F.T.C. v. TRUDEAU
662 F.3d 947 (2011)
FEDERAL TRADE COMMISSION, Plaintiff-Appellee,
Kevin TRUDEAU, Defendant-Appellant.
United States Court of Appeals, Seventh Circuit.
Argued September 24, 2010.
Decided November 29, 2011.
Kimball R. Anderson (argued), Attorney, Winston & Strawn LLP, Chicago, IL, for Defendant-Appellant.
Before RIPPLE, MANION, and TINDER, Circuit Judges.
TINDER, Circuit Judge.
Infomercialist Kevin Trudeau violated a court-approved settlement with the Federal Trade Commission by misrepresenting the content of his book The Weight Loss Cure "They" Don't Want You to Know About. FTC v. Trudeau, 567 F.Supp.2d 1016 (N.D.Ill.2007). The district court held Trudeau in contempt and ordered him to pay $37.6 million to the FTC and banned him from making infomercials for three years. On appeal, we affirmed the district court's finding of contempt but vacated the sanctions. We noted that although a $37.6 million fine "might be correct," the district court needed to explain its math and how the funds would be administered. We did not question the imposition of a coercive sanction in addition to a remedial sanction, but we held that the infomercial ban was inappropriate as a civil sanction because it did not give Trudeau an opportunity to purge, that is, to comply with the underlying order not to misrepresent his publications. FTC v. Trudeau, 579 F.3d 754 (7th Cir.2009) ("Trudeau I"). (We assume familiarity with the contempt proceedings discussed in Trudeau I and so do not repeat that background here.)
On remand, the district court reinstated the $37.6 million remedial fine. This time, however, the court explained that it reached that figure by multiplying the price of the book by the 800-number orders, plus the cost of shipping, less returns. Addressing our questions about administration, the court instructed the FTC to distribute the funds to those who bought Trudeau's book using the 800-number; any remainder not paid to those victims or used in the administration of the sanction was to be returned to Trudeau. In addition, as a coercive sanction, the district court imposed a $2 million performance bond, effective for at least five years.
Trudeau appeals the sanctions. He argues that the $37.6 million remedial sanction was improperly based on consumer loss rather than his unjust gain. Against the coercive sanction, he argues that the district court's modification of the consent order to include a performance bond was beyond its authority and, even if it had authority to modify the order, the bond requirement violates the First Amendment.
We disagree and therefore affirm the district court. The consent order was intended to protect customers from deceptive infomercials. The protections, unfortunately, were too weak: Trudeau aired infomercials in violation of the order at least 32,000 times. He should not now be surprised that he must pay for the loss he
caused. At a minimum, it was easily within the district court's discretion to conclude that he should. And $37.6 million correctly measures the loss. The figure is conservative—it only considers sales from the 800-number, not sales in bookstores carrying his "As Seen on TV" titles—and reliable—Trudeau cited this figure himself in briefing Trudeau I. As for the coercive sanction, the district court properly modified the 2004 order to increase the likelihood that Trudeau will comply going forward. After so many violations, the district court did not have to stick with the old plan. And the new plan, and the performance bond in particular, does not violate the First Amendment. The government is not impotent to protect consumers—nor is the court powerless to enforce its orders—by imposing narrowly tailored restrictions on commercial speech.
I. The Remedial Sanction
We review the district court's contempt rulings for abuse of discretion. United States v. Dowell, 257 F.3d 694, 699 (7th Cir.2001). A district court abuses its discretion if it bases its decision on an incorrect legal principle or clearly erroneous factual finding. In re Kmart Corp., 381 F.3d 709, 713 (7th Cir.2004).