Federal Trade Commission v. BlueHippo Funding, LLC
762 F.3d 238
2d Cir.2014Background
- FTC appeals the damages portion of a July 27, 2010 contempt order against BlueHippo and its CEO for violating a consent order prohibiting misrepresentations about store credit and refunds.
- District court awarded $609,856.38 in damages, limited to orders where consumers received neither a computer nor store credit, and rejected the FTC’s $14,062,627.51 demand.
- FTC sought damages on behalf of 55,892 customers under Section 13 of the FTC Act, arguing presumptive consumer reliance and full refunds as damages.
- District court did not apply a presumption of reliance or calculate damages for all misrepresentations, and declined to amend the order to reflect broader damages.
- Court holds that the FTC is entitled to a presumption of consumer reliance under appropriate showing, and that gross receipts should serve as the baseline for damages, with offsets possible on remand.
- Case is remanded for the district court to determine, in the first instance, whether the presumption applies and to calculate damages using gross receipts with potential offsets by the defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Presumption of consumer reliance in contempt damages | FTC entitled to presumption when misrepresentations were of a kind usually relied upon | District court need not apply presumption | Presumption applies if conditions met; remand for application |
| Baseline damages measure | Damages should equal total consumer losses from contumacious conduct | Damages should be limited or offset | Use gross receipts as baseline, offset allowed on remand |
| FTC's authority to seek contempt damages for consumers | Section 13 authorizes recovery for injured consumers in contempt | FTC may pursue contempt damages on behalf of consumers | |
| Remand scope and procedural contours | Remand to apply presumption and reassess damages using baseline and offsets |
Key Cases Cited
- FTC v. Kuykendall, 371 F.3d 745 (10th Cir.2004) (presumption of consumer reliance in contempt action)
- McGregor v. Chierico, 206 F.3d 1378 (11th Cir.2000) (presumption of reliance in contempt action)
- Figgie Int'l, Inc., 994 F.2d 595 (9th Cir.1993) (restitution/disgorgement framework; reliance principles in FTC actions)
- Sec. Rare Coin & Bullion Corp., 931 F.2d 1316 (8th Cir.1991) (presumption of reliance in FTC actions)
- Verity Int'l, Ltd., 443 F.3d 48 (2d Cir.2006) (two-step framework for disgorgement; relevance to remedies)