Petition for Writ of Certiorari — Universal Processing Services of Wisconsin, LLC, Petitioner v. Federal Trade Commission

Supreme Court briefMar 13, 2018

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NO.

In the Supreme Court of the United States

UNIVERSAL PROCESSING SERVICES

OF WISCONSIN, LLC,

Petitioner,

FEDERAL TRADE COMMISSION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Eleventh Circuit

PETITION FOR WRIT OF CERTIORARI

Kymberly Kochis

Alexander P. Fuchs

EVERSHEDS

SUTHERLAND (US) LLP

1114 Avenue of the Americas

The Grace Building, 40th Floor

New York, NY 10036

T: (212) 389-5000

F: (212) 389-5099

kymberlykochis@evershedssutherland.com

alexfuchs@evershedssutherland.com

Lewis S. Wiener

Counsel of Record

EVERSHEDS

SUTHERLAND (US) LLP

700 Sixth Street N.W.

Suite 700

Washington, D.C. 20001

T: (202) 383-0140

F: (202) 637-3593

lewiswiener@evershedssutherland.com

Counsel for Petitioner

Becker Gallagher · Cincinnati, OH · Washington, D.C. · 800.890.5001

QUESTIONS PRESENTED

The Federal Trade Commission Act (the “FTC Act”)

authorizes the Federal Trade Commission (the

“Commission”) to bring suit “to enjoin” a violation of

the Act. 15 U.S.C. § 53(b). The questions presented

are:

1. Can a passive service provider found liable

solely for a violation of the Telemarketing Sales

Rule, 16 C.F.R. § 310.3(b), be held jointly and

severally liable for the bad acts of common

enterprise co-defendants who violated the FTC

Act, 15 U.S.C. § 53(b), where, as other Circuit

Courts of Appeals have held consistently, such a

punitive remedy must be predicated upon a

finding of interrelation or control (a “common

enterprise”) between defendants that committed

the underlying FTC Act violations?

2. Whether the Federal Trade Commission violated

Universal’s due process rights by failing to

provide prior warning that it would seek joint

and several liability or that such a penalty could

apply based on an alleged violation of the

Telemarketing Sales Rule?

PARTIES TO THE PROCEEDINGS

AND RULE 29.6 STATEMENT

Petitioner, who was Defendant – Appellant below,

is Universal Processing Services of Wisconsin, LLC.

Universal Processing Services of Wisconsin, LLC, is a

wholly owned subsidiary of Newtek Business Services,

Corp., a publicly traded company.

Respondent, who was Plaintiff – Appellee below, is

the Federal Trade Commission.

iii

TABLE OF CONTENTS

QUESTIONS PRESENTED . . . . . . . . . . . . . . . . . . . i

PARTIES TO THE PROCEEDINGS

AND RULE 29.6 STATEMENT . . . . . . . . . . . . . ii

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . v

PETITION FOR WRIT OF CERTIORARI . . . . . . . . 1

OPINIONS BELOW . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF JURISDICTION . . . . . . . . . . . . . 1

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED . . . . . 2

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . 3

A. Factual Background and District Court

Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 5

B. The Eleventh Circuit’s Opinion. . . . . . . . . 8

REASONS FOR GRANTING THE PETITION . . . . 9

The Court Should Clarify Whether Joint and

Several Liability Applies to Violations of the

TSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. The Eleventh Circuit stands alone in

imposing joint and several liability on a

defendant that has not been found to be

part of the common enterprise (or had the

requisite interrelatedness with or control

over its co-defendants). . . . . . . . . . . . . . . . 9

B. The Eleventh Circuit stands alone in

imposing joint and several liability for a

violation of the TSR. . . . . . . . . . . . . . . . . 11

C. Liability for violating TSR § 310.3 should

not be conflated with joint and several

liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II.

Failure To Provide A Consistent Standard As

To Joint And Several Liability Violates

Universal’s Due Process Rights. . . . . . . . . . 13

III.

