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

• Decision Date: 26 November 2002
• Docket Number: No. 01-1663.,No. 00-3744.,No. 02-1268.,No. 00-4152.,00-3744.,00-4152.,01-1663.,02-1268.
• Citation: 312 F.3d 259
• Parties: FEDERAL TRADE COMMISSION, Plaintiff-Appellee, Cross-Appellant, v. THINK ACHIEVEMENT CORP., et al., Defendants, Cross-Appellees, and Steven F. Stucker, Defendant-Appellee, and William H. Tankersley and Linda S. Tankersley, Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

312 F.3d 259

FEDERAL TRADE COMMISSION, Plaintiff-Appellee, Cross-Appellant, v. THINK ACHIEVEMENT CORP., et al., Defendants, Cross-Appellees, and Steven F. Stucker, Defendant-Appellee, and William H. Tankersley and Linda S. Tankersley, Defendants-Appellants, Cross-Appellees.

No. 00-3744.

No. 00-4152.

No. 01-1663.

No. 02-1268.

United States Court of Appeals, Seventh Circuit.

Argued September 27, 2002.^*

Decided November 26, 2002.

Rehearing and Rehearing En Banc Denied January 23, 2003.

Lawrence DeMille-Wagman (Argued), Federal Trade Commission, Office of the General Counsel, Washington, DC, for Plaintiff-Appellee in 00-3744, 00-4152 and 01-1663.

Stephen Bower (Argued), Cohen & Thiros, Merrillville, IN, Linda S. Tankersley, St. Petersburg, FL, for Defendants-Appellants in 00-3744, 00-4152.

Steven A. Wilson, Carson City, NV, for Defendant-Appellee in 00-4152.

Stephen Bower, Cohen & Thiros, Merrillville, IN, Linda S. Tankersley, St. Petersburg, FL, for Defendants-Appellees in 01-1663.

Nick J. Thiros, Cohen & Thiros, Merrillville, IN, for Intervenors-Appellees in 01-1663.

Andrew B. Baker, Jr., Office of the United States Attorney, Hammond, IN, Gregory A. Ashe, Lawrence DeMille-Wagman, Federal Trade Commission, Office of the General Counsel, Washington, DC, for Plaintiff-Appellee in 02-1268.

William H. Tankersley, Metropolitan Correctional Center, Chicago, IL, for Defendant-Appellant in 02-1268.

Before POSNER, RIPPLE, and MANION, Circuit Judges.

POSNER, Circuit Judge.

The Federal Trade Commission brought suit against William Tankersley (and corporations controlled by him, but we can ignore that detail) seeking relief against a wide-ranging, nationwide scheme to defraud persons seeking employment by the Postal Service of millions of dollars in the aggregate. The district court granted summary judgment for the Commission, and Tankersley appeals; he has also attempted to appeal from a judgment for civil contempt entered against him, but that appeal is untimely and is therefore dismissed. The Commission cross-appeals from an order by the district court releasing from a constructive trust imposed by the court on Tankersley's assets $25,000 to pay one of his lawyers.

It is rare for a judge to enter summary judgment in favor of the plaintiff in a fraud case, but in this case the evidence was so overwhelming as to justify the district court in dispensing with a trial. There is no need to describe the evidence, which is detailed in two published opinions by the district court. FTC v. Think Achievement Corp., 144 F.Supp.2d 993, 1013 (N.D.Ind.2000). So far as the issue of fraud is concerned, only one matter warrants further discussion. Tankersley's telephone solicitors told callers that if they bought his package of materials for $46.95, they would be "guaranteed" to pass a test that the Postal Service occasionally gives to applicants for employment "with a score of 95% or better ... or your money is refunded." And sometimes it was refunded. Tankersley argues that so long as an advertisement offers consumers a money-back guaranty, the falsity of the claim in the advertisement (for it was indeed false) is irrelevant because harmless.

The argument (which has been repeatedly rejected, see, e.g., Montgomery Ward & Co. v. FTC, 379 F.2d 666, 671 (7th Cir.1967); FTC v. Pantron I Corp., 33 F.3d 1088, 1103 (9th Cir.1994); FTC v. SlimAmerica, Inc., 77 F.Supp.2d 1263, 1273 (S.D.Fla.1999)) puts one in mind of Holmes's theory of liability for breach of contract: he said that the only duty a contract imposes is to perform or pay damages. See Oliver Wendell Holmes, Jr., The Common Law 300-02 (1881); Holmes, "The Path of the Law," 10 Harv. L.Rev. 457, 462 (1897). Similarly, Tankersley wants us to interpret his advertised guaranty as an undertaking merely to refund the purchase price. This might be a tenable argument if obtaining a refund were costless, but of course it is not. It is a bother. No one would buy something knowing that it was worthless and that therefore he would have to get a refund of the purchase price. Had Tankersley's solicitors said, "If you buy our materials it may help you to get a higher score on the postal exam if and when the exam is given in your area, and if it doesn't help you, we'll refund your money," there would be no false representation (provided they really did refund upon request, which in fact they did only sporadically). But that is not what they said. They said buy the materials and it's a sure thing that you'll score 95 percent or better on the test, and that was a lie and it was not redeemed by their offering a refund that, as they well knew, many consumers would not bother to seek, since it was only $46.95. FTC v. Pantron I Corp., supra, 33 F.3d at 1103; cf. Lustiger v. United States, 386 F.2d 132, 138 (9th Cir.1967).

There is a further point. Some recipients of Tankersley's materials might have scored 95 or better on the test had they never bought them. They would still be victims of fraud, had they bought the materials because they were deceived into thinking that the materials would guarantee them a score of 95; yet they would not be entitled to their money back. This is another reason why a money-back guaranty does not sanitize a fraud.

The only other issue that merits discussion is the propriety of the district court's releasing $25,000 from the constructive trust to pay the fee of a lawyer representing Tankersley in a criminal case arising out of the fraud. At the outset of the present suit the court had frozen certain assets of Tankersley, and placed them in the hands of a receiver, to preserve the possibility of providing some financial redress to the victims of his fraud should the fraud be proved in the course of the litigation. That was in January 1998; in March, and again in February and March of the following year, the district court directed the receiver to release some of the funds to Tankersley's lawyer. In October 2000 the court entered its final judgment, ordering restitution (via the FTC) to the victims of Tankersley's fraud in the amount of $28 million, with the entire amount of...