In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2418
F EDERAL T RADE C OMMISSION,
Plaintiff-Appellee,
v.
K EVIN T RUDEAU,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03-c-03904—Robert W. Gettleman, Judge.
A RGUED S EPTEMBER 24, 2010—D ECIDED N OVEMBER 29, 2011
Before R IPPLE, M ANION, and T INDER, Circuit Judges.
T INDER, Circuit Judge. Infomercialist Kevin Trudeau
violated a court-approved settlement with the Federal
Trade Commission by misrepresenting the content of his
book The Weight Loss Cure “They” Don’t Want You to Know
About. FTC v. Trudeau, 567 F. Supp. 2d 1016 (N.D. Ill. 2007).
The district court held Trudeau in contempt and ordered
him to pay $37.6 million to the FTC and banned him
from making infomercials for three years. On appeal, we
2 No. 10-2418
affirmed the district court’s finding of contempt but
vacated the sanctions. We noted that although a $37.6
million fine “might be correct,” the district court needed
to explain its math and how the funds would be admin-
istered. We did not question the imposition of a coercive
sanction in addition to a remedial sanction, but we held
that the infomercial ban was inappropriate as a civil
sanction because it did not give Trudeau an opportunity
to purge, that is, to comply with the underlying order
not to misrepresent his publications. FTC v. Trudeau,
579 F.3d 754 (7th Cir. 2009) (“Trudeau I”). (We assume
familiarity with the contempt proceedings discussed
in Trudeau I and so do not repeat that background here.)
On remand, the district court reinstated the $37.6
million remedial fine. This time, however, the court
explained that it reached that figure by multiplying the
price of the book by the 800-number orders, plus the
cost of shipping, less returns. Addressing our questions
about administration, the court instructed the FTC to
distribute the funds to those who bought Trudeau’s
book using the 800-number; any remainder not paid to
those victims or used in the administration of the
sanction was to be returned to Trudeau. In addition,
as a coercive sanction, the district court imposed a
$2 million performance bond, effective for at least five
years.
Trudeau appeals the sanctions. He argues that the
$37.6 million remedial sanction was improperly based on
consumer loss rather than his unjust gain. Against the
coercive sanction, he argues that the district court’s
No. 10-2418 3
modification of the consent order to include a per-
formance bond was beyond its authority and, even if it
had authority to modify the order, the bond require-
ment violates the First Amendment.
We disagree and therefore affirm the district court. The
consent order was intended to protect customers from
deceptive infomercials. The protections, unfortunately,
were too weak: Trudeau aired infomercials in violation
of the order at least 32,000 times. He should not now be
surprised that he must pay for the loss he caused. At a
minimum, it was easily within the district court’s dis-
cretion to conclude that he should. And $37.6 million
correctly measures the loss. The figure is conservative—
it only considers sales from the 800-number, not sales
in bookstores carrying his “As Seen on TV” titles—and
reliable—Trudeau cited this figure himself in briefing
Trudeau I. As for the coercive sanction, the district
court properly modified the 2004 order to increase the
likelihood that Trudeau will comply going forward.
After so many violations, the district court did not have
to stick with the old plan. And the new plan, and the
performance bond in particular, does not violate the
First Amendment. The government is not impotent to
protect consumers—nor is the court powerless to
enforce its orders—by imposing narrowly tailored restric-
tions on commercial speech.
I. The Remedial Sanction
We review the district court’s contempt rulings for
abuse of discretion. United States v. Dowell, 257 F.3d 694,
4 No. 10-2418
699 (7th Cir. 2001). A district court abuses its discretion
if it bases its decision on an incorrect legal principle or
clearly erroneous factual finding. In re KMart Corp., 381
F.3d 709, 713 (7th Cir. 2004).
