Restitution Award

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7^th Circuit Court of Appeals

Case Name: Federal Trade Commission v. Credit Bureau Center, LLC, et al.

Case No.: 18-2847; 18-3310

Officials: MANION, SYKES, and BRENNAN, Circuit Judges.

Focus: Restitution Award

Michael Brown is the sole owner and operator of Credit Bureau Center, a credit-monitoring service. (We refer to both collectively as “Brown.”) Brown’s websites used what’s known as a “negative option feature” to attract customers. The websites offered a “free credit report and score” while obscuring a key detail in much smaller text: that applying for this “free” information automatically enrolled customers in an unspecified $29.94 monthly “membership” subscription. The subscription was for Brown’s credit-monitoring service, but customers learned this information only when he sent them a letter after they were automatically enrolled. Brown’s most successful contractor capitalized on the confusion by posting Craigslist advertisements for fake rental properties and telling applicants to get a “free” credit score from Brown’s websites.

The Federal Trade Commission eventually took notice. It sued Brown under section 13(b) of the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 53(b), alleging that the websites and referral system violated several consumer-protection statutes. The Commission sought a permanent injunction and restitution. Relevant here, the district judge found that Brown was a principal for his contractor’s fraudulent scheme and that the websites failed to meet certain disclosure requirements in the Restore Online Shopper Confidence Act (“ROSCA”). Id. § 8403. The judge entered a permanent injunction and ordered Brown to pay more than $5 million in restitution to the Commission.

Brown now concedes liability as a principal for his contractor’s Craigslist scam. And he doesn’t dispute that his own websites failed to meet some of ROSCA’s disclosure requirements. So we have no trouble affirming the judge’s decision to hold him liable for both. We also affirm the issuance of a permanent injunction. Brown’s argument there rests on an erroneous understanding of the Eighth Amendment’s Excessive Fines Clause.

But the restitution award is a different matter. By its terms, section 13(b) authorizes only restraining orders and injunctions. Stare decisis cannot justify adherence to an approach that Supreme Court precedent forecloses. Accordingly, we overrule Amy Travel and hold that section 13(b) does not authorize restitutionary relief. Because the Commission brought this case under section 13(b), we vacate the restitution award.

Vacated in part. Affirmed in part.

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.