

78 [SA218]; Doc.194-6 at 63-68, 79, 81-82, 88, 255-56 (Tr. 244-62, 305, 

316-19, 343 & Ex. 18 at 36-37) [SA075-080, 085, 087-91].8

 Yet Brown 

was unaware of any relationship Pierce had with real landlords and 

assumed Pierce had no such connections. DE.215 ¶80 [SA220]; Doc.194-

6 at 82 (Tr. 318) [SA088]. 

Brown also received hundreds of complaints from consumers 

directly and the BBB about the Craigslist fraud; Brown admitted he 

could trace the acts back to Pierce. Doc.215 ¶¶98, 99 [SA229-30]. Brown 

even discussed chargebacks with Pierce. Id. ¶¶75-76 [SA216-17]; e.g., 

8 Brown’s denials (Doc.215 ¶¶77-78) create no genuine dispute

because he testified at his deposition to these facts. A party cannot 

create a disputed fact by contradicting his own sworn testimony with 

denials to his opponent’s statement of undisputed facts, which were 

submitted by his attorney and provided no plausible explanation for any 

discrepancies. See Beckel v. Wal-Mart Assocs., 301 F.3d 621, 623 (7th

Cir. 2002). 

13 
Doc.194-6 at 51-52 (Tr. 194-98) [SA073-74]; Doc.194-7 at 21, 32 [SA092-

93]. 

Brown received complaints from other sources as well. In 

November 2015, Brown’s largest source of credit reports, Transunion, 

requested that its logo be removed from CBC’s website due to “negative 

media attention . . . about deceptive listings on craigslist.” Doc.215 ¶90 

(deemed admitted) [SA225]. Earlier that year, a contractor sent Brown 

a consumer complaint stating in part, “fake-ad-for-apartment-led-to-mybuying-their-product-Internet,” and told Brown “u are the one that 

taught me about these types of scams.” Id. ¶82 (deemed admitted) 

[SA220-21]. 

Brown now claims that he worked with the Business Consumer 

Alliance (BCA) to reduce consumer fraud (Br. 8-9), but uncontroverted 

evidence shows that Brown received complaints from the BCA that 

were traceable to Pierce, but he did nothing. Doc.215 ¶¶92, 98 [SA226, 

SA229-30]; Doc.194-6 at 75-77 (Tr. 291-97) [SA081-083]; Doc.194-7 at 

49-57 [SA097-105]. Brown knew by May 2016 that his agents were 

denying to complaining callers that the company advertised on 

Craigslist. Doc.215 ¶60 (deemed admitted) [SA204]. 

14 
Brown received so many consumer complaints about unauthorized 

charges that in September 2015 he created frequently asked questions, 

including, “How did you get my credit card number?,” “Didn’t I only 

agree to pay $1,” and “Why don’t I remember signing up?” for the public 

versions of his websites, hoping that upset consumers searching for 

answers would call his customer service number before filing 

chargebacks. Doc.215 ¶¶87-89 [SA223-24]; Doc.194-9 at 11-18, 43-44, 

52-57 (Tr. 37-44, 49-63 & Exhs. 4, 6) [SA111-126]. 

At a certain point, Brown simply avoided seeing Craigslist-related 

complaints. In September 2015, he instructed his staff not to escalate to 

him any complaints relating to rentals or housing, which included the 

Craigslist rental fraud. Doc.215 ¶85 [SA223]; Doc.194-7 at 44 (Ex. 23) 

[SA095]. 

Beyond merely knowing about the phony real estate listings, 

Brown controlled them as well. He admitted that in September 2015, he 

directed Pierce to change the landlord email templates to clarify that 

consumers should not email the credit reports, but bring them in 

person. Pierce promptly relayed Brown’s instructions to Lloyd. Doc.215 

15 
 

¶79) [SA219].9 Despite his control, however, Brown never told Pierce to 

stop his Craigslist activities and he never ended their relationship. 

Doc.215 ¶¶101, 102 [SA231]. As Pierce testified, he kept using the 

Craigslist ads “because Mike Brown wanted the traffic.” Doc.199 at 21 

(Tr. 74) [SA163]. 

E. Revenue from the Scheme 

Brown received $6,832,435.81 from Pierce’s deceptive Craigslist 

scheme; he paid $414,860.77 in refunds and $394,903.68 in 

chargebacks. Doc.215 ¶103 [SA231].10 In settlements with Pierce and 

Lloyd, the FTC received $762,000. Doc.146. Net of all those amounts, 

consumers still lost $5,260,671.36. After the FTC filed this case, the 

district court froze about $2.2 million of defendants’ assets (about $1.3 

million from Brown) to preserve it for consumer redress. 

9 Brown claims (Br. 6) this email merely reflects his concern about 

consumers feeling “phished” by sending credit report information by 

email. Whatever Brown’s motivation, the fact that he could change the 

text of the email at will reflects his control. 

10 Brown’s claim about the amount of refunds provided (Br. 9), relates 

to CBC’s overall refunds, not just what it paid to the Pierce referrals. 

Id. See Doc.215 ¶103 [SA231]. 

16 
F. The FTC’s Enforcement Lawsuit 

1. The Complaint and Preliminary Relief 

In January 2017, the FTC sued Brown, CBC, Pierce, and Lloyd for 

violating Section 5(a) of the FTC Act, 15 U.S.C. § 45(a); Section 4 of the 

Restore Online Shoppers’ Confidence Act (ROSCA), 15 U.S.C. § 8403; 

Section 612(g) of the Fair Credit Reporting Act (FCRA), 15 U.S.C. 

§ 1681j(g); and the Free Reports Rule, 12 C.F.R. §§ 1022.130-1022.138. 

Doc.1. As pertinent here, the FTC Act makes illegal deceptive acts or 

practices in commerce, and ROSCA prohibits charging consumers for 

online purchases that employ a negative option feature unless the seller 

adequately discloses all the material terms of the transaction and 

obtains the consumer’s express informed consent. The FCRA and the 

Free Reports Rule require an advertiser of free credit reports to notify 

consumers of their right to an annual free credit report. 

The district court entered a temporary restraining order (TRO) 

and a preliminary injunction (PI) against Brown and CBC. Docs.16, 58, 

17 
 

59.11 Pierce and Lloyd stipulated to the entry of preliminary and 

permanent injunctions, including monetary relief. Docs.49, 146. 

2. Summary Judgment and Final Judgment 

The FTC and Brown cross-moved for summary judgment. Doc.192 

(FTC); Doc.205 (Brown). The district court granted summary judgment 

in favor of the FTC and denied Brown’s motion. Doc.238 [A006]. The 

court concluded that the facts as set forth above were undisputed and 

thus that Brown’s websites misrepresented “that consumers were 

obtaining a free credit score and report, not a membership in a monthly 

credit monitoring service.” Id. 12 [A017]. The court explained that “[t]he 

website lacks any description of the monthly membership” for which it 

charged consumers. Id. 11 [A016]. For the same reason, the undisputed 

record showed that Brown violated ROSCA’s commands to “clearly and 

conspicuously” disclose negative option features and obtain consumers’ 

informed consent. Id. 13-16 [A018-21]. Brown also violated the Free 

Reports Rule by failing to notify consumers of their right to an annual 

free credit report. Id. 16-18 [A021-23]. 

11 In July 2017, the court found Brown in contempt for violating the PI 

by charging his former customers for non-existent credit monitoring 

services. Doc.106. The court later rejected his request to modify the PI. 

Doc.183 [A001]. 

18 
The court held CBC liable for Pierce and Lloyd’s Craigslist scheme 

and Brown personally liable, as he controlled CBC and knew or should 

have known the scheme was fraudulent. Id. 7-9, 12-22 [A012-14, A017-

27]. It held Brown personally liable as well for CBC’s deceptive 

websites, as he controlled the company and its websites. Id. 19 [A024]. 

