Fed. Trade Comm'n v. Leshin

• Decision Date: 05 June 2013
• Docket Number: No. 12–12811.,12–12811.
• Citation: 719 F.3d 1227
• Parties: FEDERAL TRADE COMMISSION, Plaintiff–Appellee, v. Randall L. LESHIN, Randall L. Leshin, P.A., d.b.a. Express Consolidation, et al., Defendants–Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

719 F.3d 1227

FEDERAL TRADE COMMISSION, Plaintiff–Appellee,

v.Randall L. LESHIN, Randall L. Leshin, P.A., d.b.a. Express Consolidation, et al., Defendants–Appellants.

No. 12–12811.

United States Court of Appeals, Eleventh Circuit.

June 5, 2013.

David Sieradzki, John F. Daly, Karen S. Hobbs, Malini Mithal, Robin L. Moore, Michael E. Tankersley, Douglas V. Wolfe, F.T.C., Office of Gen. Counsel, Washington, DC, for Plaintiff–Appellee.

Randall L. Leshin, pro se.

Appeal from the United States District Court for the Southern District of Florida.

Before BARKETT and MARCUS, Circuit Judges, and CONWAY,^* District Judge.

MARCUS, Circuit Judge:

This appeal presents an issue of first impression: whether a district court can convert the unpaid remainder of an equitable disgorgement remedy, stemming from a compensatory civil contempt sanction, into the legal remedy of a money judgment after the contemnor has disgorged as much money as he currently has the ability to pay. While this case is unusual, as the lack of precedent on the subject indicates, we conclude that the district court acted within the bounds of its broad discretion and, therefore, affirm.

I.

The underlying dispute that has given rise to this latest appeal is detailed in this Court's previous opinion in FTC v. Leshin, 618 F.3d 1221, 1227–31 (11th Cir.2010)(“ Leshin I”). The FTC sued Randall Leshin and his co-appellants (collectively referred to in this opinion as “Leshin”) based on deceptive marketing practices and other violations of the Federal Trade Commission Act committed by Leshin's debt-consolidation business. The parties settled the action, and the district court entered a stipulated injunction embodying that settlement in 2008. In 2009, based on Leshin's violations of the terms of that injunction, the district court held Leshin in civil contempt. As a compensatory civil contempt remedy, the district court ordered disgorgement of the gross receipts of Leshin's business during the relevant timeframe, which amounted to $594,987.90. Significantly, 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.”

On appeal, a panel of this Court affirmed the district court's finding of contempt based on Leshin's multiple violations of the terms of the stipulated injunction. Leshin I, 618 F.3d at 1232–37. The Court also affirmed the district court's power, in a civil contempt proceeding, to require disgorgement of the business's gross receipts rather than only its profits, along with the district court's method of calculating those receipts to produce the $594,987.90 figure that Leshin owed. Id. at 1237–38. Leshin also argued that the disgorgementof gross receipts rendered the sanction punitive, transformed the proceedings from civil to criminal contempt, and triggered his right to a jury trial. The panel rejected this claim too because the sanction remained compensatory and hence was civil in nature. It further held that Leshin had received due process because he had both notice and an opportunity to be heard. Id. at 1238–39. Finally, Leshin raised the issue now before us. Since the FTC had not yet applied to convert the disgorgement order into a money judgment, however, the panel in Leshin I found that the question of whether the district court had the power to convert an equitable remedy into a money judgment was not ripe for adjudication. See id. at 1239–40.

After losing his first appeal, Leshin failed to disgorge the roughly $590,000 required by the district court's first order of civil contempt. The district court then found him to be in contempt still again (this time, to be precise, in contempt of the disgorgement order) and ordered him to pay $92,671—the total amount that the court found that he was then able to pay—or face jail time. Notably, this second contempt proceeding was coercive in nature, not compensatory, and Leshin purged the second contempt by paying the $92,671. The original disgorgement order, less the $92,671, remained in effect.

The FTC subsequently moved to convert the remainder of the original disgorgement order, which was roughly $500,000, into a money judgment. The district court referred this matter to a magistrate judge, who recommended granting the FTC's motion. Leshin objected, but to no avail; the district court adopted the magistrate's report and recommendation and granted the FTC's motion. The district court elaborated on its reasons for granting the motion, beginning with the observation that it possessed “broad, inherent authority to remedy civil contempt.” As for Leshin's argument that the district court could not convert the equitable remedy into a legal one, the court found no basis for this assertion, as “[t]he only requirement is that the sanction be compensatory,” and Leshin had “cite[d] no authority for [his] argument that legal remedies are beyond the Court's reach in fashioning civil contempt sanctions.” The district court was also unpersuaded by Leshin's suggestion that the imposition of a money judgment would require a jury trial; since the money judgment arose out of a compensatory civil contempt proceeding, all that due process required was that Leshin receive notice and the opportunity to be heard. The district court finally rejected Leshin's claim that his contempt necessarily came to an end when he no longer had an ability to pay, since that rule applied primarily to “coercive contempt sanctions, but not compensatory contempt sanctions.” The district court therefore entered a money judgment of $502,316.90 against Leshin.

