Eleventh Circuit Approves Conversion of Compensatory Civil Contempt Remedy to Money Judgment | Practical Law

Eleventh Circuit Approves Conversion of Compensatory Civil Contempt Remedy to Money Judgment | Practical Law

In Federal Trade Commission v. Leshin, the US Court of Appeals for the Eleventh Circuit held that it was appropriate for the district court to convert the unpaid balance of a civil contempt remedy levied against the defendant into a money judgment in favor of the plaintiff.

Eleventh Circuit Approves Conversion of Compensatory Civil Contempt Remedy to Money Judgment

by PLC Litigation
Published on 10 Jun 2013 • USA (National/Federal)
In Federal Trade Commission v. Leshin, the US Court of Appeals for the Eleventh Circuit held that it was appropriate for the district court to convert the unpaid balance of a civil contempt remedy levied against the defendant into a money judgment in favor of the plaintiff.
On June 5, 2013, the US Court of Appeals for the Eleventh Circuit issued a decision in Federal Trade Commission v. Leshin. As a matter of first impression, the court upheld the district court's conversion of the unpaid remainder of an equitable disgorgement remedy based on a civil contempt sanction into a legal remedy, a money judgment.

Background

The FTC sued the defendant, alleging deceptive marketing practices and other violations of the Federal Trade Commission Act by the defendant's business. The parties settled the action, and the district court entered a stipulated injunction embodying the settlement. The defendant violated the terms of the injunction, and the district court held him in contempt. As a compensatory civil contempt remedy, the district court ordered disgorgement of the gross receipts of the defendant's business during the relevant time frame, which totalled $594,987.90. The defendant challenged the contempt sanction, but an Eleventh Circuit panel upheld it.
Because the defendant did not pay the sanctioned amount, the district court found him in contempt again and ordered him to pay $92,671, the amount that the court found he was then able to pay. The defendant purged this coercive contempt order, but the original compensatory contempt sanction of disgorgement remained in effect, less the $92,671 already paid. The FTC moved to convert the remainder of the original disgorgement order into a money judgment. The district court granted the motion, and the defendant appealed.

Outcome

The Eleventh Circuit affirmed the district court's conversion of the unpaid remainder of an equitable disgorgement remedy (originating from a compensatory civil contempt sanction) into a money judgment after the contemnor had disgorged as much money as he was able to pay. The Eleventh Circuit reasoned that:
  • The district court has extremely broad powers in determining civil contempt awards.
  • The district court had the power to grant either or both an equitable and legal remedy initially and therefore cannot be barred from converting its disgorgement order into a money judgment to attain full remedial relief.
  • The conversion of the remainder of the disgorgement order into a money judgment did not run afoul of the election of remedies doctrine because the two remedies:
    • were not inconsistent, as they were based on the same set of facts; and
    • did not allow double recovery.
  • The defendant's right to due process was satisfied because the defendant received notice and an opportunity to be heard.

Practical Implications

Litigants in the Eleventh Circuit should be aware of the possibility that a court may convert a compensatory civil contempt remedy into a money judgment.

Court Documents