In the

United States Court of Appeals

For the Seventh Circuit

No. 10-2418

FEDERAL TRADE COMMISSION,

Plaintiff-Appellee,

v.

KEVIN TRUDEAU,

Defendant-Appellant.

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 03-c-03904—Robert W. Gettleman, Judge.

ARGUED SEPTEMBER 24, 2010—DECIDED NOVEMBER 29, 2011

Before RIPPLE, MANION, and TINDER, Circuit Judges.

TINDER, Circuit Judge. Infomercialist Kevin Trudeau

violated a court-approved settlement with the Federal

Trade Commission by misrepresenting the content of his

book The Weight Loss Cure “They” Don’t Want You to Know

About. FTC v. Trudeau, 567 F. Supp. 2d 1016 (N.D. Ill. 2007).

The district court held Trudeau in contempt and ordered

him to pay $37.6 million to the FTC and banned him

from making infomercials for three years. On appeal, we

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affirmed the district court’s finding of contempt but

vacated the sanctions. We noted that although a $37.6

million fine “might be correct,” the district court needed

to explain its math and how the funds would be administered. We did not question the imposition of a coercive

sanction in addition to a remedial sanction, but we held

that the infomercial ban was inappropriate as a civil

sanction because it did not give Trudeau an opportunity

to purge, that is, to comply with the underlying order

not to misrepresent his publications. FTC v. Trudeau,

579 F.3d 754 (7th Cir. 2009) (“Trudeau I”). (We assume

familiarity with the contempt proceedings discussed

in Trudeau I and so do not repeat that background here.)

On remand, the district court reinstated the $37.6

million remedial fine. This time, however, the court

explained that it reached that figure by multiplying the

price of the book by the 800-number orders, plus the

cost of shipping, less returns. Addressing our questions

about administration, the court instructed the FTC to

distribute the funds to those who bought Trudeau’s

book using the 800-number; any remainder not paid to

those victims or used in the administration of the

sanction was to be returned to Trudeau. In addition,

as a coercive sanction, the district court imposed a

$2 million performance bond, effective for at least five

years.

Trudeau appeals the sanctions. He argues that the

$37.6 million remedial sanction was improperly based on

consumer loss rather than his unjust gain. Against the

coercive sanction, he argues that the district court’s

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No. 10-2418 3

modification of the consent order to include a performance bond was beyond its authority and, even if it

had authority to modify the order, the bond requirement violates the First Amendment.

We disagree and therefore affirm the district court. The

consent order was intended to protect customers from

deceptive infomercials. The protections, unfortunately,

were too weak: Trudeau aired infomercials in violation

of the order at least 32,000 times. He should not now be

surprised that he must pay for the loss he caused. At a

minimum, it was easily within the district court’s discretion to conclude that he should. And $37.6 million

correctly measures the loss. The figure is conservative—

it only considers sales from the 800-number, not sales

in bookstores carrying his “As Seen on TV” titles—and

reliable—Trudeau cited this figure himself in briefing

Trudeau I. As for the coercive sanction, the district

court properly modified the 2004 order to increase the

likelihood that Trudeau will comply going forward.

After so many violations, the district court did not have

to stick with the old plan. And the new plan, and the

performance bond in particular, does not violate the

First Amendment. The government is not impotent to

protect consumers—nor is the court powerless to

enforce its orders—by imposing narrowly tailored restrictions on commercial speech. 

I. The Remedial Sanction

We review the district court’s contempt rulings for

abuse of discretion. United States v. Dowell, 257 F.3d 694,

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699 (7th Cir. 2001). A district court abuses its discretion

if it bases its decision on an incorrect legal principle or

clearly erroneous factual finding. In re KMart Corp., 381

F.3d 709, 713 (7th Cir. 2004).