For Trudeau’s contempt, the district court imposed a
remedial fine measured by consumer loss. That was not
error. Longstanding precedent dictates that the district
court had power to provide “full remedial relief,” McComb
v. Jacksonville Paper Co., 336 U.S. 187, 193 (1949), “to com-
pensate the complainant for losses sustained,” United
States v. United Mine Workers of Am., 330 U.S. 258, 303-04
(1947) (emphasis added). In other words, “[r]emedial
sanctions . . . are backward looking and seek to com-
pensate an aggrieved party for losses sustained as a result
of the contemnor’s disobedience.” Dowell, 257 F.3d at
699 (quoting Jones v. Lincoln Elec. Co., 188 F.3d 709, 738
(7th Cir. 1999)).
It was within the district court’s discretion to decide
that unless the remedial sanction was measured by con-
sumer loss, the victims of Trudeau’s contempt would
not receive full relief for their actual loss. This conclusion
is informed—but not limited—by the remedies available
in the underlying FTC action. See FTC v. Kuykendall, 371
F.3d 745, 753 (10th Cir. 2004) (en banc); McGregor v.
Chierico, 206 F.3d 1378, 1387-88 (11th Cir. 2000). The
FTC enforcement action and the consent agreement
aimed to protect consumers from economic injuries
based on Trudeau’s misrepresentations. See FTC v. Febre,
128 F.3d 530, 537 (7th Cir. 1997). When that agreement
was breached flagrantly and repeatedly, the district
No. 10-2418 5
court chose a remedial sanction that might come close
to putting Trudeau’s victims in the same position they
would have been had Trudeau not misrepresented his
books in infomercials in violation of the agreement.
Kuykendall, 371 F.3d at 764; Febre, 128 F.3d at 537. To
achieve that remedial end, the district court did what
many other courts have done in similar situations and
awarded relief based on consumer loss instead of the
defendant’s unjust gain. FTC v. Direct Mktg. Concepts,
Inc., 624 F.3d 1, 14 (1st Cir. 2010). That was not error.
Trudeau misunderstands a Second Circuit case, FTC v.
Verity Int’l, Ltd., 443 F.3d 48 (2d Cir. 2006), to require a
different conclusion. Verity was not a contempt case, but
a direct action under section 13(b) of the FTC Act. At
issue on appeal in Verity was the correct measure of
damages where the defendants only profited from their
phone-sex scheme after several middlemen, the phone
companies, took their cuts for processing calls. Id. at 68.
On those facts, Verity created a narrow middleman ex-
ception to the usual rule that consumer loss may be
the proper measure of damages in a section 13(b) action.
Direct Mktg. Concepts, 624 F.3d at 15. Trudeau has
tried to assimilate his case to Verity by emphasizing
that he was compensated only indirectly for sales of
The Weight Loss Cure. But Trudeau’s situation bears no
resemblance to the defendants’ situation in Verity:
Trudeau assigned his rights to payment from his com-
pany’s assets to ITV Global in exchange for ten years
of monthly million-dollar checks. This was not about
middlemen taking a cut for their services, but about
steadying Trudeau’s cash flow. Now, having received
6 No. 10-2418
only $1.05 million from ITV Global, Trudeau argues that
the fine should be capped there. But what if ITV Global
had not paid him at all? Would the district court have
been powerless to impose any remedial fine? Of course
not. The district court recognized that precisely how
Trudeau decided to get paid for selling his books through
deceptive infomercials in violation of a court order is
irrelevant to the proper measure of his remedial fine.
To calculate his fine, the district court relied on Exhibit
20, a table of 800-number sales figures for Trudeau’s
Weight Loss Cure book, and the testimony of George
Potts, ITV’s director of financial planning and analysis.
According to the table, as explained by George Potts,
the 800-number sales plus shipping and handling,
minus returns, equals $37.6 million, the amount the
district court ultimately concluded Trudeau should
pay. Trudeau challenges the evidence supporting that
number, but his arguments are unpersuasive: In his first
appeal in this case (Trudeau I), Trudeau himself relied on
the $37.6 million figure as the measure of ITV’s gross
revenues from the Weight Loss Cure. The district court’s
reliance on that evidence was not error, much less
clear error. See FTC v. Stefanchik, 559 F.3d 924, 931 (9th
Cir. 2009). In fact, it is worth emphasizing that the
district court showed restraint in calculating the
remedial sanction based only on 800-number sales.
