Case 0:14-cv-60166-RNS Document 174 Entered on FLSD Docket 08/13/2021 Page 1 of 13
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`United States District Court
`for the
`Southern District of Florida
`
`
`Federal Trade Commission, Plaintiff
`
`v.
`
`Acquinity Interactive, LLC, and
`others, Defendants
`
`
`)
`)
`)
`)
`)
`)
`
`Civil Action No. 14-60166-Civ-Scola
`
`Omnibus Order
`This matter is before the Court upon the FTC’s motions for a preliminary
`injunction (ECF No. 138) and for an order to show cause why Robert Zangrillo,
`Brent Levison, and Elisha Rothman should not be held in contempt. (ECF No.
`137.) The Court has reviewed the motions and the relevant legal authorities and
`grants the FTC’s motion for a preliminary injunction (ECF No. 138) and grants
`in part and denies in part the FTC’s motion for an order to show cause (ECF No.
`137.) The Court also grants the FTC’s request to set a briefing schedule on
`summary contempt proceedings. (ECF No. 170.)
`Before beginning its analysis, the Court notes that the FTC’s motion is
`styled as a motion for a temporary restraining order, but in its briefing, the FTC
`stated its belief that the Court may enter a preliminary injunction without an
`evidentiary hearing once the Contempt Defendants, as defined below in this
`order, have had an opportunity to fully respond to the FTC’s motion, including by
`submitting any evidence or affidavits the Contempt Defendants seek to rely on in
`connection with responding to the FTC’s motion. Contempt Defendants Katz,
`Levison, and Rothman do not contest the FTC’s assertion, but merely state that
`they “do not concede that the FTC has proven that the websites were deceptive
`and specifically maintain the arguments made and evidence adduced at the
`preliminary-injunction hearing” in FTC v. On Point Global, 19-25046-Civ (S.D.
`Fla.) (the “On Point Matter”). (ECF No. 160, at 13 n.5.) Conversely, Robert
`Zangrillo and certain of the Entity Defendants, including Dragon Global LLC,
`Dragon Global Management LLC, and Dragon Global Holdings LLC argue that the
`Court “must hold a hearing prior” to granting a preliminary injunction because
`these respondents state that they “dispute nearly every factual assertion that the
`FTC makes.” (ECF No. 163, at 32.) The Court previously held a two-day
`evidentiary hearing on the FTC’s motion for a Preliminary Injunction in the On
`Point Matter, where the Court found a preliminary injunction was warranted
`based on the evidence presented to the Court, as further set forth in this order.
`Because Court has already found the FTC is likely to succeed on the merits in the
`On Point Matter with respect to all of the Contempt Defendants, the Court finds it
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`does not need additional evidence prior to entry of a preliminary injunction.
`Rather, the true questions at issue for the Court to decide are whether Katz’s
`settlement with the FTC is enforceable, whether the Contempt Defendants had
`actual notice of the Acquinity order, and whether the FTC satisfies the standard
`for entry of a preliminary injunction based on contemptuous conduct in the On
`Point Matter. In light of these considerations, the parties’ submissions in
`connection with the FTC’s motion, and proceedings in the On Point Matter, the
`Court does not find an evidentiary hearing is necessary before for the Court can
`enter a preliminary injunction. As such, and because all parties have had an
`opportunity to respond and submit evidence and affidavits in this matter, the
`Court construes the FTC’s motion as a motion for preliminary injunction.
