Antitrust Law Daily Wrap Up, TOP STORY—11thCir: FTC Entitled to Modification of Form of Relief in Contempt Proceeding, (Jun 5, 2013)

By Jeffrey May, J.D.

In a contempt action against an attorney who controlled a debt consolidation company for violating a 2008 FTC consent decree, the federal district court in Miami did not abuse its discretion by converting the unpaid remainder of an equitable disgorgement remedy, stemming from a compensatory civil contempt sanction against the attorney, into the legal remedy of a money judgment at the FTC's request. Thus, the U.S. Court of Appeals in Atlanta today upheld the district court's entry of a money judgment of $502,316 against the attorney (FTC v. Leshin, June 5, 2013, Marcus, S.).

In 2009, attorney Randall Leshin was found in civil contempt of a 2008 consent decree that settled FTC allegations that Leshin and his debt consolidation business engaged in deceptive marketing practices in violation of the FTC Act. As a compensatory civil contempt remedy, the district court ordered disgorgement of $594,987.90, which was equal to the gross receipts of Leshin’s 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.”

After Leshin failed to comply with the disgorgement order, the district court found him in contempt and required Leshin to pay $92,671—the total amount that the court found that he was then able to pay—or face jail time. Leshin paid the $92,671, but the original disgorgement order, less the $92,671, remained in effect.

The FTC then moved to convert the remainder of the original disgorgement order into a money judgment. The district court granted the request and entered the money judgment of $502,316 against Leshin. Leshin appealed.

Because the district court could have granted a money judgment, rather than a disgorgement order, as the remedy for Leshin’s civil contempt, it had the power to convert its disgorgement order into a money judgment in order to satisfy “the requirements of full remedial relief,” the court explained.

The appellate court rejected Leshin's assertion that the district court’s conversion of the remainder of the disgorgement order into a money judgment ran afoul of the election of remedies doctrine. The doctrine of election of remedies limits a party with the choice of two remedies that are “inconsistent with each other” from obtaining both remedies or from obtaining first the one remedy and then, at a later date, an alternative one, the appellate court explained. The two remedies in this case were not inconsistent and did not allow double recovery. The conversion of the monetary award only covered the unpaid remainder of the disgorgement order.

Leshin unsuccessfully argued that the two remedies were inconsistent because they allowed 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 was enforceable by a writ of execution. To the extent that the conversion of the remedies gave the FTC another means of obtaining the full amount awarded, the two remedies were actually complementary, the appellate court noted.

The appellate court also disposed of Leshin's constitutional arguments. Leshin contended that the district court violated the tenets of due process and his right to a jury trial under the Seventh Amendment of the Constitution. He argued that the money judgment amounted to a new judgment of liability and that the conversion of the monetary award rendered him liable for an amount that exceeded his unlawful gain and was therefore punitive rather than compensatory. Because the measure of compensation for Leshin’s contempt had already been upheld on appeal, he could not complain that the money judgment—which was merely a modification of the form of the relief arising from that original contempt finding—was improper on due process grounds. The same reasoning applied to Leshin’s claim that the district court’s sanctions amount to criminal contempt rather than civil contempt, according to the appellate court.

The case is 12-12811.

Attorneys: David Sieradzki for Federal Trade Commission. Randall L. Leshin, pro se.

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