The Questions Presented are Important and

Cleanly Presented. . . . . . . . . . . . . . . . . . . . . 15

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

APPENDIX

Appendix A Opinion in the United States Court of

Appeals for the Eleventh Circuit

(December 13, 2017) . . . . . . . . . . App. 1

Appendix B Judgment in a Civil Case in the

United States District Court, Middle

District of Florida, Orlando Division

(October 26, 2016) . . . . . . . . . . . App. 20

Appendix C Findings of Fact and Conclusions of

Law in the United States District

Court, Middle District of Florida,

Orlando Division

(October 26, 2016) . . . . . . . . . . . App. 22

TABLE OF CITED AUTHORITIES

Cases

Delaware Watch Co. v. FTC,

332 F.2d 745 (2d Cir. 1964) . . . . . . . . . . . . . . . . 10

FTC v. Bay Area Bus. Council, Inc.,

423 F.3d 627 (7th Cir. 2005) . . . . . . . . . . . . . . . 10

FTC v. E.M.A. Nationwide, Inc.,

767 F.3d 611 (6th Cir. 2014) . . . . . . . . . . . . . . . 10

FTC v. Gem Merch. Corp.,

87 F.3d 466 (11th Cir. 1996) . . . . . . . . . . . . . . . 10

FTC v. Ross,

743 F.3d 886 (4th Cir. 2014) . . . . . . . . . . . . . . . 11

FTC v. Washington Data Res., Inc.,

704 F.3d 1323 (11th Cir. 2013) . . . . . . . . . . 10, 11

Gen. Elec. Co. v. U.S. EPA,

53 F.3d 1324 (D.C. Cir. 1995) . . . . . . . . . . . . . . 13

Howmet Corp. v. EPA,

614 F.3d 544 (D.C. Cir. 2010) . . . . . . . . . . . . . . 14

Pierce v. Underwood,

487 U.S. 552 (1988) . . . . . . . . . . . . . . . . . . . . . . . 9

State Farm Mut. Auto. Ins. Co. v. Campbell,

538 U.S. 408 (2003) . . . . . . . . . . . . . . . . . . . . . . 13

Constitution

U.S. Const. amend. V . . . . . . . . . . . . . . . . . . . . . . . . 2

Statutes

15 U.S.C. § 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

15 U.S.C. § 53 . . . . . . . . . . . . . . . . . . . . . . 2, 8, 14, 15

15 U.S.C. § 6105 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

28 U.S.C. § 1254 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Treatises

Restatement (Second) of Torts § 876(b)

(1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13

Regulations

16 C.F.R. § 310.3 . . . . . . . . . . . . . . . . . . . . . . . passim

Telemarketing Sales Rules, 60 Fed. Reg. 43,842

(Aug. 23, 1995) . . . . . . . . . . . . . . . . . . . . . . . 12, 14

PETITION FOR WRIT OF CERTIORARI

Petitioner Universal Processing Services of

Wisconsin, LLC (“Universal”) respectfully petitions for

a writ of certiorari to review the December 13, 2017,

judgment of the United States Court of Appeals for the

Eleventh Circuit.

OPINIONS BELOW

The opinion of the court of appeals (App. 1-19) is

reported at 877 F.3d 1234 (11th Cir. 2017). The district

court’s order on remand finding Universal jointly and

severally liable for equitable monetary relief (App. 2246) is unpublished but available at 2016 WL 10880223

(M.D. Fla. Oct. 26, 2016). The court of appeals’ order

vacating the district court’s original award of equitable

monetary relief against Universal is unpublished but

available at 652 F. App’x 837 (11th Cir. 2016), and the

district court’s original order against Universal is

unpublished but available at 2015 WL 916349 (M.D.

Fla. Feb. 11, 2015).