`
`1. Background
`In 2014, the FTC settled a lawsuit against Burton Katz and others for his
`role in a “mobile-billing cramming scheme,” which entailed using “unsolicited text
`messages to lure consumers to fraudulent ‘free merchandise websites’” and then
`requiring those consumers to “provide personal information to qualify for free
`merchandise that did not exist or was unobtainable.” (ECF No. 160, at 2.) The
`personal information provided by the consumers was also used by the Defendants
`to identify targets to receive unsolicited pre-recorded phone messages. As part of
`this scheme, Katz utilized a company “Polling Associates, Inc.,” an SMS
`technology platform, which the Defendants utilized to place a $9.99 recurring
`charge on consumer’s telephone bills. (Id. at 3.) The FTC and Katz reached a
`settlement in October 2014 and Katz agreed he was permanently enjoined from
`“billing, submitting for billing, or assisting or facilitating the billing or submitting
`for billing, charges to any telephone bill, including but not limited to a bill for any
`voice, text, or data service.” (ECF No. 132, at 3.) Section II of Katz’s settlement
`with the FTC also noted that he, and any “officers, agent, servants, and
`employees, and all other persons in active concert or participation . . . who receive
`actual notice of this Order, whether acting directly or indirectly” are enjoined
`from, “in connection with the advertising, marketing, promotion, offering for sale,
`sale, or distribution of any product or service . . . making, or assisting others in
`making, expressly or by implication, any false or misleading material
`representation, including representations concerning the cost, performance,
`efficacy, nature, characteristics, benefits, or safety of any product or service, or
`concerning any consumer’s obligations to pay for charges for any product or
`service.” (Id.) The Court entered a Stipulated Final Judgment and Order for
`Permanent Injunction and Other Equitable Relief as to Burton Katz and others on
`October 16, 2014. (ECF No. 132.)
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`On February 12, 2020, the FTC filed a motion in this matter, seeking to
`show cause why Katz and the Entity Defendants1 should not be held in contempt
`for violating the FTC’s 2014 settlement. (ECF No. 135.) The FTC noted that Katz
`was named in another lawsuit, the On Point Matter, which alleged that Katz, in
`concert with the other On Point Matter defendants was operating “a sprawling
`online scheme that deceives consumers into providing money and their personal
`information . . . by promising a quick and easy government service” such as
`renewing a license, when in fact, the consumers would only receive “a PDF
`containing publicly available, general information about the service they sought.”
`(ECF No. 135, at 1.) The Court granted the FTC’s motion and stated it would hold
`a show cause hearing contemporaneously with trial in the On Point Matter at
`which time the Court would determine why Katz and the Entity Defendants
`should not be held in contempt for violating the settlement. (ECF No. 136.)
`The FTC now claims, through discovery in the On Point Matter, that they
`learned certain individual defendants in the On Point Matter, Robert Zangrillo,
`Brent Levison, and Elisha Rothman, were aware of Katz’s settlement with the FTC
`but despite their awareness of the settlement, acted in concert with Katz to violate
`its terms. Accordingly, the FTC asks the Court to hold a show cause hearing with
`respect to these individuals as well. The FTC also asks the Court to enter a
`preliminary injunction and freeze the assets of these individuals, Burton Katz,
`and the Entity Defendants pending conclusion of these contempt proceedings.
`
`2. Legal Standards
`A. Contempt
`The Court has authority to enforce its orders through civil contempt.
`Shillitani v. United States, 384 U.S. 364, 370 (1966). Contempt is established
`where there is clear and convincing evidence that the violated order 1) was valid
`and lawful; 2) was clear and unambiguous; 3) and where the alleged contemnor
`had the ability to comply. FTC v. Leshin, 618 F.3d 1221, 1232 (11th Cir. 2010).
`The Court may only enter “an order requiring the [d]efendant to show cause why
`the defendant should not be held in contempt” if “the court finds that the conduct
`as alleged would violate the order.” Mercer v. Mitchell, 908 F.2d 763, 765 (11th
`Cir. 1990). Pursuant to Federal Rule 65(d)(2), the Court must also find that the
`individual in question had “actual notice” of the order in question. Fed. R. Civ. P.
`65(d)(2).
`
`
`1 The Entity Defendants are: On Point Global LLC; On Point Employment LLC; On Point Guides
`LLC f/k/a Rogue Media Services LLC; Dragon Global Holdings LLC; Cambridge Media Series LLC
`f/k/a License America Media Series LLC; Issue Based Media LLC; DG DMV LLC; Direct Market
`LLC; and Bronco Family Holdings LP a/k/a Bronco Holdings Family LP.
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`B. Preliminary Injunction
`“[I]n determining whether to grant a preliminary injunction . . . a district
`court must 1) determine the likelihood that the FTC will ultimately succeed on
`the merits and 2) balance the equities.” FTC v. University Health, Inc., 938 F.2d
`1206, 1217-18 (11th Cir. 1991). To obtain a preliminary injunction, the FTC need
`not show irreparable harm. Id. at 1218. The FTC is also freed “from its burden of”
`showing “a ‘substantial’ likelihood of success” as is required by private litigants.
