Federal Trade Commission v. Randall L. Leshin

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-12811
________________________
D.C. Docket No. 0:06-cv-61851-UU
FEDERAL TRADE COMMISSION,
Plaintiff - Appellee,
versus
RANDALL L. LESHIN,
RANDALL L. LESHIN, P.A.,
d.b.a. Express Consolidation, et al.,
Defendants - Appellants,
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(June 5, 2013)
Before BARKETT and MARCUS, Circuit Judges, and CONWAY, * District Judge.
MARCUS, Circuit Judge:
*
Honorable Anne C. Conway, Chief Judge, United States District Court for the Middle District
of Florida, sitting by designation.
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This appeal presents an issue of first impression: whether a district court can
convert the unpaid remainder of an equitable disgorgement remedy, stemming
from a compensatory civil contempt sanction, into the legal remedy of a money
judgment after the contemnor has disgorged as much money as he currently has the
ability to pay. While this case is unusual, as the lack of precedent on the subject
indicates, we conclude that the district court acted within the bounds of its broad
discretion and, therefore, affirm.
I.
The underlying dispute that has given rise to this latest appeal is detailed in
this Court’s previous opinion in FTC v. Leshin, 618 F.3d 1221, 1227-31 (11th Cir.
2010) (“Leshin I”). The FTC sued Randall Leshin and his co-appellants
(collectively referred to in this opinion as “Leshin”) based on deceptive marketing
practices and other violations of the Federal Trade Commission Act committed by
Leshin’s debt-consolidation business. The parties settled the action, and the district
court entered a stipulated injunction embodying that settlement in 2008. In 2009,
based on Leshin’s violations of the terms of that injunction, the district court held
Leshin in civil contempt. As a compensatory civil contempt remedy, the district
court ordered disgorgement of the gross receipts of Leshin’s business during the
relevant timeframe, which amounted to $594,987.90. Significantly, as part of its
disgorgement order, the district court said that, “After disgorgement and any
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attendant contempt enforcement are complete, the FTC may apply to the Court to
convert any unpaid balance of this civil contempt remedy to a money judgment.”
On appeal, a panel of this Court affirmed the district court’s finding of
contempt based on Leshin’s multiple violations of the terms of the stipulated
injunction. Leshin I, 618 F.3d at 1232-37. The Court also affirmed the district
court’s power, in a civil contempt proceeding, to require disgorgement of the
business’s gross receipts rather than only its profits, along with the district court’s
method of calculating those receipts to produce the $594,987.90 figure that Leshin
owed. Id. at 1237-38. Leshin also argued that the disgorgement of gross receipts
rendered the sanction punitive, transformed the proceedings from civil to criminal
contempt, and triggered his right to a jury trial. The panel rejected this claim too
because the sanction remained compensatory and hence was civil in nature. It
further held that Leshin had received due process because he had both notice and
an opportunity to be heard. Id. at 1238-39. Finally, Leshin raised the issue now
before us. Since the FTC had not yet applied to convert the disgorgement order
into a money judgment, however, the panel in Leshin I found that the question of
whether the district court had the power to convert an equitable remedy into a
money judgment was not ripe for adjudication. See id. at 1239-40.
After losing his first appeal, Leshin failed to disgorge the roughly $590,000
required by the district court’s first order of civil contempt. The district court then
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found him to be in contempt still again (this time, to be precise, in contempt of the
disgorgement order) and ordered him to pay $92,671 -- the total amount that the
court found that he was then able to pay -- or face jail time. Notably, this second
contempt proceeding was coercive in nature, not compensatory, and Leshin purged
the second contempt by paying the $92,671. The original disgorgement order, less
the $92,671, remained in effect.
The FTC subsequently moved to convert the remainder of the original
disgorgement order, which was roughly $500,000, into a money judgment. The
district court referred this matter to a magistrate judge, who recommended granting
the FTC’s motion. Leshin objected, but to no avail; the district court adopted the
magistrate’s report and recommendation and granted the FTC’s motion. The
district court elaborated on its reasons for granting the motion, beginning with the
observation that it possessed “broad, inherent authority to remedy civil contempt.”
