1The court is deciding this motion at defendants’ request on

an emergency basis. Although the court has attempted to set out

its essential reasoning, this memorandum opinion is necessarily

confined to the explanation that can be given in the context of an

expedited ruling. 

 IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

UNITED STATES OF AMERICA, §

 §

Plaintiff, §

 § Civil Action No. 3:05-CV-2147-D

VS. §

 §

CORNERSTONE WEALTH §

CORPORATION, INC., et al., §

 §

Defendants. §

MEMORANDUM OPINION

 AND ORDER 

Defendants Cornerstone Wealth Corporation, Inc.

(“Cornerstone”) and John R. Atchley, Jr. (“Atchley”) have filed an

emergency motion to stay permanent injunction pending appeal. For

the reasons that follow, the court denies the motion.1

I

In March 2006 the court held defendants in civil contempt for

violating various portions of the Credit Repair Organizations Act

(“CROA”), 15 U.S.C. §§ 1679-1679j, that were prohibited by a 1998

stipulated consent order for permanent injunction (“1998 Order”).

United States v. Cornerstone Wealth Corp., 2006 WL 522124, at *5,

*8 (N.D. Tex. Mar. 3, 2006) (Fitzwater, J.) (“Cornerstone I”).

Defendants had entered into the 1998 Order with the United States

of America (“the government”) on behalf of the Federal Trade
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Commission (“FTC”). In a separate lawsuit——the instant

case——brought by the government against defendants, the government

alleged further violations of CROA. The court largely granted the

government’s motion for summary judgment in United States v.

Cornerstone Wealth Corp., 2007 WL 2331033, at *1 (N.D. Tex. Aug.

16, 2007) (Fitzwater, J.) (“Cornerstone II”). And in a memorandum

opinion and judgment filed January 24, 2008, the court granted

final relief in favor of the government. United States v.

Cornerstone Wealth Corp., 2008 U.S. Dist. LEXIS 5540, at *25, *35

(N.D. Tex. Jan. 24, 2008) (Fitzwater, C.J.) (“Cornerstone III”).

The judgment, in relevant part, includes a provision that

permanently enjoins defendants “from directly or indirectly owning,

operating, engaging in the business of, functioning as, providing

the services of, or being employed by a ‘credit repair

organization,’ as that term is defined in 15 U.S.C. § 1679a(3)(A).”

Judgment § I. The judgment also imposes a civil penalty against

defendants in the sum of $547,500, under 15 U.S.C. § 45(m)(1)(A).

Judgment § VI. On February 1, 2008 defendants filed the instant

emergency motion to stay permanent injunction pending appeal.

II

To decide whether a stay pending appeal should be granted, the

court must consider the following criteria:
2Because defendants cannot satisfy the first element, the

court need not analyze the remaining three. Cf. Lake Charles

Diesel, Inc. v. Gen. Motors Corp., 328 F.3d 192, 203 (5th Cir.

2003) (addressing four-factor preliminary injunction test and

holding that “[a]s alone, the absence of likelihood of success on

the merits is sufficient to make the district court’s grant of a

preliminary injunction improvident as a matter of law, we need not

address the three remaining prongs of the test for granting

preliminary injunctions.”); see also Ponce v. Socorro Indep. Sch.

Dist., 508 F3d 765, 768 (5th Cir. 2007) (holding on basis of first

factor alone that it was error for district court to issue

preliminary injunction) (“[o]ur analysis begins——and ends——with the

first requirement.”).

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(1) Whether the movant has made a showing of

likelihood of success on the merits; 

(2) Whether the movant has made a showing of

irreparable injury if the stay is not granted;

(3) Whether the granting of the stay would

substantially harm the other parties; and

(4) Whether the granting of the stay would

serve the public interest.

In re First S. Sav. Ass’n, 820 F.2d 700, 704 (5th Cir. 1987)

(citing Ruiz v. Estelle, 666 F.2d 854, 856 (5th Cir. 1982)).

Because the court holds that defendants have not made the required

showing of a likelihood of success on the merits, and because

without such a showing they are not entitled to a stay, the court

denies their emergency motion to stay permanent injunction pending

appeal.2

III

A

Defendants contend that they will be successful on appeal on

two issues. First, they posit that the court erred in Cornerstone

II and Cornerstone III by holding that their practice of accepting
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payments under a “guarantee” contract violated 15 U.S.C.

§ 1679b(b). Second, defendants maintain that the court incorrectly

held in Cornerstone II and Cornerstone III that their practice of

accepting postdated checks in advance of full performance violated

15 U.S.C. § 1679b(b).

B

In Cornerstone I the court held defendants in contempt of the

1998 Order for, inter alia, accepting payments from customers

pursuant to a “guarantee” contract under which Cornerstone promised

to re-verify its customers’ credit information until inaccurate or

obsolete information was resolved, for up to two years.

