F.T.C. v. Febre
| Citation | 128 F.3d 530 |
| Decision Date | 17 October 1997 |
| Docket Number | No. 97-1230,97-1230 |
| Parties | 1997-2 Trade Cases P 71,950 FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. Robert J. FEBRE, individually and as an officer of Ace Publishing, Inc., and Ace Publishing, Inc., doing business as Pase Corporation, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Joanne L. Levine (argued), Federal Trade Commission, Washington, DC, for Plaintiff-Appellee.
H. Kent Heller, David Stevens (argued), Heller, Holmes & Associates, Mattoon, IL, Jerome S. Lamet, Lamet & Associates, Chicago, IL, for Defendants-Appellants.
Before BAUER, COFFEY, and EASTERBROOK, Circuit Judges.
The Federal Trade Commission ("FTC" or "Commission") filed a complaint against Robert J. Febre ("Febre") and Ace Publishing, Inc. ("Ace") for violations of Section 5 of the Federal Trade Commission Act ("FTCA"), 15 U.S.C. § 45. The district court granted summary judgment in favor of the Commission, finding that Febre and Ace had violated the FTCA by using unfair and deceptive practices in advertising, promoting, and selling work-at-home opportunities and financial services. The district court issued a permanent injunction pursuant to Section 13(b) of the FTCA, 15 U.S.C. § 53(b), preventing Febre and Ace from engaging in those types of deceptive practices. The district court also entered judgment against Febre and Ace in the amount of $16,096,345. Febre and Ace do not challenge: (1) the district court's finding that they violated Section 5 of FTCA; (2) the issuance of the permanent injunction; or (3) the district court's power to award monetary relief. However, Febre and Ace contest the actual amount of damages awarded by the district court. For the reasons set forth below, we affirm the district court's order of equitable relief in the amount of $16,096,345.
Robert J. Febre is the president, director, and sole-shareholder of Ace Publishing, Inc., doing business as Pase Corporation, which advertised and sold work-at-home opportunities and certain financial services, such as loans and grants. 1 The FTC investigated the business practices of Febre and Ace. Typically, the business opportunities advertised by Febre and Ace claimed that consumers could make large sums of money by purchasing these programs and making initial payments of between $9.95 and $89.00 in order to participate. However, after making the initial payments, the consumers received additional information that disclosed significant additional costs for continued participation in the programs. Many consumers did not invest any further time or money, but others continued to pay the money demanded, still hopeful of realizing the income the advertisements promised.
In June 1994, the Commission filed a complaint for permanent injunctive relief and monetary damages, alleging that Febre and Ace violated Section 5 of the FTCA which prohibits "unfair or deceptive acts in or affecting commerce." 15 U.S.C. § 45(a)(1). The complaint alleged that the representations made by Febre and Ace to consumers in the course of advertising, promoting, and selling the work-at-home opportunities and financial services were false and misleading and failed to disclose material information. The Commission focused on eight of Ace's programs.
Various motions and memorandums were filed in support of and in opposition to the entry of preliminary injunctions against both Febre and Ace. In July 1994, Magistrate Judge Lefkow held an evidentiary hearing with respect to the FTC's request for preliminary injunctive relief. Based upon the pleadings, the stipulations of the parties, the exhibits received into evidence, and the testimony of the witnesses, Magistrate Judge Lefkow submitted a report which included proposed findings of fact and recommended to the district court that it grant injunctive relief.
In her report, Magistrate Judge Lefkow concluded that since at least 1989, Ace has been engaged in deceptive business practices by advertising, promoting, offering for sale, selling, or inducing consumers to participate in work-at-home opportunities in which consumers would use the Ace programs to earn money. Ace sold its programs using false and misleading practices which deceived consumers, and consumers never achieved the promised earning potential. Subsequently, on July 11, 1994, Judge Marvin E. Aspen adopted her recommendations, and the district court granted FTC's motion and entered its Order for Preliminary Injunction with Asset Freeze Against Defendant Ace Publishing, Inc. Subject to Bankruptcy Court's Dominion over the Assets. Then, on July 15, 1994, the district court again granted FTC's Motion for Preliminary Injunction and entered its Order for Preliminary Injunction with Asset Freeze Against Febre.
