FTC v. BlueHippo, et al., No. 11-374 (2d Cir. 2014)Annotate this Case
The FTC appealed the damages portion of a district court order granting in part the FTC's motion for contempt relating to defendants' violation of a Consent Order. The FTC argued that it was entitled to a presumption that consumers relied, when deciding to purchase defendants' products, on defendants' omissions and misrepresentations. Therefore, the FTC sought over $14 million in contempt damages, an amount equal to defendants' gross receipts. As a preliminary matter, the court concluded that the FTC may pursue recovery for contempt damages based on alleged violations of a Consent Order. The court agreed with the FTC and joined its sister circuits in holding that the FTC is entitled to a presumption of consumer reliance. Here, in the context of a contempt action arising out of violations of a promise to refrain from misrepresentations concerning material terms or omissions of material terms, the court held that the calculation of the appropriate measure of loss begins with defendants' gross receipts derived from such contumacious conduct. After the court uses defendants' gross receipts as a baseline for calculating damages, the court must permit defendants to put forth evidence showing that certain amounts should offset the sanctions assessed against them. The court vacated that portion of the district court's contempt order that has calculated damages and remanded for further proceedings.