Opinion ID: 768048
Heading Depth: 2
Heading Rank: 1

Heading: Teri Chierico

Text: 16 Teri Chierico argues that the district court abused its discretion by finding that she violated the Final Judgment. She alleges that, in evaluating the FTC's charges, the district court simply lumped together all of the defendants without considering the weight of the evidence as it applied to each individual and corporate defendant. She also argues that the FTC did not offer clear and convincing evidence that she, in particular, engaged in telemarketing activities and by this omission, failed to prove that she violated the Final Judgment. 2 Consequently, Teri Chierico asserts that we should vacate the district court's contempt order. 17 As a preliminary matter, we recognize that, with limited exceptions, active participation in telemarketing following the entry of the Final Judgment is a prerequisite to the district court's finding that the defendants violated the Final Judgment. Close analysis of the evidence reveals that Teri Chierico did not actively participate in the telemarketing business. She did not serve as an officer, shareholder, director, or employee of any of the defendant corporations. In fact, aside from her marriage to Michael Chierico, Teri Chierico's only relation to the telemarketing business derives from her status as a shareholder and employee of the non-defendant corporation, Chierico Enterprises, Inc. Chierico Enterprises owns the building which housed Michael Chierico's businesses. Teri Chierico served as a secretary and property manager and collected rent payments from the defendant corporations on behalf of Chierico Enterprises. Although Chierico Enterprises undeniably took money from the defendant corporations, there is no allegation that Chierico Enterprises engaged in any wrongdoing. Consequently, Teri Chierico's relationship with Chierico Enterprises should not impact upon the contempt charges levied against her. 3 18 Despite the lack of any business relationship between Teri Chierico and her husband's telemarketing businesses, the FTC insists that Teri Chierico was part and parcel of this operation. (1st Supp.R2-363). In conflict with this assertion, the FTC acknowledges that it presented minimal evidence at the First Contempt Hearing relating to Teri Chierico. The FTC only produced evidence that she occasionally visited her husband's telemarketing office with their children and that's it. That's the only thing she does in this operation. (1st Supp.R2-363). None of the facts presented by the FTC provide clear and convincing evidence that Teri Chierico engaged in telemarketing activities and, by doing so, violated the terms of the Final Judgment. (1st Supp.R2-363). In our view, the FTC included Teri Chierico in these contempt proceedings, not because she poses a threat to the innocent public, but because, as Michael Chierico's wife, she received some money from herhusband's businesses. This fact alone is not sufficient to support a finding of contempt. After a careful analysis of each basis for the contempt finding, we conclude that the district court erred in finding Teri Chierico in contempt for violating the Final Judgment.
19 Teri Chierico asserts that she never directly engaged in the telemarketing business after the entry of the Final Judgment and, thus, was not required to satisfy the bond requirement. The Final Judgment prohibited the defendants from engaging in telemarketing without first obtaining a performance bond. 4 The bond, executed in favor of both the FTC and the defendants' telemarketing customers, ensured the availability of reparations to customers harmed by the defendants' telemarketing practices. The bond requirement applied only to those defendants who participated in telemarketing after the Final Judgment. Thus, although other defendants decided to re-enter the telemarketing business, a defendant who did not re-enter the telemarketing business after the entry of the Final Judgment was not bound to fulfill the bond requirement. 20 In its original Show Cause Motion, the FTC alleged that Teri Chierico played a substantial role in her husband's post-Final Judgment telemarketing activities, yet the FTC failed to produce any evidence during the First Contempt Hearing to support this allegation. As a result, we conclude that Teri Chierico was never responsible for posting any of the bonds described in the Final Judgment because the bond requirements apply only to those defendants who engaged in telemarketing. Thus, the district court erred in finding that Teri Chierico violated the bond requirements. 21
22 The district court's First Contempt Order finds that the defendants' acts and practices in connection with the sale of toner violates the following injunctive provisions of the Final Order: Section I.A, subsections 1-6, Section I.B, subsections 1-4, Section I.B, and Section I.E. (R4-120-2). All of these sections prohibit certain business activities in relation to telemarketing, such as misrepresentation and violation of the FTC's Telemarketing Sales Rule, 16 C.F.R. Part 310. In addition, the district court found that Teri Chierico violated Sections VII.B and D of the Final Judgment which require that the defendant maintain certain business records in connection with the advertising, offering for sale, sale, or distribution of any goods by means of telemarketing. (R4-100-20). Given that the FTC presented no evidence that Teri Chierico participated in any way in telemarketing, there is no basis for the district court's finding that she violated these sections of the Final Judgment. Therefore, we conclude that the district court erred in finding that Teri Chierico violated the above cited provisions of the Final Judgment.
