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Federal Trade Commission v. Bluehippo Funding, LLC

United States District Court, S.D. New York

March 28, 2017

FEDERAL TRADE COMMISSION, Plaintiff,
v.
BLUEHIPPO FUNDING, LLC, and BLUEHIPPO CAPITAL, LLC, Defendants.

          OPINION & ORDER

          PAUL A. CROTTY United States District Judge

         Plaintiff, the Federal Trade Commission (the "FTC" or "Commission"), seeks an order holding Defendant Joseph K. Rensin ("Rensin" or "Defendant") in contempt for failure to comply with a final judgment (ECF 138, April 19, 2016) imposing compensatory contempt sanctions in the amount of $13, 400, 627.60; and an order determining that coercive incarceration is the appropriate sanction, but that order is to be stayed pending resolution of Rensin's bankruptcy proceedings.[1] ECF 146; ECF 165; ECF 170.

         The Court held an evidentiary hearing on the issues on January 4, 2017 and set a schedule for post-hearing briefing. ECF 154 at 187. Two days before his post-hearing briefing was due on February 17, 2017, Rensin filed a Chapter 7 Bankruptcy petition in the U.S. Bankruptcy Court, Southern District of Florida. See ECF 159. Rensin immediately filed a suggestion of bankruptcy in this Court and claimed that these proceedings were automatically stayed pursuant to § 362(a) of the Bankruptcy Code. Id. The FTC opposed. ECF 160.

         On March 6, 2017, this Court denied Rensin's motion to hold the post-hearing briefing schedule in abeyance, ECF 161. The Court determined that the automatic bankruptcy stay was inapplicable pursuant to the governmental unit regulatory power exception of 11 U.S.C. § 362(b)(4). ECF 166. Rensin has filed a Notice of Interlocutory Appeal. See ECF 167.

         The Court now proceeds to determine the merits of the instant contempt motion.

         FINDINGS OF FACT

         After holding the January 4, 2017 hearing and reviewing the parties' submissions, the Court makes the following findings of fact:

         A. This Court Found Defendant in Contempt of the Consent Order and Ordered Him to Pay $13, 400, 627.60 as a Compensatory Sanction 1. The Court has jurisdiction over the subject matter of this case and each of the parties. Venue is appropriate.

         2. On February 22, 2008, the FTC brought this action against BlueHippo Funding, LLC and BlueHippo Capital, LLC (collectively, "BlueHippo") pursuant to Section 13 of the FTC Act, 15 U.S.C. § 53(b), for alleged violations of federal statutes and regulations. ECF 1.

         3. On April 9, 2008, the parties consented to the entry of a Stipulated Final Judgment and Order of Permanent Injunction (the "Consent Order"). ECF 2.

         4. On July 27, 2010, this Court found "BlueHippo in civil contempt for violating the Consent Order by failing to disclose material terms relating to its Store Credit Policy" (the "July 2010 Contempt Order"). ECF 76 at 9. The Court held Rensin, BlueHippo's CEO, liable for BlueHippo's contempt; and held Rensin and BlueHippo jointly and severally liable for $609, 856.38 in consumer harm caused by the violations. Id. at 11-12.

         5. On appeal, the Second Circuit upheld the contempt finding, but determined that this Court had incorrectly calculated the damages. ECF 86-1 at 12-13; F.T.C. v. BlueHippo Funding, LLC, 762 F.3d 238, 246 (2d Cir. 2014).

         6. The Second Circuit held that once the FTC makes the proper showing, it is entitled to a presumption of consumer reliance in compensatory contempt proceedings. ECF 86-1 at 9-10; BlueHippo, 762 F.3d at 244-45. The Second Circuit vacated the damages award and remanded for determination of whether the presumption applied. ECF 86-1 at 13; BlueHippo, 762 F.3d at 246. Upon a finding that the FTC had made a sufficient showing, the Second Circuit instructed the District Court to "use the defendants' gross receipts as a baseline for calculating the actual loss to consumers caused by defendants' conduct" and "give the defendants the opportunity to rebut the determined baseline loss calculation." ECF 86-1 at 13; BlueHippo, 762 F.3d at 246.

         7. On November 6, 2015, after briefing and oral argument, the Court held that the presumption of consumer reliance applied, and that BlueHippo's gross revenue of $14, 062, 627.51 was the appropriate compensatory baseline. ECF 103 at 7-8.

         8. Rensin proffered rebuttal evidence to offset the baseline, ECF 107, certain categories of which the FTC moved in limine to exclude. ECF 120.

         9. The Court held a telephonic hearing after the parties fully briefed the issue on April 6, 2016. ECF 131. During the hearing, the Court made several minor adjustments and found that Rensin was liable for $13, 400, 627.60 in compensatory damages. Id.

         10. The Court directed the FTC to submit a proposed order memorializing its oral rulings, which the FTC did on April 13, 2016. ECF 131 at 12; ECF 138 at 1.

         11. Rensin objected to the form of the FTC's proposed order, including to the language affirmatively ordering Rensin to pay, and attached a proposed judgment that did not contain any affirmative obligation to pay. ECF 136; ECF 136-2.

         12. On April 19, 2016, the Court issued a Final Judgment Imposing Compensatory Contempt Sanctions in the amount of $13, 400, 627.60 (the "April 19, 2016 Order"). ECF 139.

         13. In an accompanying opinion, the Court "adopt[ed] the [FTC's] Proposed Final Judgment (with a few typographical corrections), since it is an accurate recitation of the procedural history and the Court's oral order of April 6, 2016, which resolved all open disputes." ECF 138 at 1. The Court also held that "Rensin's objections are denied as meritless." Id.

         14. On May 18, 2016, Rensin filed a Notice of Appeal. ECF 140. He raised two issues, both pertaining to the Court's refusal to permit discovery regarding certain offsets. F.T.C. v. BlueHippo Funding, LLC, No. 16-1599 (2d Cir. Aug. 29, 2016), ECF 30 at 1-2. The appeal is pending.

         B. The April 19, 2016 Final Judgment Imposing Compensatory Contempt Sanctions Was Clear and Unambiguous

         15. Section I.B.I obligated Rensin to pay $8, 000, 000 to the FTC, to be deposited into the Redress Fund, within seven days of entry of the Final Judgment. ECF 139 at 6.

         16. Section I.B.2 required Rensin to secure the remaining balance of $5, 400, 627.60 within thirty days, to be subsequently turned over to the FTC for deposit into the Redress Fund "[u]pon motion of the FTC and upon proof that the Initial Redress Sum will be exhausted." Id. at 6-8.

         17. Section I.C specified that should Rensin fail to satisfy either condition, "he [was] ordered to immediately pay the full amount of the judgment ($13, 400, 627.60) to the Commission to ...


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