STATEMENT OF JURISDICTION

The judgment of the court of appeals was entered on

December 13, 2017. The jurisdiction of this Court rests

on 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

The Fifth Amendment, U.S. Const. amend. V,

provides in pertinent part: No person shall * * * be

deprived of life, liberty, or property, without due

process of law; nor shall private property be taken for

public use, without just compensation. 15 U.S.C. § 53

(FTC Act Section 13(b)) provides in pertinent part:

(b) TEMPORARY RESTRAINING ORDERS;

PRELIMINARY INJUNCTIONS Whenever the

Commission has reason to believe – (1) that any

person, partnership, or corporation is violating,

or is about to violate, any provision of law

enforced by the Federal Trade Commission, and

(2) that the enjoining thereof pending the

issuance of a complaint by the Commission and

until such complaint is dismissed by the

Commission or set aside by the court on review,

or until the order of the Commission made

thereon has become final, would be in the

interest of the public – the Commission by any of

its attorneys designated by it for such purpose

may bring suit in a district court of the United

States to enjoin any such act or practice. Upon a

proper showing that, weighing the equities and

considering the Commission’s likelihood of

ultimate success, such action would be in the

public interest, and after notice to the

defendant, a temporary restraining order or a

preliminary injunction may be granted without

bond: . . . Provided further, That in proper cases

the Commission may seek, and after proper

proof, the court may issue, a permanent

injunction.

--------------------  -------------------The Telemarketing Sales Rule (TSR), 16 C.F.R.

§ 310.3(b) states in pertinent part:

It is a deceptive telemarketing act or practice

and a violation of this Rule for a person to

provide substantial assistance or support to any

seller or telemarketer when that person knows

or consciously avoids knowing that the seller or

telemarketer is engaged in any act or practice

that violates §§ 310.3(a), (c) or (d), or § 310.4 of

this Rule.

STATEMENT OF THE CASE

The Federal Trade Commission Act (the “Act” or the

“FTC Act”) provides the Federal Trade Commission

(the “Commission”) with limited authority “to enjoin”

violations of the Act. See 15 U.S.C. § 45(a)(1). The

relevant provisions of the Act do not afford the

Commission the authority to impose joint and several

liability for TSR violations. Yet here, the Commission

sought, and the court imposed, joint and several

liability on Universal for the bad acts over which it

exercised no control and in which it did not participate.

The court’s order requires Universal to disgorge

proceeds that it did not receive and in which it did not

share on the theory that Universal is jointly and

severally liable for the FTC Act violations of its codefendants, despite Universal not being part of its codefendants’ common enterprise. The decision below

expands the Commission’s powers well beyond those

set out in the FTC Act. It is therefore no surprise that

this decision creates a conflict with other circuit and

district courts that have imposed joint and several

liability only upon a finding that the entity in question

was interrelated or exercised control over the

defendants (that the defendants were part of a

“common enterprise”) committing the underlying FTC

Act violations. No such findings were made by the

appellate or trial court below.

The Eleventh Circuit imposed joint and several

liability based on Universal’s violation of the

Telemarketing Sales Rules (“TSR”), 16 C.F.R.

§ 310.3(b) (the “substantial assistance rule”), despite

concluding that Universal was not part of the “common

enterprise” that perpetrated the underlying violations

of the FTC Act, nor controlled any of the common

enterprise co-defendants. App. 6-8. The Eleventh

Circuit’s opinion vastly expands the Commission’s

ability to seek joint and several liability against those

who played little to no role in the underlying FTC Act

violations. This unwarranted expansion is in stark

contrast with other courts that have addressed the

scope of joint and several liability and imposed joint

and several liability only after a finding of

interrelatedness and control between defendants.

Further, the Eleventh Circuit promulgated this new

standard without warning, thus violating Universal’s

due process rights by depriving Universal (and other

passive intermediaries) of notice that they could be

subject to this harsh and disproportionate punishment.