23 Section VI.A of the Final Judgment creates affirmative obligations that apply independent of any resumed telemarketing activity. Section VI.A required Teri Chierico to report to the FTC any change in her employment status. The FTC did not present any evidence at the First Contempt Hearing as to a change in Teri Chierico's employment status, rather it first raised the charge (inappropriately) during closing argument. (1st Supp.R2-365). Even if we accept the FTC's allegation, the burden rests on the complaining party, here the FTC, to show by clear and convincing evidence that the alleged contemnoracted in violation of the court's order. See Jordan, 851 F.2d at 1292. Thus, the district court's finding is unsupported by the evidence and, as such, constitutes an abuse of discretion.
24 In civil contempt proceedings, a party guilty of contempt may be required to compensate those injured by its contempt. 5 See In re DuPont De Nemours & Co. (Benlate Litigation), 99 F.3d 363, 368 (11th Cir.1996). The district court predicated its assessment of redress for consumer injury against Teri Chierico upon a finding that she engaged in fraudulent telemarketing after signing the Final Judgment. (R4-120-2). Teri Chierico appeals this portion of the order on the basis that she never engaged in telemarketing activity and, accordingly, could not have caused any consumer injury. 25 With no evidence to support its allegation that Teri Chierico engaged in telemarketing activity, the FTC argues alternatively that, in any event, Teri Chierico should be held liable for the payment of consumer redress because she is a conduit ... a sort of fallback position for Michael Chierico whereby he can protect his ill-begotten assets. (1st Supp.R2-361). Pursuant to this reasoning, the FTC requested that the district court order the forfeiture of all of the assets in this case-boat, bank accounts, everything, regardless of whether they belong to Michael Chierico or Teri Chierico. While this argument certainly deepens the pocket from which the FTC can collect, it ignores the fact that a court cannot use its contempt power to acquire assets owned by innocent individuals. Fundamental fairness requires that Teri Chierico not be held liable for consumer redress when she did not participate in any acts which caused harm to consumers. 26 That said, we must now determine what effect Teri Chierico's innocence will have upon the validity of the district court's order that the Chiericos forfeit jointly held property, in particular, their family home. The district court's order mandates that the defendants supply to the FTC a certified check for $2 million to be used for payment of consumer redress. (R4-120-4). The order indicated that the funds for the check shall be supplied through the conversion of any realizable equity in the defendants' home.... (R4-120-4). The family home referenced in the First Contempt Order is owned by Michael and Teri Chierico as tenants by the entirety. 27 This court has already determined that severance of a tenancy by the entirety for the purpose of taking the property owned by a guilty spouse, works a partial taking of the innocent spouse's property. See United States v. One Single Family Residence, 894 F.2d 1511, 1515 (11th Cir.1990). The partial taking results from the fact that [a] tenant by the entireties holds an indivisible right to own and occupy the entire property. Havoco of Am., Ltd. v. Hill, 197 F.3d 1135, 1139 (11th Cir.1999) (internal quotations omitted). To convert that right to own and occupy into a tenancy in common would effect an unlawful taking. See One Single Family Residence, 894 F.2d at 1516. 28 Although One Single Family Residence is a forfeiture case, and Havoco of America, Ltd. is a bankruptcy case, the reasoning of those cases may be readily extended to the civil contempt context. See 197 F.3d at 1139; 894 F.2d at 1512. As tenants by the entireties, this court cannot extract Michael Chierico's rights in the family home without affecting Teri Chierico's rights. Because the district court erred in holding Teri Chierico in contempt, it would be unjust to force her to relinquish any innocently held property rights. Thus, in effect, protection of Teri Chierico's interest in the family home renders Michael Chierico's interest in the home unreachable by the court's contempt power. 29 In conclusion, we must vacate the portion of the district court's First Contempt Order which requires the conversion of Teri Chierico's realizable equity in the family home for the provision of consumer redress. Vacating this aspect of the First Contempt Order necessarily impacts upon the Second and Third Contempt Orders, 6 which hold both Michael and Teri Chierico in contempt for their failure to comply with this limited element of the First Contempt Order. Accordingly, the Second and Third Contempt Orders must be vacated as well. 7