United States District Court, D. Maryland
MEMORANDUM OPINION
PETER
J. MESSITTE UNITED STATES DISTRICT JUDGE
The
Federal Trade Commission ("FTC") has filed three
motions to hold certain Defendants in contempt for violating
this Court's Orders in FTC. v. Ameridebt, Inc. et
al, 03-cv-3317-PJM ("AmeriDebt”).
ECF Nos. 266, 267, 268. On July 25, 2019, the Court directed
the Parties to brief the question of whether the contempt
remedies the FTC seeks are essentially criminal in nature and
whether the alleged contemnors have the right to a jury trial
in connection therewith. ECF No. 529. The FTC has filed a
submission on the issue. ECF No. 542. Defendant Peter Baker
has responded in Opposition. ECF No. 558, Defendant Andris
Pukke has responded in Opposition, ECF No. 560, and the FTC
has filed a Consolidated Reply, ECF No. 572. For the
following reasons, the Court holds that the remedies the FTC
seeks are civil in nature and that the alleged contemnors do
not have the right to a jury trial.
I.
Factual and Procedural History
In
2003, the FTC sued Pukke under Section 5 of the Federal Trade
Commission Act ("FTC Act"), 15 U.S.C. § 45(a),
in connection with what it alleged were fraudulent activities
related to two credit counseling companies he owned and/or
operated. AmeriDebt, ECF No. 1. Instead of going to
trial in that case, Pukke agreed to a Stipulated Final
Judgment and Permanent Injunction (the "Final
Order"). AmeriDebt, ECF No. 473. In addition to
entering a $172 million judgment against Pukke and his
companies[1], the Final Order barred Pukke and
"employees, or affiliates, and those persons in active
concert or participation with [Pukke] who receive actual
notice of this Order by personal service or otherwise"
from ""making, or causing or assisting others to
make, expressly or by implication, any false or misleading
representation, including but not limited to
misrepresenting... any aspect of the performance, efficacy,
nature of central characteristics of the goods or
services" while telemarketing that good or service.
Id. The Final Order also barred these same
individuals from violating the Telemarketing Sales Rule.
Id.
In
2018, in the present proceeding, the FTC filed three contempt
motions for violations of Orders issued in
AmeriDebt, including the Final Order. The first
motion seeks to hold Pukke, Baker and John Usher in contempt
for allegedly violating the Final Order in AmeriDebt
by deceptively telemarketing Sanctuary Belize Lots to
consumers ("Telemarketing Contempt"). ECF No. 266.
The FTC asks for "full remedial relief equal to the
total amount paid by lot purchasers in the present litigation
as a result of the allegedly contumacious conduct which, if
the contempt is proven, will be used to compensate purchasers
of Sanctuary Belize lots. Id. While this amount is
still undetermined, the FTC believes it will likely be
greater than $144 million.[2] Id.
In the
second motion, ECF No. 267, the FTC seeks to hold Pukke,
Baker and Usher in contempt for failing to turn over a
specific parcel of land in Belize (the "Sanctuary
Parcel" or "Parcel") to the Receiver, as
ordered by the Court multiple times in AmeriDebt. See
e.g., AmeriDebt, ECF No. 571. According to the
FTC, Pukke and Baker continued to maintain control over the
Sanctuary Parcel even after the Court ordered Pukke and Baker
to turn it over and even after the Court held Pukke and Baker
in contempt for their failure to do so. ECF No. 267. In its
Parcel Contempt motion, the FTC asks that the Parcel be
turned over to the Receiver to allow the Receiver to either
fully recover the Parcel itself or its value, to be used for
the benefit of consumers, and that Pukke, Baker and Usher
face coercive incarceration if they fail to do so within 10
days of the Court's ruling. Id. To be clear, the
Court understands that, if contempt is found in this regard,
the proceeds from the Sanctuary Parcel will be used to
compensate consumers in the AmeriDebt proceeding,
not the lot purchasers in the present case.
In its
third motion, ECF No. 268, the FTC seeks to hold Pukke in
contempt for violating an Order in AmeriDebt
prohibiting him from partially or fully repaying a loan to
John Vipulis prior to fully satisfying the FTC's judgment
against him, ECF No. 625. The FTC alleges that, in clear
violation of the Order, Pukke repaid Vipulis over $3.25
million for the loan. See ECF No. 268. The FTC asks
that Pukke be found in contempt and ordered to pay $3.25
million plus interest to the FTC "as a compensatory
contempt remedy." Id. Again, the Court
understands that if Pukke is found to be in contempt, any
recovery from him will be used to compensate consumers in the
AmeriDebt proceeding, not the lot purchasers in the
present litigation.[3] Notably, in March 2019, Vipulis settled
with the FTC with respect to both the contempt motion, and
the present case. ECF No. 352. Vipulis agreed to and
apparently did turn over $4, 112, 000 to the Receiver, who in
sequence would turn the funds over to the FTC. Id.
After
receiving these motions, the Court ordered supplemental
briefing on the question of whether the remedies the FTC
seeks are essentially criminal in nature, in which case the
alleged contemnors would be entitled to a jury trial, or
whether they are civil in nature, in which case they would
not be. ECF No. 529.
II.
Legal Standard
Under
the Supreme Court's decision in Int'l Union,
United Mine Workers of Am. v. Bagwell, a "contempt
fine is considered civil and remedial if it either coerces a
defendant into compliance with a court order or compensates
the complainant for losses sustained." 512 U.S. 821, 821
(1994). See also Bradley v. Am. Household Inc., 378
F.3d 373, 378 (4th Cir. 2004) (holding that "civil
contempt sanctions are intended to coerce the contemnor into
compliance with court orders or to compensate the complainant
for losses sustained") (internal citations and quotation
marks omitted); see also Cromer v. Kraft Foods N. Am.,
Inc., 390 F.3d 812, 822 (4th Cir. 2004) (stating that
"civil contempt sanctions can serve the purpose of
compensating a complainant for losses sustained"). Civil
contempt sanctions require nothing more than "notice and
an opportunity to be heard." Bagwell, 512 U.S.
at 827.[4]
In
contrast, criminal contempt sanctions are
"punitive" in nature, and are intended "to
vindicate the authority of the court." Id. at
828. See also Bradley, 378 F.3d at 378 (stating
criminal' sanctions are "intended to vindicate the
authority of the court by punishing the contemnor and
deterring future litigants' misconduct" (internal
citations and quotation marks omitted)).
However,
"the stated purposes of a contempt sanction alone cannot
be determinative" because "[most] contempt
sanctions, like most criminal punishments, to some extent
punish a prior offense as well as coerce an offender's
future obedience." Bagwell, 512 U.S. at 828
(omitting internal citations and quotation marks). Therefore,
"conclusions about the civil or criminal nature of a
contempt sanction are properly drawn...from an examination of
the character of the relief itself." Id.,
(omitting internal citations and quotation marks).
Once a
contempt is found to be civil in nature, remedies are
"within the court's broad discretion" and may
include ordering the contermnor to reimburse the complainant
for losses sustained and for reasonable attorney's fees.
In re General Motors Corp., 61 F.3d 256, 259 (4th
Cir. 1995). Coercive incarceration is a
"paradigmatic" civil sanction. Bagwell,
512 U.S. at 828. But a court must keep in mind that
"[generally], a compensatory sanction may not exceed the
actual loss to the complainant caused by the actions of
respondent, lest the contempt fine become punitive in nature,
which is not appropriate in a civil contempt
proceeding." In re General Motors Corp., 61
F.3d at 259 (internal citations and quotation marks omitted).
III.
...