The Eleventh Circuit’s opinion will have deep and

far-reaching consequences. Many third-party vendors,

not just payment processors, provide essential services

to companies under the Commission’s jurisdiction, and

could thereby be subject to joint and several liability

under the standard articulated by the Eleventh Circuit,

even if they are not related to or have control over the

defendants perpetrating the underlying FTC Act

violations. Without restraint, the Commission will be

free to find a financially-solvent defendant on which to

pin “substantial assistance” liability and, consequently,

joint and several liability, regardless of how tangential

or tenuous the defendant’s association with the

underlying wrongdoer may be. This case presents the

Court with an opportunity to resolve this issue before

future service providers are harmed by this

misapplication of the remedial scope of the FTC Act.

This question is recurring, and will have a significant

impact on the modern economy.

A. Factual Background and District Court

Proceedings.

Universal is a payment processor. App. 3. Payment

processers electronically facilitate credit and debit card

payments between merchants and their customers by

linking merchants with sponsoring bank members of

entities such as Visa and MasterCard. Transactions

consumers engage in on a daily basis using credit or

debit cards, from buying clothes online to purchasing a

gallon of milk at the corner store, are facilitated

electronically by payment processors. The interface

Universal provides to thousands of legitimate

merchants is of unquestioned importance in the

modern economy.

The “Treasure Your Success” (“TYS”) scheme that

underlies this case involved a telemarketing operation

that sold consumers “credit card interest rate reduction

services.” App. 26. Universal became entangled in the

TYS scheme when Defendant Hal E. Smith, one of

Universal’s 50-100 independent sales agents, helped

principals in the TYS scheme obtain two of

approximately 15,000 merchant accounts serviced by

Universal. App. 4, 29. Shortly after Universal’s senior

management learned of the scheme, Universal closed

both of the TYS accounts and took drastic remedial

steps, including paying $429,003.49 out of Universal’s

own funds as refunds to TYS customers.

The Commission initially instituted an action

relating to the TYS scheme against certain individuals

and companies, which did not include Universal.

App. 4. The Commission later amended its complaint

to add additional defendants, including Universal.

App. 4-5. Unlike all of the other defendants, Universal

was not charged with substantive violations of the TSR

or Section 5 of the FTC Act. Rather, Universal was

charged with one count of violating TSR § 310.3(b),

which deems that “[i]t is a deceptive telemarketing act

or practice and a violation of this Rule for a person to

provide substantial assistance or support to any seller

or telemarketer when that person knows or consciously

avoids knowing that the seller or telemarketer is

engaged in any act or practice” that violates

substantive provisions of the TSR.

16 C.F.R.

§ 310.3(b). App. 8. Notably, the TSR does not

expressly provide for the imposition of joint and several

liability.

The district court granted the Commission

summary judgment on all counts in its amended

complaint, including its charges against Universal.

App. 5. The Commission subsequently moved for

$1,734,972 in equitable monetary relief against

defendants Universal and Smith, which the district

court granted in a brief order. Id. That amount

represents the TYS scheme’s gross revenues (i.e.,

revenues collected by other defendants), less the

refunds and chargebacks already paid by Universal.

Id. In other words, Universal had already disgorged its

own revenues, and the district court now held it

responsible for disgorging the profits of the other

defendants, with whom Universal had not entered into

a common enterprise (or had control over). Universal

appealed, and on June 14, 2016, the Eleventh Circuit

Court of Appeals vacated the district court’s order and

remanded the case for further findings of fact and

conclusions of law. App. 24.

On October 26, 2016, without further briefing or

additional hearings, the district court reissued its

Findings of Fact and Conclusions of Law with respect

to the Eleventh Circuit’s remand, summarily

concluding again that Universal, as the credit card

processing company, was jointly and severally liable for

the full amount of $1,734,972 in equitable and

monetary relief “to relieve the substantial and

undisputed consumer losses in this case.” App. 26, 41,

45. While the district court discussed at length the

other defendants’ participation in the scheme that gave

rise to the FTC Act violations, the court did not, and

could not, find Universal to be part of the common

enterprise that perpetrated the violations. App. 9, 25.