As for Leshin’s argument that the district court could not convert the equitable
remedy into a legal one, the court found no basis for this assertion, as “[t]he only
requirement is that the sanction be compensatory,” and Leshin had “cite[d] no
authority for [his] argument that legal remedies are beyond the Court’s reach in
fashioning civil contempt sanctions.” The district court was also unpersuaded by
Leshin’s suggestion that the imposition of a money judgment would require a jury
trial; since the money judgment arose out of a compensatory civil contempt
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proceeding, all that due process required was that Leshin receive notice and the
opportunity to be heard. The district court finally rejected Leshin’s claim that his
contempt necessarily came to an end when he no longer had an ability to pay, since
that rule applied primarily to “coercive contempt sanctions, but not compensatory
contempt sanctions.” The district court therefore entered a money judgment of
$502,316.90 against Leshin.
Leshin timely appealed.
II.
“We review the remedial relief granted as a contempt sanction for an abuse
of discretion.” Leshin I, 618 F.3d at 1231 (citing McGregor v. Chierico, 206 F.3d
1378, 1388 (11th Cir. 2000)). “A district court abuses its discretion if it applies an
incorrect legal standard, applies the law in an unreasonable or incorrect manner,
follows improper procedures in making a determination, or makes findings of fact
that are clearly erroneous.” Thomas v. Blue Cross & Blue Shield Ass’n, 594 F.3d
814, 821 (11th Cir. 2010) (internal quotation marks omitted).
A.
The core of Leshin’s appeal is his argument that the district court abused its
discretion by converting the unpaid remainder of its disgorgement order, an
equitable remedy, into a money judgment, a legal remedy. We begin with the
observation that the original disgorgement order arose out of civil contempt, an
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area where the district court has extremely broad and flexible powers. There is no
dispute that Leshin was in contempt of the stipulated injunction. Therefore, the
district court had “wide discretion in fashioning an equitable remedy for [Leshin’s]
civil contempt.” McGregor, 206 F.3d at 1385 n.5 (citing United States v. City of
Miami, 195 F.3d 1292, 1298 (11th Cir. 1999)). “[S]anctions in civil contempt
proceedings may be employed for either or both of two purposes: to coerce the
defendant into compliance with the court’s order, and to compensate the
complainant for losses sustained.” Local 28 of Sheet Metal Workers’ Int’l Ass’n v.
EEOC, 478 U.S. 421, 443 (1986) (internal quotation marks omitted). A coercive
contempt sanction comes with some limitations; for instance, once a contemnor’s
contumacious conduct has ceased or the contempt has been purged, no further
sanctions are permissible. See Leshin I, 618 F.3d at 1239 (“A contemnor need only
be afforded the opportunity to purge his sanction of a fine, in the civil context,
where a fine is not compensatory.”). On the other hand, we have repeatedly
stressed that “the district court’s discretion in imposing non-coercive sanctions is
particularly broad and only limited by the requirement that they be compensatory.”
Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1521 (11th Cir. 1990); see also
Leshin I, 618 F.3d at 1239. Indeed, the Supreme Court has observed that district
courts possess particularly expansive and flexible powers in these circumstances:
“The measure of the court’s power in civil contempt proceedings is determined by
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the requirements of full remedial relief.” McComb v. Jacksonville Paper Co., 336
U.S. 187, 193 (1949); cf. AT&T Broadband v. Tech Commc’ns, Inc., 381 F.3d
1309, 1316 (11th Cir. 2004) (“[W]hen the public interest is involved . . . , [the
district court’s] equitable powers assume an even broader and more flexible
character.” (alterations in original) (internal quotation marks omitted)).