Most of the sales caused by Trudeau’s violation of
the court order may have been made through the 800-
number, but not all. Out of an abundance of caution—in
order to avoid using any questionable figures—the dis-
trict court decided not to include internet sales or in-store
No. 10-2418 7
sales of the Weight Loss Cure, even though those books
were sold with a conspicuous “As Seen on TV” sticker,
making the link between those sales and the infomer-
cial less than speculative. In the end, the district
court’s careful approach has left us with a reliable and
conservative figure—$37.6 million—that is comfortably
within its discretion.
II. The Coercive Sanction
We held in Trudeau I that a three-year infomercial ban
was an improper coercive sanction because it did not
give Trudeau the opportunity to purge. 579 F.3d at 776.
On remand, the district court replaced the infomercial
ban with a requirement that Trudeau post a $2 million
bond before he participates in any “infomercial for
any book, newsletter, or other informational publica-
tion, about the benefits, performance, or efficacy of any
product, program or service referenced in any such [pub-
lication].” This sanction is purgeable because Trudeau’s
bond is not forfeited to the FTC unless he makes a decep-
tive infomercial, as defined by the district court’s original
and supplemental orders. FTC v. Trudeau, 708 F. Supp. 2d
711, 722 (N.D. Ill. 2010). According to Trudeau, however,
the coercive sanction (the bond requirement) is still
impermissible because it violates the First Amendment.
And moreover, Trudeau argues, before we even reach
the First Amendment question, we should reject the
addition of a performance bond because the district
court was powerless to modify the consent order under
Rule 60(b)(5) without identifying significant changed
circumstances.
8 No. 10-2418
Trudeau, again, is incorrect. It was well within the
district court’s discretion to modify the consent order.
Lee v. Village of River Forest, 936 F.2d 976, 979 (7th Cir.
1991) (Rule 60(b) modification is reviewed for abuse
of discretion). Trudeau believes that the district court
incorrectly applied United States v. United Shoe Machinery
Corp., 391 U.S. 244, 252 (1968)—which allows for modifica-
tion of an order if it is not achieving its purpose—instead
of Rufo v. Inmates of the Suffolk County Jail, 502 U.S. 367,
383 (1992)—which requires the moving party establish
that there has been a significant change of circumstances
that warrants modification. Trudeau reaches further
to assert that Rufo actually overruled United Shoe, so a
modification because the order was not achieving its
purpose is out of the question.
But—unquestionably—Rufo did not overrule United
Shoe. Rufo applies when a defendant seeks to modify an
injunction in an institutional reform case. 502 U.S. at
383. United Shoe, by contrast, supplies the rule where a
plaintiff is seeking to impose additional restrictions
on an enjoined party. 391 U.S. at 251-52. There is simply
no conflict between the two. Indeed, Rufo cites with
approval the page in United Shoe explaining that the
“new and unforeseen conditions” requirement for de-
fendants asking for relief from an injunction does not
apply to requests for increased protections by a plaintiff.
Rufo, 502 U.S. at 380; United Shoe, 391 U.S. at 248.
Because the FTC is seeking to modify the original
injunction to better achieve its purpose, this case falls
squarely under United Shoe. So, if the FTC proved that
No. 10-2418 9
the order was not achieving its purpose, the district
court had discretion “to modify the decree so as to
achieve the required result with all appropriate expedi-
tion.” United Shoe, 391 U.S. at 252; see also United States
v. Krilich, 303 F.3d 784, 789 (7th Cir. 2002) (holding that
the general rules for modification of judgments under
Rule 60(b) apply to consent orders). The “required result”
or purpose of the consent order in this case is “to
protect consumers from [Trudeau’s] deceptive practices
and to compensate those already allegedly deceived.”