As a remedy, the court permanently enjoined Brown and CBC 

from offering credit monitoring services with a negative option feature 

and restricted their use of affiliate marketers. Doc.239 §§ I, III [A048-

53]. It required them to provide disclosures relating to free credit 

reports, and disclosures and the receipt of consumer consent for sales 

made using negative options. Id., §§ V-VI, VIII [A054-58, A059-63]. The 

court concluded these provisions were necessary given the reasonable 

likelihood that Brown and CBC could engage in future deceptive 

schemes. Op. 22-24 [A027-29]. The court also ordered Brown and CBC 

to pay, jointly and severally, $5,260,671.36 in equitable monetary relief, 

the amount that consumers lost from the Craigslist scheme and had not 

recouped from other sources. Doc.239 § IX [A064-65]. 

19 
3. Request for Attorneys’ Fees 

In January 2018, the court granted in part an attorneys’ fee 

request by Brown allowing about half of the fees he wanted, but 

cautioned that Brown’s lawyer could not count on receiving additional 

funds as he “has no legitimate reliance interest” on receiving “any of the 

frozen funds for fees.” Doc.183 at 4. After judgment was entered, in 

October 2018 the district court denied Brown’s request for an additional 

$132,000 in attorneys’ fees from money being held for consumer redress. 

Doc.268 [A073]. The court concluded that the lawyers had no basis to 

expect they would collect their fees and that the money was more 

equitably used to compensate victims, particularly where the frozen 

funds amounted to only about 20% of the consumer loss. Id. at 3-4 

[A075-76]. 

4. Stay Requests 

On September 26, 2018, the district court denied in large part 

Brown’s motion to stay the permanent injunction, except it stayed the 

distribution of his funds pending appeal. Doc.266. On January 8, 2019, 

this Court denied Brown’s motion to stay the judgment pending appeal. 

20 
 STANDARD OF REVIEW 

This Court reviews de novo a district court’s order of summary 

judgment, and views the record in the light most favorable to the nonmoving party to determine if there are disputed issues of material facts. 

Bay Area Bus. Council, 423 F.3d at 634. The non-moving party, 

however, must set forth admissible record evidence to contest the 

moving party’s statement of undisputed facts. Id. at 633. 

The Court reviews for abuse of discretion district court orders: 

1) deeming facts admitted due to a party’s failure to comply with local 

summary judgment rules, Cracco v. Vitran Express, Inc., 559 F.3d 625, 

630, 632 (7th Cir. 2009); 2) granting equitable monetary and injunctive 

relief, FTC v. Febre, 128 F.3d 530, 533-34 (7th Cir. 1997); and 

3) denying a motion to pay a defendant’s legal bills out of an equitable 

judgment estate, FTC v. Think Achievement Corp., 312 F.3d 259, 262 

(7th Cir. 2002). 

SUMMARY OF THE ARGUMENT 

1.a. This Court recognized 30 years ago that Section 13(b) of the 

FTC Act empowers district courts to order equitable monetary relief as 

part of their authority to issue a “permanent injunction” under the 

statute. Congress has twice ratified this judicial power. 

21 
Nothing in Kokesh v. SEC, 137 S. Ct. 1635 (2017), disturbs this 

precedent. Kokesh considered how a statute of limitations applies to the 

securities laws; it did not speak to equitable monetary relief under the 

FTC Act. And the Court expressly disclaimed reaching any 

determination on judicial authority to order disgorgement under the 

securities laws. 

b. The FTC can seek a permanent injunction under Section 13(b) 

without first undertaking an administrative proceeding. As this Court 

explained long ago, preliminary and permanent injunctions under 

Section 13(b) “are entirely different animals.” United States v. JS & A 

Grp., Inc., 716 F.2d 451, 456 (7th Cir. 1983). Preliminary relief is 

authorized by one part of the statute, and permanent relief by a wholly 

separate proviso. 

c. Section 19 of the FTC Act, 15 U.S.C. § 57b, does not bar 

monetary relief under Section 13(b). To the contrary, and as courts have 

recognized, it expressly preserves remedies provided under other 

provisions of the Act, such as Section 13(b). 

d. Tracing requirements do not apply to equitable monetary 

judgments under Section 13(b). The judgment imposes an equitable 

22 
 

obligation to return sums equal to the amount defendants wrongfully 

took from consumers, not particular funds in their possession. 

2.a. Undisputed facts show that CBC’s websites violated Section 

5(a) of the FTC Act. The sites prominently featured the promise of a 

free credit report and score, but enrolled consumers in an expensive 

monthly credit monitoring service. Compared with the conspicuous and 

bold text promising the free report and score, disclosures about the 

monthly service were effectively hidden. 

The FTC’s consumer declarants testified that they were misled by 

Brown and CBC’s websites. The many consumer complaints and 

chargebacks are further evidence of deceit. Brown’s claim that some of 

the declarants knew they would be charged does not negate the 

deceptive net impression. The FTC need not show that every reasonable 

consumer was misled by a claim, but just that some misunderstood the 

message. And here, the undisputed record shows that many consumers 

were misled by the deceptive websites.

 Brown challenges the declarants’ reliability, but he failed to 

depose the declarants or provide his own consumer testimony. He offers 

only conjecture, not a genuine dispute of fact. 

23 
 

b. Brown’s websites’ failure to fully disclose their credit 

monitoring program with its monthly charges violated ROSCA. The 

statute requires a seller of online services using a negative option 

feature to clearly and conspicuously disclose all the material terms of 

the deal and get the consumers’ express informed consent. The 

disclosures about charges the sites did contain were essentially 

designed to be overlooked by consumers, not to inform them. 

3. CBC’s websites violated the Free Reports Rule by failing to 

disclose that consumers have a legal right to a free annual credit report. 

The FTC need not enforce this rule administratively because a rule 

violation is also deemed a violation of Section 5(a), which the FTC may 

enforce in court under Section 13(b). The rule also covers a combined 

credit report and score, as the FTC made explicit when it amended the 

rule in 2010. 

4. Brown does not challenge his personal liability for the Craigslist 

scheme. He challenges his liability for the deceptive websites, but he 

admitted control and gained the requisite knowledge of the fraud 

through the voluminous consumer complaints and chargebacks. 

24 
5.a. The district court properly based the amount of equitable 

monetary relief on consumer loss stemming from the deceptive websites 

and the Craigslist fraud, which began around January 2014. Joint and 

several liability was appropriate because Brown and CBC jointly 

contributed to the entire consumer harm. The monetary remedy also 

properly included losses from consumers who continued to pay for 

Brown’s services because CBC misled them into remaining customers. 

b. The behavioral injunction was reasonable and proportional to 

Brown’s illegal conduct and the likelihood of recurrence. The permanent 

ban against selling credit monitoring services using a negative option 

feature prohibits Brown from engaging again in the very practice he 

was found liable for here. The affiliate notification provision likewise is 

an appropriate response to Brown’s use of affiliates to carry out his 

unlawful scheme. Brown’s lack of contrition is evident from his claim 

that he was Pierce’s and Lloyd’s victim, even though he ratified and 

enjoyed the fruits of their conduct for years. 

c. The monetary and injunctive provisions imposed by the district 

court did not constitute a penalty or an “excessive fine” under the 

Eighth Amendment. The monetary judgment wasn’t a fine at all, but 

25 
 

equitable relief, and it wasn’t excessive because the monetary award 

equaled the amount of consumer loss. 

6. The district court properly denied Brown’s request to pay his 

legal bills from the money set aside for consumer redress. His lawyer 

worked the case knowing that he might not get paid, and his claims do 

not outweigh those of the defrauded consumers. 

ARGUMENT 

I. SECTION 13(b) OF THE FTC ACT EMPOWERED THE AGENCY 

TO SEEK AND THE COURT TO GRANT EQUITABLE 

MONETARY REMEDIES 

Brown contends that the district court lacked authority to order 

monetary relief. He makes three overlapping arguments: 1) that Section 

13(b) does not authorize equitable monetary relief at all; 2) that the 

Commission cannot seek any relief under Section 13(b) without first 

having issued an administrative complaint; and 3) that Section 19 

confirms the first two points. Br. 17-26. He also argues that equitable 

restitution requires tracing and cannot include money unrelated to the 

fraud. Br. 27-28. He is wrong on all counts. 