At the outset of the contempt proceedings, on this record, the district court
could have granted a money judgment, rather than a disgorgement order, as the
remedy for Leshin’s civil contempt. We know this because, for one thing, Leshin
conceded this point both in his briefs and at oral argument. In his initial brief,
Leshin said, “The FTC could have sought a contempt sanction of a compensatory
money judgment, but instead specifically asked for disgorgement.” His reply brief
reiterated this concession: “The FTC says that the district court could have entered
a money judgment all along. Defendants do not dispute that assertion.” Leshin is
right that the district court could have done so. Although we have found no case
squarely on point, the Supreme Court and at least one court of appeals have
acknowledged that a court can issue a money judgment as a remedy for civil
contempt. See De Beers Consol. Mines, Ltd. v. United States, 325 U.S. 212, 220
(1945) (containing dicta regarding “process which conceivably may be issued for
satisfaction of a money judgment for contempt” (emphasis added)); In re Prof’l Air
Traffic Controllers Org., 699 F.2d 539, 542 (D.C. Cir. 1983) (describing how one
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party “registered its three civil contempt money judgments” (emphasis added)).
Moreover, the district court’s decision to grant a money judgment would have
accorded with the general equitable principle (albeit one rarely invoked) that
“where the aggrieved party shows entitlement to equitable relief, but a grant
appears to be impossible or impracticable, the court may nevertheless proceed with
the case . . . , awarding damages or a money judgment in lieu of the requested
equitable remedy.” Millsap v. McDonnell Douglas Corp., 368 F.3d 1246, 1265
(10th Cir. 2004) (emphasis added) (internal quotation mark omitted).
If the district court could have granted either disgorgement or a money
judgment as a remedy for Leshin’s civil contempt, we are at a loss to see why the
district court lacked the power to grant both the equitable remedy and the legal one
so long as it did not permit double recovery. Thus, at the front end of this
controversy the district court could have granted a disgorgement order covering
some proportion of the total compensatory award and a money judgment for the
remainder. While this bifurcation of remedies would be unusual, courts in other
contexts regularly grant both equitable and legal relief. The most common
combination of equitable and legal remedies, for instance, is a district court’s grant
of both an injunction that prevents future harm along with an award of damages
that compensates for past harm. See, e.g., Proudfoot Consulting Co. v. Gordon,
576 F.3d 1223, 1232 (11th Cir. 2009). A court may also grant an aggrieved party
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both specific performance of a contract along with damages resulting from the
defendant’s delay in performing his obligations under that contract. See Bracken v.
Atlantic Trust Co., 55 N.Y.S. 506, 511 (N.Y. App. Div. 1899). Copyright
infringement suits provide still another example; a victorious plaintiff may receive
both disgorgement and expectation damages. See Christopher Phelps & Assocs.,
LLC v. Galloway, 492 F.3d 532, 546 (4th Cir. 2007) (“[A] copyright holder is
entitled to both actual damages -- the market price of the license -- and
disgorgement of the infringer’s profits . . . .”). If the district court had the power to
grant either or both the equitable and the legal remedy in the first place, then there
is no reason we can discern why it would be barred from converting its
disgorgement order into a money judgment in order to satisfy “the requirements of
full remedial relief.” McComb, 336 U.S. at 193. And Leshin has failed to cite a
statute, case, or legal principle that restricted the district court from doing so.
Leshin asserts, nonetheless, that once the FTC asked the district court for,
and received, the disgorgement order, it could no longer ask for a money judgment
to replace that disgorgement order. In essence, Leshin is saying that the district
court’s order runs afoul of the election of remedies doctrine. The doctrine of
election of remedies, however, does not automatically bar a complainant from
obtaining multiple forms of relief. Rather, the rule limits a party with the choice of
two remedies that are “inconsistent with each other” from obtaining both remedies
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or from obtaining first the one remedy and then, at a later date, an alternative one.