Leshin timely appealed.

II.

“We review the remedial relief granted as a contempt sanction for an abuse of discretion.” Leshin I, 618 F.3d at 1231 (citing McGregor v. Chierico, 206 F.3d 1378, 1388 (11th Cir.2000)). “A district court abuses its discretion if it applies an incorrect legal standard, applies the law in an unreasonable or incorrect manner, follows improper procedures in making a determination, or makes findings of fact that are clearly erroneous.” Thomas v. Blue Cross & Blue Shield Ass'n, 594 F.3d 814, 821 (11th Cir.2010) (internal quotation marks omitted).

A.

The core of Leshin's appeal is his argument that the district court abused its discretion by converting the unpaid remainder of its disgorgement order, an equitable remedy, into a money judgment, a legal remedy. We begin with the observation that the original disgorgement order arose out of civil contempt, an area where the district court has extremely broad and flexible powers. There is no dispute that Leshin was in contempt of the stipulated injunction. Therefore, the district court had “wide discretion in fashioning an equitable remedy for [Leshin's] civil contempt.” McGregor, 206 F.3d at 1385 n. 5 (citing United States v. City of Miami, 195 F.3d 1292, 1298 (11th Cir.1999)). “[S]anctions in civil contempt proceedings may be employed for either or both of two purposes: to coerce the defendant into compliance with the court's order, and to compensate the complainant for losses sustained.” Local 28 of Sheet Metal Workers' Int'l Ass'n v. EEOC, 478 U.S. 421, 443, 106 S.Ct. 3019, 92 L.Ed.2d 344 (1986) (internal quotation marks omitted). A coercive contempt sanction comes with some limitations; for instance, once a contemnor's contumacious conduct has ceased or the contempt has been purged, no further sanctions are permissible. See Leshin I, 618 F.3d at 1239 (“A contemnor need only be afforded the opportunity to purge his sanction of a fine, in the civil context, where a fine is not compensatory.”). On the other hand, we have repeatedly stressed that “the district court's discretion in imposing non-coercive sanctions is particularly broad and only limited by the requirement that they be compensatory.” Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1521 (11th Cir.1990); see also Leshin I, 618 F.3d at 1239. Indeed, the Supreme Court has observed that district courts possess particularly expansive and flexible powers in these circumstances: “The measure of the court's power in civil contempt proceedings is determined by the requirements of full remedial relief.” McComb v. Jacksonville Paper Co., 336 U.S. 187, 193, 69 S.Ct. 497, 93 L.Ed. 599 (1949); cf. AT&T Broadband v. Tech Commc'ns, Inc., 381 F.3d 1309, 1316 (11th Cir.2004) (“[W]hen the public interest is involved ..., [the district court's] equitable powers assume an even broader and more flexible character.” (alterations in original) (internal quotation marks omitted)).

At the outset of the contempt proceedings, on this record, the district court could have granted a money judgment, rather than a disgorgement order, as the remedy for Leshin's civil contempt. We know this because, for one thing, Leshin conceded this point both in his briefs and at oral argument. In his initial brief, Leshin said, “The FTC could have sought a contempt sanction of a compensatory money judgment, but instead specifically asked for disgorgement.” His reply brief reiterated this concession: “The FTC says that the district court could have entered a money judgment all along. Defendants do not dispute that assertion.” Leshin is right that the district court could have done so. Although we have found no case squarely on point, the Supreme Court and at least one court of appeals have acknowledged that a court can issue a money judgment as a remedy for civil contempt. See De Beers Consol. Mines, Ltd. v. United States, 325 U.S. 212, 220, 65 S.Ct. 1130, 89 L.Ed. 1566 (1945) (containing dicta regarding “process which conceivably may be issued for satisfaction of a money judgment for contempt” (emphasis added)); In re Prof'l Air Traffic Controllers Org., 699 F.2d 539, 542 (D.C.Cir.1983) (describing how one party “registered its three civil contempt money judgments” (emphasis added)). Moreover, the district...