Federal Court Preserves Jury Trial Rights in FTC Debt Relief Enforcement Case

Case Snapshot

• Court: U.S. District Court for the Southern District of California
• Case: United States v. Stratics Networks Inc. et al., No. 23-cv-00313-BAS-GC
• Decision Date: Oct. 15, 2026 (jury demand); Oct. 16, 2026 (reconsideration)
• Core Issue: Whether the Seventh Amendment permits a jury to determine liability for alleged TSR violations when the government seeks civil penalties.
• Key Allegation: Defendants participated in unlawful debt relief telemarketing activities and improperly collected advance fees.
• Court Holding: A jury may determine liability underlying the government’s TSR civil penalty claims. The judge retains authority over injunctive relief and civil penalty amounts.
• Outcome: Motion to strike the jury demand granted in part and denied in part. Related motion for reconsideration denied.
• Notable Detail: The FTC enforcement action resulted in the government requesting a jury trial while the defendants sought to strike that demand.

A federal court in California has ruled that a jury may determine liability for alleged Telemarketing Sales Rule (TSR) violations in an ongoing Federal Trade Commission enforcement case, while reserving decisions on injunctive relief and civil penalty amounts for the judge.

In an Oct. 15 ruling, Chief U.S. District Judge Cynthia Bashant of the Southern District of California partially granted a motion by Ace Business Solutions LLC and Sandra Barnes to strike the government’s jury demand in United States v. Stratics Networks Inc. et al.

The decision clarifies how Seventh Amendment jury trial protections apply when federal regulators pursue both monetary penalties and equitable relief for alleged violations of consumer protection regulations.

Court Separates Liability From Remedies

The case involves allegations that several interconnected companies participated in unlawful telemarketing campaigns promoting debt relief services through robocalls and ringless voicemail technology.

The government requested a jury trial, while Ace Business Solutions and Barnes sought to eliminate that demand.

The court found that neither the FTC Act nor the TSR expressly establishes a statutory right to a jury trial. However, the Seventh Amendment protects the right to a jury trial when the government seeks civil penalties intended to punish or deter unlawful conduct.

Citing the Supreme Court’s decisions in Tull v. United States and SEC v. Jarkesy, Bashant determined that the government’s claims for civil penalties were legal in nature, preserving the right to have a jury decide liability.

The court distinguished that determination from the remedies available under the FTC Act. It held that injunctive relief under Section 13(b) and the amount of civil penalties must be determined by the judge rather than a jury.

The ruling does not resolve whether Ace Business Solutions or Barnes violated the TSR.

Separate Ruling Keeps Debt Relief Claims Alive

In a related Oct. 16 order, the court denied a motion by Ace Business Solutions and Barnes to reconsider an earlier summary judgment decision involving alleged advance fees for debt relief services.

The government alleges that the defendants improperly received payments through the Provident Solutions Program before providing qualifying debt relief services.

Ace disputed whether its activities constituted debt relief services or telemarketing under the TSR, arguing that its work primarily involved debt validation letters.

The court found sufficient evidence to allow the claim to proceed, including records indicating that Ace received customer payments and participated in quality control calls involving representations about the program. The court also cited evidence that Ace representatives offered reduced payments to customers seeking to cancel services.

Whether the defendants’ activities satisfy the TSR’s definitions of sellers, telemarketers and prohibited advance-fee practices remains subject to disputed factual questions.

Implications for Receivables Management Companies

The jury trial ruling may have implications for organizations defending federal enforcement actions involving the TSR and other consumer protection requirements.

Although jury trials are unavailable for certain equitable claims, the court confirmed that disputed liability underlying government requests for civil penalties may qualify for Seventh Amendment protection.

The related reconsideration decision also illustrates the potential compliance exposure associated with debt relief partnerships and outsourced consumer communications.

For receivables management companies working with lead generators, payment processors, debt relief providers, and third-party marketers, the case underscores the importance of examining how customer interactions, program representations, and fee collection practices may affect liability under the TSR.

The FTC’s original enforcement action was filed in February 2023 and alleged that interconnected service providers facilitated millions of unlawful robocalls promoting debt relief services and other offers.