The court nevertheless imposed joint and several

liability thereby distinguishing itself as the only court

to ever impose such a penalty absent a predicate

finding that the co-defendant operated as a common

enterprise (or had the requisite interrelatedness with

or control over its co-defendants).

B. The Eleventh Circuit’s Opinion.

On December 13, 2017, the Eleventh Circuit

affirmed the district court’s October 26, 2016 order.

App. 1-19. By bootstrapping various TSR and FTC Act

provisions, the Eleventh Circuit found that the text of

the TSR supports the imposition of joint and several

liability because: (1) a violation of § 310.3(b) is a

violation of the TSR, (2) a violation of the TSR is a

violation of the Telemarketing and Consumer Fraud

and Abuse Prevention Act (TCFAPA), 15 U.S.C.

§ 6105(b), (3) a violation of the TCFAPA is a violation

of the FTC Act, §13(b), which in turn (4) authorizes the

Commission to seek injunctive and equitable monetary

relief. App. 10-11. Relying on an absence of law, the

Eleventh Circuit expanded joint and several liability to

a defendant found solely liable for a TSR violation.

The Eleventh Circuit further found that a “common

enterprise finding” is not required to support joint and

several liability even if the defendant did not

perpetrate the underlying FTC Act violation. Id. The

court of appeals applied tort principles and “aiderabettor principles” from securities law to find that

providing “substantial assistance” under the TSR alone

is sufficient to warrant the imposition of joint and

several liability. Id. 10-12. The Eleventh Circuit’s

holding expands the Commission’s powers to impose

joint and several liability on entities that are not part

of the common enterprise (or have the requisite

interrelatedness with or control over its co-defendants)

beyond the bounds established by other courts.

This petition followed.

REASONS FOR GRANTING THE PETITION

The Court Should Clarify Whether Joint

and Several Liability Applies to Violations

of the TSR.

In its unprecedented decision, the Eleventh Circuit

Court of Appeals affirmed the imposition of joint and

several liability against a passive intermediary found

solely liable for a TSR violation that was not part of the

common enterprise (or had the requisite

interrelatedness with or control over its co-defendants)

perpetrating the FTC Act violations. In doing so, the

Eleventh Circuit isolated itself from all other Circuit

Courts that have opined on the circumstances under

which joint and several liability is appropriate for

violation of the FTC Act. The Court should resolve the

discord between the Eleventh Circuit and the other

circuits that have addressed this issue because the

decision gives lower courts the ability to impose “a

substantial amount of liability.” Pierce v. Underwood,

487 U.S. 552, 561-62 (1988).

A. The Eleventh Circuit stands alone in

imposing joint and several liability on a

defendant that has not been found to be

part of the common enterprise (or had

the requisite interrelatedness with or

control over its co-defendants).

The Eleventh Circuit affirmed the district court’s

opinion finding that Universal was not part of the

common enterprise that existed among the other codefendants. App. 9. Despite that finding, the Eleventh

Circuit upheld a significant joint and several monetary

penalty against Universal for the bad acts of its

common enterprise co-defendants. App. 10-12. This

decision makes Universal liable for the unjust

enrichment of its insolvent co-defendants despite the

fact that Universal was not found to be part of the

common enterprise (or had the requisite

interrelatedness with or control over its co-defendants).

This outcome would have been different had Universal

been in any other circuit that addressed this issue.