`FTC v. Sterling Precious Metals, LLC, 894 F. Supp. 2d 1378, 1383 (S.D. Fla. 2012)
`(Marra, J.).
`
`3. Analysis
`A. Contempt Proceedings
`The FTC states in its motion that at the time it moved for contempt against
`Katz, the FTC was not aware that Zangrillo, Levison, and Rothman each had
`notice of Katz’s settlement, but through discovery in the On Point Matter, came to
`learn that each of these individuals had contemporaneous knowledge of the order
`and acted in concert with Katz to violate it while carrying out the deceptive
`practices that gave rise to the On Point Matter.
`Zangrillo, Rothman, and Levison contend the Court should not require
`them to show cause why they should not be held in contempt because 1) Section
`II the FTC’s settlement with Katz is not clear, definite, unambiguous, valid or
`enforceable; 2) the FTC has failed to show that these individuals had notice of the
`order; and 3) in any event, the FTC has failed to show non-compliance.
`
`a. The Acquinity Settlement
`In support of their arguments that they should not be made to show cause,
`Zangrillo, Levison, and Rothman state that the FTC’s order was not clear and
`unambiguous and that it was not a valid and lawful settlement. Moreover, they
`state that the order does not describe in sufficient detail the conduct that was to
`be enjoined in violation of Federal Rule 65. Specifically, these individuals state
`that they believe the FTC’s settlement with Katz is a “quintessential obey the law
`injunction” which provides little information to Katz or others what conduct is
`enjoined, instead simply telling them they must obey the law. (ECF No. 159, at 8.)
`In response, the FTC acknowledges that an “obey the law” order may be too
`ambiguous to be enforced, but notes that the Eleventh Circuit has held there is
`nothing inherently wrong with an injunction instructing individuals to obey the
`law, and in any event, the FTC claims that the FTC’s settlement with Katz
`required Katz and others affiliated with Katz from doing more than simply obeying
`the FTC Act. See FTC v. Nat’l Urological Grp. Inc., 786 F. App’x 947, 956 n.3 (11th
`Cir. 2019) (“an injunction that simply tells a defendant to obey the law can be too
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`ambiguous. But aside from concerns about clarity, there is nothing inherently
`wrong with an injunction that instructs a party to comply with a specific law.”).
`The Court agrees with the FTC that Section II of the FTC’s settlement with
`Katz is not so vague and ambiguous as to be an impermissible obey the law
`injunction. The FTC Act provides that “unfair methods of competition in or
`affecting commerce, and unfair or deceptive acts or practices in or affecting
`commerce, are hereby declared unlawful.” 15 U.S.C. § 45(a)(1). The FTC’s
`settlement with Katz, however, enjoined Katz and others from “in connection with
`the advertising, marketing, promotion, offering for sale, sale, or distribution of
`any product or service . . . making, or assisting others in making, expressly or by
`implication, any false or misleading material representation, including
`representations as to the cost, performance, efficacy, nature, characteristics,
`benefits, or safety of any product or service, or concerning any consumer’s
`obligation to pay for charges for any product or service.” (ECF No. 132, at 3.) The
`settlement, therefore, is more specific than the much broader provision of the FTC
`Act which makes deceptive acts or practices in commerce unlawful, generally
`speaking.
`Moreover, as the FTC notes in its briefing, fencing-in relief has been
`approved by the Supreme Court, which allows the FTC to “prohibit[] respondents
`from engaging in similar practices with respect to ‘any product’ they advertise.”
`FTC v. Colgate-Palmolive, Co., 380 U.S. 374, 384 (1965). In Palmolive, the
`Supreme Court stated “the propriety of a broad order depends upon the specific
`circumstances of the case, but the courts will not interfere except where the
`remedy selected has no reasonable relation to the unlawful practices found to
`exist.” Id. at 394-95. Here, the conduct which led to the Katz settlement in
`Acquinity was not so different from the conduct which led the FTC to file its
`complaint in the On Point Matter and therefore has a reasonable relation to the
`unlawful practices previously found to exist. For instance, both the Acquinity
`action and the On Point Matter involved a scheme in which Katz and others
`fraudulently represented to consumers that products or services were available to
`them when in fact that was not the case. In the Acquinity action, the scheme
`involved luring consumers to “fraudulent ‘free merchandise websites’” requiring
`the consumers to provide personal information for products that were not
`available. That information was then utilized to target victims of Katz’s “mobile-
`billing cramming scheme.” Similarly, in the On Point Matter, Katz and others
`developed “patently misleading” websites in order to trick consumers into
`thinking they could easily obtain government services through such websites,
`when no such government service was provided—all the consumers would receive
`was a guide that could have been obtained for free elsewhere on government
`sites. Thus, Section II of the Katz settlement, in addition to not being an “obey the
`law” injunction, appropriately ring-fences Katz and others from deceiving
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`consumers into providing them items of value by promising them that certain
`products are available to them, when in fact that was not the case.