For Trudeau’s contempt, the district court imposed a

remedial fine measured by consumer loss. That was not

error. Longstanding precedent dictates that the district

court had power to provide “full remedial relief,” McComb

v. Jacksonville Paper Co., 336 U.S. 187, 193 (1949), “to compensate the complainant for losses sustained,” United

States v. United Mine Workers of Am., 330 U.S. 258, 303-04

(1947) (emphasis added). In other words, “[r]emedial

sanctions . . . are backward looking and seek to compensate an aggrieved party for losses sustained as a result

of the contemnor’s disobedience.” Dowell, 257 F.3d at

699 (quoting Jones v. Lincoln Elec. Co., 188 F.3d 709, 738

(7th Cir. 1999)).

It was within the district court’s discretion to decide

that unless the remedial sanction was measured by consumer loss, the victims of Trudeau’s contempt would

not receive full relief for their actual loss. This conclusion

is informed—but not limited—by the remedies available

in the underlying FTC action. See FTC v. Kuykendall, 371

F.3d 745, 753 (10th Cir. 2004) (en banc); McGregor v.

Chierico, 206 F.3d 1378, 1387-88 (11th Cir. 2000). The

FTC enforcement action and the consent agreement

aimed to protect consumers from economic injuries

based on Trudeau’s misrepresentations. See FTC v. Febre,

128 F.3d 530, 537 (7th Cir. 1997). When that agreement

was breached flagrantly and repeatedly, the district

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court chose a remedial sanction that might come close

to putting Trudeau’s victims in the same position they

would have been had Trudeau not misrepresented his

books in infomercials in violation of the agreement.

Kuykendall, 371 F.3d at 764; Febre, 128 F.3d at 537. To

achieve that remedial end, the district court did what

many other courts have done in similar situations and

awarded relief based on consumer loss instead of the

defendant’s unjust gain. FTC v. Direct Mktg. Concepts,

Inc., 624 F.3d 1, 14 (1st Cir. 2010). That was not error.

Trudeau misunderstands a Second Circuit case, FTC v.

Verity Int’l, Ltd., 443 F.3d 48 (2d Cir. 2006), to require a

different conclusion. Verity was not a contempt case, but

a direct action under section 13(b) of the FTC Act. At

issue on appeal in Verity was the correct measure of

damages where the defendants only profited from their

phone-sex scheme after several middlemen, the phone

companies, took their cuts for processing calls. Id. at 68.

On those facts, Verity created a narrow middleman exception to the usual rule that consumer loss may be

the proper measure of damages in a section 13(b) action.

Direct Mktg. Concepts, 624 F.3d at 15. Trudeau has

tried to assimilate his case to Verity by emphasizing

that he was compensated only indirectly for sales of

The Weight Loss Cure. But Trudeau’s situation bears no

resemblance to the defendants’ situation in Verity:

Trudeau assigned his rights to payment from his company’s assets to ITV Global in exchange for ten years

of monthly million-dollar checks. This was not about

middlemen taking a cut for their services, but about

steadying Trudeau’s cash flow. Now, having received

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only $1.05 million from ITV Global, Trudeau argues that

the fine should be capped there. But what if ITV Global

had not paid him at all? Would the district court have

been powerless to impose any remedial fine? Of course

not. The district court recognized that precisely how

Trudeau decided to get paid for selling his books through

deceptive infomercials in violation of a court order is

irrelevant to the proper measure of his remedial fine.

To calculate his fine, the district court relied on Exhibit

20, a table of 800-number sales figures for Trudeau’s

Weight Loss Cure book, and the testimony of George

Potts, ITV’s director of financial planning and analysis.

According to the table, as explained by George Potts,

the 800-number sales plus shipping and handling,

minus returns, equals $37.6 million, the amount the

district court ultimately concluded Trudeau should

pay. Trudeau challenges the evidence supporting that

number, but his arguments are unpersuasive: In his first

appeal in this case (Trudeau I), Trudeau himself relied on

the $37.6 million figure as the measure of ITV’s gross

revenues from the Weight Loss Cure. The district court’s

reliance on that evidence was not error, much less

clear error. See FTC v. Stefanchik, 559 F.3d 924, 931 (9th

Cir. 2009). In fact, it is worth emphasizing that the

district court showed restraint in calculating the

remedial sanction based only on 800-number sales.

