687 F. App'x 3
2d Cir.2017Background
- The FTC sought compensatory civil contempt sanctions against Joseph K. Rensin, who controlled BlueHippo Funding, LLC, for violating a prior Consent Order that required clear disclosures of refund/cancellation/exchange and store-credit terms.
- The Consent Order included a $3.5 million monetary judgment to fund consumer redress plus injunctive relief prohibiting misrepresentations about refund/credit terms and conditioning credit on prohibited transfers.
- The district court calculated damages using gross receipts as the baseline under the FTC presumption of consumer reliance and allowed defendants to offset that baseline only with traceable consumer compensation or refunds.
- Rensin requested discovery from BlueHippo’s bankruptcy trustee for consumer invoices to show some consumers were not charged taxes/shipping when using store credit, arguing this could rebut reliance or create offsets to the gross-receipts baseline.
- The district court denied that discovery as irrelevant to rebutting the FTC’s presumption of reliance and found the sanctions were compensatory; it awarded contempt sanctions. Rensin appealed.
- The Second Circuit affirmed: discovery denial was not an abuse of discretion and Rensin’s due-process claim failed because he received notice and an opportunity to be heard for civil, compensatory sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Relevance of requested discovery to rebut FTC presumption of reliance | FTC: Presumption applies once misrepresentations were material, widely disseminated, and consumers purchased; relevance of invoices is limited | Rensin: Invoices would show some consumers in certain states faced no extra fees, so reasonable consumers there wouldn’t rely on BlueHippo’s misrepresentations — thus rebut reliance | Denied: Invoices irrelevant to rebut presumption because injury occurs at the moment of misrepresentation regardless of later fees; denial not an abuse of discretion |
| Discovery to establish offsets to gross-receipts baseline | FTC: Offsets limited to payments/refunds actually made to compensate injured consumers; speculative state-level absence of fees cannot establish offsets | Rensin: State-level invoice evidence would show amounts to subtract from gross receipts as offsets | Denied: Speculation insufficient; offsets must be traceable compensation; district court correctly refused discovery for that purpose |
| Nature of contempt sanction and required process | FTC: Sanction is civil and compensatory, so notice and opportunity to be heard suffice | Rensin: Sanction may require greater procedural protections (citing Bagwell) | Affirmed: Sanction is civil compensatory; Rensin received notice and full opportunity to be heard; due process satisfied |
| Whether district court abused discretion in discovery denial and contempt award | FTC: Court followed BlueHippo precedent and proper standards | Rensin: Discovery denial and award were erroneous and deprived him of rights | Affirmed: No abuse of discretion; district court acted within bounds and applied correct legal standards |
Key Cases Cited
- FTC v. BlueHippo Funding, LLC, 762 F.3d 238 (2d Cir. 2014) (establishes FTC presumption of reliance and use of gross receipts as baseline for redress)
- Pippins v. KPMG LLP, 759 F.3d 235 (2d Cir. 2014) (discovery-ruling abuse-of-discretion standard)
- Wills v. Amerada Hess Corp., 379 F.3d 32 (2d Cir. 2004) (standard for reviewing discovery rulings)
- CBS Broad., Inc. v. FilmOn.com, Inc., 814 F.3d 91 (2d Cir. 2016) (standard for reviewing civil contempt sanctions)
- Kuykendall, 371 F.3d 745 (10th Cir. 2004) (formulation of FTC reliance presumption and damages approach)
- Bronson Partners, LLC, 674 F. Supp. 2d 373 (D. Conn. 2009) (offsets require traceable evidence; speculation insufficient)
- Febre, 128 F.3d 530 (7th Cir. 1997) (uncertainty of damages should fall on wrongdoer)
- Int’l Union, United Mine Workers v. Bagwell, 512 U.S. 821 (1994) (distinguishes civil compensatory contempt from criminal contempt and required protections)
- Jacobs v. Citibank, N.A., [citation="318 F. App'x 3"] (2d Cir. 2008) (notice and opportunity to be heard adequate for compensatory contempt)
- Leshin, 719 F.3d 1227 (11th Cir. 2013) (civil contempt due-process principles)
- Ahearn v. Int’l Longshore & Warehouse Union, 721 F.3d 1122 (9th Cir. 2013) (same)