Federal Trade Commission v. Abeyta et al

1FTC filed its complaint in the United States District Court, District of Nevada against
the following defendants: 	National Vending Consultants, Inc., Success Vending Group, Inc.,
USA Candy Express, Inc., Patrick Abeyta, Jr., Debra Abeyta, Larry Welli, and Richard Savard.
1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	JUNIOR ABEYTA and 	No. 11-06-11026 MA
D. LEE ABEYTA,
Debtors.
_____________________________________________________________________________
FEDERAL TRADE COMMISSION,
Plaintiff,
v. 	Adversary No. 06-1177 M
JUNIOR ABEYTA,
Defendant.
MEMORANDUM OPINION
THIS MATTER is before the Court on Plaintiff Federal Trade Commission’s Motion for
Summary Judgment (“Motion”). 	Plaintiff Federal Trade Commission (“FTC”) obtained a
$9,298,447.29 judgment against Defendant Junior Abeyta, a/k/a Patrick Abeyta and others1 for
restitution in accordance with 15 U.S.C. § 13(b), based on violations of Section 5 of the Federal
Trade Commission Act (“FTC Act”). The Final Judgment and Permanent Injunction Order
(“Judgment”) was issued by the United States District Court, District of Nevada (“Nevada
District Court”) in Civil Action No. CV-S-05-160-RCJ-PAL (“District Court Action”) along
with Findings and Conclusions entered by the Nevada District Court on March 26, 2006
following a contested motion for summary judgment filed by the FTC. 	Defendant filed a
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2FTC’s Reply also reports that Defendant recently pleaded guilty to several counts of
fraud in a related criminal proceeding and attaches a copy of the Reporter’s Transcript of Change
of Plea/Evidentiary Hearing (“Transcript”) dated April 21, 2008 from Case No. 2:06-cr-393-
KJD-LRL, entitled United States of America v. Patrick Abeyta, Jr. Neither the Transcript nor
Defendant’s guilty plea in connection with that proceeding were considered by the Court in
deciding the Motion.
2
voluntary petition under Chapter 11 of the Bankruptcy Code on June 15, 2006 as Case No. 11-
06-11026MA.
FTC seeks to have the Judgment entered in the District Court Action declared non-
dischargeable under 11 U.S.C. § 523(a)(2)(A) as a debt for money obtained by false pretenses, a
false representation, or actual fraud, and asserts that the judgment serves to collaterally estop
Defendant from re-litigating the same issues as part of this non-dischargeability proceeding.
FTC further asserts that the Findings and Conclusions entered by the Nevada District Court
establish as a matter of law that the Judgment against Defendant Junior Abeyta is non-
dischargeable under 11 U.S.C. § 523(a)(2)(A). 	Defendant opposes the Motion, asserting among
other things, that the FTC is not the real party in interest and lacks standing to bring this non-
dischargeability action and that Defendant did not have a meaningful ability to litigate the issues
in the District Court Action, having invoked his Fifth Amendment privilege on advice of his
criminal counsel. See Defendant’s Response in Opposition to the Federal Trade Commission’s
Motion for Summary Judgment (“Response”) - Docket # 77.
Upon review of the Motion, the Findings and Conclusions, the Judgment, Defendant’s
Response, and the FTC’s reply (See Docket # 78) 2, the Court finds that the Findings and
Conclusions and the Judgment entered by the Nevada District Court sufficiently establish the
elements necessary to the determination that the judgment is non-dischargeable under 11 U.S.C.
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3See also, In re Black, 95 B.R. 819, 823 (Bankr.M.D.Fla. 1989)(finding that the FTC is a
creditor with standing to bring a non-dischargeability complaint).
3
§ 523(a)(2)(A) and that all the remaining requirements for collateral estoppel have been met.
Consequently, the Court will grant the Motion and enter summary judgment in favor of the FTC.
DISCUSSION
FTC’s Standing to Bring a Non-Dischargeability Action.
