Federal Trade Commission v. Washington Data Resources, Inc.
2013 U.S. App. LEXIS 1078
11th Cir.2013Background
- Appellants Bishop, McDaniel, and Caldwell were involved in a mortgage relief enterprise that allegedly used deceptive marketing in violation of the FTC Act and the TSR.
- The FTC filed suit in 2009; after a bench trial in April 2011, the district court issued an order on April 23, 2012 finding liability and ordering disgorgement of damages.
- The district court awarded damages equal to the net revenues the Appellants received during the period they controlled the Enterprise and did not base damages on consumer losses.
- The FTC conceded a lack of reliable evidence for consumer losses and sought relief under §§ 13(b) and 19(b) of the FTC Act, seeking disgorgement of unjust gains.
- The sole issue on appeal is whether the district court abused its discretion by calculating damages based on net revenues (unjust gains) rather than profits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Measure of disgorgement under §13(b) | FTC argues disgorgement of unjust gains (net revenues) is proper. | Appellants contend profits (net revenues minus expenses) should be the baseline. | Net revenue, not profit, is the correct measure under §13(b). |
| Relation to consumer losses | Disgorgement targets defendant’s unjust enrichment, not consumer losses. | Damages should reflect consumer losses as the basis for restitution. | Damages based on consumer losses were improper; disgorgement may be based on unjust gains. |
Key Cases Cited
- FTC v. Gem Mfr. Corp., 87 F.3d 466 (11th Cir. 1996) (disgorgement under §13(b) focuses on unjust enrichment)
- Wash. Data Res. v. Wash. Data Res., 856 F. Supp. 2d 1247, no official reporter citation (M.D. Fla. 2012) (district court decision discussed for context)
- FTC v. Verity Intern., Ltd., 443 F.3d 48 (2d Cir. 2006) (gain may equal consumer loss; restitution often based on defendant’s gains)
- Bronson Partners, LLC v. FTC, 654 F.3d 359 (2d Cir. 2011) (net revenue not reduced by expenses as restitution baseline)
- FTC v. Direct Marketing Concepts, Inc., 624 F.3d 1 (1st Cir. 2010) (damages based on gross receipts rather than net profits)
- FTC v. Febre, 128 F.3d 530 (7th Cir. 1997) (consumers’ net payments as measure of restitution)
- In re Red Carpet Corp. of Panama City Beach, 902 F.2d 883 (11th Cir. 1990) (abuse of discretion standard in equitable relief review)
- Wilshire Inv. Mgmt. Co. v. CFTC, 531 F.3d 1339 (11th Cir. 2008) (standard of review for equitable monetary relief)