Opinion ID: 768048
Heading Depth: 2
Heading Rank: 2

Heading: Michael Chierico

Text: 30 Michael Chierico 8 presents all of the same issues on appeal as Teri Chierico, but in contrast to the case against his wife, we conclude that the FTC presented ample evidence at the First Contempt hearing of Michael Chierico's misconduct in connection with his telemarketing. Consequently, Michael Chierico's appeal from the district court's finding that he violated the Final Judgment is without merit. 9 Nonetheless, Michael Chierico's appeal from the district court's assessment of the amount of consumer redress deserves some discussion. 31 The district court ordered forfeiture of substantially all of Michael Chierico's assets to fund payment of consumer compensation pursuant to the court's finding that the defendants' contumacious conduct resulted in at least $7,282,404 in consumer injuries. Michael Chierico appeals the damages award as excessive. The district court's ability to order payment of consumer redress is limited to actual damages. See City of Miami, 195 F.3d at 1298 ([A] court's civil contempt power is measured solely by the requirements of full remedial relief.)(internal quotations omitted). 32 An award of damages in a civil contempt proceeding requires proof of both the fact of injury to the aggrieved party and the amount of damages the aggrievedparty has suffered. Graves v. Kemsco Group, Inc., 864 F.2d 754, 756 (Fed.Cir.1988). The standard of proof for the amount of damages, once contempt has been established by clear and convincing evidence, is unclear. At least three other circuits have held that the injury need only be proven by a preponderance of the evidence. See In re General Motors Corp., 110 F.3d 1003, 1018 (4th Cir.1997); Reliance Ins. Co. v. Mast Constr. Co., 159 F.3d 1311, 1318 (10th Cir.1998); Graves, 864 F.2d at 755 (applying Seventh Circuit law); but see Gregory v. Depte, 896 F.2d 31, 40 (3d.Cir.1990) (Becker, J., concurring and dissenting) (civil contempt awards ... must be vacated if they appear to us excessive, or unsupported by clear and convincing evidence). We agree with the Fourth Circuit that, [s]ince [the court] has already found by clear and convincing evidence that harm has occurred, the damages issue should be treated no differently than any other run-of-the-mill civil action. In re General Motors Corp., 110 F.3d at 1018. Thus, in a civil contempt action, we hold that damages must be proven by a preponderance of the evidence. 33 At the First Contempt Hearing, the FTC bore the burden of proving the amount of consumer injury by a preponderance of the evidence. Following the FTC's recommendation, the district court valued the amount of damages according to the gross sales generated by the defendant companies during the relevant 18-month period. 10 Michael Chierico contends that gross sales is not the appropriate measure of damages because not all of his customers were misled and because his customers received some benefit from the toner.
34 Michael Chierico asserts that the district court's award of consumer redress in the amount of gross sales was inappropriate because the FTC did not prove actual reliance on false and misleading statements for each of his customers. He argues instead that the court should limit its assessment of consumer redress to those losses specifically proven by the FTC. 35 The inherent equitable powers of the federal courts authorize the district court to order payment of consumer redress for injury caused by Michael Chierico's contumacious conduct. See Granfinanciera v. Nordberg, 872 F.2d 397, 400-01 (11th Cir.1989). In the underlying action, the sanctions imposed by the district court would have been authorized by Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b), which provides a remedy, specifically in the form of injunctive relief, for consumers harmed by unfair or deceptive acts or practices in or affecting commerce. 15 U.S.C. 45(a)(1). Federal courts have used their inherent equitable power to justify the use of non-injunctive equitable sanctions as permissible remedies under section 13(b). See FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 1314 (8th Cir.1991) (Where Congress allows resort to equity for the enforcement of a statute, all the inherent equitable powers of the district court are available for the proper and complete exercise of the court's equitable jurisdiction, unless the statute explicitly ... limits the scope of that jurisdiction.); accord FTC v. Gem Merchandising Corp., 87 F.3d 466, 470 (11th Cir.1996) (holding that section 13(b) permits a district court to order a defendant to disgorge illegally obtained funds). The analysis which applies to consumer remedies issued under section 13(b) is instructive in the case before us because the remedy for Michael Chierico's contemptuous conduct is closely akin tothe remedy for the statutory violation which lies at the heart of this action. 36 Liability under the FTC Act is predicated upon certain misrepresentations or misleading statements, coupled with action taken in reliance upon those statements. Proof of individual reliance by each purchasing customer is not a prerequisite to the provision of equitable relief needed to redress fraud. See FTC v. Figgie Int'l, Inc., 994 F.2d 595, 605 (9th Cir.1993). A presumption of actual reliance arises once the [FTC] has proved that the defendant made material misrepresentations, that they were widely disseminated, and that consumers purchased the defendant's product. Id. at 605-06; see also Security Rare Coin, 931 F.2d at 1316. 37 The FTC presented evidence that Michael Chierico's businesses routinely used deceptive calling scripts to induce the purchase of toner. 11 In most cases, the telemarketer made credible and persuasive misrepresentations concerning the existence of a preexisting relationship between Michael Chierico's businesses and the purchasing company. The evidence provided by the FTC creates a presumption that the fraudulent statements of Michael Chierico's telemarketers induced customers to accept and pay for unordered toner. Given this presumption, the FTC need not prove subjective reliance by each customer, as [i]t would be virtually impossible for the FTC to offer such proof, and to require it would thwart and frustrate the public purposes of FTC action. Security Rare Coin, 931 F.2d at 1316. Because it is clear from the record that Michael Chierico failed to successfully rebut the presumption of fraud raised by the FTC's evidence, all that is left for us to review is the district court's valuation of the losses sustained by Michael Chierico's customers. 38
39 Michael Chierico challenges the district court's $7.2 million valuation of the damages caused by his fraudulent telemarketing. He argues that the FTC's evidence supports, at best, several thousand dollars in damages. Michael Chierico bases this argument on the existence of a full refund policy, coupled with the FTC's failure to show that the complaining businesses did not receive toner, or did not use the toner they received. We review the district court's assessment of contempt sanctions for an abuse of discretion. See Jove Eng'g, Inc. v. Internal Revenue Serv., 92 F.3d 1539, 1559 (11th Cir.1996). 40 [T]here can be no 'equity' in a compensatory award except as it provides a fair equivalent for some loss. Gregory, 896 F.2d at 35 (quoting National Drying Mach. Co. v. Ackoff, 245 F.2d 192, 195 (3d Cir.1957)). While it may be true that the defrauded businesses received a useful product, and though less likely, they may have even received the product at a competitive price, 12 the central issue here is whether the seller's misrepresentations tainted the customer's purchasing decisions. See Figgie, 994 F.2d at 606. Weagree with the Ninth Circuit in Figgie that in cases like this, [t]he fraud in the selling, not the value of the thing sold, is what entitles consumers in this case to full refunds ... for each [product] that is not useful to them. Id. 13 Accordingly, we affirm the district court's assessment of damages in the amount of gross sales.