Federal Trade Commission v. National Urological Group, Inc.

USCA11 Case: 21-14161 Document: 57-1 Date Filed: 08/29/2023 Page: 1 of 16
[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-14161
____________________
FEDERAL TRADE COMMISSION,
Plaintiff-Counter Defendant-
Appellee,
CERTUS BANK, N.A.,
Plaintiff,
versus
NATIONAL UROLOGICAL GROUP, INC.
dba WARNER LABORATORIES, et al.,
Defendants-Counter Claimant,
HI-TECH PHARMACEUTICALS, INC.,
corporations,
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2 Opinion of the Court 21-14161
JARED WHEAT,
individually and as officers of the corporations,
STEPHEN SMITH,
individually and as officers of National Urological Group, Inc. and
National Institute for Clinical Weight Loss, Inc.
Defendants-Appellants.
____________________
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 1:04-cv-03294-CAP
____________________
Before WILLIAM PRYOR, Chief Judge, JILL PRYOR, Circuit Judge, and
COOGLER,∗ Chief District Judge.
JILL PRYOR, Circuit Judge:
Hi-Tech Pharmaceuticals, Inc., Jared Wheat, and Stephen
Smith appeal the district court’s denial of their request for relief
from contempt sanctions. Nearly twenty years ago, the Federal
Trade Commission (FTC) sued them for violations of the Federal
Trade Commission Act, alleging they had misrepresented their
∗ The Honorable L. Scott Coogler, Chief United States District Judge for the
Northern District of Alabama, sitting by designation.
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21-14161 Opinion of the Court 3
weight-loss products to consumers. The agency sought equitable
monetary remedies and an injunction against future unlawful trade
practices. Relying on our precedent interpreting the Act, the dis-
trict court granted injunctive relief and ordered them to pay $16
million in equitable monetary relief. Years later, the district court
found that they had violated the injunction, held them in civil con-
tempt, and ordered them to pay an additional $40 million in con-
tempt sanctions.
Before the $40 million contempt judgment was collected,
the United States Supreme Court decided AMG Capital Manage-
ment, LLC v. Federal Trade Commission, which recognized that the
Act limited the FTC’s authority to seek equitable monetary reme-
dies directly in district court without first going through adminis-
trative enforcement proceedings. 141 S. Ct. 1341 (2021). Invoking
Federal Rule of Civil Procedure 60(b), Hi-Tech, Smith, and Wheat
returned to district court to request relief from the contempt judg-
ment, arguing that continued enforcement of the judgment was no
longer equitable after AMG. The district court denied the motion,
reasoning in part that AMG had no bearing on a district court’s con-
tempt powers. We agree and thus affirm.
I. BACKGROUND
We begin by summarizing the initial litigation and the con-
tempt proceedings that followed. We then discuss the Supreme
Court’s decision in AMG and the Rule 60(b) proceedings that are
the subject of this appeal.
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4 Opinion of the Court 21-14161
Hi-Tech sold dietary supplements, which it advertised as
clinically proven to cause weight loss and other beneficial effects.
Approximately twenty years ago, the FTC filed a complaint against
Hi-Tech and two of its officers, Smith and Wheat, for false adver-
tising and unfair and deceptive trade practices in violation of §§ 5
and 12 of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a),
52. At the time, our precedent interpreted § 13(b) of the Act to al-
low the FTC to seek monetary relief, such as restitution and dis-
gorgement, directly in the district court without first completing
administrative enforcement proceedings. See FTC v. On Point Cap.
Partners LLC, 17 F.4th 1066, 1078 (11th Cir. 2021) (discussing our
previous interpretation). Proceeding under § 13(b), the FTC sought
an injunction against future unlawful trade practices as well as eq-
uitable monetary relief in the form of consumer redress and dis-
gorgement of profits. The district court granted summary judg-
ment for the FTC after determining that the defendants had vio-
lated the Act. It ordered the defendants to pay nearly $16 million in
consumer redress and “attendant expenses for the administration
of such equitable relief.” Doc. 230 at 18. 1
Besides ordering $16 million in equitable monetary reme-
dies, the district court permanently enjoined the defendants from
making unsubstantiated claims regarding their weight-loss prod-
ucts. They appealed, and we affirmed the judgment. See FTC v. Nat’l
Urological Grp., Inc., 356 F. App’x 358 (11th Cir. 2009) (unpublished),
cert. denied, 562 U.S. 1003 (2010). After extensive garnishment
1 “Doc.” numbers refer to the district court’s docket entries.