`
`b. Knowledge of the Acquinity Settlement
`Next the Court considers whether Zangrillo, Levison, and Rothman had
`knowledge of the Acquinity settlement. Turning first to Levison, in his deposition,
`Levison admitted that he has seen the Acquinity settlement and that he was made
`aware of it by Katz “when it got resolved or when it got entered into.” (Levison
`Dep., ECF No. 144-13, at 237:14-239:9.) Katz appears to confirm the same in a
`compliance report he provided in connection with his Acquinity settlement. In his
`report, Katz stated “at or around the time of the entry of the Order,” Katz had a
`verbal communication with Levison “regarding the substance of the Order.” (ECF
`No. 140-19, at 2.) Therefore, the Court finds that Levison had actual notice of the
`Katz settlement.
`Similarly, with regards to Rothman’s knowledge of the Acquinity settlement,
`the Court notes that Rothman also had contemporaneous knowledge of Katz’s
`settlement with the FTC. While Rothman claims not to have reviewed the
`Acquinity settlement, he nonetheless states that “around the end of 2014,
`beginning of 2015” he had a “conversation with Mr. Katz” about his litigation with
`the FTC. (Levison Dep., ECF No. 144-12, at 317:1-320:10.) In his deposition,
`Levison states that he was aware Katz had settled with the FTC to resolve the
`issues being litigated in the Acquinity action. Id. Moreover, just as with Levison,
`Katz’s compliance report similarly confirms that he had a conversation with
`Rothman “regarding the substance of the Order.” (ECF No. 140-19, at 2.)
`Therefore, the Court also finds that Rothman had actual notice of the order at
`issue.
`Finally, with respect to Zangrillo, the FTC states that it can be inferred that
`Zangrillo had notice of Katz’s settlement with the FTC because “Zangrillo directly
`paid Katz’s full judgment amount of $704,244 in the Acquinity case from his
`personal account to Katz’s law firm’s escrow account on the date the judgment
`was due” and because Zangrillo “participated in at least one call with Linda
`Goldstein, who represented Katz in the Acquinity matter, regarding Katz’s
`settlement with the FTC.” (ECF No. 137, at 14.) In response, Zangrillo states that
`the record developed in the On Point Matter is clear that while he did have a call
`with Mr. Katz’s law firm to be sure there “was no pending or legal restrictions that
`Mr. Katz had that would prohibit” Zangrillo and Katz from doing busines together,
`Zangrillo states that at no point did he become aware that the “FTC had sued Mr.
`Katz” and that the extent of his knowledge was that “there was no existing
`litigation against Mr. Katz”; that “he had no convictions or accusations of any
`felony”; and that “[h]e had prior civil litigation, not knowing [with] who, and that
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`there was no restrictions on his ability to serve as an officer or director of a
`venture backed company.” (Zangrillo Dep., ECF No. 144-11, at 278:1-20.)
`Zangrillo confirmed again in his deposition that he was not aware that Katz had
`been sued by the FTC and simply knew the civil litigation pertained to “mobile
`billing and [was] similar to civil litigation that was against Verizon and other
`mobile phone carriers.” (Id. at 279:4-18.) Zangrillo further confirmed that he did
`not inquire about the outcome of the litigation, as he simply wanted to ensure
`that “there was no restrictions or anything to worry about” and that question had
`been answered to his satisfaction. (Id. at 280:14-23.) Katz, in his deposition,
`stated that he may have told Zangrillo “about a settlement, but I definitely never
`showed Mr. Zangrillo the provisions of the order” and when asked if Katz told
`Zangrillo the settlement was with the FTC, he stated “I believe so. I believe so. I
`can’t affirmatively say yes, but I believe so. I don’t know.” (Katz Dep., ECF No.
