Opinion ID: 223605
Heading Depth: 3
Heading Rank: 2

Heading: Calculating Equitable Monetary Relief

Text: To guide the district court on remand, our opinion in Verity adopted a two-step burden-shifting framework for calculating monetary relief under Section 13(b). 443 F.3d at 67. This framework requires the FTC to first show that its calculations reasonably approximated the amount of the defendant's unjust gains, after which the burden shifts to the defendants to show that those figures were inaccurate. Id. (internal quotation marks omitted), citing FTC v. Febre, 128 F.3d 530, 535 (7th Cir.1997). After the burden shifts, the risk of uncertainty fall[s] on the wrongdoer whose illegal conduct created the uncertainty. 443 F.3d at 69. Bronson argues that the district court erred at the first step of the calculation by failing to account for bounced checks and credit card chargebacks related to the sale of the diet tea and patch. As our decision in Verity made clear, funds returned to consumers or never received by a defendant are not unjust gains. Id. Which party must show that particular revenues were or were not received by the defendant will vary, however, depending on the nature of the funds in question. In this case, the evidentiary burden was on Bronson to establish that these particular funds never made their way into its coffers. The district court arrived at its baseline calculation of Bronson's unjust gains using sales figures and pricing information that neither party disputed. During the relevant period, Bronson sold 57,177 units of diet tea and 2,328 units of the Bio-Slim Patch that generated total revenues of $2,071,257. Because the tea and Bio-Slim Patch provided none of their advertised benefit to consumers, none of Bronson's gains from the sale of these products could be considered just. As we established in Verity, in calculating the remedial baseline, the district court is also obliged to take account of systematic divergences between the victims' losses and the defendant's gains from wrongdoing. But there was no reason, analogous to the presence of the middleman in Verity, for the district court to believe that such systematic divergences existed in this case. The $2,071,257 total therefore represents a reasonable approximation of the gains that Bronson could be expected to have realized from the sale of the two products and, under normal circumstances, would constitute the remedial baseline. While the district court must take account of systematic divergences between the defendant's gain and the losses of the victims in calculating the remedial baseline, claims that individual transactions were atypical and resulted in a lower-than-expected gain to the wrongdoer are properly considered at stage two of the analysis, where the burden of proof rests with the defendant. In this case, because the FTC did not dispute that Bronson issued $128,932 in refunds related to the products in question, the district court discounted the presumptive amount of Bronson's unjust gains to $1,942,325 without putting the defendants to their proof. The burden remained with Bronson, however, to show that it was entitled to a further reduction of the award on account of bounced checks and credit card chargebacks. This it has failed to do. Bronson's incomplete records only allow it to calculate losses from bounced checks and credit card chargebacks across all of its sixty-plus products. Bronson therefore suggests that the court should have estimated that 25.25 percent of these losses were attributable to the Chinese Diet Tea and the Bio-Slim Patch because these products accounted for 25.25 percent of Bronson's revenues. Like the district court, we decline to indulge this presumption in light of the complete lack of evidence connecting bounced checks and credit card chargebacks to the two products at issue.