26 
A. This Court Held Decades Ago That Section 13(b)

Authorizes Equitable Monetary Relief, And That 

Ruling Remains Good Law 

Brown first claims that Section 13(b) does not permit the FTC to 

seek monetary remedies. Br. 18, 21-23. Longstanding precedent of this 

Court shows otherwise. 

The relevant part of Section 13(b) states: “provided further, that in 

proper cases the Commission may seek, and after proper proof, the 

court may issue, a permanent injunction.” Thirty years ago, this Court 

recognized that the statute’s authorization of a “permanent injunction” 

also provides district courts with the power to direct “any ancillary 

equitable relief necessary to accomplish complete justice,” including 

equitable monetary relief against a defendant whose deceptive conduct 

causes monetary harm to consumers. FTC v. Amy Travel Serv., Inc., 875 

F.2d 564, 571-72 (7th Cir. 1989); FTC v. World Travel Vacation Brokers, 

Inc., 861 F.2d 1020, 1026 (7th Cir. 1988) (citation omitted). The Court 

has affirmed this principle repeatedly. See, e.g., FTC v. Trudeau, 579 

F.3d 754, 771 (7th Cir. 2009); Bay Area Bus. Council, 423 F.3d at 634; 

Think Achievement, 312 F.3d at 262; FTC v. Febre, 128 F.3d 530, 534 

27 
 

 

 

(7th Cir. 1997). Every other court of appeals to have considered the 

issue has come to the same conclusion.12 

These decisions are rooted in the Supreme Court’s ruling in Porter 

v. Warner Holding Co., 328 U.S. 395 (1946), which held that where a 

statute authorizes the district court to issue an injunction, it may 

exercise “all the inherent equitable powers” necessary for “the proper 

and complete exercise of that jurisdiction,” including the award of 

monetary relief. Id. at 398. The Court explained that “[n]othing is more 

clearly a part of the subject matter of a suit for an injunction than the 

recovery of that which has been illegally acquired and which has given 

rise to the necessity for injunctive relief.” Id. at 399. The Court later 

emphasized that when Congress grants a court the power to issue an 

injunction, it “must be taken to have acted cognizant of the historic 

power of equity to provide complete relief in light of the statutory 

12 See FTC v. Commerce Planet, Inc., 815 F.3d 593, 598-99 (9th Cir. 

2016); FTC v. Ross, 743 F.3d 886, 890-92 (4th Cir. 2014); FTC v. 

Bronson Partners, LLC, 654 F.3d 359, 365-66 (2d Cir. 2011); FTC v. 

Magazine Sols., LLC, 432 F. App’x 155, 158 n.2 (3d Cir. 2011)

(unpublished); FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 15 (1st

Cir. 2010); FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192, 1202 n.6 

(10th Cir. 2005); FTC v. Gem Merch. Corp., 87 F.3d 466, 468-70 (11th

Cir. 1996); FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 

1314-1315 (8th Cir. 1991). 

28 
purposes.” Mitchell v. Robert De Mario Jewelry, Inc., 361 U.S. 288, 291-

92 (1960). Just four years ago, the Court cited Porter for the principle 

that “[w]hen federal law is at issue and the public interest is involved, a 

federal court’s equitable powers assume an even broader and more 

flexible character than when only a private controversy is at stake,” 

including the power to “accord full justice” to all parties. Kansas v. 

Nebraska, 135 S. Ct. 1042, 1053 (2015) (cleaned up). 

Brown nevertheless claims (Br. 19-20) that in Kokesh v. SEC, 137 

S. Ct. 1635 (2017), the Supreme Court upended that consistent line of 

precedent and “rejected the broad expansionist view set out in Porter.” 

But the Court made explicitly clear that it did no such thing. 

Kokesh addressed whether the general five-year statute of 

limitations for a “penalty” in 28 U.S.C. § 2462 applies to disgorgement 

under federal securities law and held that it does. 137 S. Ct. at 1639. 

Disgorgement, the Court explained, is a form of restitution, measured 

by the defendant’s unlawful gain. Id. at 1640. The Court noted that “in 

many cases, SEC disgorgement is not compensatory,” because disgorged 

funds are paid to the U.S. Treasury rather than to victims. Id. at 1644. 

29 
 

 

 

The Court thus held that this type of disgorgement was a “penalty” for 

purposes of the statute of limitations. Id. at 1644-45. 

But the Court expressly limited its holding to the application of 

the statute of limitations to the securities laws. Effectively rejecting the 

very argument Brown now makes, the Court stated that: 

Nothing in this opinion should be interpreted as an opinion 

on whether courts possess authority to order disgorgement 

in SEC enforcement proceedings or on whether courts have 

properly applied disgorgement principles in this context. 

Id. at 1642 n.3. Kokesh thus plainly does not support a wholesale 

reversal of decades of decisions rendered by nine circuits. Brown gets no 

help from comments made by individual justices at the Kokesh oral 

argument. Br. 19 (citing Doc.156-7 at 7-9, 13). The Court’s unanimous 

opinion speaks for itself. 

Beyond its explicit disclaimer, Kokesh does not apply here for 

several more reasons. The case concerned application of the statute of 

limitations, an issue not presented here.13 It also involved disgorged 

funds dispersed to the Treasury, coupled with civil penalties, a remedy 

that the Court found serves deterrent and not compensatory purposes. 

13 The complaint was filed in January 2017 seeking relief for deceptive 

conduct beginning in January 2014 (Doc.1 ¶11), well within Section 

2462’s five-year statute of limitations. 

30 
 

 

 

 

Kokesh, 137 S. Ct. at 1643-44. In contrast, here the FTC seeks redress 

for consumer losses, not retribution or deterrence. The FTC fully 

intends to distribute the money it collects from Brown to defrauded 

consumers.14 As the Supreme Court has recognized, a “public remedy” 

granting equitable monetary relief is not “rendered punitive” when it is 

compensatory. Mitchell, 361 U.S. at 293.15 

Brown also is wrong that Meghrig v. KFC Western, Inc., 516 U.S. 

479 (1996), “dramatically limited Porter.” Br. 20. Meghrig held that a 

citizen-suit provision in an environmental law that gives district courts 

14 Indeed, over the last few years, over 99% of the monetary remedies 

obtained in Section 13(b) cases were distributed to consumers (less the 

costs of distribution) rather than disgorged to Treasury. See Federal 

Trade Commission, Office of Claims and Refunds, 2018 FTC Annual 

Report on Refunds to Consumers, 

https://www.ftc.gov/system/files/documents/reports/2018-annual-reportrefunds-consumers/annual_redress_report_2018.pdf, at 1 (comparing

money sent for consumer refunds to money sent to Treasury); Federal 

Trade Commission, Office of Claims and Refunds, Annual Report 2017, 

https://www.ftc.gov/system/files/documents/reports/bureau-consumerprotection-office-claims-refunds-annual-report-2017-consumer-refundseffected-july/redressreportformattedforweb122117.pdf, at 1 (same). 

15 Brown also cites (Br. 24) a recent concurring opinion expressing the 

view that controlling Ninth Circuit precedent on this issue should be 

overruled. See FTC v. AMG Capital Mgmt., LLC, 910 F.3d 417 (9th Cir.

2018). For the reasons discussed herein, we respectfully disagree with 

that view. Other Ninth Circuit panels have ruled that Kokesh does not 

affect the SEC’s authority to seek disgorgement. See, e.g., SEC v. Liu, 

No. 17-55849, 2018 WL 5308171, at *3 (9th Cir. Oct. 25, 2018). 

31 
injunctive authority to order the remediation of present harms and the 

prevention of future ones did not allow a court to award compensation 

to private parties for past cleanup costs. Id. at 484. Meghrig reached 

that determination by comparing the statute before it with a similar 

environmental statute that afforded identical injunctive relief, but 

expressly provided for the recovery of past cleanup costs. Congress 

“knew how to provide for the recovery of cleanup costs,” the Court 

explained, so its decision to provide such a recovery in one statute 

revealed an intent not to do so in the other statute, which lacked the 

operative language. 516 U.S. at 485. Moreover, the injunctive authority 

conveyed in the statute before it limited relief to instances of 

“imminent” danger, which an already-cleaned-up site did not pose. Id. 

at 485-86. The holding, which turns on the particularities of two specific 

environmental statutes, sheds no light on how to interpret Section 

13(b). 