Most of the sales caused by Trudeau’s violation of

the court order may have been made through the 800-

number, but not all. Out of an abundance of caution—in

order to avoid using any questionable figures—the district court decided not to include internet sales or in-store

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sales of the Weight Loss Cure, even though those books

were sold with a conspicuous “As Seen on TV” sticker,

making the link between those sales and the infomercial less than speculative. In the end, the district

court’s careful approach has left us with a reliable and

conservative figure—$37.6 million—that is comfortably

within its discretion.

II. The Coercive Sanction

We held in Trudeau I that a three-year infomercial ban

was an improper coercive sanction because it did not

give Trudeau the opportunity to purge. 579 F.3d at 776.

On remand, the district court replaced the infomercial

ban with a requirement that Trudeau post a $2 million

bond before he participates in any “infomercial for

any book, newsletter, or other informational publication, about the benefits, performance, or efficacy of any

product, program or service referenced in any such [publication].” This sanction is purgeable because Trudeau’s

bond is not forfeited to the FTC unless he makes a deceptive infomercial, as defined by the district court’s original

and supplemental orders. FTC v. Trudeau, 708 F. Supp. 2d

711, 722 (N.D. Ill. 2010). According to Trudeau, however,

the coercive sanction (the bond requirement) is still

impermissible because it violates the First Amendment.

And moreover, Trudeau argues, before we even reach

the First Amendment question, we should reject the

addition of a performance bond because the district

court was powerless to modify the consent order under

Rule 60(b)(5) without identifying significant changed

circumstances.

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Trudeau, again, is incorrect. It was well within the

district court’s discretion to modify the consent order.

Lee v. Village of River Forest, 936 F.2d 976, 979 (7th Cir.

1991) (Rule 60(b) modification is reviewed for abuse

of discretion). Trudeau believes that the district court

incorrectly applied United States v. United Shoe Machinery

Corp., 391 U.S. 244, 252 (1968)—which allows for modification of an order if it is not achieving its purpose—instead

of Rufo v. Inmates of the Suffolk County Jail, 502 U.S. 367,

383 (1992)—which requires the moving party establish

that there has been a significant change of circumstances

that warrants modification. Trudeau reaches further

to assert that Rufo actually overruled United Shoe, so a

modification because the order was not achieving its

purpose is out of the question.

But—unquestionably—Rufo did not overrule United

Shoe. Rufo applies when a defendant seeks to modify an

injunction in an institutional reform case. 502 U.S. at

383. United Shoe, by contrast, supplies the rule where a

plaintiff is seeking to impose additional restrictions

on an enjoined party. 391 U.S. at 251-52. There is simply

no conflict between the two. Indeed, Rufo cites with

approval the page in United Shoe explaining that the

“new and unforeseen conditions” requirement for defendants asking for relief from an injunction does not

apply to requests for increased protections by a plaintiff.

Rufo, 502 U.S. at 380; United Shoe, 391 U.S. at 248.

Because the FTC is seeking to modify the original

injunction to better achieve its purpose, this case falls

squarely under United Shoe. So, if the FTC proved that

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No. 10-2418 9

the order was not achieving its purpose, the district

court had discretion “to modify the decree so as to

achieve the required result with all appropriate expedition.” United Shoe, 391 U.S. at 252; see also United States

v. Krilich, 303 F.3d 784, 789 (7th Cir. 2002) (holding that

the general rules for modification of judgments under

Rule 60(b) apply to consent orders). The “required result”

or purpose of the consent order in this case is “to

protect consumers from [Trudeau’s] deceptive practices

and to compensate those already allegedly deceived.”

Trudeau I, 579 F.3d at 764. The remedial sanction

discussed above addresses the compensatory purpose

of the order while the performance bond has been added

primarily to reinforce the order’s protections going forward. In light of Trudeau’s 32,000-plus broadcasts of

deceptive infomercials for The Weight Loss Cure, we have

little trouble agreeing with the district court that its

original order provided insufficient consumer protections. It was within the district court’s discretion to reinforce the order by clarifying its terms and adding a performance bond. See United States v. Vlahos, 884 F. Supp. 261,

266-67 (N.D. Ill. 1995), aff’d, No. 95-1484, 1996 WL 459937,

at *3 (7th Cir. Aug. 9, 1996) (unpublished) (holding that

a performance bond was an acceptable method of deterring additional instances of unlawful commercial speech).