`144-10, at 108:11-109:22.) Conflictingly, in Katz’s same compliance report,
`unlike with regards to Rothman and Levison, Katz stated he had “at least one
`verbal communication . . . regarding the settlement of a civil action” and that Katz
`“does not recall discussing the existence of the Order” with Zangrillo. (ECF No.
`140-19, at 2.)
`It appears then, that Mr. Zangrillo did not receive notice of the Katz’s
`settlement with the FTC as part of his diligence with respect to beginning a
`business relationship with Katz. Nonetheless, the FTC urges the Court to look to
`circumstantial evidence to find that Zangrillo was aware of Katz’s settlement,
`namely, the fact that Zangrillo paid the exact amount of Katz’s $704,244.00
`settlement to Katz’s lawyers on the day his payment was due to the FTC. (See
`ECF No. 145, at 3 (showing payment of $704,244.00 at the request of Robert
`Zangrillo to Katz’s attorneys).) Even assuming that the FTC is correct that notice
`of an injunction can be shown by circumstantial evidence, the Court does not
`find that the FTC has pointed to circumstantial evidence showing that Zangrillo
`had notice of Katz’s settlement with the FTC. Rather, what the record shows is
`that Zangrillo conducted a diligence session with Katz’s attorneys, received notice
`that Katz had settled a civil litigation involving mobile billing, and made a
`payment in an amount that satisfied Katz’s settlement with the FTC while Katz
`was experiencing “liquidity issues.” (Katz Dep., ECF No. 144-10, at 99:13-100:12.)
`This is not enough to support a finding that Zangrillo had actual notice of Katz’s
`settlement to support a potential finding of contempt.
`Finally, Rothman argues, even if he was aware of the existence of Katz’s
`settlement with the FTC, he must be aware “not only that there is an order, but of
`the terms of the order.” (ECF No. 159, at 12.) At the outset, the Court notes that
`the record appears to support that Rothman did have notice of Katz’s settlement,
`including it terms. As noted above, Rothman had a discussion with Katz about
`his litigation with the FTC, knew that Katz had settled with the FTC to resolve the
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`Acquinity action, and moreover Katz reported that he discussed “the substance of
`the Order” with Rothman. While Rothman argues this is a non-event and
`consistent with his deposition testimony, the Court does not agree and finds that
`the fact Katz and Rothman discussed the Acquinity litigation, including the
`substance of his settlement, shows that Rothman had notice of the settlement.
`Even so, notwithstanding the above, the Court agrees with the FTC—adopting the
`reasoning advanced by Rothman would allow an individual who is aware of an
`order’s existence to otherwise “maintain a studied ignorance of the terms of the
`decree in order to postpone compliance and preclude a finding of contempt.”
`United States v. Planes, No. 8:18-cv-2726-T-23TGW, 2019 WL 3024895, at *8
`(M.D. Fla. July 11, 2019). Instead, what is required in a contempt action is
`“knowledge of the mere existence of the injunction; not its precise terms.” FTC v.
`Neiswonger, 494 F. Supp. 2d 1067, 1079 (E.D. Mo. 2007); see also Gen. Motors
`Corp. v. Gibson Chem. & Oil Corp., 627 F. Supp. 678, 681-82 (E.D.N.Y. 1986) (“It
`is clear, however, that the knowledge required of a party in contempt is
`knowledge of the existence of the order . . . not knowledge of the particulars of
`that order.”).
`Therefore the Court finds that Levison and Rothman, but not Zangrillo had
`actual notice of the Katz settlement, sufficient to support a potential finding of
`contempt.
`
`c. Entity Defendants
`On May 14, 2021, the Entity Defendants filed a motion in response to the
`FTC’s February 12, 2020 motion for an order to show cause as to why Burton
`Katz and twelve Corporate Defendants in the On Point Matter should not be held
`in contempt. (ECF Nos. 158; 162; and 163.) However, this appears to ignore the
`Court’s February 14, 2020 order which already required the Entity Defendants to
`show cause as to why they should not be held in contempt for violating the Katz
`settlement. These Entity Defendants neither sought reconsideration of the Court’s
`prior order which has been in place for sixteen months and the Court declines to
`disturb this order with respect to the Entity Defendants. The Court’s prior ruling,
`therefore, stands and the Entity Defendants must show cause as they were
`already required to do.