Indeed, Congress has twice ratified the FTC’s authority to obtain 

equitable monetary relief under Section 13(b). A decade after courts 

recognized the availability of such relief, Congress expanded the 

statute’s venue and service-of-process provisions. See FTC Act 

32 
Amendments of 1994, Pub. L. No. 103-312, § 10, 108 Stat. 1691 (Aug. 

26, 1994). Even as it amended Section 13(b), Congress let stand the 

many existing decisions permitting monetary relief under the statute. 

The Senate Report accompanying the legislation recognized that 

Section 13(b) authorizes the FTC to “go into court ... to obtain consumer 

redress.” S. Rep. No. 103-130, at 15-16 (1993). Congressional retention 

of statutory language, which courts have interpreted in a particular 

way, when Congress otherwise amends a statute shows “that Congress 

accepted and ratified” that interpretation. Texas Dep’t of Housing & 

Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S. Ct. 2507, 2520 

(2015). 

Congress directly codified the judicial understanding of Section 

13(b) when it enacted the U.S. Safe Web Act of 2006, Pub. L. 109-455, 

120 Stat. 3372 (Dec. 22, 2006) (codified in scattered sections of 15 

U.S.C.). There, the legislature expanded the FTC’s authority to enforce 

the FTC Act against certain practices abroad, providing that “[a]ll 

remedies available to the Commission with respect to unfair and 

deceptive acts or practices shall be available for acts and practices [in 

33 
 

foreign commerce] ... including restitution to domestic or foreign 

victims.” 15 U.S.C. § 45(a)(4)(B). 

B. Section 13(b) Does Not Require The FTC To

Pursue Administrative Proceedings Before 

Seeking A Permanent Injunction 

Brown next claims that Section 13(b) permits the FTC to seek a 

permanent injunction only after it conducts an administrative 

proceeding under Section 5(b) of the FTC Act, 15 U.S.C. § 45(b). Br. 18, 

25. This Court long ago rejected that argument, recognizing that the 

part of Section 13(b) that authorizes preliminary injunctive relief 

pending issuance of an administrative complaint and the second proviso 

of the statute that authorizes permanent injunctive relief “are entirely 

different animals.” JS & A Group, 716 F.2d at 456. Had Congress 

intended to require the Commission to file an administrative complaint 

before it sought permanent relief “it undoubtedly would have included 

language similar to that found in the provision governing preliminary 

injunctive relief.” Id. 

The Senate Report supporting Section 13(b) makes this clear. It 

explains that where the FTC “does not desire to further expand upon 

the prohibitions of the [FTC] Act through the issuance of a cease-and34 
desist order” after administrative proceedings, the Commission could 

“seek a permanent injunction” directly in district court. S. Rep. No. 93-

151, 93d Cong., 1st Sess. 30-31 (1973). This Court relied on that history 

to hold that the Commission may seek a permanent injunction in 

federal court where the agency does not need to apply its “expertise to a 

novel regulatory issue through administrative proceedings.” World 

Travel Vacation Brokers, 861 F.2d at 1028. 

Brown gets no help from language in the first portion of Section 

13(b) limiting the Commission’s authority to seek an injunction to cases 

where it has reason to believe a defendant “is violating, or is about to 

violate” a law provision. Br. 23. When the FTC filed its complaint, 

Brown and CBC were actively violating the FTC Act; they stopped only 

after the district court issued a TRO. Their related contention that the 

FTC cannot seek a remedy for past conduct, Br. 23, 24, is plainly wrong 

in light of the legions of decisions recognizing the agency’s ability to 

obtain monetary redress, which necessarily involves past conduct. 

C. Section 19 Does Not Limit The Remedies 

Separately Authorized Under Section 13(b) 

Brown and CBC further assert that the monetary remedies 

expressly authorized under Section 19 of the FTC Act, 15 U.S.C. § 57b, 

35 
limit the remedies available under Section 13(b). Br. 24-26. In fact, 

Section 19 precludes such a result on its face. 

Section 19(a), 15 U.S.C. § 57b(a), authorizes suit in federal court 

where a defendant has violated a Commission rule or an administrative 

cease-and desist order. In such suits, a court may order “relief . . . 

necessary to redress injury to consumers,” including “rescission,” “the 

refund of money,” and “the payment of damages,” but not “any 

exemplary or punitive damages.” Section 19(b), 15 U.S.C. § 57b(b). The 

statute then states expressly that the “[r]emedies provided in this 

section are in addition to, and not in lieu of, any other remedy” allowed 

under the FTC Act, and that “[n]othing in this section shall be 

construed to affect any authority of the Commission under any other 

provision of law.” 15 U.S.C. § 57b(e). Not surprisingly, courts have long 

ruled without exception that Section 19 does not limit the Commission’s 

ability to seek equitable remedies under Section 13(b). See, e.g., FTC v. 

H.N. Singer, Inc., 668 F.2d 1107, 1113 (9th Cir. 1982); FTC v. Bronson 

Partners, LLC, 654 F.3d 359, 366-67 (2d Cir. 2011). 

Brown and CBC also contend that the FTC cannot seek restitution 

under Section 13(b), because it is “punitive” and thus barred by Section 

36 
 

 

19. Br. 26. Even if Section 19 applied here, the district court ordered the 

monetary award to redress consumer loss. There is nothing punitive 

about it.16 

D. Tracing Is Not Required For Equitable

Monetary Relief Under Section 13(b) 

Brown next argues that the FTC and the district court were 

required to trace consumer relief to specific funds in his bank account. 

Because the account holds both tainted and untainted money, he 

claims, it cannot be used to pay the monetary award here. Br. 27-28. No 

such tracing was required. 

Tracing of funds is not required for equitable monetary relief 

under Section 13(b). Commerce Planet, 815 F.3d at 601; Bronson 

Partners, 654 F.3d at 373-74; see Op. 26-27 [A031-32]. As the Ninth 

Circuit explained, “tracing requirements would greatly hamper the FTC 

enforcement efforts by, among other things, precluding restitution of 

any funds the defendant has wrongfully obtained but already managed 

16 Brown mistakenly relies (Br. 26) on a law review article written by 

former FTC personnel. Even if such a paper could constitute authority, 

the authors recognize that Section 13(b) should “allow for monetary 

relief when the practices at issue are dishonest or fraudulent,” as they 

were here. See J. Howard Beales III & Timothy J. Muris, Striking the 

Proper Balance: Redress Under Section 13(b) of the FTC Act, 79 

Antitrust L.J. 1, 33 (2013). 

37 
to spend on non-traceable items.” 815 F.2d at 601 (citing Montanile v. 

Bd. of Trustees of the Nat’l Elevator Industry Health Benefit Plan, 136 

S. Ct. 651, 657-62 (2016)). Indeed, Brown’s suggested rule would simply 

create an incentive for scammers to dispose of tainted money as quickly 

as possible. Bronson Partners thus recognized that there is “no case in 

which a public agency seeking to obtain equitable monetary relief has 

been required to satisfy the tracing rules.” 654 F.3d at 374. That Court 

explained that equitable relief sought by the FTC under Section 13(b) is 

distinct from private remedies based on common law claims, because 

the FTC is “seeking to enforce explicit statutory provisions” to obtain a 

“public-regarding remedy.” Id. at 372-73. 

 Brown’s cases are not to the contrary. Montanile and Great-West 

Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), both involved 

lawsuits by private health plans under the Employee Retirement 

Income Security Act seeking reimbursement for expenses from plan 

participants who recovered from third parties. The Act only allowed the 

plans to recover “appropriate equitable relief.” Great West rejected the 

plan’s claim to equitable restitution in the form of a constructive trust 

or equitable lien over specific property, because the participant no 

38 
longer possessed those particular funds so the claim was legal not 

equitable. 534 U.S. at 714-15. Montanile held that the plan could not 

seek an equitable remedy (such as an equitable lien) when the 

participant had dissipated those particular funds. Both cases recognized 

that, under longstanding principles of equity, the constructive trust or 

equitable lien require private plaintiffs to identify particular funds that 

belonged to them, but were possessed by the defendant “in trust” or 

traceable items that the defendant purchased with those funds. See also 

Bronson Partners, 654 F.3d at 373. 