As a preliminary matter, Defendant asserts that FTC has no standing to bring this action
seeking a determination of non-dischargeability under 11 U.S.C. § 523(a)(2)(A), arguing that the
individual consumers, rather than the FTC, are the real parties in interest. 	This argument lacks
merit. 	As explained by the bankruptcy court in FTC v. Austin (In re Austin), 138 B.R. 898, 903
(Bankr.N.D.Ill. 1992), “the only standing requirement for a party seeking to have a debt declared
nondischargeable under § 523(a)(2)(A) is that the party must have a right to receive payment on
the debt in question.” The FTC holds a judgment against the Defendant that it obtained before
the Defendant filed his bankruptcy petition. Consequently the FTC holds a claim against the
debtor and is a creditor as defined by 11 U.S.C. § 101(10)(A) with standing to bring an action
under 11 U.S.C. § 523(a)(2)(A). Id. 	The Austin court further rejected the argument that the
FTC lacks standing because it is bringing claims on behalf of injured consumers. Id. at 904
(stating that “[t]he FTC’s status as a creditor is unaffected by the fact that the FTC seeks to
recover money on behalf of defrauded consumers rather than on its own behalf.”).3 This Court
agrees with the reasoning of Austin, and finds that FTC has sufficient standing to bring this cause
of action to determine the dischargeability of its judgment under 11 U.S.C. § 523(a)(2)(A).
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4
Summary Judgment Standards.
It is appropriate for the Court to grant summary judgment if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law. Rule 56, Fed.R.Civ.P., made applicable to bankruptcy proceedings
by Rule 7056, Fed.R.Bankr.P. 	“[A] party seeking summary judgment always bears the initial
responsibility of informing the . . . court of the basis for its motion, and . . . [must] demonstrate
the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323,
106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). 	In determining whether summary judgment should be
granted, the Court will view the record in the light most favorable to the party opposing
summary judgment. Harris v. Beneficial Oklahoma, Inc. (In re Harris), 209 B.R. 990, 995 (10th
Cir. BAP 1997)(citing Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796
(1995)(remaining citations omitted)). 	But in order to defeat a motion for summary judgment,
the opposing party may not simply rest on its pleading or denials of the allegations; rather, the
opposing party must demonstrate that genuine issues of material fact require a trial. See Rule
56(e), Fed.R.Civ.P., made applicable to bankruptcy proceedings by Rule 7056, Fed.R.Bankr.P.
(A party opposing a properly supported motion for summary judgment “may not rest upon the
mere allegations or denials of the adverse party’s pleading, but the adverse party’s response, by
affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is
a genuine issue for trial.”). 	“Only disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of summary judgment.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
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4Defendant incorporated, and adopted "to the extent applicable" his responses to FTC's
motion for summary judgment filed in the District Court Action. The FTC's Motion is based
upon the Judgment and the Findings and Conclusions entered in the District Court Action which
were entered after the district court's consideration of the Defendant's responses. Because the
Motion can be decided based on the collateral estoppel effect of the Judgment and the Findings
and Conclusions, the Court need not consider the responses Defendant filed in the District Court
Action. 	Indeed, Defendant acknowledges that the FTC's Motion is grounded on the findings of
fact entered in the District Court Action. See Response, p. 3.
5See In re Doskocil Companies, Inc., 130 B.R. 858, 863 (Bankr.D.Kan. 1991)(finding
that the matter was ripe for summary judgment where opposing party failed to present any
affidavit evidence concerning the factual allegations of the case).
6 Grogan v. Garner, 498 U.S. 279, 284 n.11, 111 S.Ct. 654, 658, 112 L.Ed.2d 755 (1991)
(“We now clarify that collateral estoppel principles do indeed apply in discharge exception
proceedings pursuant to § 523(a).”).
5
Defendant did not submit any affidavits in defense of the Motion and has not, therefore,
attempted to raise a genuine issue of material fact. 4 Instead, Defendant asserts that the FTC is
not entitled to summary judgment because the findings and conclusions from the District Court
Action upon which FTC bases its Motion fail to establish a claim of non-dischargeability under
11 U.S.C. § 523(a)(2)(A).5
Collateral Estoppel Applies to Dischargeability Actions
The FTC asserts that the Judgment together with the Findings and Conclusions entered in
the District Court Action serve to collaterally estop Defendant from re-litigating the factual
issues that are identical to the issues relevant to this adversary proceeding. 	“Collateral
estoppel, or issue preclusion, is a doctrine that prohibits the relitigation between the same parties
of issues of ultimate fact that have been ‘determined by a valid and final judgment.’” In re
Armstrong, 294 B.R. 344, 357 (10th Cir. BAP 2003), aff’d, 97 Fed.Appx. 285 (10 th Cir.