Cornerstone I, 2006 WL 522124, at *5-*8. The court concluded that

defendants’ acceptance of payments before the end of the

“guarantee” period constituted accepting payments in advance of

full performance, which was prohibited under 15 U.S.C. § 1679b(b)

and the 1998 Order. Id. After the court clearly characterized the

receipt of payments under the “guarantee” contract as “an artifice

that enables Cornerstone to charge for services before they have

been fully performed,” the court ordered that Cornerstone

“immediately cease and desist charging or receiving any money or

other valuable consideration from consumers for credit repair

services that have not been fully performed.” Id. at *8, *10.

In Cornerstone II the court held that the government had

established beyond peradventure that defendants had continued to
3

Defendants’ conduct in the almost ten-year history of this

dispute——including some of the arguments they have advanced——gives

force to the concerns that prompted Congress to regulate credit

repair agencies. For example, they have engaged in at least one

artifice to circumvent the clear intent of CROA, and they have

given this court’s orders unreasonable readings when necessary to

continue conduct that they prefer to engage in, despite its

illegality under CROA.

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collect payments in advance of full performance under the

“guarantee” contract for customers retained before Cornerstone I,

in violation of § 1679b(b), the 1998 Order, and Cornerstone I.

Cornerstone II, 2007 WL 2331033, at *3-*4. Because Cornerstone

failed to respond to the government’s summary judgment motion, the

court decided the motion under the standards that apply when no

response is filed. Id. at *2-*3. Similarly, defendants failed to

respond to the government’s motion that the court decided in

Cornerstone III. Cornerstone III, 2008 U.S. Dist. LEXIS 5540, at

*8.

In their emergency stay motion, defendants acknowledge that

they continued to accept payments from customers who had signed a

“guarantee” contract before Cornerstone I, but they maintain that

the “guarantee” for these customers had expired under the

contracts’ “acceleration/termination clause” and that all payments

received from these customers were accepted after all services were

performed.

Defendants’ argument is not supported by the record.3

 After

Cornerstone I, defendants sent a November 16, 2006 compliance
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report to the government in which they admitted that they had

continued to accept payments under the “guarantee” contracts as to

customers retained before Cornerstone I: 

Additionally, Cornerstone still accepts and

requests payments from customers who

contracted with Cornerstone prior to March 3,

2006 because it is Cornerstone’s belief that

the Court’s March, 3, 2006 Order, just like

the original Court order in this matter and

the original settlement agreement entered into

by and between Cornerstone and the Government,

does not address the acceptance or requesting

of payments from customers who contracted

prior to the date thereof. 

P. Mot. Summ. J. App. 58. Defendants’ admission says nothing to

indicate that these “guarantee” contracts——under which defendants

continued to accept payments——were terminated or expired. 

Similarly, in an April 16, 2007 deposition, Atchley admitted

without qualification that Cornerstone continued to accept payments

under the “guarantee” contracts entered into before Cornerstone I:

Q. Now, in response to-here on the compliance

report it states that as to customers who had

contracts already in effect on March 3, 2006

Cornerstone continued to charge and receive

monthly payments from those customers,

correct?

A. Yes.

Q. So that’s accurate?

A. Yes.

Q. These would be customers who signed the

old contract that the Court ordered you to

change, right?

A. Yes. 

Q. And these pre-March 2006 customers had the

two-year guarantee in their contract, right?

A. Can you repeat the question?

Q. These customers that I’m referring to from

before March of 2006 had the two-year
- 7 -

guarantee in their contracts, right?

A. Yes.

Q. So some customers signed the contract with

the two-year guarantee as recently as February

of 2006, correct?

A. Yes.

Q. So some-some customers who signed the old

contract with the two-year guarantee are

currently making monthly payments to

Cornerstone, correct?

A. Yes.

P. Mot. Summ. J. App. 67-68. Not only did Atchley fail to point

out that these “guarantee” contracts had expired, his admission

that pre-March 2006 customers would continue to make monthly

payments is completely inconsistent with defendants’ current

position in the emergency stay motion that the “guarantee”

contracts of pre-March 2006 customers from whom Cornerstone

accepted payments had expired under an acceleration or termination

clause. If these customers’ “guarantee” contracts had expired, it

would make little sense that they would continue making monthly

installments to defendants. 