But this case involves a government lawsuit seeking general 

equitable monetary remedies, not a constructive trust or equitable lien. 

The FTC does not seek any particular funds in Brown’s possession, but 

rather “an equitable obligation to return a sum equal to the amount 

wrongfully obtained.” Id. at 374 (citing SEC v. Banner Fund Int'l, 211 

F.3d 602, 617 (D.C. Cir. 2000) (tracing not required in SEC 

disgorgement cases because there is no “requirement to replevy a 

specific asset.”)). The two situations are not comparable. 

Moreover, the injunctive relief available under Section 13(b) is 

broader than that available under ERISA. And private remedies are 

39 
 

more limited than public ones. When the government seeks equitable 

relief to protect the public interest, a court’s “equitable powers assume 

an even broader and more flexible character than when only a private 

controversy is at stake.” Porter, 328 U.S. at 398. Tracing would 

undermine the FTC Act’s broad remedial purpose “to protect consumers 

from economic injuries” by allowing the recovery of all consumer losses. 

Febre, 128 F.3d at 536. 

II. UNDISPUTED RECORD FACTS SHOWED THAT BROWN’S 

WEBSITES MISLED CONSUMERS IN VIOLATION OF SECTION 5 

OF THE FTC ACT AND ROSCA 

The district court determined that undisputed facts showed that 

Brown’s websites misled consumers in violation of Section 5 of the FTC 

Act and ROSCA. Brown asserts that the determination was error 

because he showed genuine disputes over material facts. Br. 28-36. The 

court’s judgment was sound. 

A. Uncontroverted Evidence Showed That Brown’s 

Websites Deceived Consumers 

A claim is deceptive in violation of Section 5(a) of the FTC Act, 15 

U.S.C. § 45(a), if it contains “material misrepresentations likely to 

mislead a reasonable consumer.” Bay Area Bus. Council, 423 F.3d at 

635. A representation is material if it is likely to affect a consumer’s 

40 
conduct regarding a product or service. Kraft, Inc. v. FTC, 970 F.2d 311, 

322 (7th Cir. 1992). When making those determinations, courts consider 

the overall net impression of an advertisement or claim. FTC v. ColgatePalmolive Co., 380 U.S. 374 (1965); Kraft, 970 F.2d at 322; Sterling 

Drug, Inc. v. FTC, 741 F.2d 1146, 1154 (9th Cir. 1984). 

It is well established that it is deceptive under the FTC Act to 

prominently advertise a low-cost or free product while burying in less 

conspicuous fine print a more expensive conjoined product. This Court 

explained in Porter & Dietsch v. FTC, 605 F.2d 294, 301 (7th Cir. 1979), 

that fine print disclosures do not negate a misleading net impression 

created by large headlines. The Ninth Circuit similarly held in FTC v. 

Cyberspace.com LLC, 453 F.3d 1196, 1200-01 (9th Cir. 2006), that 

deception caused by a check falsely purporting to be a refund or rebate 

was not cured by fine print disclosures on the back that cashing it 

signed the consumer up for an ongoing monthly service. Instead, 

disclosures of the true deal must be “sufficiently prominent and 

unambiguous to change the apparent meaning of the claims and to 

leave an accurate impression.” Removatron Int’l Corp. v. FTC, 884 F.2d 

1489, 1497 (1st Cir. 1989). 

41 
 

The district court applied those principles to find that Brown’s 

website was deceptive as a matter of law. The court carefully examined 

the text size, placement, and contrast of the various statements on 

screenshots of the websites. It is not in dispute that the offer of “free” 

credit reports and scores was conveyed in a large, bolded heading on the 

landing page: “Get Your Free Credit Score and Report as of 

[Date].” Op. 31 [A036]; Doc.215 ¶41 [SA188-89]; e.g., Doc.11-4 at 24-25, 

62-63 [SA050-51, SA060-61]; see supra at 6-8. Additional statements – 

all in bold highlighted text – on the landing page and subsequent pages 

of the website reaffirmed CBC’s offering of a credit score and report for 

a mere $1 refundable processing fee. Op. 31-34 [A036-39]; e.g., Doc. 11-4 

at 11-12, 15, 43, 65 [SA043-44, SA047, SA053, SA063]; see supra at 9-

10. By contrast, the only discussion of ongoing monthly services 

appeared in far smaller type and far less conspicuous color, and the 

services were not described. 

Moreover, consumer declarants stated that the only payment 

information they saw was a “$1.00 refundable processing fee,” 

announced above the payment space. Doc.211 ¶32 [SA182-83]; e.g., 

Doc.11-1 at 6 (¶8) [SA003]; id. at 31 (¶10) [SA007]. And the sheer 

42 
number of consumer complaints and credit card charge backs 

challenging the unexpected charges (supra at 11-12) significantly 

underscore the deceptive nature of the website. Although the FTC need 

not prove actual deception, consumer declarations of this nature are 

“highly probative to show that a practice is likely to mislead consumers 

acting reasonably under the circumstances.” Cyberspace.com, 453 F.3d 

at 1201. 

On that record, the district court properly concluded that the net 

impression of the websites was the claim that consumers would receive 

a free credit score and report, not enroll in a costly ongoing credit 

monitoring service. Op. 9-11 [A014-16]. And the court was correct in 

ruling that consumers “can discern that submitting payment 

information will enroll them in the membership only by reviewing text 

that is smaller and less noticeable than the surrounding text”; indeed, 

“[t]he website lacks any description of the monthly membership.” Id. 11 

[A016]. 

Brown is wrong that the disclosures on his websites raise a 

genuine question of fact. Br. 29-30. There is no dispute over the 

information his websites conveyed; as discussed above, the net 

43 
impression of the websites can be a question of law, and so long as the 

net impression is misleading, the mere fact of some disclosure does not 

raise a factual dispute. Brown’s disclosures appear in much smaller 

type and in a much less prominent color than the headline promise of a 

free credit score and report, and the disclosures never even describe the 

alleged monthly service they pertain to. 

Brown also claims that the FTC’s consumer declarations raise 

genuine issues regarding the websites’ net impression. Br. 31-32. Not 

so. The district court deemed admitted that many consumers learned 

about CBC’s monthly charges only when they discovered the charges on 

their account statements. Doc.215 ¶61 [SA205-06]. That in itself is 

sufficient to show that consumers were misled into believing that they 

would receive a free credit report and score. 

The consumer declarants confirmed the misleading nature of the 

website, testifying that the prominent feature they saw on CBC’s 

website was the free credit report and score (at most with the $1 

processing fee) and not a monthly credit monitoring service. E.g., 

Doc.11-1 at 5-7 [SA002-04]; id. at 52-55 [SA013-16]. Although Brown 

44 
challenges the declarants’ “reliability,” Br. 31, he failed to depose any of 

them or provide his own consumer testimony. 

Brown points to two declarants who claimed they saw language 

about the monthly charge. Br. 31. But this does not negate the 

deceptive net impression. This Court has long recognized that the FTC 

need not show that every reasonable consumer would be misled by a 

claim; rather, it need only show that “some customers actually 

misunderstood the thrust of the message” to support a “finding of a 

tendency to mislead.” World Travel, 861 F.2d at 1029-30 (citing 

Beneficial Corp v. FTC, 542 F.2d 611, 617 (3d Cir. 1976)). The 

undisputed record shows that many consumers were misled by the 

websites’ misrepresentations. 

Brown is also wrong that a reasonable consumer could not read 

only the portion of the website about the free credit scores and report 

yet miss disclosures about the negative option feature and its fees. Br. 

