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FTC v. Affordable Media, LLC - 179 F.3d 1228 (9th Cir. 1999)

Rule:

A district court may grant the FTC a preliminary injunction upon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest. An appellate court reviews a district court's findings of fact in connection with a civil contempt adjudication for clear error.

Facts:

Defendants, a husband and wife, formed a limited liability company to serve as the primary telemarketer of media units. The group was unable to sell enough products to return the promised yields to the media-unit investors, but the group was able to take the later investors' investments to pay the promised yields to earlier investors, a classic Ponzi scheme. Plaintiff agency, seeking to recover as much money as possible for defrauded investors, filed a complaint, charging defendants and others with violations of the Federal Trade Commission Act and the Telemarketing Sales Rule for their participation in a scheme to telemarket fraudulent investments to consumers. A preliminary injunction was entered against defendants, which required defendants to repatriate any assets held for their benefit outside of the United States. Defendants refused to comply with the order and the federal district court held them in civil contempt of court.  Defendants sought appellate review of the order holding them in civil contempt.

Issue:

Did a federal district court abuse its discretion in holding certain telemarketers in civil contempt after the telemarketers refused to comply with a preliminary injunction?

Answer:

No.

Conclusion:

Because there was no clear error in the federal district court's finding that telemarketers remained in control of their trust and could repatriate the trust assets, the district court did not abuse its discretion in holding them in civil contempt of court after the telemarketers failed to comply with a preliminary injunction. 

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