Court May Convert Unpaid Portion of Disgorgement Remedy, Imposed as Compensatory Civil Contempt Sanction, into Money Judgment after Contemnor Has Disgorged What It Can — Breadth of, and Limitations on, Contempt—Good Quotes—No Election of Remedies
Federal Trade Comm’n v. Leshin, 719 F.3d 1227 (11th Cir. 2013):
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.***
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. ***
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 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, 226 U.S. App. D.C. 1 (D.C. Cir. 1983) (describing how one party "registered its three civil contempt money judgments" (emphasis added)). Moreover, the district court's decision to grant a money judgment would have accorded with the general equitable principle (albeit one rarely invoked) that "where the aggrieved party shows entitlement to equitable relief, but a grant appears to be impossible or impracticable, the court may nevertheless proceed with the case . . . , awarding damages or a money judgment in lieu of the requested equitable remedy." Millsap v. McDonnell Douglas Corp., 368 F.3d 1246, 1265 (10th Cir. 2004) (emphasis added) (internal quotation mark omitted).
If the district court could have granted either disgorgement or a money judgment as a remedy for Leshin's civil contempt, we are at a loss to see why the district court lacked the power to grant both the equitable remedy and the legal one so long as it did not permit double recovery. Thus, at the front end of this controversy the district court could have granted a disgorgement order covering some proportion of the total compensatory award and a money judgment for the remainder. While this bifurcation of remedies would be unusual, courts in other contexts regularly grant both equitable and legal relief. The most common combination of equitable and legal remedies, for instance, is a district court's grant of both an injunction that prevents future harm along with an award of damages that compensates for past harm. See, e.g., Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1232 (11th Cir. 2009). A court may also grant an aggrieved party both specific performance of a contract along with damages resulting from the defendant's delay in performing his obligations under that contract. See Bracken v. Atlantic Trust Co., 36 A.D. 67, 55 N.Y.S. 506, 511 (N.Y. App. Div. 1899). Copyright infringement suits provide still another example; a victorious plaintiff may receive both disgorgement and expectation damages. See Christopher Phelps & Assocs., LLC v. Galloway, 492 F.3d 532, 546 (4th Cir. 2007) ("[A] copyright holder is entitled to both actual damages -- the market price of the license -- and disgorgement of the infringer's profits . . . ."). If the district court had the power to grant either or both the equitable and the legal remedy in the first place, then there is no reason we can discern why it would be barred from converting its disgorgement order into a money judgment in order to satisfy "the requirements of full remedial relief." McComb, 336 U.S. at 193. And Leshin has failed to cite a statute, case, or legal principle that restricted the district court from doing so.
Leshin asserts, nonetheless, that once the FTC asked the district court for, and received, the disgorgement order, it could no longer ask for a money judgment to replace that disgorgement order. In essence, Leshin is saying that the district court's order runs afoul of the election of remedies doctrine. The doctrine of election of remedies, however, does not automatically bar a complainant from obtaining multiple forms of relief. Rather, the rule limits a party with the choice of two remedies that are "inconsistent with each other" from obtaining both remedies or from obtaining first the one remedy and then, at a later date, an alternative one. See A. Klipstein & Co. v. Grant, 141 F. 72, 72 (5th Cir. 1905). Remedies are inconsistent if they provide "double recovery for the same injury," MCA Television Ltd. v. Pub. Interest Corp., 171 F.3d 1265, 1274 (11th Cir. 1999), or rely on sets of facts that are inconsistent with one another, see Roberts v. Sears, Roebuck & Co., 573 F.2d 976, 985 (7th Cir. 1978). Thus, for example, a party who establishes the breach of a contract for the sale of land may obtain specific performance or expectation damages (i.e., the difference between the market price and the sale price); but the party must elect either the equitable remedy or the legal one, since receiving both would effectively give that party twice the benefit of its bargain. See, e.g., Mycogen Corp. v. Monsanto Co., 28 Cal. 4th 888, 123 Cal. Rptr. 2d 432, 51 P.3d 297, 307 (Cal. 2002). If a party has obtained full satisfaction of the judgment by means of one remedy, then it can no longer seek alternative ones that were originally available. Cf. Princeton Homes, Inc. v. Virone, 612 F.3d 1324, 1334 n.6 (11th Cir. 2010) (rule under Florida law is that "the doctrine of election of remedies only applies after one of the remedies has been satisfied"). In this case, the district court's conversion of the remainder of the disgorgement order into a money judgment does not run afoul of the election of remedies doctrine. Plainly, the two remedies are not inconsistent -- they rely on precisely the same set of facts -- and do not allow double recovery; the roughly $90,000 that the FTC obtained under the disgorgement order has been deducted from the original contempt award, and the money judgment covers only the remainder.
Leshin levels several other objections, all of which are unavailing. ***
Quite simply, Leshin's obligation to pay has not been extinguished by his inability to do so.
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