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proceedings, what remained of the $16 million judgment was col-
lected in 2015.
Several years after the judgment was entered, the FTC
moved to hold the defendants in civil contempt for violating the
injunction. After extensive briefing and a two-week bench trial, the
district court found that the defendants had violated the injunction,
held them in contempt, and ordered them to pay $40 million,
jointly and severally, in compensatory sanctions for the contempt. 2
The district court directed that when the money was collected it
would be deposited in the court’s registry and used to reimburse
consumers who had purchased the falsely advertised products. The
contempt judgment provided that “[t]he FTC may access the funds
only with an order by the court granting permission to access and
distribute the funds to the affected consumers.” Doc. 966 at 130.
The order allowed the FTC to use a “reasonable portion” of the
award to cover the costs of reimbursement, including locating the
affected customers. Id. If any funds remained after distribution to
the affected consumers, the judgment read, “the court will then
make a determination of the appropriate distribution of those
funds.” Id. Thus far, the FTC has collected through garnishment
proceedings around $2.3 million of the $40 million judgment.
2 The original contempt order was vacated on appeal. See FTC v. Nat’l Urologi-
cal Grp., Inc., 785 F.3d 477, 483 (11th Cir. 2015) (holding that the district court
misapplied collateral estoppel when it barred the defendants from presenting
certain evidence and remanding for further proceedings). On remand, the dis-
trict court once again found the defendants in contempt and imposed the same
compensatory sanctions.
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The defendants appealed the contempt judgment, arguing
that the language of the injunction was ambiguous and thus unen-
forceable. See FTC v. Nat’l Urological Grp., Inc., 786 Fed. App’x 947,
954 (11th Cir. 2019) (unpublished). We rejected this argument, con-
cluding that the defendants had waived their challenge to the clar-
ity of the injunction by not objecting or raising it on direct appeal
from the judgment entering the injunction. Id. at 955–56. We af-
firmed the contempt judgment and the entry of sanctions because
the district court did not abuse its discretion by holding the defend-
ants in contempt. Id. at 957–60.
Two years after we affirmed the contempt judgment, the
Supreme Court ruled that § 13(b) does not permit an award of eq-
uitable monetary relief such as restitution or disgorgement. See
AMG Cap. Mgmt., 141 S. Ct. at 1344. Relying on AMG, the defend-
ants moved under Rule 60(b) for relief from the contempt judg-
ment. They argued, as they do on appeal, that the contempt judg-
ment “flowed from” the FTC’s initial complaint under § 13(b).
Doc. 1101-1 at 20. Because the FTC could not seek equitable mon-
etary remedies directly under § 13(b), the defendants argued, the
district court lacked the power to order the same equitable mone-
tary relief indirectly as a contempt sanction for violating the injunc-
tion. The defendants also asked the district court to order an ac-
counting of the funds the FTC had collected under both the origi-
nal $16 million judgment and the $40 million contempt judgment,
urging that the funds must be returned to consumers rather than
deposited in the United States Treasury. Otherwise, they argued, it
would constitute an improper penalty.
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The district court denied the defendants’ motion on three
grounds. First, the court rejected the defendants’ request for relief
under Rule 60(b)(5) because the contempt judgment ordering the
defendants to pay money for past conduct was not “prospective”
within the meaning of Rule 60(b)(5). Second, it denied relief under
Rule 60(b)(6) because neither the Supreme Court’s decision in AMG
nor the defendants’ complaints about the FTC’s consumer redress
program amounted to exceptional circumstances warranting relief.
The court reasoned that the Supreme Court’s ruling in AMG had
no bearing on the underlying injunction or the district court’s au-
thority to order contempt sanctions for violating the injunction.
Third, the district court denied the defendants’ request for an ac-
counting of the collected funds because the original $16 million
judgment prohibited the defendants from challenging the way in
which funds were distributed; the $40 million contempt judgment
was not close to being satisfied, making an accounting unnecessary;
and the defendants had not identified any legal authority for order-
ing an accounting in these circumstances.
The defendants timely appealed.
