Fed. Trade Comm'n v. Leshin
| Decision Date | 03 September 2010 |
| Docket Number | No. 09-11679,09-12003,09-15972 and 10-10875.,09-11679 |
| Citation | 618 F.3d 1221 |
| Parties | FEDERAL TRADE COMMISSION, Plaintiff-Appellee,v.Randall L. LESHIN, Randall L. Leshin, P.A., d.b.a. Express Consolidation, Express Consolidation, Inc., Charles C. Ferdon, Defendants-Appellants,Consumer Credit Consolidation, Inc., Maureen A. Gaviola, Defendants.Federal Trade Commission, Plaintiff-Appellee,v.Randall L. Leshin, Randall L. Leshin, P.A., also d.b.a. Express Consolidation, Express Consolidation, Inc., Charles C. Ferdon, Defendants-Appellants,Debt Management Counseling Center, Inc., Appellant,Consumer Credit Consolidation, Inc., Maureen A. Gaviola, Defendants.Federal Trade Commission, Plaintiff-Appellee,v.Randall L. Leshin, Randall L. Leshin, P.A., also d.b.a. Express Consolidation, Express Consolidation, Inc., Charles C. Ferdon, Defendants-Appellants,Debt Management Counseling Center, Inc., Appellant,Consumer Credit Consolidation, Inc., et al., Defendants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
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Richard W. Epstein, Rebecca F. Bratter, Greenspoon Marder, P.A., Ft. Lauderdale, FL, Victor S. Kline, Greenspoon, Marder, Hirschfeld & Rafkin, Ross & Berger, Orlando, FL, for all Appellants.
David L. Sieradzki, John F. Daly, Karen S. Hobbs, Michael E. Tankersley, Philip P Tumminio, Douglas V. Wolfe, FTC, Washington, DC, for FTC in all cases.
Theodore W. Atkinson, Roger A. Colaizzi, Mary Ellen Himes, Ari N. Rothman, Barbara L., Waite, Venable, LLP, Washington, DC, Kimberly Lynn Nelson, Venable, LLP, Vienna, VA, Herman J. Russomanno, Russomanno & Borrello, P.A., Miami, FL, for Leshin.
Richard J. Capriola, W. Hennen Ehrenclou, Marvin P. Pastel, II, Michael Weinstock, Weinstock & Scavo, P.C., Atlanta, GA, Gerald B. Wald, Murai, Wald, Biondo & Moreno, P.A., Coral Gables, FL, for Service.
Appeals from the United States District Court for the Southern District of Florida.
Before PRYOR and FAY, Circuit Judges, and QUIST,* District Judge.
This consolidated appeal presents the question whether the district court abused its discretion when it held the defendants in contempt for violating a stipulated injunction and when it ordered the defendants to disgorge all fees collected in violation of the injunction. The district court entered the injunction based on a complaint filed by the Federal Trade Commission against Randall Leshin, Randall Leshin, P.A., Express Consolidation, Inc., and Charles Ferdon for providing debt consolidation services in violation of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a), 53(b), 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act id. §§ 6101-6108. After entry of the injunction, the Commission moved for an order to show cause why the defendants and the Debt Management Counseling Center, Inc., a nonparty acting in concert, should not be held in contempt. After briefing and a two-day hearing, the district court held the defendants and the Counseling Center in contempt of the injunction and entered sanctions against them. We affirm.
We divide our discussion of the background of this appeal in three parts. First, we address the complaint and the stipulated injunction. Second, we address the clarification of the injunction by the district court. Third, we address the contempt proceedings and order of disgorgement.
As early as August 2003, Randall Leshin, an attorney from Florida, controlled Randall L. Leshin, P.A., and Express Consolidation, Inc., and used these entities to secure tens of thousands of contracts for debt consolidation. Leshin serves as the president of Express and, until January 2009, Charles Ferdon served as the vice president, secretary, and general manager of Express. Under the contracts for debt consolidation or debt management Leshin, P.A., and Express acted as intermediaries between consumers and their creditors for the purpose of obtaining more favorable terms of payment.