2004)(quoting Phelps v. Hamilton, 122 F.3d 1309, 1318 (10 th Cir. 1997)). The doctrine of
collateral estoppel applies to dischargeability actions.6 Thus when the elements of a prior claim
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7See In re Jordana, 232 B.R. 469, 475 (10th Cir. BAP 1999), aff’d, 216 F.3d 1087 (10th
Cir. 2000)(“Federal principles of collateral estoppel apply to prior judgments that are rendered
by a federal court.”)(citing Murdock v. Ute Indian Tribe, 975 F.2d 683, 687 (10thCir.1992)
(remaining citations omitted)); First Pacific Bancorp, Inc. v. Helfer, 224 F.3d 1117, 1128 (9th
Cir. 2000)(“When considering the preclusive effect of a federal court judgment, we apply the
federal law of claim preclusion.”)(citing Sullivan v. First Affiliated Sec., Inc., 813 F.2d 1368,
1376 (9th Cir.1987)).
6
are identical to the elements required to establish an exception to discharge, it is appropriate for
the Court to give collateral estoppel effect to those elements that “were actually litigated and
determined in the prior action.” Grogan v. Garner, 498 U.S. at 284.
Summary judgment on a non-dischargeability claim may, therefore, be granted based on a prior
judgment obtained outside of bankruptcy provided that the prior judgment establishes all
elements necessary to the determination of non-dischargeability under the Bankruptcy Code.
In determining the preclusive effect of a prior judgment rendered by a federal court, the
Court must apply federal principles of collateral estoppel.7 The federal common law of
collateral estoppel requires a showing of the following elements: “‘(1) the issue previously
decided is identical with the one presented in the action in question, (2) the prior action has been
finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party
or in privity with a party to the prior adjudication, and (4) the party against whom the doctrine is
raised had a full and fair opportunity to litigate the issue in the prior action.’” Jordana, 232 B.R.
at 475-76 (quoting Frandsen v. Westinghouse Corp., 46 F.3d 975, 978 (10 th Cir.1995)(quotation
omitted)).
In this case three of the four elements required for collateral estoppel are clearly present.
First, the Findings and Conclusions and the judgment entered in the District Court Action
constitute a valid and final judgment. Second, the Defendant was a party to the District Court
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8 See Brill v. Dvorak (In re Dvorak), 118 B.R.619, 624 (Bankr.N.D.Ill. 1990)(discussing
collateral estoppel under Illinois law and stating that “[e]ntry of judgment pursuant to motion for
summary judgment or motion for failure to state a claim satisfies the ‘actually litigated’ standard
only if the party against whom judgment was entered had proper incentive to and did in fact fully
contest the motion on the merits.”)(citing United States Life Title Ins. Co. v. Dohm, 19 B.R. 134,
138 (N.D.Ill.1982)(remaining citation omitted); Kathan Associates, Inc. v. Wien (In re Wien),
155 B.R. 479, 485 (Bankr.N.D.Ill. 1993)(discussing split in authority as to whether uncontested
summary judgments should have collateral estoppel effect as having satisfied “actually litigated”
requirement); Alvarado v. Kallmeyer (In re Kallmeyer), 143 B.R. 271, 273 (Bankr.D.Kan.
1992)(partial summary judgment entered in favor of debtor-defendant was given collateral
estoppel effect as having satisfied “actually litigated” requirement). See also, Federal Trade
Comm’n v. Wright (In re Wright), 187 B.R. 826, 833-834 (Bankr.D.Conn. 1995)(noting that
“[t]he requirement that an issue be ‘actually litigated’ to qualify for collateral estoppel does not
imply that preclusion is available only for those issues established after a full evidentiary and
adversarial trial[ ]” but cautioning the court to “resist simply applying a blanket rule based on the
appellation assigned the disposition – e.g., default judgment, summary judgment, etc.” and
instead consider each disposition on a case-by-case basis upon “review of the full record of the
prior proceeding”).
7
Action. Third, the Defendant had a full and fair opportunity to litigate the issues determined in
the District Court Action. He actively contested the FTC’s motion for summary judgment filed in
the District Court Action. 	The Nevada District Court heard argument on FTC’s motion for
summary judgment, and affidavits were offered in support of the motion. A contested motion for
summary judgment that results in the entry of summary judgment can satisfy the requirement
that the opposing party had a full and fair opportunity to litigate the issues as well as the
requirement that the prior matter be “actually litigated”.8 In this case, the record of the prior
proceeding adequately demonstrates that Defendant actively participated in the District Court
Action, had a full and fair opportunity to litigate the issues; consequently, the Court concludes
that the issues determined in the Findings and Conclusions and the judgment entered in the
District Court Action were “actually litigated” as required under the doctrine of federal collateral
estoppel.