II. STANDARD OF REVIEW
We review a district court’s denial of relief under Rules
60(b)(5) and 60(b)(6) for abuse of discretion. Cano v. Baker, 435 F.3d
1337, 1342 (11th Cir. 2006). “An abuse of discretion occurs when a
district court commits a clear error of judgment, fails to follow the
proper legal standard or process for making a determination, or re-
lies on clearly erroneous findings of fact.” Yellow Pages Photos, Inc.
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v. Ziplocal, LP, 846 F.3d 1159, 1163 (11th Cir. 2017). We review the
district court’s denial of an accounting for abuse of discretion as
well. Managed Care Advisory Grp., LLC v. CIGNA Healthcare, Inc.,
939 F.3d 1145, 1153 (11th Cir. 2019).
III. DISCUSSION
Federal Rule of Civil Procedure 60(b) allows a district court
to grant relief from a final judgment under circumstances specified
in the rule. The defendants advance two grounds for relief from the
contempt judgment. First, they argue that the district court erred
in denying relief under Rule 60(b)(5) because “applying [the judg-
ment] prospectively is no longer equitable.” Fed. R. Civ. P. 60(b)(5).
Alternatively, they argue that the district court should have
granted relief under Rule 60(b)’s catchall provision, which encom-
passes “any other reason that justifies relief.” Fed. R. Civ. P.
60(b)(6). They offer that the FTC cannot seek—and thus the district
court cannot grant—equitable monetary remedies via contempt
when it cannot do so directly under § 13(b). And they argue that
the district court abused its discretion in denying the request for an
accounting because allowing the collected funds to be deposited in
the United States Treasury would be inequitable and constitute dis-
gorgement, an improper penalty. We reject their arguments.
A. The District Court Did Not Abuse Its Discre-
tion in Denying Relief under Rule 60(b)(5).
A district court may grant relief from a final judgment when
“applying it prospectively is no longer equitable.” Fed. R. Civ. P.
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60(b)(5). We need not decide whether the district court’s order to
pay contempt sanctions operates “prospectively” within the mean-
ing of Rule 60(b)(5), because the defendants have not shown that
enforcing the judgment is no longer equitable. AMG dealt with
monetary remedies awarded directly under § 13(b). By contrast,
the contempt sanctions at issue here were imposed because the de-
fendants violated the injunction. The court’s inherent authority to
enforce its own orders—including through equitable monetary re-
lief—was unaffected by AMG.
The FTC Act generally prohibits false advertising and unfair
and deceptive trade practices. See 15 U.S.C. §§ 45(a) & 52. To rem-
edy violations of the Act, the FTC may institute administrative en-
forcement proceedings and obtain a cease and desist order. Id.§ 45(b). After obtaining a final cease and desist order, the agency
may bring a civil action for consumer redress, see id. § 57b(a)(2),
including through the “refund of money or return of property,” id.
§ 57b(b). Independently, § 13(b) allows the FTC to proceed directly
to court—without first going through administrative proceed-
ings—to obtain a “permanent injunction” to halt unlawful trade
practices. Id. § 53(b). Before AMG, we interpreted the phrase “per-
manent injunction” in § 13(b) to encompass the full range of a dis-
trict court’s equitable powers. See FTC v. Gem Merch. Corp., 87 F.3d
466, 468–69 (11th Cir. 1996). District courts therefore could not
only enjoin future conduct under § 13(b) but also order equitable
monetary relief, such as restitution and disgorgement, or freeze as-
sets to satisfy a future monetary judgment. See id.
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In AMG, however, the Supreme Court held that § 13(b) does
not grant the FTC the authority to obtain equitable monetary re-
lief. See AMG Cap. Mgmt., 141 S. Ct. at 1352. The Court explained
that § 13(b) “focuses upon relief that is prospective, not retrospec-
tive.” Id. at 1348. Section 13(b), then, is not a substitute for tradi-
tional administrative proceedings; rather, it is aimed at “stopping
seemingly unfair practices from taking place while the Commission
determines their lawfulness.” Id. Although AMG limited district
courts’ authority to grant equitable monetary remedies under
§ 13(b), it did not threaten their authority to enter injunctions un-
der § 13(b). And it did not address whether a district court could
impose contempt sanctions for violating such an injunction.
