Federal Trade Commission v. Bronson Partners, LLC
654 F.3d 359
| 2d Cir. | 2011Background
- FTC sued Bronson Partners for deceptive advertising of Chinese Diet Tea and Bio-Slim Patch (2003–2004).
- Bronson admitted liability for Bio-Slim Patch; summary judgment against tea entered (2008).
- Remedies hearing (2009) revealed Bronson earned $1,942,325 from the two products in 2003–2004 and commingled funds across >60 products.
- District court held Section 13(b) permits monetary relief as ancillary equitable relief and calculated a $1,942,325 baseline.
- Court applied a two-step burden-shifting framework to determine unjust gains and rejected some expense deductions.
- Bronson appealed arguing 13(b) does not authorize monetary relief or that the amount was miscalculated; court affirmed district court’s award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 13(b) permits monetary relief ancillary to an injunction | FTC: 13(b) authorizes ancillary monetary relief. | Bronson: 13(b) only permits injunctions; no monetary relief. | Yes; 13(b) permits ancillary equitable monetary relief. |
| Whether the monetary award under 13(b) is equitable or legal | FTC: award is equitable disgorgement. | Bronson: court awarded legal damages rather than equitable relief. | Award is equitable disgorgement, not legal damages. |
| Appropriate framework to calculate equitable monetary relief under 13(b) | FTC: use Verity two-step burden-shifting framework. | Bronson: challenge to the framework and baseline calculations. | Adopts Verity two-step framework for determining unjust gains and adjustments. |
| Whether tracing is required to support disgorgement under 13(b) | FTC: disgorgement does not require tracing to specific funds. | Bronson: tracing should limit recovery to traceable funds. | Tracing not required; disgorgement may be based on revenues as an equitable remedy. |
| Whether the remedy is properly characterized as disgorgement under 13(b) | FTC: remedy is an equitable disgorgement of ill-gotten gains. | Bronson: argues for a narrower constructive trust/traceable-funds approach. | Remedy satisfies equitable disgorgement; district court’s calculation based on revenues is proper. |
Key Cases Cited
- Porter v. Warner Holding Co., 328 U.S. 395 (Supreme Court, 1946) (disgorgement as an equitable adjunct to injunction and complete relief)
- Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (Supreme Court, 1960) (equitable jurisdiction to award backpay alongside injunctive relief)
- FTC v. Gem Merch. Corp., 87 F.3d 466 (11th Cir., 1996) (injunctions include equitable remedies such as consumer redress and disgorgement)
- FTC v. Verity International, Ltd., 443 F.3d 48 (2d Cir., 2006) (two-step burden-shifting framework for equitable monetary relief; tracing discussed)
- Fischbach Corp., 133 F.3d 170 (2d Cir., 1997) (disgorgement aims to deprive violators of ill-gotten gains)
- Knudson, 534 U.S. 204 (Supreme Court, 2002) (distinction between restitution in equity and legal claims; basis for restitution claims)
- Commonwealth Chem. Sec., Inc., 574 F.2d 90 (2d Cir., 1978) (equitable remedies and disgorgement context in SEC actions)
- Texas Gulf Sulphur Co., 446 F.2d 1301 (2d Cir., 1971) (context of disgorgement as an equitable remedy)