Moreover, defendants’ current position is not supported by any

record evidence. Although defendants assert that they can prove

the validity of their new argument, they should have done this in

response to the government’s summary judgment motion and its

subsquent motion for an order of relief. Defendants had two

opportunities to advance the arguments they now present in this

emergency stay motion, but they failed to file timely responses to

either government motion. The court therefore correctly held in
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Cornerstone II and Cornerstone III that defendants continued to

accept payments under “guarantee” contracts that the court had

previously characterized as illegal. Defendants have therefore

failed to show that they are likely to succeed on the merits of an

appeal that challenges this holding.

C

Defendants also maintain that they will successfully appeal

the court’s holding in Cornerstone II that Cornerstone’s practice

of accepting postdated checks in an initial meeting with customers

is receiving “money or other valuable consideration” before all

services are fully performed, in violation of 15 U.S.C. § 1679b(b).

Defendants posit that the court’s reliance on Tex. Bus. & Com. Code

Ann. § 4.401(c) (Vernon 2002) is misplaced. 

Section 4.401(c) provides: “A bank may charge against the

account of a customer a check that is otherwise properly payable

from the account, even though payment was made before the date of

the check, unless the customer has given notice to the bank of the

postdating describing the check with reasonable certainty.”

§ 4.401(c) (emphasis added). Defendants argue that § 4.401(c)

addresses only the issue of when a bank may charge a customer’s

account without incurring liability. They cite Tex. Bus. & Com.

Code Ann. § 3.113 as support for their position that a postdated

check is not payment until the date on the check. Section 3.113

states, in relevant part: “An instrument may be antedated or
- 9 -

postdated. The date stated determines the time of payment if the

instrument is payable at a fixed period after date. Except as

provided in Section 4.401(c), an instrument payable on demand is

not payable before the date of the instrument.” Although § 3.113

says that an instrument is not payable before the date of the

instrument, it expressly excepts instruments charged on a

customer’s account under § 4.401(c), which permits banks to honor

postdated checks before the date on the check. 

Defendants also contend that a payee on a postdated check

incurs liability if it presents the check to the drawee bank before

the date on the check, but they provide no legal authority for this

position. Although a payee on a postdated check may not have a

claim against the payor if the drawee bank fails to honor the check

when presented before the date on the check, the acceptance of

postdated checks is still accepting “money or other valuable

consideration,” because the drawee bank is legally permitted to

honor the postdated check. 

But even assuming arguendo that a postdated check is not

payable until the date on the check, credit repair organizations

that accept postdated checks in an initial meeting with customers

still receive “money or other valuable consideration” in advance of

full performance of services. The purpose of CROA is “to protect

the public from unfair or deceptive advertising and business

practices by credit repair organizations.” 15 U.S.C. § 1679(b)(2).
- 10 -

In enacting CROA, Congress sought to prevent credit repair

organizations from cheating their customers out of money by forcing

them to pay for worthless services after being misled by the credit

repair organization’s representations concerning those services.

See FTC v. Gill, 71 F.Supp.2d 1030, 1040 n.11 (C.D. Cal. 1999),

aff’d, 265 F.3d 944 (9th Cir. 2001). Section 1679b(b) serves this

goal by prohibiting credit repair organizations from accepting

“money or other valuable consideration” until all their services

are fully performed. If a credit repair organization accepts a

postdated check in an initial meeting and then renders a worthless

service before the date on the check, the customer is at risk of

being forced to pay for the worthless service. This is because the

credit repair organization can present the check to the drawee bank

for payment before the date of the check, depriving the customer of

the opportunity to request that the payment be returned. Thus

credit repair organizations that accept postdated checks in advance

of full performance, and then deposit the checks before the dates

the customer has written on them, will be paid regardless whether

their services fulfilled the representations made to their

customers. This is plainly inconsistent with the intentions of

CROA. The court therefore concludes that defendants have failed to

show that they are likely to obtain reversal on appeal of the
4

Although the court’s decision to issue a permanent injunction

did rely in part upon defendants’ practice of accepting postdated

checks, this particular violation of CROA was not a critical factor

in its reasoning. Cornerstone III, 2008 U.S. Dist. LEXIS 5540, at

*17-*25. Thus even assuming that defendants are correct that

accepting postdated checks in an initial meeting does not

constitute reception of “money or other valuable consideration” in

advance of full performance, the court, for other reasons, properly

granted the government’s request for a permanent injunction. 

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court’s holding concerning postdated checks.4 

* * *

Accordingly, defendants’ February 1, 2008 emergency motion to

stay permanent injunction pending appeal is denied. 

SO ORDERED.

February 5, 2008.

_________________________________

SIDNEY A. FITZWATER

CHIEF JUDGE