See A. Klipstein & Co. v. Grant, 141 F. 72, 72 (5th Cir. 1905).1 Remedies are
inconsistent if they provide “double recovery for the same injury,” MCA
Television Ltd. v. Pub. Interest Corp., 171 F.3d 1265, 1274 (11th Cir. 1999), or
rely on sets of facts that are inconsistent with one another, see Roberts v. Sears,
Roebuck & Co., 573 F.2d 976, 985 (7th Cir. 1978). Thus, for example, a party who
establishes the breach of a contract for the sale of land may obtain specific
performance or expectation damages (i.e., the difference between the market price
and the sale price); but the party must elect either the equitable remedy or the legal
one, since receiving both would effectively give that party twice the benefit of its
bargain. See, e.g., Mycogen Corp. v. Monsanto Co., 51 P.3d 297, 307 (Cal. 2002).
If a party has obtained full satisfaction of the judgment by means of one remedy,
then it can no longer seek alternative ones that were originally available. Cf.
Princeton Homes, Inc. v. Virone, 612 F.3d 1324, 1334 n.6 (11th Cir. 2010) (rule
under Florida law is that “the doctrine of election of remedies only applies after
one of the remedies has been satisfied”). In this case, the district court’s conversion
of the remainder of the disgorgement order into a money judgment does not run
afoul of the election of remedies doctrine. Plainly, the two remedies are not
1
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this Court
adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to
October 1, 1981.
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inconsistent -- they rely on precisely the same set of facts -- and do not allow
double recovery; the roughly $90,000 that the FTC obtained under the
disgorgement order has been deducted from the original contempt award, and the
money judgment covers only the remainder. 2
Leshin levels several other objections, all of which are unavailing. Leshin
argues at length that the money judgment represents a serial contempt finding or
new liability, and that he had already purged the entirety of his original civil
contempt by paying the $90,000. However, this claim is based on a misreading of
the record. What Leshin purged was the second, coercive contempt sanction
entered on March 8, 2011, which the district court entered after Leshin failed to
comply with the disgorgement order that was the result of the earlier,
compensatory civil contempt proceeding. The district court has repeatedly made
this point, stating in one order that “Defendants complied with the Court’s March
8, 2011 Order and have purged themselves of the finding of civil contempt set
forth therein,” and in another that “[t]he Contempt Defendants then wired
$92,671.00 to Plaintiff, thereby purging themselves of their second contempt.”
2
Leshin attempts to argue that the two remedies are inconsistent because they allow the FTC to
attack Leshin’s assets in different ways. The disgorgement order gave the FTC access to
otherwise exempt assets, while the money judgment is enforceable by a writ of execution. But
the fact that the two remedies are different does not mean they are incompatible or inconsistent
with each other; indeed, to the extent that the conversion of the remedies gives the FTC another
means of obtaining the full amount awarded, the two remedies are actually complementary. The
disgorgement and the money judgment would be inconsistent if they relied on inconsistent facts
or if they allowed for double recovery, MCA Television Ltd., 171 F.3d at 1274, but Leshin has
never made those claims, nor could he.
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(Emphasis added). The district court never said that Leshin had purged the
compensatory civil contempt finding or relieved Leshin of the obligation of paying
the balance of the $590,000 disgorgement order.
Leshin further objects for two overlapping reasons. According to Leshin,
“[i]f the contemnor pays the compensatory sanction, to the extent he has the ability
to comply with that sanction, the contempt is purged.” Second, “[a]t some point
contempt, particularly civil contempt, simply must come to an end.” In support of
the second point, which is stated only at the highest order of abstraction, Leshin
cites to Lance v. Plummer, 353 F.2d 585, 592 (5th Cir. 1965), where the former
Fifth Circuit stated that “since sanctions imposed in civil contempt proceedings
must always give the alleged contemnor the opportunity to bring himself into
compliance, the sanction cannot be one that does not come to an end when he
repents his past conduct and purges himself.” However, Leshin fails to grapple
with the difference between compensatory civil contempt sanctions and coercive
civil contempt sanctions. To be sure, for a coercive sanction, ability to pay is a
complete defense. See Maggio v. Zeitz, 333 U.S. 56, 71-74 (1948); Newman v.