Although this Court has not expressly addressed

the issue, other courts of appeals, including the Second,

Sixth and Seventh Circuits, have imposed joint and

several liability only where the facts show that the

charged defendant is a member of the common

enterprise (or had the requisite interrelatedness with

or control over its co-defendants) that violated the FTC

Act. See, e.g., FTC v. E.M.A. Nationwide, Inc., 767 F.3d

611, 636–37 (6th Cir. 2014) (adopting the “common

enterprise theory” as the basis for imposing joint and

several liability); FTC v. Bay Area Bus. Council, Inc.,

423 F.3d 627, 635 (7th Cir. 2005) (suggesting that the

“common enterprise” theory provides the correct

analysis for imposing joint and several liability but not

deciding the question in light of defendants’

concession); Delaware Watch Co. v. FTC, 332 F.2d 745,

746 (2d Cir. 1964) (finding that joint and several

liability is appropriate where a group of entities,

though legally independent from each other, operate as

one unit, “transacting an integrated business through

a maze of interrelated companies”) (per curiam); see

also FTC v. Gem Merch. Corp., 87 F.3d 466, 468 (11th

Cir. 1996) (finding no error in imposing joint and

several liability where defendants had direct control

over business engaged in fraudulent scheme); FTC v.

Washington Data Res., Inc., 704 F.3d 1323, 1325 (11th

Cir. 2013) (upholding the imposition of joint and

several liability where facts showed defendant had

control of fraudulent enterprise); FTC v. Ross, 743 F.3d

886, 889 (4th Cir. 2014) (affirming the imposition of

joint and several liability where defendants had actual

knowledge of and control over fraudulent scheme).

Universal is unaware of (and the Eleventh Circuit did

not cite) any case in which joint and several liability

was imposed without a finding that the defendant was

part of a “common enterprise” or had substantial

interrelatedness with or control over the other

defendants.

Under the standard articulated by the Eleventh

Circuit, an allegation that a passive intermediary

violated the TSR would be enough to impose joint and

several liability. As a consequence, innocent but

solvent defendants will be placed in the Commission’s

cross hairs, and will be pressured to settle or face

penalties for the wrongdoing of others far in excess of

their alleged wrongdoing. The Court should grant the

petition in order to resolve this discord before it results

in further harm to passive intermediaries that have not

directly participated in a violation of the FTC Act.

B. The Eleventh Circuit stands alone in

imposing joint and several liability for a

violation of the TSR.

The Eleventh Circuit alone has imposed joint and

several liability for a sole violation of the TSR without

also finding violations of the FTC Act. Other courts

that have considered the issue have applied joint and

several liability only after a finding of interrelatedness

or control between the defendants (referred to as a

“common enterprise”) committing the underlying FTC

Act violation. The Eleventh Circuit’s decision finding

a TSR violation standing alone is sufficient to impose

joint and several liability is an outlier that departs

from the decisions of its sister courts and expands joint

and several liability under the FTC Act far beyond its

previous bounds.

Clarification by the Court is

necessary to guide the courts as to if and when joint

and several liability is appropriate for a violation of the

TSR alone.

C. Liability for violating TSR § 310.3 should

not be conflated with joint and several

liability.

The Eleventh Circuit found that Universal’s

provision of substantial assistance under the TSR was

enough to satisfy a finding of joint and several liability.

App. 10. To reach that conclusion, the court relied

heavily on commentary to the final TSR rule and on the

basic common law tort premise articulated in the

Restatement (Second) of Torts § 876(b) (1979).

App. 11-12. Neither the TSR commentary nor the

Restatement supports the Eleventh Circuit’s finding.

The language of the TSR itself draws a distinction

between joint and several liability and “substantial

assistance” under 16 C.F.R. § 310.3(b).

The

Commission’s commentary goes even further, noting

that the “Commission declines to read joint and several

liability for sellers and telemarketers into the

Telemarketing Act.” TSR, 60 Fed. Reg. 43,842, 43,845

(Aug. 23, 1995).

Further, the Commission

contemplated numerous examples of “substantial

assistance” that would fall within the TSR’s purview.

Id. at 43,852. Determining whether substantial

assistance could give rise to joint and several liability,

however, is for the court to determine after thorough

analysis. The district court and court of appeals did

not conduct that level of analysis.

