Opinion ID: 223605
Heading Depth: 3
Heading Rank: 1

Heading: Monetary Relief, Equitable and Legal

Text: Our conclusion in Part II that Section 13(b) does not limit the district court to awarding only injunctions rested on the well-established principle that a court sitting in equity is empowered to award complete relief including relief that customarily might be conferred by a court of law. Porter, 328 U.S. at 399, 66 S.Ct. 1086. At the time of the divided bench, a party seeking a mixture of legal and equitable relief on a single claim  damages and an injunction, for example  could not obtain full redress in the courts of law, which were prohibited from awarding equitable relief of any kind. In contrast, pursuant to the equitable cleanup doctrine, a court of equity could fully resolve the matter  awarding the injunction, over which it had exclusive jurisdiction, as well as the damages as an equitable adjunct to the primary decree. See 1 John Norton Pomeroy, A Treatise on Equity Jurisprudence As Administered in the United States of America §§ 181, 231 (5th ed. 1941); Medtronic, Inc. v. Intermedics, Inc., 725 F.2d 440, 442 (7th Cir.1984) (Posner, J.); see also Mertens v. Hewitt Assocs., 508 U.S. 248, 256, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) (At common law [] there were many situations ... in which an equity court could `establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority.') (quoting Pomeroy, supra ). If we were writing on a clean slate we would therefore have no cause to consider whether the district court's monetary award would traditionally have been characterized as equitable or legal. Relying on the cleanup doctrine, Porter and its progeny instruct that when a court is statutorily authorized to enjoin unlawful conduct, it may invoke the full range of its remedial powers  both legal and equitable  in fashioning an order that affords complete relief. Our court, however, has taken a somewhat narrower view of the ancillary remedies available to the district court when proceeding under Section 13(b). In FTC v. Verity International, Ltd., 443 F.3d 48 (2d Cir.2006), we reviewed an order of the district court that imposed monetary penalties on several defendants who had violated the FTC Act by adding fraudulent charges to consumers' telephone bills. During the initial period of the scheme, one telephone service provider, AT & T, deducted its own costs from the funds charged to consumers before paying the balance to the defendants. Later, pursuant to an agreement with a different phone company, Sprint, the defendants received the entire proceeds of the fraud in the first instance and then cut a check to Sprint for its services. After a bench trial finding that the defendants had violated the FTC Act, the district court awarded a judgment for the Commission in the amount of $17.9 million, a figure intended to account for the full amount lost by consumers due to the scheme. Verity, 443 F.3d at 67. We vacated the judgment, holding that Section 13(b) did not authorize the district court to base its award reflexively on the loss to consumers that resulted from the defendants' fraud. Our decision was motivated by the belief that because the authority to grant ancillary remedies under Section 13(b) derives from the district court's equitable jurisdiction, the court in such a case may grant only remedies that were uniquely equitable at the time of the divided bench. Id. Though, as we have already noted, this premise is historically questionable, it nevertheless led us to establish that the district court is prohibited in a Section 13(b) action from awarding legal remedies such as damages or legal restitution. Although we acknowledged the existence of uniquely equitable monetary remedies, we emphasized that those remedies are restitutionary, meaning that they, unlike the district court's order, are measured by a defendant's unjust gain, rather than by a plaintiff's loss. Id., quoting Pereira v. Farace, 413 F.3d 330, 340 (2d Cir.2005) (internal quotation marks omitted). Accordingly, we concluded that the district court erred in basing its monetary award on the victims' loss, without discounting for the phone-service fees that were collected during the AT & T period but never made their way into the defendants' hands.