And the bond requirement does not violate the First

Amendment. See id. (holding that a similar performance

bond did not violate the First Amendment). Trudeau

raises a variety of First Amendment arguments, but the

only one that merits discussion is whether his right to

engage in commercial speech is violated by the requireCase: 10-2418 Document: 00711697904 Filed: 02/07/2012 Pages: 12
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ment that he post a bond before he participate in any

infomercial, misleading or not. Insofar as the court order

applies to misleading commercial speech, there is no

possible First Amendment violation, of course, because

misleading commercial speech gets no constitutional

protection. Florida Bar v. Went For It, Inc., 515 U.S. 618, 624-

25 (1995). The First Amendment is implicated here, however, because Trudeau is required to post a bond before

he participates in an infomercial regardless of whether

it contains a misleading statement. His bond will not

be forfeited unless he makes a misrepresentation in

violation of the court order, but that does not eliminate

the need for First Amendment scrutiny: The bond requirement is itself a restriction on commercial speech

entitled to intermediate scrutiny. Id. at 623.

Therefore, it is the FTC’s burden to show that (1) there is

a substantial interest supporting the restriction, (2) the

restriction directly advances that substantial interest,

and (3) the restriction is “narrowly drawn.” Central

Hudson Gas & Elec. Corp. v. Public Serv. Comm’n, 447 U.S.

557, 564-5 (1980); Florida Bar, 515 U.S. at 624. On these

facts, the first two constitutional requirements are obviously met. The protection of consumers is a substantial

interest. And the performance bond directly advances

that interest in at least two ways: It makes it more

likely that consumers will be compensated for future

violations and, more importantly, it makes it less likely

that there will be future violations because Trudeau

will face a considerable financial loss if he is involved

in a deceptive infomercial.

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The tailoring prong requires more discussion but the

result is the same. Central Hudson stated that a restriction

on commercial speech must not be “more extensive than

necessary.” 447 U.S. at 566. That language led some

courts to require a “least-restrictive-means approach.”

Bd. of Trs. of the State Univ. of New York v. Fox, 492 U.S. 469,

477 (1989). An extensive discussion in Fox, however,

clarified that, “commensurate with [the] subordinate

position of [commercial speech] in the scale of First

Amendment values,” the fit needn’t be perfect, but only

“reasonable[,] . . . not necessarily the single best disposition but one whose scope is in proportion to the

interest served.” Id. at 477, 480. But to say that the restriction must be “reasonably well tailored to its stated

objective,” Florida Bar, 515 U.S. at 633, is not to confuse

it with a “rational basis” analysis; rational basis allows

a legitimate end to be achieved even at “inordinate cost,”

whereas here, dealing with a restriction on protected

commercial speech, the cost of achieving the substantial

interest must be “carefully calculated,” Fox, 492 U.S. at 480.

The performance bond meets this standard. First, a

bond is required only if Trudeau decides to resume

making infomercials. It does not limit Trudeau as an

author; it does not curtail Trudeau’s attempt to pitch

products in any print medium; it does not even apply

if Trudeau makes a TV or radio ad under two minutes.

Its application targets only the commercial conduct that

has caused such tremendous consumer harm in the

past—infomercials. Second, the district court set the

performance bond at $2 million but took seriously Trudeau’s claim that it is beyond what he can afford by

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allowing him to file an audited financial statement and

prove as much in a hearing. Third, the bond requirement is proportional to the amount of harm Trudeau

caused by previous deceptive infomercials. If anything,

the number seems low given that, over the course of

nearly a year, Trudeau’s Weight Loss Cure infomercial

sold thousands of books each day for many months. 

AFFIRMED.

11-29-11

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