The defendants concede that AMG did not address contempt
sanctions, but they urge us to embrace a broader reading of the
Supreme Court’s opinion. They argue that AMG stands for the
proposition that “Congress never intended for the FTC to obtain
or courts to award equitable monetary relief for violations of the
FTC Act absent the FTC’s completion of an underlying administra-
tive proceeding.” Appellants’ Reply Br. at 13 (emphasis omitted).
And so, they argue, when Congress restricted the agency’s author-
ity to seek certain equitable relief, it also restricted district courts’
ability to grant that relief. The defendants’ argument rests on a mis-
understanding of the basis for the contempt judgment.
The contempt judgment was not, as the defendants assert,
“imposed under the FTC Act for violation[s] of the FTC Act.” Ap-
pellants’ Br. at 26. Instead, it was imposed pursuant to the district
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court’s “inherent powers to punish contempt against it” after the
defendants violated the injunction the court imposed under § 13(b).
In re McLean, 794 F.3d 1313, 1319 (11th Cir. 2015).
For starters, AMG reaffirmed district courts’ authority to
award prospective injunctive relief, like the injunction the district
court entered here, under § 13(b). See AMG Cap. Mgmt., 141 S. Ct.
at 1349 (“[T]he Commission may use § 13(b) to obtain injunctive
relief while administrative proceedings are foreseen or in process,
or when it seeks only injunctive relief.”); see also On Point Cap.,
17 F.4th at 1079 (“Prospective injunctive relief is still allowed under
§ [1]3(b).”); FTC v. Pukke, 53 F.4th 80, 106 (4th Cir. 2022) (“AMG
does not undercut the injunctive relief entered under Section
13(b)[.]”). When a district court enters an injunction, whether un-
der § 13(b) or any other authority, it generally retains inherent con-
tempt powers to remedy violations of its own orders. District
courts have “extremely broad and flexible powers” to remedy civil
contempt. FTC v. Leshin, 719 F.3d 1227, 1231 (11th Cir. 2013).
Among other purposes, a court’s contempt power “ensure[s] that
the Judiciary has a means to vindicate its own authority.” McLean,
794 F.3d at 1319 (alteration adopted) (internal quotation marks
omitted).
“The violation of an injunction is a contempt against an en-
tire court insofar as it flouts the court’s basic authority to preserve
order and administer justice.” Id. This authority exists inde-
pendently of the underlying statute’s prescribed remedies. See
EEOC v. Guardian Pools, Inc., 828 F.2d 1507, 1516 (11th Cir. 1987)
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(concluding that district court had the authority “to issue contempt
sanctions, including fines to coerce the employer or compensate
the victims [of employment discrimination], under its inherent au-
thority to ensure compliance with its orders” regardless of the con-
straints governing relief under Title VII); cf. Porter v. Warner Holding
Co., 328 U.S. 395, 398 (1946) (“Unless otherwise provided by stat-
ute, all the inherent equitable powers of the District Court are
available for the proper and complete exercise of [its] jurisdic-
tion.”).
We reject the defendants’ argument that the district court
lacked the authority to enter the contempt judgment post-AMG.
Regardless of the decision’s effect on the district court’s authority
to award the $16 million in equitable monetary remedies, the court
retained the authority to enter prospective injunctive relief under
§ 13(b), as it had done in the original FTC action. And after the
defendants violated the injunction, the court had the inherent
power to vindicate its own authority by imposing the $40 million
contempt judgment.
Our conclusion is consistent with a recent Fourth Circuit de-
cision addressing a similar argument. See Pukke, 53 F.4th at 102–03.
In Pukke, the defendants were subject to a pre-existing injunction
that prohibited them from making false representations in telemar-
keting. Id. at 100. When they later engaged in unfair trade practices,
in violation of both the FTC Act and the injunction, the FTC filed
a civil action and obtained an equitable monetary judgment based
on § 13(b). See id. at 105–06. The agency also sought to hold the
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defendants in contempt of the injunction; it obtained a second
judgment in the form of contempt sanctions. Id. On appeal from
both judgments, the Fourth Circuit concluded that “[t]he Supreme
Court’s holding in AMG . . . render[ed] invalid the . . . equitable
monetary judgment, at least to the extent that judgment rest[ed]
on Section 13(b).” Id. at 105. But the court left the contempt sanc-
tions intact, explaining that “there is ‘no question’ that courts ‘have
inherent power to enforce compliance with their lawful orders
through civil contempt.’” Id. at 102–03 (quoting Shillitani v. United
States, 384 U.S. 364, 370 (1966)). The court thus concluded that “the
$120.2 million order [for violations of the telemarketing injunction]
can be upheld under the contempt judgment.” Id. at 106. The same
is true for the contempt judgment here.