`
`d. Violation of the Order
`As the Court found the FTC has not shown Zangrillo had notice of Katz’s
`settlement, the Court will consider only whether the FTC has shown that there is
`clear and convincing evidence that Levison and Rothman violated the Acquinity
`order. Whether or not these individuals intended to violate the Katz settlement is
`irrelevant. Courts “do not focus on the subjective beliefs or intent of the alleged
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`contemnors in complying with the order, but whether in fact their conduct
`complied with the order at issue.” FTC v. Leshin, 618 F.3d 1221, 1233 (11th Cir.
`2010) (internal quotations omitted). “The only issue is compliance.” Id. at 1232.
`At its two-day long preliminary injunction hearing in the On Point Matter,
`the Court found the “Defendants have engaged in . . . acts or practices that
`violate Section 5(a) of the FTC Act . . . and that Plaintiff is therefore likely to
`prevail on the merits of this action.” (ECF No. 126, at 2, On Point Matter.) This
`finding was based on “undercover purchases; consumer complaints and
`declarations; expert testing; corporate, banking, and payment processing records;
`and additional documents filed by the FTC” which showed the FTC would have a
`likelihood of success in showing that Defendants deceived consumers “by
`misrepresenting the services they offer, thus inducing consumers to pay money or
`divulge personal information under false pretenses” through “websites [that] were
`patently misleading.” (Id.)
`The evidence submitted by the FTC in connection with its motion for an
`order to show cause shows that, consistent with the Court’s prior findings in the
`On Point Matter, that the Defendants have engaged in acts that appear to violate
`the Katz settlement in this action. The Court finds it is proper for Levison and
`Rothman to show cause why they should not be held in contempt for violating
`Katz’s settlement with the FTC in Acquinity based on the Court’s prior preliminary
`injunction hearing and the evidence submitted in connection with the briefing of
`this issue.
`
`B. Preliminary Injunction
`Knowing that Katz, Levison, Rothman and the Entity Defendants (the
`“Contempt Defendants”) will be required to show cause for potentially violating
`Katz’s settlement with the FTC, the Court now turns to the FTC’s request to enter
`a preliminary injunction with respect to the Contempt Defendants. The FTC
`states in its motion that it is moving in “this contempt matter to maintain the
`asset freeze to protect its ability to recover civil contempt compensatory relief,
`which remains available regardless of the Change in the interpretation of Section
`13(b) of the FTC Act” by the Supreme Court in AMG Capital Management, LLC v.
`FTC, 141 S. Ct. 1341 (2021). In AMG, the Supreme Court found that “Section
`13(b) does not authorize the award of equitable monetary relief.” In response, and
`in light of AMG, the Contempt Defendants argue that the FTC’s request for a
`preliminary injunction is “an impermissible end run around AMG”; that monetary
`contempt sanctions are unavailable to the FTC; that any potential order of
`monetary contempt must be limited to each individual’s putative benefit; and that
`the balance of the equities favors denying the FTC’s request. (ECF No. 160, at 15-
`20.)
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`The Court turns first to the Contempt Defendants’ argument that the FTC’s
`request for a preliminary injunction is an impermissible end-run around AMG. In
`response to this argument, the FTC concedes “it cannot now obtain monetary
`relief under Section 13(b), but continues to seek that relief on legally solid
`grounds: civil contempt.” (ECF No. 168, at 10.) The Court agrees with the FTC
`that the FTC’s tactical decision to change strategy in the wake of the AMG
`decision is not an impermissible “end-run” around a Supreme Court decision, but
`rather, is an attempt by the FTC to utilize another tool at its disposal to hold the
`Contempt Defendants accountable for allegedly violating Katz’s settlement with
`the FTC, which they were aware of, in the Acquinity action.
