Court Opinion

ID: 9363202
Source: CourtListenerOpinion
Date Created: 2023-01-13 18:57:55.452242+00
Date Added: 2024-06-11T17:15:29.927422
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       DEC 27 2022
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

CONSUMER FINANCIAL PROTECTION                   No.    21-56052
BUREAU,
                                                D.C. No.
                Plaintiff-Appellee,             8:20-cv-00043-SB-ADS

 v.
                                                MEMORANDUM*
JAWAD NESHEIWAT,

                Defendant-Appellant,

and

CHOU TEAM REALTY, LLC, FKA Chou
Team Realty, Inc., DBA Monster Loans,
DBA MonsterLoans; et al.,

                Defendants.

                   Appeal from the United States District Court
                       for the Central District of California
                 Stanley Blumenfeld, Jr., District Judge, Presiding

                          Submitted November 17, 2022**
                              Pasadena, California

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: WARDLAW and W. FLETCHER, Circuit Judges, and KENNELLY,***
District Judge.

      Jawad Nesheiwat (Nesheiwat) appeals the district court’s grant of summary

judgment and its award of restitution, civil penalties, and injunctive relief to the

Consumer Protection Financial Bureau (CFPB). As the parties are familiar with

the facts, we do not restate them here. We have jurisdiction under 28 U.S.C. §

1291, and we affirm. There are no genuine disputes of material facts regarding

Nesheiwat’s liability under provisions of the Financial Credit Reporting Act

(FCRA), 12 U.S.C. § 1681b(f)(1), the Telemarketing Sales Rule (TSR), 16 C.F.R.

§§ 310.3(a)(2)(x), (a)(5), and the Consumer Financial Protection Act (CFPA), 12

U.S.C. §§ 5536(a)(1)(B), (a)(3). Nesheiwat’s baseless evidentiary objections, bald

assertions that a jury could find other individuals ultimately (or similarly)

responsible, and various procedural challenges are unavailing.

      1.     Undisputed record evidence shows that Nesheiwat recklessly violated

the FCRA by using and obtaining consumer reports for unauthorized purposes. 12

U.S.C. § 1681b(f)(1). Nesheiwat played a central role in a scheme to obtain

prescreened lists of student loan borrowers under false pretenses, purporting to

extend a “firm offer of credit or insurance,” id. § 1681b(c)(1)(B)(i), but in fact

      ***
            The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.

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marketing false debt relief services offered through student loan debt relief (SLDR)

companies. Nesheiwat knew these lists were used for an unauthorized purpose and

instructed employees to prepare fraudulent “compliant mailers” to avoid detection

by regulators.

      2.     Undisputed record evidence shows that Nesheiwat recklessly violated

the TSR by charging advance fees to individuals for debt relief services, 16 C.F.R.

§ 310.4(a)(5), and misrepresenting material aspects of such services, id. §

310.3(a)(2)(x). Nesheiwat is individually liable for corporate violations of the TSR

because “(1) he participated directly in the [unlawful] acts or had the authority to

control them and (2) he had knowledge of [such conduct] . . . or was aware of a

high probability of” such conduct and “intentional[ly] avoid[ed] . . . the truth.”

FTC v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009).

      Nesheiwat edited and approved telemarketing scripts for the SLDR

companies. He directed managers at such companies to use these scripts, which

instructed sales associates to collect advance fees, and materially misrepresented

the SLDR companies’ services—promising false benefits such as lower interest

rates and improved credit scores.

      Nesheiwat provided “substantial assistance” to the SLDR companies in

violating both provisions of the TSR. 16 C.F.R. § 310.3(b). First, neither party

disputes that the SLDR companies violated the TSR. Second, Nesheiwat provided

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more than mere “casual or incidental” assistance to the companies by approving

and editing telemarketing scripts. FTC v. Chapman, 714 F.3d 1211, 1216–17 (10th

Cir. 2013). Third, undisputed evidence shows that Nesheiwat knew, or

consciously avoided knowing, that the companies were violating the TSR.

      3.     Undisputed record evidence shows that Nesheiwat violated the CFPA.

Evidence of Nesheiwat’s role in the SLDR companies’ telemarketing program

makes out a basis for liability under both the deceptive acts provision of the TSR,

16 C.F.R. § 310.3(a)(2)(x), and a related provision of the CFPA, 12 U.S.C. §

5536(a)(1)(B). Additionally, Nesheiwat played a central role in the companies’

direct mail marketing, using contact information obtained in violation of the FCRA

to encourage consumers to call in. These mailers misrepresented material aspects

of the SDLR companies’ debt relief services in a manner “likely to mislead

consumers acting reasonably under the circumstances,” CFPB v. Gordon, 819 F.3d

1179, 1192–93 (9th Cir. 2016) (citing FTC v. Pantron I Corp., 33 F.3d 1088, 1095

(9th Cir. 1994)), by touting lower interest rates, improved credit scores, and false

claims that the Department of Education would become consumers’ new loan

servicer.

      Nesheiwat is individually liable for corporate violations of the CFPA.

