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Federal Trade Commission v. Vantage Point Services, LLC

United States District Court, W.D. New York

July 17, 2017

FEDERAL TRADE COMMISSION and PEOPLE OF THE STATE OF NEW YORK, by ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, Plaintiffs,


          WILLIAM M. SKRETNY United States District Judge


         Plaintiffs, the Federal Trade Commission (“FTC”) and the New York State Attorney General, commenced this action under Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b) (“FTCA”); Section 814 of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692l; New York Executive Law § 63(12); and New York General Business Law § 349 and § 602 for Defendants' alleged abusive and deceptive debt collection practices. The complaint names four individual defendants and four corporate defendants. Presently before this Court is Plaintiffs' Motion for Summary Judgment (Docket No. 146), which seeks a permanent injunction and monetary judgment against three individuals, Gregory Mackinnon, Angela Burdorf, and Joseph Ciffa (together, the “Individual Defendants”), and four corporate defendants, Vantage Point Services, LLC (“Vantage”), Payment Management Solutions, Inc. (“PMSI”), and Bonified Payment Solutions, Inc. (“Bonified”) (together, the “Corporate Defendants”). Also pending before this Court are Plaintiffs' motion to strike and Defendants' appeals of a Decision and Order by the Magistrate Judge. For the following reasons, the motions and appeals are denied.


         1. Facts

         The following facts are taken from the pleadings and motion papers in this action, including Plaintiffs' Statement of Material Facts (Docket No. 146-2 (“SOF”)). The SOF attaches 470 exhibits totaling more than 1, 500 pages. (Docket Nos. 146-4 through 146-99, 147-1 through 147-3, 163-2). The exhibits consist of excerpts from Defendants' depositions, consumer declarations, correspondence, business records, telephone recording transcriptions, discovery responses, and other evidence concerning the Defendants' alleged unlawful debt collection practices. The Defendants have failed to properly respond to the SOF pursuant to Local Rule 56, but do submit memoranda of law and accompanying evidence arguing that they did not participate in, and were unaware of, any unlawful debt collection activities.[1] This order sets forth only those facts necessary to resolve the pending motions.

         Vantage was initially formed in 2008 by Defendant VanDeViver, against whom Plaintiffs have not sought summary judgment. At that time, Vantage was a debt collection company that placed collections calls on debt that was owned by third parties. VanDeViver transferred ownership of Vantage to MacKinnon in January 2010. Under MacKinnon's ownership, Vantage initially continued collecting debt, but later began brokering debt: purchasing it, selling it, and placing the debt it owned with third parties for collection.

         Vantage acknowledges that it continued some debt collection activities until the initiation of this suit, but maintains that this was “limited in scope and time” and “represented a small fraction of the collection activity at issue in this litigation.” (Docket No. 167 ¶¶ 30-34.) Vantage contends that its primary line of business was purchasing and placing debt with third parties, and it therefore rarely had direct interaction with consumers.[2] Consumer contact came instead from third-party call initiators, who were responsible for contacting consumers directly to convince them to pay on the debt owned by Vantage. Once a consumer agreed to make a payment, the call initiators would transfer the consumer to a separate payment processor, who would obtain the consumer's payment information and authorization for payment. Defendants maintain that the call initiators and payment processors were wholly independent entities, and that there is no evidence that Vantage or any other Defendant owned or otherwise had the ability to control the third parties who conducted collection activities on Vantage's debt portfolios.

         In 2012, Burdorf began working for Vantage as an independent contractor providing payment processing services to Vantage. Burdorf was made an equitable partner and officer of Vantage, but she states that this was a nominal role, put into place solely so that she could monitor the company's merchant accounts for payment processing without true control of the company. In April 2013, she left her work as a contractor at Vantage and founded PMSI, where she was the principal member and owner. Burdorf used money lent by MacKinnon to fund PMSI and to purchase a debt portfolio for collection. Although PMSI initially collected debt on that portfolio, Burdorf later placed the debt with a third party call initiator located in Nevada and PMSI changed its focus to payment processing. PMSI began acting as a payment processor for debt owned by Vantage in August of 2013, and assumed all payment processing services for Vantage-owned debt as of April 2014. At the time the suit was filed, approximately 75% of PMSI's payment processing services were performed for Vantage. Between August 2013 and September 2014, PMSI had revenues of approximately $4, 423, 795 and, between April 2013 and November 2014, PMSI wired over $2, 400, 000 to Vantage. PMSI also provided payment processing services for several smaller debt collectors.