32. But for all the reasons described above, undisputed facts show that 

disclosures about monthly services were inconspicuous and 

overwhelmed by the larger and bolder claims offering free credit reports 

and scores. Op. 31-34 [A036-39]; see supra at 6-10. That is the essence 

45 
of the “net impression” test. If Brown were right, any disclosure, 

however buried, would defeat a charged FTC Act violation. 

Finally, Brown challenges the district court’s rejection of his 

“friendly fraud” argument that many consumers knowingly signed up 

for his services and then falsely claimed they were deceived in order to 

get a refund. Br. 32-33. But as the district court correctly found, the 

claim lacked admissible evidentiary support, and before this Court 

Brown supplies none. Op. 13 [A018]. The material Brown relies on are 

not admissible. For example, his testimony challenging consumers’ 

motives and honesty is not based on his personal knowledge, as 

required by Fed. R. Evid. 602 and Fed. R. Civ. P. 56(c)(4). It also 

constituted improper lay opinion testimony under Fed. R. Evid. 701. 

The “article” he cites that purportedly shows the harm caused by 

friendly fraud, see Doc.206-1 §24, Ex.10, is in reality a blog 

post/advertisement that lacks foundation and is inadmissible hearsay. 

Fed. R. Evid. 801(c), 802; Fed. R. Civ. P. 56(c)(2) & (4). 

B. Brown’s Websites Violated ROSCA 

For similar reasons, Brown’s websites also plainly violated 

ROSCA. That statute prohibits a seller from charging consumers for 

46 
 

online purchases that employ a negative option feature unless the seller 

(1) clearly and conspicuously discloses all the material terms of the 

transaction and (2) obtains the consumer’s express informed consent. 15 

U.S.C. § 8403(1) and (2).17 Brown’s credit monitoring service was a 

negative option program under ROSCA because consumers who 

requested a free credit report were automatically enrolled in the 

program and charged a monthly fee unless they took action within 

seven days to cancel. See 16 C.F.R. § 310.2(w) (definition from FTC’s 

Telemarketing Sales Rule adopted into ROSCA by Section 8403). 

Brown contends that his websites complied with ROSCA because 

consumers were informed three times that they were subscribing to his 

monthly credit monitoring program and could cancel within seven days 

if they did not want to be charged. He claims those disclosures were 

conspicuously depicted. Br. 33-36. 

But the undisputed evidence showed otherwise for all the reasons 

discussed above. As the district court concluded, CBC “embedded its 

disclosures into pages with larger, bolder text that promised ‘free’ credit 

reports and scores.” Op. 15 [A020]. The disclosures “were not 

17 A third element in Section 8403 was not at issue. 

47 
prominent” compared to the other larger and bolder text, and “appear 

‘designed to ensure minimal attention by the reader.’” Id. (citing Cole v. 

U.S. Capital, Inc., 389 F.3d 719, 731 (7th Cir. 2004)). 

 Brown also failed to obtain the required consent. Other than a 

vague statement that consumers would be charged a monthly fee for 

some service, the disclosures Brown cites never actually described the 

service he was offering. A consumer cannot meaningfully consent to 

charges of which they were unaware for services that were undisclosed. 

Op. 16 [A021]. 

Brown also contends (Br. 34) that the district court erroneously 

relied on Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719 

(7th Cir. 2008) and Cole, 389 F.3d at 731. Op. 15. Both cases were 

private suits claiming that the defendants failed to make certain FCRArequired disclosures (which were made in 6-point font) “clear and 

conspicuous,” a term left undefined in the statute. Cole concluded that a 

notice is conspicuous if the consumer’s attention is drawn to it, a 

condition not met in that case. 389 F.3d at 731. Murray interpreted the 

same FCRA provision, but also looked for guidance to an FTC rule 

(issued after Cole), 16 C.F.R. § 642.3, that requires 8-point or 12-point 

48 
font consumer disclosure notices (depending on the type of notice). 523 

F.3d at 725. But a rule requiring a minimum font size does not by itself 

immunize any disclosure using that font, when other elements yield a 

misleading net impression. Indeed, Cole and Murray, as well as Section 

642.3, require the disclosures to be sufficiently distinct from other text 

(such as being in bold, italicized, underlined, or in a contrasting color) to 

be adequately conspicuous. 

Finally, Brown gets no help from Commerce Planet, 878 F. Supp. 

2d 1048, 1064-66 (C.D. Cal. 2012), Br. 35, which concluded that 

disclosures about defendants’ negative option plan with a monthly 

membership fee was “buried with other densely packed information and 

legalese” in smaller text and hard-to-read graphics. Brown is not correct 

that just because the disclosures in another case may have been even 

more obscure than his, that means that his were adequate. 

III. BROWN’S WEBSITES VIOLATED THE FREE REPORTS RULE, 

AND THE FTC CAN ENFORCE THE VIOLATION IN FEDERAL 

COURT 

Brown next challenges (Br. 36-38) the district court’s conclusion 

that he violated the Free Reports Rule. Op. 16-19 [A021-24]. The rule 

requires that an advertisement for a free credit report must disclose 

49 
that a consumer has the right to obtain a free report annually under 

federal law. 15 U.S.C. § 1681j(g)(1); 12 C.F.R. § 1022.138. Brown does 

not contend that he provided the notice. Op. 16-17 [A021-22]. He claims 

instead that the FTC cannot enforce the rule in federal court and that 

the rule does not apply to him in any case. While the judgment is 

unaffected by Brown’s arguments (it is fully supported by his other law 

violations), his assertions fail. 

Brown first contends that the rule may be enforced only through 

an administrative proceeding (which does not allow a monetary award) 

and not in federal court. Br. 36-37. The claim rests on 15 U.S.C. 

§ 1681s(a)(1), which provides that violations of FCRA-based rules “shall 

be subject to enforcement by the Federal Trade Commission under 

Section 5(b)” of the FTC Act, 15 U.S.C. § 45(b). Section 5(b) authorizes 

administrative proceedings and does not mention judicial proceedings, 

and Brown asserts that Congress’s use of “shall” means that only 

administrative enforcement is allowed. 

Brown waived the argument by raising it only in his reply brief 

below. See Mendez v. Perla Dental, 646 F.3d 420, 423-24 (7th Cir. 2011). 

It also fails on the merits, because it runs counter to the plain language 

50 
of the FCRA and the FTC Act. The FCRA (under which the Free Report 

Rule was established) states that “a violation of any requirement or 

prohibition imposed under” the FCRA “constitute[s] an unfair or 

deceptive act or practice . . . in violation of Section 5(a) of the [FTC] 

Act.” 15 U.S.C. § 1681s(a)(1). Section 13(b) of the FTC Act, in turn, 

allows the FTC to seek both injunctive and monetary relief for the 

violation of “any provision of law enforced by” the FTC. 15 U.S.C. 

§ 53(b). The plain statutory terms thus defeat Brown’s claim that the 

FTC can enforce the FCRA only through administrative proceedings. 

Congress’s use of the word “shall” in § 1681s(a)(1) does not change 

the analysis. It is obvious from the passive statutory usage of the term – 

“shall be subject to enforcement” – that Congress used the word “shall” 

to provide authority to the FTC to enforce through administrative 

proceedings, not as an exclusive mandate for that particular means of 

enforcement. Indeed, the statute also states that a violation of the 

FCRA “shall constitute an unfair or deceptive act or practice” in 

violation of the FTC Act, thereby subjecting the violator to all the 

51 
 

 

means of FTC enforcement of that Act.18 The full statutory context is 

important because it can show, as here, that “shall” can be “the 

equivalent of ‘may.’” Sierra Club v. Whitman, 268 F.3d 898, 904 (9th 

Cir. 2001). 

Second, Brown argues that his product, which combined a credit 

report and a credit score, is not subject to the rule, which he claims does 

not apply to credit scores. Br. 37-38. Nowhere does the rule exempt 

credit report advertisers who also offer scores. Indeed, when the 

Commission amended the rule in 2010, it rejected the very argument 

Brown now makes. As the Commission explained, “advertising for 

bundled services that promote free credit reports, in addition to other 

products and services, such as credit monitoring, is the very type of 

advertising that is likely to confuse consumers,” and thus must be 

covered by the rule. Free Annual File Disclosures; Final Rule, 75 Fed. 