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9Fowler Bros v. Young (In re Young), 91 F.3d 1367, 1373 (10 th Cir. 1996) (identifying the
five elements necessary to a determination of non-dischargeability under 11 U.S.C. §
523(a)(2)(A), but requiring reasonable reliance); Field v. Mans, 516 U.S. 59, 69-76, 116 S.Ct.
437, 133 L.Ed.2d 351 (1995) (establishing justifiable reliance standard under § 523(a)(2)(A));
Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) (establishing
preponderance of the evidence standard for dischargeability actions).
8
Defendant argues that he did not have a full and fair opportunity to participate
meaningfully in the District Court Action because he invoked his Fifth Amendment privilege
against self-incrimination on advice of his Nevada counsel. 	“There is no requirement that the
defendant actually testify in his or her defense in the prior proceedings[ ]” in order to satisfy the
requirement that issues be “actually litigated” in the prior proceeding. In re Rutledge, 245 B.R.
678, 683 (Bankr.D.Kan. 1999)(citing In re Quinn, 170 B.R.1013 (Bankr.E.D.Mo. 1994)). 	Thus
even when a party invokes his Fifth Amendment privilege in the prior suit, the “actually
litigated” requirement for purposes of collateral estoppel may nevertheless be satisfied. Id.
The remaining requirement for collateral estoppel is identity of issues. Only if the issues
determined in the prior Federal Court Action satisfy all the required elements for non-
dischargeability under 11 U.S.C. § 523(a)(2)(A) will collateral estoppel suffice to grant summary
judgment to the FTC.
Tenth Circuit Standards for Non-Dischargeability under 11 U.S.C. § 523(a)(2)(A)
Under applicable Tenth Circuit standards, to prevail on a cause of action for non-
dischargeability under 11 U.S.C. § 523(a)(2)(A) the complainant must demonstrate, by a
preponderance of the evidence: 1) that the Defendant made a false representation; 2) that the
representation was made with intent to deceive; 3) that the party justifiably relied on the
representation; and 5) that the party sustained a loss as a result of the false representation. 9
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10Fowler Bros., 91 F.3d at 1375 (“The second element of § 523(a)(2)(A), the debtor’s
intent to deceive the creditor in making false representations to the creditor, ‘may be inferred
from the ‘totality of the circumstances’’”)(quoting In re Gans, 75 B.R. 474, 486
(Bankr.S.D.N.Y. 1987)(quoting Eastern Food Serv., Inc. v. Leger (In re Leger), 34 B.R. 873,
878 (Bankr.D.Mass.1983)); In re Daviscourt, 353 B.R. 674, 685 (10th Cir. BAP 2006)(“Intent to
deceive under this subsection [§ 523(a)(2)(A)] may be inferred from the totality of the
circumstances, and includes reckless disregard of the truth.”)(citation omitted); In re McGuire,
284 B.R. 481, 493 (Bankr.D.Colo.2002)(noting that “the Tenth Circuit has held that a finding of
reckless disregard may satisfy the scienter element” under § 523(a)(2)). See also, Driggs v.
Black (In re Black), 787 F.2d 503, 506 (10 th Cir. 1986)(interpreting § 523(a)(2)(B), and stating
that “the requisite intent may be inferred from a sufficiently reckless disregard of the accuracy of
the facts.”)(citations omitted).
9
Intent to deceive can be inferred based on the totality of circumstances, and may be
demonstrated by a Defendant’s reckless disregard for the truth or accuracy of the
representations.10 The Court is mindful, however, that reckless disregard for the truth or
accuracy of the representations as a basis for satisfying the intent requirement under 11 U.S.C. §
523(a)(2)(A) should be construed narrowly. See McGuire, 284 B.R. at 493 (stating that “A
finding of reckless disregard, however, ‘should be very narrowly interpreted.’”)(quoting In re
Kukuk, 225 B.R. 778, 787 (10th Cir. BAP 1998)). There must be some indication as a whole that
“‘presents a picture of deceptive conduct by the debtor which indicates an intent to deceive the
creditor.’” In re Davis, 246 B.R. 646, 652 (10th Cir. BAP 2000)(quoting 3 William L. Norton, Jr.