True, the Supreme Court in AMG emphasized that the
FTC’s traditional administrative proceedings must not be circum-
vented. See AMG Cap. Mgmt., 141 S. Ct. at 1349 (explaining that the
FTC “may obtain monetary relief by first invoking its administrative
procedures and then § 19’s redress provisions (which include limita-
tions)”) (emphasis added). But the Court said nothing about how
courts could enforce injunctions imposed under § 13(b). Neither the
text of the Act nor the Supreme Court’s decision in AMG expressly
limits a district court’s contempt powers in this context.
Returning to Rule 60(b)(5), we cannot say that after AMG,
applying the contempt judgment “is no longer equitable.” Fed. R.
Civ. P. 60(b)(5). Indeed, “[w]e have long emphasized that Rule
60(b) strikes a delicate balance between the court’s obligation to do
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substantial justice and the sanctity of final judgments.” Bainbridge
v. Governor of Fla., No. 22-10525, --- F.4th ---, 2023 WL 4986412, at
*6 (Aug. 4, 2023) (citation and internal quotation marks omitted).
“[I]t is not enough that a grant of the [Rule 60(b)] motion[] might
have been permissible or warranted; rather, the decision to deny
the motion[] must have been sufficiently unwarranted as to
amount to an abuse of discretion.” Griffin v. Swim-Tech Corp.,
722 F.2d 677, 680 (11th Cir. 1984). Because AMG did not address the
district court’s inherent authority to sanction contempt, the district
court did not abuse its discretion when it denied the defendants’
request for relief under Rule 60(b)(5). 3
B. The District Court Did Not Abuse Its Discre-
tion in Denying Relief under Rule 60(b)(6).
Alternatively, the defendants argue that they are entitled to
relief under Rule 60(b)(6), which permits a court to reopen a judg-
ment for “any other reason that justifies relief.” Fed. R. Civ. P.
60(b)(6). Relief under Rule 60(b)(6) is only available in “extraordi-
nary circumstances.” Gonzalez v. Crosby, 545 U.S. 524, 536 (2005)
(internal quotation marks omitted). “Even then, whether to grant
the requested relief is a matter for the district court’s sound
3 The defendants raise additional arguments challenging the calculation of the
contempt sanctions and the propriety of the district court’s original award of
equitable monetary relief under § 13(b). But because they did not rely on these
arguments in their Rule 60(b) motion before the district court, we do not con-
sider them. See Ramirez v. Sec’y, U.S. Dep’t of Transp., 686 F.3d 1239, 1249 (11th
Cir. 2012) (“It is well-settled that we will generally refuse to consider argu-
ments raised for the first time on appeal.”).
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discretion.” Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1317
(11th Cir. 2000) (alteration adopted) (citation and internal quota-
tion marks omitted).
The defendants have failed to show extraordinary circum-
stances justifying relief under Rule 60(b)(6). As we have explained,
AMG did not concern a district court’s ability to enforce its own
orders and thus had no bearing on the contempt sanctions at issue
here. The district court did not abuse its discretion when it denied
the defendants’ request for relief under Rule 60(b)(6).
C. The District Court Did Not Abuse Its Discre-
tion in Denying the Defendants an Account-
ing.
The defendants also sought an accounting of funds the FTC
has collected to ensure that the funds are paid to consumers rather
than deposited in the United States Treasury as disgorgement. The
district court denied the request, reasoning that the original $16
million judgment has been fully collected, and it is undisputed that
AMG did not have retroactive effect. As for the contempt judg-
ment, the district court explained that the FTC has collected only
a little over $2 million of the $40 million judgment and is appar-
ently in the early stages of remitting money to consumers. The
premise of the defendants’ argument is flawed because the roughly
$2 million in collected funds comprise contempt sanctions, not dis-
gorgement ordered under § 13(b). And they cite no authority com-
pelling the district court to order an accounting in these
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circumstances. Thus, we conclude that the district court did not
abuse its discretion in denying the defendants’ request.
IV. CONCLUSION
For the above reasons, we affirm the denial of the defend-
ants’ motion for relief under Rule 60(b) and for an accounting.
AFFIRMED.