Reg. 9726, 9733, 2010 WL 710308 (Mar. 3, 2010) (now codified at 12 

C.F.R. § 1022.130). 

18 When the FCRA was enacted in 1970, see Pub. L. 91-508, 84 Stat. 

1127, 1134-1135 (1970), the FTC’s sole means of enforcement was 

through administrative proceedings. But Congress expanded the FTC’s 

enforcement arsenal when it added Section 13(b) in 1973 and 

authorized judicial enforcement as well. 

52 
Regardless of what Brown thinks landlords want when seeking 

new tenants, Br. 37-38, the rule requires disclosure to consumers that 

they are entitled to a free credit report. And his assertion that 

consumers were not injured by his rule violations, Br. 37, is belied by 

the fact that the Craigslist scheme duped them out of more than $6 

million instead of informing them they could get a credit report for free. 

IV. BROWN IS PERSONALLY LIABLE FOR CBC’S DECEPTIONS 

Brown challenges the district court’s determination that he is 

individually liable for CBC’s fraud. Br. 39. The claim is meritless. 

Under the FTC Act, once corporate liability is established, an 

individual defendant may be held jointly and severally liable for 

corporate misconduct if he: (1) participated directly in or controlled the 

corporation’s deceptive practices and (2) had “actual knowledge of 

material misrepresentations, reckless indifference to the truth or falsity 

of such misrepresentations, or an awareness of a high probability of 

fraud along with an intentional avoidance of the truth.” Amy Travel, 

875 F.2d at 573-74. An individual’s “degree of participation in business 

affairs is probative of knowledge.” Id. at 574. 

53 
 

Brown concedes that he controlled the CBC websites and knew 

their contents.19 Doc.215 ¶5 [SA170]. He also knew that many 

consumers complained about unauthorized charges and about the high 

number of credit card chargebacks for those charges. See supra at 11-

12. “To claim ignorance in the face of the consumer complaints and 

returned checks amounts to, at the least, reckless indifference to the 

corporations’ deceptive practices.” Bay Area Bus. Council, 423 F.3d at 

638; see also Amy Travel, 875 F.2d at 574-75 (high volume of consumer 

complaints and “excessive credit card chargebacks” placed defendants 

on notice of fraud). 

Instead, Brown contends that he bears no liability because CBC 

did not violate the law, which was supported by his friendly fraud 

testimony. Br. 39. The claim is nothing more than a rehash of all the 

arguments discussed above, and it fails for the same reasons. 

19 Brown does not appear to challenge his personal liability for the 

Craigslist fraud, which he also knew of and controlled. See supra at 13-

16; Op. 7-9 [A012-14]. 

54 
V. THE DISTRICT COURT’S REMEDIES WERE APPROPRIATE 

A. The District Court Properly Ordered Monetary 

Relief 

Brown next challenges the monetary remedy. Br. 39-41. He shows 

no reason why the district court’s determination to impose 

$5,260,671.36 in monetary relief (Op. 27-29 [A032-34]; Doc.239 § IX 

[A064-65]) fell beyond its broad discretion. 

To support a claim for equitable monetary relief, the FTC must 

provide evidence and calculations showing the amount of consumer loss. 

Febre, 128 F.3d at 535-36; Amy Travel, 875 F.2d at 570-72. The 

monetary remedy ordered by the court reflected consumer loss because 

it was based on the revenue CBC earned from consumers deceived by 

the Craigslist scheme, less chargebacks, refunds, and the amounts 

collected from the Pierce and Lloyd settlements. 

Brown asserts that he may be held liable only for conduct 

occurring after CBC activated certain websites on December 1, 2015, 

and not before then. Br. 40. But before December 2015, consumers 

deceived through the Craigslist scheme were directed to get their credit 

reports from earlier versions of CBC’s websites. Doc.215 ¶35 [SA184-

85]; Doc.194-10 at 2-18 [SA128-44]. Thus, as the district court held, “the 

55 
amount of liability is based on the duration of the campaign of 

misrepresentation conducted through the Craigslist marketing scheme, 

not the existence of certain websites.” Op. 27-28 [A032-33]. “The date on 

which certain websites became active is irrelevant to the calculation.” 

Id. 

Brown also asserts that joint and several liability cannot be 

imposed in FTC cases. Br. 40 (citing Honeycutt v. United States, 137 S. 

Ct. 1626 (2017)). This Court and others have consistently held to the 

contrary where multiple actors collectively cause a single harm. See, 

e.g., FTC v. World Media Brokers, 415 F.3d 758, 765-66 (7th Cir. 2005); 

Commerce Planet, 815 F.3d at 600-01; FTC v. WV Universal Mgmt., 

LLC, 877 F.3d 1234, 1240-43 (11th Cir. 2017). Honeycutt does not 

change those holdings. It turned on the specific language of a criminal 

forfeiture statute that restricted forfeiture to the property a defendant 

acquired from the crime. The statutory language precluded joint and 

several liability for property the defendant did not acquire. 137 S. Ct. at 

1632-33. Section 13(b) contains no similar language and therefore is not 

so limited. 

56 
Brown’s argument that monetary liability should be “setoff” by 

amounts received from purportedly legal sources (Br. 41) fails because 

the remedy was already limited to money derived from the Craigslist 

scheme. Op. 28 [A033]. To the extent Brown seeks additional setoffs for 

business costs or lost revenue (Br. 41), the district court properly denied 

this request as inappropriately reducing consumer recovery to 

compensate him for the costs of running his scheme. Op. 29 [A034]; see 

also Febre, 128 F.3d at 536 (rejecting net profits as measure of relief). 

Brown further contends monetary relief should exclude those 

customers who did not cancel the credit monitoring after calling to 

complain. Br. 40. Undisputed evidence showed, however, that Brown 

retained those customers by lying to them, falsely saying that his 

company had no connection to the Craigslist scheme. See Doc.215 ¶59 

(deemed admitted) [SA203-04]. As the district court held, Brown should 

not “keep the revenue obtained from customers who were retained” 

under false pretenses. Op. 28 [A033]. 

Finally, Brown argues that monetary relief should be limited to 

the period when Brown first became aware of the Craigslist fraud, 

which he claims was when he saw the BBB complaints in June 2016. 

57 
Br. 41. As the district court concluded, however, undisputed evidence 

shows that Brown learned of Pierce’s scheme no later than April 2015 

and received numerous additional signs of Pierce’s misconduct well 

before he received the BBB complaints. Op. 28-29 [A033-34]. Indeed, 

Brown knew from the time Pierce became his affiliate in January 2014 

that Pierce was advertising apartments on Craigslist and directing 

would-be renters to CBC’s websites despite having no connection to any 

landlords. Doc.215 ¶80 [SA220]; Doc.194-6 at 63-65 (Tr. 244, 248, 252) 

[SA075-77]. Brown knew or could easily have determined that 84% of 

CBC’s chargebacks beginning in January 2015 were from Pierce’s 

customer traffic. Doc.215 ¶¶72, 98 [SA215, SA229-30]. Brown therefore 

is liable for the revenue generated from the Craigslist scheme beginning 

in January 2014 when he “should have known about the deceptive 

practices.” Bay Area Bus. Council, 423 F.3d at 636. 

B. The District Court Properly Ordered Injunctive 

Relief 

Brown also challenges the permanent injunction as overly broad 

and disproportionately severe. Br. 43-47. To the contrary, the 

injunctions were an appropriate and proportional response to his 

Craigslist scheme violations. 

58 
Section 13(b) of the FTC Act authorizes the entry of a permanent 

injunction to prevent further violations of the FTC Act. Febre, 128 F.3d 

at 534. To justify behavioral injunctive relief, the moving party must 

“show that there is a reasonable likelihood of future violations.” SEC v. 