Graddick, 740 F.2d 1513, 1524-25 (11th Cir. 1984) (where contempt is “designed
to compel a person to do what the court has ordered him to do,” then the
contemnor “must be given the opportunity to bring himself into compliance,” and
“inability to comply is a complete defense”). It is futile to punish defendants in an
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attempt to compel them to do that which they cannot do. In contrast, for a
compensatory civil contempt sanction, “in order to purge themselves of contempt,”
defendants must “pay the damages caused by their violations of the decree.” Clark
v. Boynton, 362 F.2d 992, 998 (5th Cir. 1966) (internal quotation mark omitted). In
other words, the contempt ends when the contemnor pays the full amount.
For a compensatory contempt sanction, in contrast to a coercive one,
inability to pay is no defense. This Court made this point clearly in Leshin I, see
618 F.3d at 1239 (“A contemnor need only be afforded the opportunity to purge his
sanction of a fine, in the civil context, where a fine is not compensatory.”), and it is
consistent with the general rule that a disgorgement order “establishes a personal
liability, which the defendant must satisfy regardless whether he retains the . . .
proceeds of his wrongdoing.” SEC v. Banner Fund Int’l, 211 F.3d 602, 617 (D.C.
Cir. 2000). The reasons that the D.C. Circuit elaborated upon in Banner Fund apply
with equal force in this context:
To hold, as [Defendant] maintains, that a court may order a defendant
to disgorge only the actual assets unjustly received would lead to
absurd results. Under [Defendant’s] approach, for example, a
defendant who was careful to spend all the proceeds of his fraudulent
scheme, while husbanding his other assets, would be immune from an
order of disgorgement. [Defendant’s] would be a monstrous doctrine
for it would perpetuate rather than correct an inequity.
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Id. Quite simply, Leshin’s obligation to pay has not been extinguished by his
inability to do so.3
In sum, while the district court’s conversion order is unusual, the court did
not abuse its considerable discretion. The district court merely did what it could
have done from the beginning of the contempt proceeding: it granted a
compensatory contempt remedy in the form of a money judgment. The conversion
did not run afoul of the election of remedies doctrine because it only covered the
unpaid remainder of the disgorgement order. Leshin’s objections fail because they
rely either on misreading the record or conflating the distinct principles governing
compensatory and coercive contempt sanctions.
B.
3
Leshin’s remaining arguments are even farther off the mark. He argues that there is “Catch-22”
language in the original disgorgement order, which says that the FTC may apply to convert the
disgorgement remedy into a money judgment only after contempt enforcement is complete.
According to Leshin, this presents a paradox: if contempt enforcement is complete, then how can
there be anything that remains to be converted into a money judgment? A quick glance at the
record resolves this problem. The order actually states, “After disgorgement and any attendant
contempt enforcement are complete, the FTC may apply to the Court to convert any unpaid
balance of this civil contempt remedy to a money judgment.” Leshin omits the word “attendant,”
which alters the meaning of the entire pronouncement and makes it appear as if the district court
was telling the FTC to seek a money judgment after all contempt enforcement was complete.
Read in its proper context, the district court actually indicated that the FTC could apply for a
money judgment after exhausting all means of enforcement attendant to -- that is, related to -- the
disgorgement order. That is precisely what occurred here.
Finally, Leshin objects to the conversion because it fails to contain “disbursement
requirements to consumers.” It is unclear whether Leshin can even bring this claim, which
alleges harm to the consumers rather than to himself. In any event, however, the district court’s
conversion of the remedy from disgorgement to a money judgment did not modify or supersede
the disgorgement order’s specific provisions ordering the FTC to disburse the money to
consumers. Therefore, even to the extent that Leshin could make this argument, the record does
not support it.