`Next, the Court turns to the Contempt Defendants’ argument that
`monetary contempt sanctions are unavailable to the FTC. As an initial matter, the
`Court agrees with the FTC that generally speaking there remain certain avenues
`the FTC can pursue to obtain monetary remedies, including those pursuant to
`Section 19, 15 U.S.C. § 57b of the FTC Act, though the Court notes that is not the
`provision the FTC is proceeding under here. In an earlier decision in the On Point
`Matter, the Court noted that the bounds of any contempt sanctions would likely
`trace the bounds of Section 13(b), which the Contempt Defendants have
`described as an “admonishment,” but the Court’s statement should not be read
`as limiting the Court’s authority to enter monetary sanctions where it is
`appropriate to do so. In Leshin, the Eleventh Circuit found it was not an abuse of
`discretion to order disgorgement of gross receipts upon a finding of contempt, and
`noted that the Tenth Circuit, Seventh Circuit, and Ninth Circuit are in accord
`with this approach. 618 F.3d at 1237. Indeed, the Eleventh Circuit noted that
`district courts are granted “wide discretion in fashioning an equitable remedy in
`civil contempt, which includes ordering disgorgement.” Id.
`In any event, contempt remedies are not limited by the bounds of the FTC
`Act, though Courts turn to statutes such as Section 13(b) prior to AMG, Section
`19 of the FTC Act, or other similar statutes, which provide guidance to courts
`when they seek to craft an appropriate remedy in response to a finding of
`contempt. Indeed, in McGregor v. Chierico, the Eleventh Circuit noted that “the
`inherent equitable powers of the federal courts authorize the district court to
`order payment of consumer redress for injury caused by . . . contumacious
`conduct.” 206 F.3d 1378, 1387 (11th Cir. 2000). Far from Section 13(b) limiting
`the Court’s authority to utilize disgorgement as a remedy in fashioning a
`contempt remedy, the Eleventh Circuit noted that courts may find it useful to
`turn to “the remedy for [a] statutory violation” as instructive for a court where a
`court is seeking to craft a contempt sanction and the “contemptuous conduct is
`closely akin” to the statutory violation. Id. at 1387-88. It is not as if consumer
`redress is unavailable at all to the FTC, as consumer redress is still available
`under Section 19, which the Court could turn to as an alternative statutory basis
`
`

`

`Case 0:14-cv-60166-RNS Document 174 Entered on FLSD Docket 08/13/2021 Page 11 of 13
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`for guidance. See AMG, 141 S. Ct., at 1349 (“The Commission may obtain
`monetary relief by . . . invoking . . . § 19’s redress provisions.”). Regardless of
`whether the Court were to turn to Section 13(b) or Section 19 as guidance,
`district courts are not required to reference a statute when crafting contempt
`sanctions. Howard Johnson Co., Inc. v. Khimani, 892 F.2d 1512, 1519 (11th Cir.
`1990) (noting reference to Lanham Act as guide in structuring civil contempt
`sanctions was within the district court’s “discretion.”). Therefore, the Court
`disagrees that monetary remedies are unavailable to the FTC.
`The Court turns now to the Contempt Defendants’ argument that the
`Court’s authority to issue an equitable monetary remedy is limited to
`disgorgement, not of net revenues on a joint and several basis. (ECF No. 160, at
`19.) The Contempt Defendants state an award must be limited to the amount of
`each Contempt Defendants’ purported benefit. (Id.) In response, the FTC argues
`that the Contempt Defendants’ arguments ignore Supreme Court and Eleventh
`Circuit precedent.
`As the basis for its argument, the Contempt Defendants argue that district
`courts may not utilize civil contempt power to impose a punitive or criminal
`contempt sanction, a concept which according to the Contempt Defendants the
`Supreme Court recently explored in, Liu v. Securities and Exchange Commission,
`140 S. Ct. 1936 (2020). The Court, however, does not read Liu as broadly as the
`Contempt Defendants. In Liu, the Supreme Court cautioned courts from “test[ing]
`the bounds of equity practice” by, among other things, “ordering the proceeds of
`fraud to be deposited in Treasury funds instead of disbursing them to victims.”
`Id. at 1946. The Court notes, however, that Liu was not decided in the context of
`a contempt proceeding, and is therefore distinguishable. While Liu did discuss
`principles of equity, as the Contempt Defendants note, the question the Supreme
`Court decided in Liu was “whether, and to what extent, the SEC may seek
`‘disgorgement’ in the first instance through its power to award ‘equitable relief’
`under 15 U.S.C. § 78u(d)(5), a power that historically excludes punitive sanctions.”
`Id. at 1940 (emphasis added). The answer to that question is that “a disgorgement
`award that does not exceed a wrongdoer’s net profits and is awarded for victims is
`equitable relief under § 78u(d)(5).” Id. (emphasis added). As the Court noted in a
`prior decision in this ma