FTC, Florida's Claims 'Conclusory,' Says Global E-Trading's Motion to Dismiss

The FTC and Florida don’t adequately allege any required element of their claims but “merely recite elements and allege conclusory allegations,” said Chargebacks911 in a motion to dismiss (docket 8:23-cv-00796) with prejudice a fraud complaint in U.S. District Court for Middle Florida in Tampa. Failure to plead any of the elements “is grounds for dismissal,” it said.

Plaintiffs allege Chargebacks911 unfairly thwarted consumers trying to dispute credit card charges in violation of the FTC Act and the Florida Unfair and Deceptive Trade Practices Act (FDUTPA). Gary Cardone and Monica Eaton, owners of Global E-Trading, doing business as Chargebacks911, used “multiple unfair techniques” to prevent consumers from winning chargeback disputes over unwanted, fraudulent or incorrect credit card charges, said the April complaint (see 2304130013).

The complaint points to conduct from over four years ago, “making no serious effort at showing any risk of future harm, disqualifying Government Plaintiffs’ request for injunctive relief,” the complaint said. The FDUTPA claims should also be dismissed because they’re barred by the four-year statute of limitations and cover conduct excluded from the act under the “Banking Activity Exception,” it said.

Plaintiffs haven't adequately pleaded an “unfair act” under either the FTC Act or FDUTPA, said the motion. Citing Section 5 of the FTC Act, plaintiffs said a practice is unfair if it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” They cited a similar ruling under the FDUTPA in Altor Locks v. Proven Industries. Plaintiffs didn’t adequately plead consumer harm, the motion said.

Defendants disputed the claim that Chargebacks911 submitted “representment” screenshots to show the consumer filing the chargeback “saw or should have seen disclosures about key offer terms, such as the free trial and subscription terms,” on the merchant’s website, and agreed to those terms when making a purchase. Plaintiffs “do not identify a single customer who was wrongfully denied a chargeback to which the customer was entitled; nor do they present a single example where Cb911 did something in the chargeback process that caused a customer to be denied a chargeback,” said the motion.

Even if plaintiffs had identified a harmed consumer, that wouldn’t meet their claim because both consumer protection statutes require that plaintiffs “plausibly allege ‘substantial’ consumer harm,” it said. In most cases, that would involve “monetary or economic harm,” said the motion, citing an 11th Circuit U.S. Court of Appeals ruling in LabMD v. FTC. Plaintiffs don’t plead actual harm in a quantified way “or even attempt to discuss how the alleged practices resulted in 'substantial harm,'” it said.

A chargeback doesn’t mean a consumer was harmed, said the motion. The filing of a chargeback is “the opposite” of consumer injury because it's a “consumer trying to avoid harm” in cases where the chargeback is warranted, it said. The complaint doesn’t “allege or estimate the number of chargebacks that consumers lost or the average price of the underlying disputes,” it said, "and it never ties a consumer losing a legitimate chargeback dispute" to the company.

Neither the FTC Act nor the FDUTPA creates liability “where the potentially aggrieved ‘consumers had a free and informed choice that would have enabled them to avoid the unfair practice,’” said the motion, citing FTC v. Windward Marketing. “Consumers may act to avoid injury before it occurs if they have reason to anticipate the impending harm and the means to avoid it, or they may seek to mitigate the damage afterward if they are aware of potential avenues toward that end,” it said. Plaintiffs failed to allege facts to support a claim that customers “could not reasonably avoid the alleged harm.”

FTC and Florida have been investigating Chargebacks911 “for years,” said the motion, and the commission investigated and brought cases against the three clients discussed in the complaint: Apex Capital, F9 Advertising and AH Media Group. Because the plaintiffs “have already enjoyed the benefit of years of discovery and investigation, allowing them to amend would be futile,” it said.