F.T.C. v. Think Achievement Corp.

• Decision Date: 18 October 2000
• Docket Number: No. 2:98-CV-12-TS.,2:98-CV-12-TS.
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. THINK ACHIEVEMENT CORP., et al., Defendants, and Linda Tankersley, Relief Defendant.
• Court: U.S. District Court — Northern District of Indiana

144 F.Supp.2d 1013

FEDERAL TRADE COMMISSION, Plaintiff, v. THINK ACHIEVEMENT CORP., et al., Defendants, and Linda Tankersley, Relief Defendant.

No. 2:98-CV-12-TS.

United States District Court, N.D. Indiana, Hammond Division.

October 18, 2000.

Gregory A. Ashe, Federal Trade Commission, Washington, DC, for plaintiff.

Gregory J. Sarkisian, Sarkisian and Fleming, Portage, IN, Nick J. Thiros, Cohen and Thiros, Merrillville, IN, for defendants.

MEMORANDUM OF DECISION AND ORDER

SPRINGMANN, United States Magistrate Judge.

This matter is before the Court on a Motion for Summary Judgment filed by the Plaintiff, the Federal Trade Commission ("Commission"), on June 8, 1999, against the corporate Defendants, Think Achievement Corp., National Service, Inc., The Answering Service, Inc., The Rosewood Group, New Age Advertising Corp., H.D. Davidson Advertising Corp., Career Advancement Corp., and Information Delivery Systems, Inc. (collectively, "Corporate Defendants"), the individual Defendant William H. Tankersley ("Tankersley"), and the Relief Defendant Linda Tankersley. The Defendant, Tankersley, and Linda Tankersley, filed their Response on August 8, 1999. The Plaintiff filed its Reply on September 20, 1999.

On September 29, 2000, the Court granted the Plaintiff's Motion for Summary Judgment in part and indicated that the Court would issue a separate Memorandum and Order on damages, including the issue of fees. The Court's September 29, 2000, Memorandum and Order are incorporated herein. For the following reasons, summary judgment is GRANTED as to the remaining portions of the Plaintiff's Motion for Summary Judgment.

MATERIAL FACTS

Managers and employees of the Corporate Defendants, who worked for the Defendants at various times and for various terms between 1991 and 1998, testified as follows regarding what percentage of the Corporate Defendants' business involved the marketing and sales of postal materials as opposed to non-postal materials: the vast majority of sales (between 90% and 95%) were for postal programs; more postal than anything else; the other materials were not our main thing we did there all the time; the postal employment program was the primary product sold; 90% postal; a large majority of sales from January of 1996 to January of 1998 was of postal materials; 99% postal in 1996 and 1997; we did not do sales of other materials a lot; we mainly did postal; and by 1994, more postal than anything else.¹ SJ Ex. 10 ¶ 4; SJ Ex. 13 at 144; SJ Ex. 16 at 196, 201; SJ Ex. 19 at 250; SJ Ex. 20 at 279; SJ Ex. 24 at 349; SJ Ex. 31 at 476-77. See also SJ Ex. 38 at 20, 44; SJ Ex. 39 at 70-71. Thus, during the course of their operation, at least ninety percent of the Corporate Defendants' business involved the marketing and sales of postal materials.

During the course of their operation, the Defendants had gross revenues of at least $34,752,592. See Pl.'s Mot. for Summ. J. at 41-44; Pl.'s Motion for Default J., filed Dec. 30, 1998, at Ex. 1 ¶ 8, Attach. C, D, E, and F; Id. Ex. 2 ¶ 4. Of this amount, approximately $31,277,333 was derived from the sale of the Defendants' postal materials.² Pl.'s Motion for Default J filed Dec. 30, 1998, at Ex. 2 ¶ 5. See also SJ Ex. 10 ¶ 4; SJ Ex. 13 at 144; SJ Ex. 16 at 196, 201; SJ Ex. 19 at 250; SJ Ex. 20 at 279; SJ Ex. 24 at 349; SJ Ex. 31 at 476-77; SJ Ex. 38 at 20, 44; SJ Ex. 39 at 70-71. Considering that the Defendants' refund rate was approximately 10%, they would have paid out approximately $3,127,733 in refunds. See Pl. Mot. for Default J. at Ex. 2 ¶ 6.

ANALYSIS

The Commission has brought this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to secure injunctive relief against the Corporate Defendants, Tankersley, and Linda Tankersley because of unfair and deceptive acts and practices that violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). Section 13(b) plays an important role in enabling the Commission to enforce consumer protection laws and is used by the Commission to pursue violations of Section 5 of the FTC Act. As indicated in the Court's September 29, 2000, Memorandum and Order, the Corporate Defendants and Tankersley engaged in deceptive practices in violation of Section 5 of the FTC Act.

Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), provides that "in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction." A violation of Section 5 of the FTC Act has been found to be such a proper case. See FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1027-28 (7th Cir.1988). The authority to grant a permanent injunction includes the authority to order any other ancillary equitable relief necessary to effectuate the exercise of the granted powers. FTC v. Febre, 128 F.3d 530, 534 (7th Cir.1997); FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 571-72 (7th Cir.1989); World Travel, 861 F.2d at 1026.

A. Permanent Injunctive Relief

The Commission has requested that the Court grant a permanent injunction against the Corporate Defendants and Tankersley. Section 13(b) of the FTC Act authorizes the granting of permanent injunctions to prevent defendants from engaging in deceptive business practices in violation of the FTC Act. Febre, 128 F.3d at 534; World Travel, 861 F.2d at 1027-28. "A federal court has broad power to restrain acts which are of the same type or class as unlawful acts which the court has found to have been committed or whose commission in the future, unless enjoined, may fairly be anticipated from the defendant's conduct in the past." Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 132, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969); NLRB v. Express Publ'g Co., 312 U.S. 426, 435, 61 S.Ct. 693, 85 L.Ed. 930 (1941). The breadth of the injunction must depend upon the circumstances of the particular case, "the purpose being to prevent violations, the threat of which in the future is indicated because of their similarity or relation to those unlawful acts ... found to have been committed ... in the past." Express Publ'g, 312 U.S. at 436-37, 61 S.Ct. 693. Courts in equitable actions may enjoin otherwise lawful conduct to ensure that the final relief ordered is effective. See United States v. Loew's, Inc., 371 U.S. 38, 53, 83 S.Ct. 97, 9 L.Ed.2d 11 (1962) ("Some of the practices which the Government seeks to have enjoined with its requested modifications are acts which may be entirely proper when viewed alone. To ensure, however, that relief is effectual, otherwise permissible practices connected with the acts found to be illegal must sometimes be enjoined."); EEOC v. Wilson Metal Casket Co., 24 F.3d 836, 842 (6th Cir.1994) ("The proper scope of an injunction is to enjoin conduct which has been found to have been pursued or is related to the proven unlawful conduct."); United States v. Holtzman, 762 F.2d 720, 726 (9th Cir.1985) ("[F]ederal courts have the equitable power to enjoin otherwise lawful activity if they have jurisdiction over the general subject matter and if the injunction is necessary and appropriate in the public interest to correct or dissipate the evil effects of past unlawful conduct."); Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368, 390 (5th Cir.1977) ("In fashioning relief against a party who has transgressed the governing legal standard, a court of equity is free to proscribe activities that, standing alone, would have been unassailable."). A "court's power to grant injunctive relief survives discontinuance of the illegal conduct," and because the "purpose is to prevent future violations," injunctive relief is appropriate when there is a "cognizable danger of recurrent violation, something more than the mere possibility." United States, v. W.T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953). Once a violation is demonstrated, all that need be shown is that "there is some reasonable likelihood of future violations," and past unlawful conduct is "highly suggestive of the likelihood of future violations." Commodity Futures Trading Comm'n v. Hunt, 591 F.2d 1211, 1220 (7th Cir.1979). In deciding whether to issue an injunction in light of past violations, courts should consider factors such as the egregiousness of the defendant's actions, the isolated or recurrent nature of the infraction, the degree of scienter involved, the sincerity of the defendant's assurances against future violations, the defendant's recognition of the wrongful nature of his conduct, and the likelihood that the defendant's occupation will present opportunities for future violations. SEC v. Blatt, 583 F.2d 1325, 1334 & n. 29 (5th Cir.1978). See also SEC v. Posner, 16 F.3d 520, 521-22 (2d Cir.1994), cert. denied, 513 U.S. 1077, 115 S.Ct. 724, 130 L.Ed.2d 629 (1995) (barring defendants from serving as officers or directors of any public company for past violations and concerns regarding future violations of securities laws); SEC v. First Pacific Bancorp, 142 F.3d 1186, 1193 (9th Cir.1998) (barring a defendant from serving as an officer or director of a publicly traded corporation for violations of securities laws).

Defendants may be enjoined from making misrepresentations or false representations. See Goodman v. FTC, 244 F.2d 584, 595-96, 598-600 (9th Cir.1957). Reasonable fencing-in provisions are appropriate to prevent defendants from engaging in illegal practices. See FTC v. Colgate-Palmolive Co., 380 U.S. 374, 395, 85 S.Ct. 1035, 13 L.Ed.2d 904 (1965) ("The Commission is not limited to prohibiting the illegal practices in the precise form in which it is found to have existed in the past. Having been caught violating the [FTC] Act, respondents must expect some reasonable fencing in.") (internal quotation marks and citations omitted); Litton Indus., Inc. v. FTC, 676 F.2d 364, 370 (9th Cir.1982) (reasonable "[f]encing-in provisions serve to `close all roads to the prohibited goal, so that [the FTC's] order may not be...