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Leshin also argues on appeal that the district court violated the tenets of due
process and his right to a jury trial under the Seventh Amendment of the
Constitution. We remain unpersuaded. In the first place, the district court’s
decision of what remedy to grant did not alter the source of Leshin’s obligation to
pay, which stemmed from a civil contempt finding. It is by now well-settled law
that due process is satisfied when a civil contempt defendant receives notice and an
opportunity to be heard -- both of which Leshin has undeniably been provided. See
Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 827 (1994)
(“[C]ivil contempt sanctions . . . are considered to be coercive and avoidable
through obedience, and thus may be imposed in an ordinary civil proceeding upon
notice and an opportunity to be heard. Neither a jury trial nor proof beyond a
reasonable doubt is required.”); Shillitani v. United States, 384 U.S. 364, 365
(1966). Second, Leshin has already argued that he should have received a jury trial
in Leshin I, and this Court squarely rejected the claim. See 618 F.3d at 1238-39.
We are bound by the law of the case doctrine to follow the prior panel’s holding in
the first appeal. Burger King Corp. v. Pilgrim’s Pride Corp., 15 F.3d 166, 169
(11th Cir. 1994) (“[F]indings of fact and conclusions of law by an appellate court
are generally binding in all subsequent proceedings in the same case in the trial or
on a later appeal.” (internal quotation marks omitted)).
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Leshin attempts to sidestep all of this, again arguing that the money
judgment cannot be a product of the underlying contempt finding, which he
purged, but rather amounts to a new judgment of liability. Leshin also says that the
district court’s conversion of the monetary award rendered him liable for an
amount that exceeded his unlawful gain and had therefore become punitive rather
than compensatory. These claims are unavailing.
Leshin’s first argument cannot help his cause because, as we have already
explained, Leshin purged only the second, coercive contempt finding by paying the
$90,000. Notably, he did not erase his obligation to pay the $500,000 balance of
the disgorgement order, which was a product of the original compensatory
contempt proceeding. Leshin already disputed the amount of the sanction
stemming from that compensatory contempt proceeding in his first appeal to this
Court. But the panel in Leshin I found that the district court had not abused its
discretion by “requir[ing] disgorgement of gross receipts, even though the
consumer received some value from the product or service.” 618 F.3d at 1237. We
remain bound by the prior panel’s holdings. Since the panel already held that gross
receipts were the proper measure of compensation for Leshin’s contempt, he
cannot now complain that the money judgment -- which is merely a modification
of the form of the relief arising from that original contempt finding -- is improper
on due process grounds.
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The same reasoning applies to Leshin’s claim that the district court’s
sanctions amount to criminal contempt rather than civil contempt. Leshin insists
that since the district court has already determined his ability to pay, and since he
has paid that amount, the original disgorgement amount was not truly
compensatory. In the first place, Leshin has already litigated this claim and lost.
Leshin I concluded that “[t]he order to disgorge all fees collected in violation of
the injunction is a civil sanction for contempt.” 618 F.3d at 1239 (emphasis added).
It was “remedial in nature,” “attempt[ed] to restore the status quo before the
contempt defendants” violated the injunction, and was “imposed to compensate
consumers for the losses they sustained.” Id. Thus, this Court concluded that “[t]he
district court did not deprive the contempt defendants of due process. The
contempt defendants were afforded notice and an opportunity to be heard.” Id.
These pronouncements form the law of the case. Moreover, Leshin is laboring
under the erroneous view that the extent of his ability to pay was the extent to
which the contempt was truly compensatory in nature. But, as we’ve said, this
theory makes little sense, for then defendants who dissipated their ill-gotten gains
would have to compensate the victims nothing at all. The outer limit of a
compensatory sanction is “all fees collected in violation of the injunction,” an
amount already determined in this case to be roughly $590,000. Leshin I, 618 F.3d
at 1239. Only if the district court required more than that amount would it have
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violated the principle that civil contempt must be compensatory or remedial in
nature. Yet the district court only entered a money judgment for the unpaid portion
of a sum that Leshin undeniably owes, one way or the other. Leshin is not entitled
to a jury trial on this contempt proceeding.
AFFIRMED.
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