Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Supreme Court will not consider FTC contempt proceedings, (Jan 13, 2014)

By Jeffrey May, J.D.

The U.S. Supreme Court will not review a decision of the U.S. Court of Appeals in Atlanta, upholding entry of a money judgment of $502,316 in a contempt action against a debt consolidation company’s executives for violating a 2008 FTC consent decree. The Court today denied a petition for certiorari, filed on August 30, by the executives, arguing that there was a need for the Supreme Court’s guidance on the proper procedures in contempt proceedings (Leshin v. FTC, Dkt. 13-294).

The petition arose out of a 2006 FTC enforcement action that was resolved by consent decree in 2008. Not long after the consent decree was entered, the FTC filed an order to show cause why the petitioners should not be held in contempt for violations of the consent decree.

In 2009, there was a finding of contempt. As a compensatory civil contempt remedy, the district court ordered disgorgement of $594,987.90, which was equal to the gross receipts of the business during the relevant timeframe. As part of its disgorgement order, the district court said that, “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.” The appellate court affirmed the disgorgement order under an abuse of discretion standard (618 F.3d 1221, 2010-2 Trade Cases ¶77,158). The appellate court did not address the provision allowing the FTC to move to convert the compensatory contempt sanction to a money judgment if it was not paid in full. Faced with a threat of jail time, the petitioners paid $92,671, but the original disgorgement order, less the $92,671, remained in effect. Later, the district court converted the compensatory sanction to a money judgment with the future possibility that it could be serially converted back to a contempt order if the judgment was not satisfied. In June 2013, the appellate court upheld the lower court’s order (719 F.3d 1227, 2013-1 Trade Cases ¶78,405). The petition for review followed.

The petitioners had asked the Court, specifically: (1) whether a court may proceed with an indirect civil contempt trial without issuing a sufficient show cause order, and is a failure to give adequate notice and opportunity to prepare a denial of a meaningful opportunity to be heard; (2) whether the procedures used for contempt proceedings involving lengthy, complex and confusing consent decrees should be reassessed, where inadvertant technical violations are unavoidable; (3) whether a trial court may convert a contempt sanction to a money judgment with the implication of serial reconversion to contempt if not paid and whether converting a contempt sanction to a money judgment without a jury trial is a denial of the Seventh Amendment right to jury trial; and (4) whether, for any of the foregoing grounds, the courts below violated due process and departed from the accepted course of judicial proceedings, or sanctioned such a departure, as to warrant certiorari.

In response, the FTC had contended that further review was not warranted. According to the agency, district courts have broad discretion to impose compensatory sanctions for civil contempt. Moreover, the petitioners’ arguments that they received inadequate notice and opportunity to be heard and that the disgorgement order was not compensatory in nature because consumers had received value from the services petitioners provided were not properly before the Court, in the FTC’s view. Even if they were, the FTC argued that the petitioners’ challenges to the district court’s disgorgement order lacked merit.

Attorneys: Richard Glenn Elie for Randall L. Leshin. Donald B. Verrilli, Jr., Solicitor General, for FTC.

News: ConsumerProtection FederalTradeCommissionNews