Norton bankruptcy Law and Practice 2d § 47:16, n.62 (1999)(citations omitted), aff’d in part and
vacated in part by 35 Fed.Appx. 826 (10th Cir. 2002).
Whether the Findings and Conclusions Establish All Elements Necessary to a Claim for
Non-Dischargeability Under 11 U.S.C. § 523(a)(2)(A)
FTC’s entitlement to summary judgment in this adversary proceeding is dependent upon
whether the issues determined in the prior Federal Court Action satisfy all the required elements
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10
for non-dischargeability under 11 U.S.C. § 523(a)(2)(A). The Findings of Fact and Conclusions
of Law entered in the District Court Action include the following findings: that Defendant
participated directly in the acts or practices of National Vending Consultants, Inc. ("NVC"),
Success Vending Group, Inc. ("SVG"), and USA Candy Express, Inc. ("Candy Express"), closed
sales at NVC and directed SVG telemarketers to use a scripted sales pitch (See Findings and
Conclusions ¶62); that Defendant had authority to control the acts or practices of NVC and SVG
(Findings and Conclusions ¶ 63); that Defendant directed company policies relating to sale
presentations and responses to consumer complaints (Findings and Conclusions ¶62); that
Defendant had knowledge of the acts or practices of NVC and SVG (Findings and Conclusions ¶
64); that the earnings projections contained in the scripted sales pitches were false (See Findings
and Conclusions ¶ 21- stating that the scripted sales pitches included numerous earnings
projections; and Findings and Conclusions ¶ 25 - stating that the earnings projections of the
"Vending Enterprise" (defined as NVC, SVG and Candy Express) were false). 	These findings
supported the following conclusion: that Defendant committed unfair and deceptive acts through
his control of and participation in the conduct of SVG and NVC in violation of Section 5(a) of
the FTC Act. (See Findings and Conclusions ¶ 93). 	The Judgment stated that Defendant
engaged in acts and practices that violate Section 5(a) of the FTC Act, and awarded judgment
against Defendant in the amount of $9,298,447.29.
As recited in the Findings and Conclusions, a violation of Section 5(a) of the FTC Act
based upon deceptive acts or practices requires a showing of the following elements: 1) a
representation, omission or practice; 2) that is likely to mislead consumers acting reasonably
under the circumstances; and 3) that the representation, omission, or practice is material.
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11
Findings and Conclusions, ¶ 82 (citing FTC v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir.
1994). The factual findings and the elements required to sustain a cause of action for violation
of Section 5(a) of the FTC Act sufficiently establish all elements necessary to the determination
of non-dischargeability under 11 U.S.C. § 523(a)(2)(A). 	The findings of fact stating that the
business materials contained false information and that Defendant controlled the corporations
and directed its employees to distribute the information to consumers establish that Defendant
made false and misleading statements to consumers regarding the earnings potential of the
vending business opportunity. 	The requirement under 11 U.S.C. § 523(a)(2)(A) that Defendant
make a false representation has, therefore, been satisfied.
Section (5)(a)’s requirement that the misrepresentation is likely to mislead consumers
acting reasonably under the circumstances, and material if it involves facts important to
consumers that will likely affect their conduct meets or exceeds the standards for reasonable
reliance under 11 U.S.C. § 523(a)(2)(A). See In re Audley, 268 B.R. 279, 282 n.7
(Bnakr.D.Kan. 2001)(noting that Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 L.Ed.2d 351
(1995) rejected the more strict reasonable reliance standard in favor of justifiable reliance, and
stating that “reliance is not justifiable if the recipient of the misrepresentation could have
appreciated its falsity at the time by the use of his senses.”). 	By determining that Defendant
violated Section 5(a) of the FTC Act, the Nevada District Court necessarily determined that
consumers reasonably relied on Defendant’s misrepresentations when they purchased the
vending machine business opportunities from Defendant.
The intent requirement under 11 U.S.C. § 523(a)(2)(A) has also been satisfied. In Austin
the bankruptcy court considered the collateral estoppel effect of a prior judgment obtained by the
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12
FTC against the debtor for deceptive trade practices under the FTC Act. 138 B.R. at 906. 	The
crux of the Austin decision was whether the findings in the FTC action established the requisite
intent to defraud required under 11 U.S.C. § 523(a)(2)(A). The Austin court determined that the
findings in the FTC action that the defendant “knew or should have known” were insufficient to
establish a reckless misrepresentation which would satisfy the intent requirement under
523(a)(2)(A), but that defendant’s acknowledgment that he was individually liable for monetary
restitution for violations of the FTC Act was sufficient to establish for purposes of collateral
estoppel that he acted knowingly and/or recklessly with respect to the false representations that
formed the basis of FTC’s action. Austin, 138 B.R. at 907.
