Opinion ID: 617945
Heading Depth: 1
Heading Rank: 1

Heading: The Remedial Sanction

Text: We review the district court's contempt rulings for abuse of discretion. United States v. Dowell, 257 F.3d 694, 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, 69 S.Ct. 497, 93 L.Ed. 599 (1949), to compensate the complainant for losses sustained,  United States v. United Mine Workers of Am., 330 U.S. 258, 303-04, 67 S.Ct. 677, 91 L.Ed. 884 (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 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 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 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.