On December 12, 2006, the Federal Trade Commission filed a complaint against Randall Leshin; Randall L. Leshin, P.A.; Express Consolidation, Inc.; and Charles Ferdon. The complaint alleged that the defendants were conducting “unfair or deceptive acts or practices in or affecting commerce” and deceptive telemarketing practices and other abusive telemarketing acts or practices in violation of the Federal Trade Commission Act id. §§ 45(a), 53(b), 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act id. §§ 6101-6108. In an amended complaint, the Commission requested injunctive relief, imposition of a constructive trust on consumer fees, and the equitable remedies of disgorgement of profits, restitution, and rescission of the illicit contracts for debt consolidation.
The amended complaint also alleged that the defendants engaged telemarketers to conduct illegal telemarketing campaigns, which sent over 6.4 million prerecorded solicitation messages to prospective customers nationwide. These messages announced that Express Consolidation, a certified nonprofit organization, was offering to reduce dramatically the credit card payments of consumers. As alleged, these actions violated the Telemarketing Sales Rule, 16 C.F.R. § 310, and other restrictions on automated telemarketing by not allowing any consumer who answered the phone to connect to a live sales representative, delivering messages to thousands of people on the National “Do Not Call” Registry, and placing repeated calls to consumers who specifically requested not to be called by Express or telemarketers working on its behalf. The complaint alleged that the defendants mischaracterized the status of Express as a nonprofit entity, when in truth, Leshin or Leshin, P.A., a for-profit entity, received all fees from the contracts. In addition, the complaint alleged that the defendants misrepresented critical terms of the contracts for debt consolidation by making false claims about the program fees, the effects on interest rates and credit reports, and the total savings that would result from the program. The advertisements and contracts falsely represented that the defendants were qualified to offer services in every state and that any fees were adjusted to conform to state requirements, when in truth no fees were adjusted to comply with state limitations and the defendants were not qualified to offer services in a number of states.
In early 2007, after the Commission filed its complaint, Leshin and Ferdon incorporated Debt Management Counseling Center, Inc., and directed the employees of Express to secure contracts for debt consolidation in the name of the Counseling Center. The Counseling Center is wholly owned by RLL Holding Company, of which Leshin is the sole shareholder and director. Ferdon served as the president of the Counseling Center. The Counseling Center has only two directors, Matt Wiley and Michael Bradford, both of whom are employees of Express. The Counseling Center has no employees, and Leshin controls and supervises the actions of its directors and officers. The Counseling Center was never named as a defendant in the complaint filed by the Commission.
In March 2008, the defendants agreed to settle the charges against them, and the parties stipulated to an injunction, which the district court entered on May 5, 2008. Although the Counseling Center was not a named defendant in the original complaint, many provisions of the injunction apply to the Counseling Center, and Leshin acknowledged on behalf of the shareholders of the Counseling Center that they had received a copy of the injunction. The injunction enjoined the named defendants and their representatives, which the injunction defined as “successors, assigns, officers, agents, servants, employees and those persons in active concert or participation with Defendants who receive actual notice of this Order by personal service or otherwise.” The injunction enjoined the defendants and their representatives from making certain false representations regarding their services for debt consolidation or engaging in deceptive or abusive telemarketing practices; charging fees, or executing contracts with fees, that “are prohibited by or exceed applicable restrictions under state law” in the state in which the consumer resides; failing to comply with all requirements of state law, including “licensing, registration, reporting, audit, insurance, [and] escrow account” requirements in the state in which defendants offer services for debt consolidation; and “[o]ffering, entering into, or accepting the transfer of, a contract for debt consolidation services with a person when Defendants are not, at the time of the offer, transfer or execution of the contract, in compliance with legal requirements imposed by the state in which the person resides.”
The injunction also appointed a temporary monitor “for the purpose of monitoring certain payments and accounts, [and] providing notice to existing customers.” The injunction required the monitor to notify “existing clients” of the defendants and inform them of their rights. “Existing clients” are defined as persons who signed a contract for debt consolidation with the defendants, “including contracts under the name ‘Debt Management Counseling Center,’ ... or Debt Management Counseling Center, Inc.”; have not notified the defendants that they are canceling their contracts; and have made payments under the contracts to Leshin, Leshin, P.A., or the Counseling Center during the 60 days before entry of the injunction.
The injunction divided the monitor's task of notifying existing clients between those states where Express was legally qualified to provide services for debt management and those where it was not. The injunction defined when Express is “qualified to provide debt management services” in a state. If a state did not issue licenses for...
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