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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 12-13392
Non-Argument Calendar
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D.C. Docket No. 8:09-cv-02309-SDM-TBM
FEDERAL TRADE COMMISSION,
Plaintiff - Appellee,
versus
WASHINGTON DATA RESOURCES, INC.,
a Florida corporation, et al.,
Defendants,
RICHARD A. BISHOP,
Individually and as a member of
Optimum Business Solutions, LLC,
BRENT MCDANIEL,
individually and as an officer of
Washington Data Resources,
TYNA CALDWELL,
individually, et al.,
Defendants - Appellants.
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Appeal from the United States District Court
for the Middle District of Florida
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(January 16, 2013)
Before HULL, WILSON and JORDAN, Circuit Judges.
PER CURIAM:
Appellants and codefendants Richard Bishop, Brent McDaniel, and Tyna
Caldwell appeal the district court’s order awarding damages to Plaintiff-Appellee
Federal Trade Commission (FTC) for engaging in deceptive marketing practices,
in violation of section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC’s
Telemarketing Sales Rule (TSR), 16 C.F.R. §§ 310.1–.9. Specifically, Appellants
argue that the district court abused its discretion when it calculated damages based
on the net revenue, rather than the profits, Appellants received during the time they
controlled the offending enterprise. For the reasons that follow, we affirm.
I.
The facts leading up to this appeal are detailed in full in the district court’s
April 23, 2012 order. FTC v. Wash. Data Res., 856 F. Supp. 2d 1247 (M.D. Fla.
2012). We recount only those facts pertinent to this appeal.
Appellants were each involved in the same mortgage loan modification
enterprise (the Enterprise), which solicited financially distressed homeowners and
offered the possibility of relief through either a loan modification or bankruptcy.
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The Enterprise caught the eye of the FTC and in 2009, the FTC filed a complaint
against Appellants, three other individual defendants, and three corporate
defendants. The complaint alleged that Appellants violated section 5(a) of the FTC
Act and the TSR, §§ 310.1–.9, by engaging in deceptive activities relating to their
sale and marketing of mortgage relief and home foreclosure services. Following a
bench trial in April 2011, Appellants were found liable for violating both section
5(a) and the TSR. In an order dated April 23, 2012, the district court found Bishop
and McDaniel jointly and severally liable for $1,974,270, and Caldwell liable for
$644,704. The only issue before us today is whether the district court abused its
discretion when it ordered Appellants to pay damages equal to the net revenues
they received during the period they controlled the Enterprise.
II.
We review a district court’s order granting equitable monetary relief for
abuse of discretion. Commodity Futures Trading Comm’n v. Wilshire Inv. Mgmt.,
531 F.3d 1339, 1343 (11th Cir. 2008). “An abuse of discretion occurs if the judge
fails to apply the proper legal standard or to follow proper procedures in making
the determination, or bases an award upon findings of fact that are clearly
erroneous.” In re Red Carpet Corp. of Panama City Beach, 902 F.2d 883, 890
(11th Cir. 1990). “We review a district court’s factual findings for clear error, and
its application of law to facts de novo.” Wilshire Inv. Mgmt., 531 F.3d at 1343.
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III.
Appellants first argue that the district court improperly awarded damages
based on consumer losses. Appellants are correct that here, a damages award
based on consumer losses would be improper. “The equitable remedy of
restitution does not take into consideration the plaintiff’s losses, but only focuses
on the defendant’s unjust enrichment.” Id. at 1345. But the district court did not
award damages based on consumer loss. The district court awarded damages
based on Appellants’ unjust gains.
Because each Appellant was liable for a violation of section 5(a) and the
TSR, the FTC was entitled to seek relief under both section 13(b), 15 U.S.C.
§ 53(b), and section 19(b), 15 U.S.C. § 57b, of the FTC Act. In the district court,
the FTC conceded that the record lacked evidence to accurately determine
consumer loss and chose not to establish consumer loss. The FTC sought only to
disgorge Appellants’ net revenue and thus proceeded to seek relief under section
13(b). Section 13(b) provides “an unqualified grant of statutory authority” to issue
“the full range of equitable remedies,” including disgorgement, which considers
only the defendants’ unjust gain and ignores consumer loss. FTC v. Gem Merch.
Corp., 87 F.3d 466, 469 (11th Cir. 1996). Said another way, section 13(b) permits
disgorgement measured by the Appellants’ unjust enrichment but prohibits
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disgorgement measured by consumer loss. Here, the district court properly
measured disgorgement by Appellants’ unjust gains, not consumer loss.
Appellants further contend that here, “net revenue is tantamount to consumer
loss” because the total net revenue and the total consumer loss is the same. 1 This
argument fails. The district court expressly calculated Appellants’ unjust gains as
the measure of equitable relief. See Wash. Data Res., 856 F. Supp. 2d at 1281. As
the Second Circuit found in FTC v. Verity Intern., Ltd., 443 F.3d 48, 68 (2nd Cir.
2006), “in many cases in which the FTC seeks restitution, the defendant’s gain will
be equal to the consumer’s loss because the consumer buys goods or services
directly from the defendant.” Thus, it is of no consequence that the measure of
Appellants’ unjust gains happens to equal the amount of consumer loss. The
district court ultimately—and properly— based its calculation of damages on
Appellants’ unjust gains.
IV.
Lastly, Appellants aver that the district court erred when it considered the
net revenue (gross receipts minus refunds) when it calculated damages. They
contend that the district court should have instead considered Appellants’ profits
1
The FTC claimed that $3,941,588 was both the Enterprise’s net revenue and the
consumers’ injury. Wash. Data Res., 856 F. Supp. 2d at 1281. The FTC, however, conceded
below that the record lacked evidence to accurately determine consumer loss, chose not to
establish consumer loss, and stated that “consumer losses far exceed Defendants’ net revenue.
The FTC seeks only to disgorge that net revenue.” Id.
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(net revenue minus expenses) when it calculated damages. Appellants are
incorrect.
Other circuits have been presented with this issue and have found a damages
award based on net revenue rather than profit proper under Section 13(b). See FTC
v. Bronson Partners, LLC, 654 F.3d 359, 375 (2d Cir. 2011) (holding that
defendant was “not entitled to deduct its expenses from the restitutionary
baseline”); FTC v. Direct Mkg. Concepts Inc., 624 F.3d 1, 14–16 (1st Cir. 2010)
(finding no error when district court “rest[ed] its damages determination on
Defendants’ gross receipts rather than their net profits”); FTC v. Febre, 128 F.3d
530, 536 (7th Cir. 1997) (upholding district court’s acceptance of magistrate’s
finding the appropriate measure of restitution was consumers’ net payments to
defendants rather than defendants’ profits.).
We agree with our sister circuits and today hold that the amount of net
revenue (gross receipts minus refunds), rather than the amount of profit (net
revenue minus expenses), is the correct measure of unjust gains under section
13(b). We echo the Second Circuit’s sentiment that “defendants in a disgorgement
action are not entitled to deduct costs associated with committing their illegal
acts.” Bronson Partners, LLC, 654 F.3d at 375. Accordingly, the district court did
not err when it considered Appellants’ net revenues, instead of their profits, in its
calculation for damages.
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The district court’s order is AFFIRMED.
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