The Findings and Conclusions entered in the District Court Action acknowledge that
intent to deceive is not a requirement under the FTC Act. (See Findings and Conclusions, ¶ 83
("It is not necessary to prove Defendants' misrepresentations were made with an intend to
defraud or deceive, or were made in bad faith to establish a Section 5 violation." and ¶92 "In
order to establish individual liability, the Commission need not show that the individual intended
to defraud consumers."). 	But the standards for awarding restitution under the FTC Act as
applied in Austin, are the same in the Ninth Circuit. See FTC v. Affordable Media, LLC, 179
F.3d 1228, 1234 (9th Cir. 1999)(stating that “[t]he knowledge requirement can be satisfied by
showing that the individuals ‘had actual knowledge of material misrepresentations, [were]
recklessly indifferent to the truth or falsity of a misrepresentation, or had an awareness of a high
probability of fraud along with an intentional avoidance of the truth.’”)(quoting FTC v.
Publishing Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir. 1997)). 	Thus, as in Austin, the
fact that the FTC obtained a judgment for restitution against Defendant indicates that Defendant
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11See also, John Deere Co. v. Gerlach (In re Gerlach), 897 F.2d 1048, 1051 (10 th Cir.
1990)(adopting the position that dischargeability is an “‘all or nothing’ proposition”)(quoting
Birmingham Trust Nat’l Bank v. Case, 755 F.2d 1474, 1477 (11 th Cir. 1985)).
13
at least acted with reckless indifference to the truth. See Austin, 138 B.R. at 907. 	Given the
surrounding facts and circumstances as established by the Findings and Conclusions, acting with
reckless indifference to the truth is sufficient to satisfy the intent requirement under §
523(a)(2)(A).
Finally, Defendant takes issue with the calculation of the damages in the District Court
Action, and argues that because it is not clear from the judgment that the damages were based
upon actual pecuniary losses incurred as a result of the fraud, that the damages are dischargeable.
This Court disagrees.
The Judgment awarded damages for restitution under the FTC Act. See Findings and
Conclusions, ¶ 103 and 102 (awarding damages for "redress, restitution, and disgorgement of
profits in the amount of $9,298,447.29[ ]" and stating that "[t]he proper calculation for restitution
is the full amount consumers lost as a result of Defendants' illegal practices."(citation omitted)).
The damages amount was based upon net sales income from consumers, net of refunds, for the
period from April 14, 2001 through February 10, 2005. See Findings and Conclusions ¶ 76.
Based on these conclusions, the Court is satisfied that the damages award was based upon
Defendant's fraudulent acts and is, therefore, non-dischargeable under 11 U.S.C. §
523(a)(2)(A).11 Moreover, as argued by the FTC, Defendant's objection to the calculation of
damages is an impermissible collateral attack on the damage calculation determined in the
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12 Cf. Nelson v. Tsamasfyros (In re Tsamasfyros), 940 F.2d 605, 608 n.4 (10 th Cir.
1991)(stating that “[i]t logically follows that a state court’s calculation of damages may not be
collaterally attached in the bankruptcy court.”)(citing In re Hopper, 71 B.R. 67, 68
(Bankr.D.Colo. 1987); Swanson v. Tam (In re Tam), 136 B.R. 281, 285 (Bankr.D.Kan.
1992)(calculation of the damage award in arbitration proceeding establishing that the reliance
proximately caused the damage to plaintiffs could not be collaterally attacked in the bankruptcy
court).
14
District Court Action.12
Based on the foregoing, the Court concludes that summary judgment should be entered in
favor of FTC. 	An appropriate judgment of non-dischargeability will be entered in accordance
with this Memorandum Opinion.
_________________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
Date entered on docket: May 8, 2008
COPY TO:
Yaa A Apori
Attorney for Federal Trade Commission
601 New Jersey Ave
Washington, DC 20001
Julie Mack
Attorney for Federal Trade Commission
600 Pennsylvania Ave NW
Washington, DC 20580
Louis Puccini, Jr
Attorney for Junior Abeyta
PO Box 30707
Albuquerque, NM 87190-0707
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