An individual (the “member”) held a fifty percent ownership interest in a company and the titles of Chief Financial Officer and General Counsel. In his roles, the member possessed the authority to and did enter into agreements on behalf of the company, including a “Debt Relief Service Merchant Agreement Addendum” which assented to compliance with the Consumer Financial Protection Act (CFPA) and the Telemarketing Sales Rule (TSR). The member appealed the district court’s decision of summary judgment, which found that the member, as an individual in a control position, was liable for company violations of the CFPA and the TSR. Additionally, the member appealed the denial of a motion to reopen discovery and the award of restitution and civil penalties to the agency and the states.
In Consumer Fin. Prot. Bureau v. Wen, No. 23-55700, 2025 WL 2254521, 2025 U.S. App. LEXIS 19949 (9th Cir. Aug. 7, 2025) (unpublished opinion), the court affirmed the district court’s judgment on all counts. The court first reviewed the district court’s decision to grant summary judgment, holding that courts may hold an individual liable for a company’s violations of the CFPA and TSR if “(1) he participated directly in the deceptive acts or had the authority to control them, and (2) he had knowledge of the misrepresentations, was recklessly indifferent to the truth or falsity of the misrepresentation, or was aware of a high probability of fraud along with an intentional avoidance of the truth.” CFPB v. CashCall, Inc., 35 F.4th 734,749 (9th Cir. 2022). The court held that, because the member was an owner, founder, and controller of the company, served as general counsel during the relevant period, and owned fifty percent of the company, he satisfied the first element. The court also affirmed the district court’s holding that the individual was at least recklessly indifferent to the company’s misrepresentations because he provided more than incidental assistance to the company and did so recklessly, according to the record. The court further affirmed the district court’s formulation of remedies, finding the individual liable for the entire amount of the harm. The court also affirmed the appropriateness of second-tier penalties because of the individual’s role in the company and the validity of the use of weekends and holidays in penalty calculation. The court rejected the claims that the penalty was excessive or egregious because of the individual’s reckless conduct and direct contribution to the monetary harm caused. Lastly, the court affirmed the denial of the further discovery motion because of the individual’s lack of diligence in pursuing discovery and in moving to reopen or modify discovery. To conclude, the court affirmed the district court judgments on all counts.
By Sophie Bunn [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Hayden Mariott [email protected]
Edited By Kristin Meurer [email protected]