Trudeau I, 579 F.3d at 764. The remedial sanction
discussed above addresses the compensatory purpose
of the order while the performance bond has been added
primarily to reinforce the order’s protections going for-
ward. In light of Trudeau’s 32,000-plus broadcasts of
deceptive infomercials for The Weight Loss Cure, we have
little trouble agreeing with the district court that its
original order provided insufficient consumer protec-
tions. It was within the district court’s discretion to rein-
force the order by clarifying its terms and adding a per-
formance bond. See United States v. Vlahos, 884 F. Supp. 261,
266-67 (N.D. Ill. 1995), aff’d, No. 95-1484, 1996 WL 459937,
at *3 (7th Cir. Aug. 9, 1996) (unpublished) (holding that
a performance bond was an acceptable method of deter-
ring additional instances of unlawful commercial speech).
And the bond requirement does not violate the First
Amendment. See id. (holding that a similar performance
bond did not violate the First Amendment). Trudeau
raises a variety of First Amendment arguments, but the
only one that merits discussion is whether his right to
engage in commercial speech is violated by the require-
10 No. 10-2418
ment that he post a bond before he participate in any
infomercial, misleading or not. Insofar as the court order
applies to misleading commercial speech, there is no
possible First Amendment violation, of course, because
misleading commercial speech gets no constitutional
protection. Florida Bar v. Went For It, Inc., 515 U.S. 618, 624-
25 (1995). The First Amendment is implicated here, how-
ever, because Trudeau is required to post a bond before
he participates in an infomercial regardless of whether
it contains a misleading statement. His bond will not
be forfeited unless he makes a misrepresentation in
violation of the court order, but that does not eliminate
the need for First Amendment scrutiny: The bond re-
quirement is itself a restriction on commercial speech
entitled to intermediate scrutiny. Id. at 623.
Therefore, it is the FTC’s burden to show that (1) there is
a substantial interest supporting the restriction, (2) the
restriction directly advances that substantial interest,
and (3) the restriction is “narrowly drawn.” Central
Hudson Gas & Elec. Corp. v. Public Serv. Comm’n, 447 U.S.
557, 564-5 (1980); Florida Bar, 515 U.S. at 624. On these
facts, the first two constitutional requirements are obvi-
ously met. The protection of consumers is a substantial
interest. And the performance bond directly advances
that interest in at least two ways: It makes it more
likely that consumers will be compensated for future
violations and, more importantly, it makes it less likely
that there will be future violations because Trudeau
will face a considerable financial loss if he is involved
in a deceptive infomercial.
No. 10-2418 11
The tailoring prong requires more discussion but the
result is the same. Central Hudson stated that a restriction
on commercial speech must not be “more extensive than
necessary.” 447 U.S. at 566. That language led some
courts to require a “least-restrictive-means approach.”
Bd. of Trs. of the State Univ. of New York v. Fox, 492 U.S. 469,
477 (1989). An extensive discussion in Fox, however,
clarified that, “commensurate with [the] subordinate
position of [commercial speech] in the scale of First
Amendment values,” the fit needn’t be perfect, but only
“reasonable[,] . . . not necessarily the single best dis-
position but one whose scope is in proportion to the
interest served.” Id. at 477, 480. But to say that the re-
striction must be “reasonably well tailored to its stated
objective,” Florida Bar, 515 U.S. at 633, is not to confuse
it with a “rational basis” analysis; rational basis allows
a legitimate end to be achieved even at “inordinate cost,”
whereas here, dealing with a restriction on protected
commercial speech, the cost of achieving the substantial
interest must be “carefully calculated,” Fox, 492 U.S. at 480.
The performance bond meets this standard. First, a
bond is required only if Trudeau decides to resume
making infomercials. It does not limit Trudeau as an
author; it does not curtail Trudeau’s attempt to pitch
products in any print medium; it does not even apply
if Trudeau makes a TV or radio ad under two minutes.
Its application targets only the commercial conduct that
has caused such tremendous consumer harm in the
past—infomercials. Second, the district court set the
performance bond at $2 million but took seriously Tru-
deau’s claim that it is beyond what he can afford by
12 No. 10-2418
allowing him to file an audited financial statement and
prove as much in a hearing. Third, the bond require-
ment is proportional to the amount of harm Trudeau
caused by previous deceptive infomercials. If anything,
the number seems low given that, over the course of
nearly a year, Trudeau’s Weight Loss Cure infomercial
sold thousands of books each day for many months.
A FFIRMED.
11-29-11