Similarly, the Restatement of Torts does not assume

that the simple act of assisting another tortfeasor

automatically makes one liable for the acts of the

tortfeasor. Restatement (Second) of Torts § 876(b)

comment D (“The assistance of or participation by the

defendant may be so slight that he is not liable for the

act of the other.”). The lower courts’ interpretation of

§ 876(b) does not accord with the limitations on third

party liability articulated in the Restatement (Second)

of Torts.

It is imperative that this Court set forth a standard

for what courts must examine when determining if

substantial assistance can or should result in a finding

of joint and several liability.

II.

Failure To Provide A Consistent Standard

As To Joint And Several Liability Violates

Universal’s Due Process Rights.

“Elementary notions of fairness enshrined in our

constitutional jurisprudence dictate that a person

receive fair notice not only of the conduct that will

subject him to punishment, but also of the severity of

the penalty that a State may impose.” State Farm Mut.

Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003); see

also Gen. Elec. Co. v. U.S. EPA, 53 F.3d 1324, 1329

(D.C. Cir. 1995) (“[W]hen sanctions are drastic . . .

elementary fairness compels clarity in the statements

and regulations setting forth the actions with which

the agency expects the public to comply.”) (internal

citations and quotations omitted). The court of appeals

holding violated Universal’s due process rights in two

respects.

First, the Commission has not provided any

guidance on the applicability of joint and several

liability to violations of the TSR. Indeed, the only

official guidance unambiguously states that the

“Commission declines to read joint and several liability

for sellers and telemarketers into the Telemarketing

Act.” TSR, 60 Fed. Reg. 43,842, 43,845 (Aug. 23, 1995).

Yet the court of appeals found a violation of the TSR

substantial assistance provision, alone, to be sufficient

to impose joint and several liability. Where, as here, a

penalty is imposed for violations of an, at best,

ambiguous regulation and the regulation fails to give

fair warning of the potential consequences of the

regulated conduct, the penalty cannot be assessed

without violating the due process clause of the Fifth

Amendment. See Howmet Corp. v. EPA, 614 F.3d 544,

553 (D.C. Cir. 2010) (providing that an agency may not

“penaliz[e] a private party for violating a rule without

first providing adequate notice”).

Second, even if a violation of the TSR is an

automatic violation of the FTC Act, joint and several

liability pursuant to § 13(b) of the FTC Act was not

contemplated in the Commission’s promulgation of the

TSR. See TSR, 60 Fed. Reg. 43,842, 43,844 (Aug. 23,

1995). Universal did not have notice or fair warning of

the possibility that non-substantive violations of the

TSR would expose itself to disgorgement of the common

enterprise’s profits. The judgment below therefore

lacks the hallmarks of notice and fair warning.

III.

The Questions Presented are Important

and Cleanly Presented.

The imposition of joint and several liability against

Universal is incorrect as a matter of law and has

significant implications for payment processors and

any entity acting as a passive intermediary. Indeed,

payment processors are an integral part of the fabric of

the U.S. economy; all merchants rely on payment

processors. Exponentially increasing the potential

exposure of these intermediary processors will have a

significant chilling effect on the industry.

The decision below cleanly presents significant and

purely legal questions for the Court’s review. The

lower court opinion can be reduced to two issues:

(1) whether joint and several liability under Section

13(b) of the FTC Act is an available remedy for

violation of the TSR’s substantial assistance rule by a

passive intermediary that is not part of the “common

enterprise,” and if so, under what circumstance is joint

and several liability appropriate; and (2) whether

payment processors, like Universal, have fair warning

of the Eleventh Circuit’s expanded interpretation of the

remedies available to the Commission in prosecuting

violations of the TSR. This case provides an ideal

vehicle for the Court to clarify if, and when, joint and

several liability attaches for violations of the TSR

and/or to non-common enterprise defendants, and

whether Universal’s constitutional rights have been

infringed on due to the court’s imposition of punitive

liability without fair notice.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

Lewis S. Wiener

Counsel of Record

EVERSHEDS SUTHERLAND (US) LLP

700 Sixth Street N.W., Suite 700