         Bonified was formed by Ciffa and incorporated in New York State in June 2014. Plaintiffs allege that Bonified was formed to open additional merchant accounts that could accept consumer payments on debt owned by Vantage. Bonified paid individuals who worked under the name Island Recovery Group, which Plaintiffs allege is a fictitious entity created by Ciffa that also collected on debts owned by Vantage.

         MacKinnon initially operated Vantage from a location on Delaware Avenue in Buffalo, then moved to office space at 4248 Ridge Lea Road in Amherst, New York, where it paid rent for Suites 45, 25, and 9, and also held itself out as doing business from Suites 1 and 101. PMSI operated out of 4248 Ridge Lea Road, Suites 25 and 45. Burdorf has stated that she had a verbal lease with MacKinnon for use of the premises, and that her business was kept entirely separate from Vantage, with separate entrances and locked doors in between the spaces. Ciffa also operated Island Recovery Group out of 4248 Ridge Lea Road in Amherst, New York. Ciffa had a lease for the premises he operated out of at Ridge Lea, and deducted the funds for his rent from payments Vantage made to Ciffa for sales and collection work. All three businesses later left the Ridge Lea offices and Vantage ultimately had operations in three separate locations. Plaintiffs present evidence that suggests that at least one other Defendant operated out of each of Vantage's locations. Defendants maintain that, although they may have been in the same building, the operations were separate and independent from each other.

         The third-party call initiators who collected on debt owned by Vantage have not been named as defendants in this suit. They include Island Recovery Group, Northwest Capital Solutions, Financial Solutions a/k/a Alternative Dispute Resolution, Ross Delong & Associates, and a company doing business as Stewart Silverman & Associates. Plaintiffs contend that these businesses (Vantage, PMSI, Bonified, and the call initiators) are interconnected, and that Defendants structured their businesses as separate corporate entities in order to avoid liability. Specifically, by separating the debt collection business into (at least) three parts-the owner of the debt, the call initiator, and the payment processor-Defendants hoped to insulate themselves from any wrongdoing on the part of those who contacted consumers. Further, by recording the payment processor's interaction with the consumer separately from the interaction with the call initiator, Defendants created a record of consent for payment that did not include any deceptive or illegal tactics. Plaintiffs contend that Defendants used these recordings to fight chargebacks and other payment disputes. Defendants contend that each business operated separately and independently, and that all interactions between the entities happened at arm's length. Defendants further contend that any wrongdoing was committed by the entities who were not named as defendants, and over which the Defendants had no control or oversight.

         2. Procedural History

         The FTC and the State of New York filed a nine-count complaint on January 5, 2015. (Docket No. 1.) The same day they filed their complaint, Plaintiffs moved for an ex parte temporary restraining order (“TRO”). On January 5, 2015, this Court granted Plaintiffs' ex parte motion and issued a TRO with an asset freeze and appointment of a Receiver to oversee the named Corporate Defendants and their assets, subsidiaries, and affiliates, including accounts held by Solidified Payment Solutions, LLC and Vision Asset Management Group, LLC. (Docket No. 11.) Pursuant to the authority granted by the TRO, Plaintiffs and the Receiver entered Defendants' business premises on January 7, 2015, and the Receiver took control of the Corporate Defendants and related entities. Plaintiffs then moved for a preliminary injunction with terms similar to the TRO, which this Court granted on May 15, 2015, over Defendants' objections. (Docket Nos. 61, 62.)

         Following discovery, on August 19, 2016, Plaintiffs moved for summary judgment as to six of the seven Defendants. (Docket No. 146.) In support of the motion, Plaintiffs argue that recordings, scripts, consumer declarations, complaints, consumer lawsuits, collection letters, and other documents show that the corporate defendants and other allegedly associated businesses violated the FTC Act, the FDCPA, and New York law. With respect to MacKinnon, Burdorf, and Ciffa, Plaintiffs argue that they are individually liable for the Corporate Defendants' wrongdoing because they participated in, or had the authority to control, the Corporate Defendants' activities, and they had knowledge of their unlawful practices. Plaintiffs seek a permanent injunction that would prohibit the Defendants from engaging in debt collection activities, bar them from making certain misrepresentations with respect to related consumer financial products and service markets, enable the FTC to monitor their compliance with a final order, and impose a money judgment for $22, 534, 919, i.e., the amount deposited into a Vantage account used for deposits derived from consumer payments between January 2012 and December 2014.[3]

         III. ...

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