Holschuh, 694 F.2d 130, 144 (7th Cir. 1982). Factors that courts 

consider in making this determination include: (1) the gravity of harm; 

(2) the extent of the defendant’s participation; (3) whether the infraction 

is recurring and the likelihood the defendant may engage in the same 

conduct again; (4) the defendant’s recognition of his own culpability; 

and (5) the sincerity of assurances against future violations. Id.; Op. 22 

[A027]. Past misconduct is “highly suggestive of the likelihood of future 

violations.” CFTC v. Hunt, 591 F.2d 1211, 1220 (7th Cir. 1979). 

The district court found that all those factors supported imposing 

a permanent injunction. Brown caused significant consumer harm to 

the tune of millions of dollars and needless exposure of their sensitive 

financial information. Op. 23 [A028]. He was “deeply involved” in the 

scheme and could engage in similar conduct again because such 

schemes “are easy to facilitate.” Id. Indeed, Brown violated the 

preliminary injunction by charging consumers, again, through a 

59 
 

negative option feature without their consent. Doc.99 at 7; Doc.106. 

Brown also eschewed culpability and failed to give any assurances 

against future violations, as shown by Brown’s blame-the-consumer 

“friendly fraud” defense.20 Op. 23 [A028]. 

Brown’s objections fail. He first claims the permanent ban on 

selling credit monitoring services employing a negative option feature is 

“draconian.” Br. 43-44. But he provides no reason to believe that 

colorful adjective is accurate. The provision restricts Brown from 

reengaging in the precise conduct for which he was found liable. 

Imposing that ban on an unrepentant fraudster was well within the 

district court’s discretion. Contrary to Brown’s description, the 

injunction does not bar him “from employment in the credit card 

reporting industry” generally. Br. 44. 

Brown also challenges the requirement that he notify potential 

affiliates (the role played by Pierce and Lloyd here) about the order and 

take steps to ensure that they comply with it. Doc.239 § III [A049-53]. 

Brown cannot use or pay for noncompliant affiliate marketing materials 

20 Brown’s failure to accept responsibility is made clear by his 

remarkable claim that he was the victim of Pierce and Lloyd. Br. 45. In 

fact, he ratified, directed, and benefited from their fraud and could have 

stopped it at any time. Op. 7-9, 21-22; see supra at 15-16. 

60 
and must end his relationship with an affiliate he determines has 

violated the order. This provision too is well within the court’s 

discretion to curtail future abuse of affiliate relationships. It is not 

rendered unduly burdensome because it may dissuade affiliates from 

doing business with Brown. Br. 44. To be sure, affiliates may wish not 

to do business with a proven fraudster, but that does not turn a sensible 

prophylactic requirement into a punishment. No law-abiding affiliate 

marketer would hesitate to acknowledge the order. Further, as the 

district court recognized, legitimate affiliates would find out about the 

order anyway when they conduct due diligence on Brown. Doc.266 at 2-

3. 

The remainder of Brown’s challenges to the injunction are 

insubstantial. He claims no evidence shows that he created the 

Craigslist scheme, Br. 45, but undisputed evidence shows he controlled 

and ratified the scheme by letting it continue and enjoying its fruits for 

three years and that he had the requisite knowledge of the fraud. See 

supra at 13-16. His unsupported claim that consumers were only 

injured “minimally” and received what they paid for is belied by 

uncontested evidence showing that consumers were swindled out of 

61 
more than $6 million. His contention that some consumers received 

refunds, Br. 45, is rebutted by the many consumers who complained 

they were denied refunds. See supra at 11-12. In any event, refunds do 

not negate the need for injunctive relief to prevent future deception. 

Finally, Brown asserts that the monetary judgment, together with 

the injunction barring Brown (he claims) from working in “internet 

marketing,” amounts to an “excessive fine” or penalty in violation of the 

Eighth Amendment. Br. 46-47. The equitable monetary judgment is not 

a fine at all but a way to return ill-gotten gains to victims, and it is 

directly related to the amount of harm Brown caused; he fails to explain 

how that remedy can possibly be “grossly disproportional” to his 

misdeeds. United States v. Bajakajian, 524 U.S. 321, 334 (1998). He 

also mischaracterizes the behavioral injunctive relief. In fact, Brown 

may engage in internet marketing as long as it does not involve credit 

monitoring services with a negative option feature. 

VI. THE DISTRICT COURT PROPERLY DENIED BROWN’S 

PETITION FOR ATTORNEYS’ FEES 

Brown asked the district court to allow him to pay his lawyers 

from the frozen funds set aside for victim relief. The court denied that 

request (Doc.268 [A073] and Brown now challenges the denial. Br. 41-

62 
43. He does not nearly establish that the court abused its discretion. 

The law is clear that redress to victims takes priority over legal fees 

where counsel undertook the representation knowing he might not get 

paid. 

 Once a final judgment is entered under the FTC Act, any frozen 

assets (up to the full amount of the judgment) are designated for 

redress to the consumer victims. Think Achievement, 312 F.3d at 262. 

The final judgment establishes that the frozen assets are “a product of 

fraud or necessary to compensate the victims of the fraud for their 

losses” and that defendants therefore have “no right to use any part of 

the frozen money for [their] own purposes,” including paying their legal 

bills. Id. The only exception to that rule is where attorneys can show 

they could “count on” payment from frozen assets and agreed to the 

representation on that ground. Id. at 262-63. 

Here, Brown’s lawyer could not “count on” the payment Brown 

now seeks. Before judgment, the district court allowed Brown to pay 

about half of the then-incurred fees from frozen assets, but he warned 

Brown and his lawyer that “[c]ounsel has no legitimate reliance 

interest, because he came into the case with no understanding or 

63 
 

representations regarding the availability of any of the frozen funds for 

fees.” Doc.183 at 4. 

After final judgment, the court ruled that all of the seized or 

frozen funds should go to compensate Brown’s consumer victims and 

none should go to pay legal bills. Doc.268 at 3 [A075]. Indeed, only 

about 20% of the approximately $5.2 million monetary judgment had 

been recovered from Brown, and Brown’s attorney sought more than 

12% of that amount. As in Think Achievement, the frozen assets were 

substantially less than the amount “necessary to compensate the 

victims of the fraud for their losses.” 312 F.3d at 262. The court 

recognized that the propriety of devoting the funds to consumer redress 

“far outweigh[s]” paying legal bills. Doc.268 at 4 [A076]. The decision 

was well within the court’s discretion.21 

21 Brown also contends that the district court was required to address 

his fee requests before final judgment, but he provides no good reason 

why the court’s decision to defer the matter could possibly amount to an 

abuse of discretion. 

64 
 

 

CONCLUSION 

For the foregoing reasons, the rulings of the district court on 

appeal should be affirmed. 

Of Counsel: 

GUY G. WARD

Attorney 

Federal Trade Commission 

Chicago, IL 60604 

Dated: March 12, 2019 

Respectfully submitted, 

ALDEN F. ABBOTT 

General Counsel 

JOEL MARCUS 

Deputy General Counsel 

/s/ Michael D. Bergman

MICHAEL D. BERGMAN 

Attorney

Federal Trade Commission 

600 Pennsylvania Ave., N.W.

Washington, D.C. 20580

65 
 

 

 

 

 

CERTIFICATE OF COMPLIANCE 

I certify that the foregoing Brief of the Federal Trade Commission 

complies with the type-volume limitation in Fed. R. App. P. 32(a)(7) and 7th 

Cir. R. 32(c) because it contains 12,312 words, excluding the parts of the brief 

exempted by Fed. R. App. P. 32(f). It also complies with the typeface 

requirements of Fed. R. App. P. 32(a)(5) and 7th Cir. R. 32(b), and the type 

style requirements of Fed. R. App. P. 32(a)(6), because the brief has been 

prepared in a proportionally spaced typeface using 14-point Century 

Schoolbook type style. 

March 12, 2019 Michael D. Bergman

 Michael D. Bergman 

CERTIFICATE OF SERVICE 

I certify that on March 12, 2019, I electronically filed the foregoing Brief 

of the Federal Trade Commission with the Clerk of the Court for the United 

States Court of Appeals for the Seventh Circuit by using the CM/ECF system. 

I certify that all participants in the case are registered CM/ECF users and 

that service will be accomplished by the CM/ECF system. 

Michael D. Bergman

 Michael D. Bergman