Gordon, 819 F.3d at 1193. He “participated directly” in these deceptive practices

and “had the authority to control them.” Id. (quoting Stefanchik, 559 F.3d at 931).

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Nesheiwat was also “recklessly indifferent to the truth or falsity of the

misrepresentations,” id., and did not attempt to verify the truthfulness of statements

in SLDR companies’ telemarketing and direct mail materials.

      Nesheiwat provided substantial assistance to the SLDR companies in

violating the CFPA. Our analysis regarding Nesheiwat’s liability for substantial

assistance under the TSR largely tracks our analysis under the CFPA. First, neither

party disputes that the SLDR companies violated the CFPA by making false

promises to consumers via direct mail and sales calls. Second, Nesheiwat provided

substantially more than “mere casual or incidental” assistance to the companies in

their marketing program. Chapman, 714 F.3d at 1216–17. Third, undisputed

evidence shows that Nesheiwat acted recklessly by failing to verify the truthfulness

of the SLDR companies’ marketing materials.

      4.     Nesheiwat asserts that CFPB filed this action outside the CFPA’s

three-year statute of limitations. 12 U.S.C. §§ 5564(b), (g)(1). He “bears the

burden of proving that the plaintiff filed beyond the limitations period.” Payan v.

Aramark Mgmt. Servs. Ltd. P’ship, 495 F.3d 1119, 1122 (9th Cir. 2007) (citations

omitted). By merely gesturing at a handful of consumer complaints submitted to

CFPB, he fails to carry his burden . At most, the 24 consumer complaints he

identifies disclose some elements of the SLDR companies’ violations of the

FCRA, TSR, and CFPA. None identifies Nesheiwat by name. Nesheiwat provides

                                          5
no evidence that CFPB was aware of these complaints. Standing alone, they offer

no insight into CFPB’s “date of discovery.” 12 U.S.C. § 5564(g)(1).

      5.     The district court did not abuse its discretion in ordering restitution,

civil penalties, and injunctive relief. To calculate restitution, the district court

faithfully applied our circuit’s “two-step burden-shifting framework.” Gordon,

819 F.3d at 1195. At step one, CFPB bore its “burden of proving that the amount

it seeks in restitution reasonably approximates the defendant’s unjust gains,”

measured as net revenue. Id. (citation omitted). CFPB relied on undisputed

evidence to calculate net revenue: the amount of fees charged to consumers minus

refunds—$19,699,870. At step two, Nesheiwat failed to “demonstrate that the net

revenues figure overstates the defendant’s unjust gains.” Id. The district court

awarded “legal restitution” to CFPB. Accordingly, we need not decide what

impact, if any, the Supreme Court’s holding in Liu v. SEC, 140 S. Ct. 1936 (2020),

has on this appeal.

      6.     The district court did not abuse its discretion in imposing second-tier

civil penalties for Nesheiwat’s reckless violations of Federal consumer financial

law. 12 U.S.C. § 5565(c)(2)(B); 12 C.F.R. § 1083.1(a). Nesheiwat offers no legal

argument to contest the district court’s award, instead asserting that such penalties

are “seriously and unjustifiably disproportionate to the penalties imposed against”

other defendants. He has waived his challenge. United States v. Cazares, 788 F.3d

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956, 983 (9th Cir. 2015) (“The failure to cite to valid legal authority waives a claim

for appellate review.”); Fed. R. App. P. 28(a)(8)(A).

      7.     The district court did not abuse its discretion in granting a permanent

injunction “broad[] enough to prevent [the defendant] from engaging in similarly

illegal practices in [the] future.” Litton Indus., Inc. v. FTC, 676 F.2d 364, 370 (9th

Cir. 1982) (quoting FTC v. Colgate-Palmolive Co., 380 U.S. 374, 395 (1965)).

Fencing-in provisions, such as restrictions on an individual’s ability to work in a

specific industry, “will be upheld so long as [they] bear[] a ‘reasonable relation to

the unlawful practices found to exist.’” FTC v. Grant Connect, LLC., 763 F.3d

1094, 1105 (9th Cir. 2014) (quoting Colgate-Palmolive, 380 U.S. at 394–95).

Nesheiwat “acted in blatant and utter disregard of the law.” Litton Indus., 676 F.2d

at 371. Nesheiwat’s “elaborate and wide-ranging” unlawful conduct spanned

multiple industries. Accordingly, the district court did not abuse its discretion in

barring Nesheiwat from engaging in debt relief, mortgage loans, and telemarketing

services, and obtaining consumer data.

      8.     We deem Nesheiwat’s other challenges to the district court’s holding

waived. Nesheiwat waived his challenges to the court’s Local Rules and standing

order on summary judgment. See Crime Just. & Am., Inc. v. Honea, 876 F.3d 966,

978 (9th Cir. 2017) (issues raised in captions in brief which are not supported by

argument are waived). He also waived challenges to the district court’s denial of

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his evidentiary objections. See Palmer v. IRS, 116 F.3d 1309, 1312–13 (9th Cir.

1997) (issue raised in motion that district court refused to consider “because it was

untimely and in contravention of local rules” which a party does not appeal is

waived).

      AFFIRMED.

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