After entry of the preliminary injunctions against both Febre and Ace, Febre filed a Motion for Partial Summary Judgment on November 25, 1994 with the Commission filing a motion in opposition on December 20, 1994. Meanwhile, the FTC filed its Motion for Summary Judgment on October 31, 1995 which included a Local Rule 12(M) statement of material facts as to which there was no genuine dispute. Febre and Ace, in their response to the Commission's Motion for Summary Judgment which was filed the same day, failed to file a statement of disputed facts as required by Local Rule 12(N) of the rules for the Northern District of Illinois.
On January 9, 1996, the district court granted FTC's Motion to Transfer its Motion for Summary Judgment to Magistrate Judge Lefkow to conduct another evidentiary hearing. Relying upon the findings of fact as reported in her July 1994 Report and Recommendation, Magistrate Judge Lefkow submitted her Report to Judge Manning on March 20, 1996, recommending denial of Febre's Motion to Lift the Preliminary Injunction. Magistrate Judge Lefkow further recommended that Febre's Motion for Partial Summary Judgment also be denied. The district court accepted these recommendations on April 23, 1996.
On July 2, 1996, Magistrate Judge Lefkow filed another Report and Recommendation, recommending that the district court grant FTC's Motion for Summary Judgment. Febre and Ace filed objections to the magistrate judge's report on July 12, 1996, 2 and the FTC responded to their objections on July 22, 1996. The FTC also filed its Proposed Order for Permanent Injunction and Final Judgment Against Febre and Ace on the same day.
The district court entered its Memorandum and Order on September 25, 1996, fully adopting the magistrate judge's Report and Recommendation granting the permanent injunction and ordering Febre and Ace to pay $16,096,345 as equitable restitution to compensate the consumers. The FTC filed a new proposed order on October 8, 1996. However, more than three months later, a final written order still had not been entered, and Febre and Ace filed their notice of appeal on January 21, 1997. The FTC immediately filed its Motion for Entry of Final Judgment on January 30, 1997.
The district court granted the FTC's motion and entered its Order for Permanent Injunction and Final Judgment against Febre and Ace Publishing, Inc. on February 6, 1997. The final judgment granted the permanent injunction, ordered Febre and Ace to pay more than $16,000,000 in damages, and specified that if any money could not be distributed to the victims, then the excess should be paid to the United States Treasury as disgorgement of defendants' unjust enrichment.
Febre and Ace now appeal this award of equitable monetary relief. They argue that the district court abused its discretion by: (1) awarding damages at summary judgment without a hearing; (2) using the figures generated from the Pase Consumer database and the figures asserted by Pase employees to calculate damages; (3) calculating damages by consumers' losses rather than defendants' profits; and (4) ordering equitable disgorgement of damages to the United States Treasury.
As a threshold matter, an initial question arose as to whether we have jurisdiction to hear this appeal. Pursuant to the Federal Rules of Appellate Procedure, "a notice of appeal filed after the court announces a decision or order but before the entry of the judgment or order is treated as filed on the date of and after the entry." Fed. R.App. Pro. 4(a)(2). In FirsTier Mortgage Co. v. Investors Mortgage Ins. Co., the appellant filed a notice of appeal after the district court had granted summary judgment and requested the parties to submit a final order, but before the court had entered final judgment. FirsTier Mortg. Co. v. Investors Mortg. Ins. Co., 498 U.S. 269, 111 S.Ct. 648, 112 L.Ed.2d 743 (1991). The United States Supreme Court held that the subsequent entry of a final judgment validated the appeal under Federal Rule of Appellate Procedure 4(a)(2). Id. at 277, 111 S.Ct. at 653. Thus, the notice of appeal filed by Febre and Ace on January 21, 1997 was properly validated on February 6, 1997 when the district court entered its order and final judgment. Accordingly, we have jurisdiction to hear this appeal.
We also should clarify that this appeal involves only a question regarding the actual amount of damages awarded by the district court. We do not review the district court's grant of summary judgment, nor do we examine the power of the court to grant relief in this case. 3 We review only the narrow issue of whether the actual amount of damages awarded by the district court, $16,096,345, was calculated properly. We review a district court's grant of equitable relief for abuse of discretion. Weinberger v. Romero-Barcelo, 456 U.S. 305, 320, 102 S.Ct. 1798, 1807, 72 L.Ed.2d 91 (1982) (); SEC v. Advance Growth Capital Corp., 470 F.2d 40, 53 (7th Cir.1972) (...
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