Opposition Brief — Andris Pukke, et al., Petitioners v. Federal Trade Commission, et al.

No. 22-958

In the Supreme Court of the United States

ANDRIS PUKKE, ET AL., PETITIONERS

v.

FEDERAL TRADE COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

ANISHA S. DASGUPTA

General Counsel

JOEL MARCUS

Deputy General Counsel for

Litigation

BRADLEY GROSSMAN

Counsel

Federal Trade Commission

Washington, D.C. 20580

ELIZABETH B. PRELOGAR

Solicitor General

Counsel of Record

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTIONS PRESENTED

1. Whether the district court entered judgment for

the Federal Trade Commission without giving petitioners an opportunity to be heard and without making sufficient factual findings to support its judgment.

2. Whether the district court denied petitioners due

process by freezing assets that petitioners claim were

necessary to pay for counsel.

(I)

TABLE OF CONTENTS

Page

Opinions below .............................................................................. 1

Jurisdiction .................................................................................... 1

Statement ...................................................................................... 2

Argument....................................................................................... 7

Conclusion ................................................................................... 13

TABLE OF AUTHORITIES

Cases:

AMG Capital Management, LLC v. FTC,

141 S. Ct. 1341 (2021) ..................................................... 6, 11

Adir International, LLC v. Starr Indemnity &

Liability Co., 994 F.3d 1032 (9th Cir. 2021), cert.

denied, 142 S. Ct. 861 (2022) .............................................. 13

CFTC v. Morse, 762 F.2d 60 (8th Cir. 1985) ....................... 13

CFTC v. Noble Metals International, Inc.,

67 F.3d 766 (9th Cir. 1995), cert. denied,

519 U.S. 815 (1998).............................................................. 13

Deckert v. Independence Shares Corp.,

311 U.S. 282 (1940).............................................................. 11

FTC v. AmeriDebt, Inc.,

373 F. Supp. 2d 558 (D. Md. 2005) ...................................... 2

FTC v. Kuykendall, 371 F.3d 745 (10th Cir. 2004) ............ 10

FTC v. Trudeau, 579 F.3d 754 (7th Cir. 2009) .................... 10

FTC v. World Wide Factors, Ltd.,

882 F.2d 344 (9th Cir. 1989) ............................................... 13

Grupo Mexicano de Desarrollo S.A. v. Alliance

Bond Fund, Inc., 527 U.S. 508 (1999) ............................... 11

Kaley v. United States, 571 U.S. 320 (2014) ....................... 12

Luis v. United States, 578 U.S. 5 (2016) ............................. 12

Mullane v. Central Hanover Bank & Trust Co.,

339 U.S. 306 (1950)................................................................ 8

(III)

IV

Cases—Continued:

Page

Raffel v. United States, 271 U.S. 494 (1926) ......................... 8

Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) ....................... 11

Turner v. Rogers, 564 U.S. 431 (2011) ................................. 12

United States v. Johnston, 268 U.S. 220 (1925).................. 10

Constitution, statutes, regulation, and rule:

U.S. Const.:

Amend. V (Due Process Clause) ................................ 8, 12

Amend. VI ........................................................................ 12

Federal Trade Commission Act, ch. 311, 38 Stat. 717

(15 U.S.C. 41 et seq.) ............................................................. 2

15 U.S.C. 45(a) §5(a)...................................................... 2, 4

15 U.S.C. 45(a)(1)............................................................... 2

15 U.S.C. 53(b) §13(b) ................................................... 5, 6

16 C.F.R. 310.3 ......................................................................... 4

Sup. Ct. R. 10 ......................................................................... 10

In the Supreme Court of the United States

No. 22-958

ANDRIS PUKKE, ET AL., PETITIONERS

v.

FEDERAL TRADE COMMISSION, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-66a)

is reported at 53 F.4th 90. A memorandum opinion of

the district court (Pet. App. 74a-297a) is reported at 482

F. Supp. 3d 373. An additional memorandum opinion of

the district court (Pet. App. 67a-73a) is not published in

the Federal Supplement but is available at 2021 WL

119209.

JURISDICTION

The judgment of the court of appeals was entered on

November 1, 2022. A petition for rehearing was denied

on December 30, 2022 (Pet. App. 298a-301a). The petition for a writ of certiorari was filed on March 30, 2023.

The jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

This case involves two separate, consolidated proceedings that arose out of a real-estate telemarketing

scam. The Federal Trade Commission (FTC or Commission) (1) commenced an enforcement action alleging

that the scam violated the Federal Trade Commission

Act (FTC Act), ch. 311, 38 Stat. 717 (15 U.S.C. 41 et

seq.); and (2) moved for civil-contempt sanctions, charging that petitioners’ involvement with the scam violated

a permanent injunction, entered in an earlier FTC enforcement action, that barred future deceptive telemarketing practices. After a three-week bench trial, the

district court found that petitioners had violated the

FTC Act, an FTC regulation, and the earlier injunction.

The court issued additional permanent injunctions and

ordered petitioners to pay compensatory contempt

sanctions. Pet. App. 67a-73a, 74a-297a. The court also

found that petitioner Pukke had not met the conditions

of the earlier judgment, under which most of his monetary obligation was suspended contingent upon his cooperation with the Commission. Id. at 293a-295a. The

court declared Pukke liable for the full original judgment of $172 million. Ibid. The court of appeals affirmed in part, vacated in part, and remanded. Id. at

1a-66a.

1. Petitioner Andris Pukke founded a company

called AmeriDebt, “which turned out to be a credit

counseling scam.” Pet. App. 42a. In 2003, the Commission sued Pukke under Section 5(a) of the FTC Act,

which forbids “deceptive acts or practices in or affecting

commerce.” 15 U.S.C. 45(a)(1); see FTC v. AmeriDebt,

Inc., 373 F. Supp. 2d 558, 561 (D. Md. 2005).

Pukke settled that case with the FTC. See Pet. App.

42a. The district court entered a stipulated judgment

3

that enjoined Pukke from making false representations

in connection with the telemarketing of any good or service. See ibid. The judgment also required Pukke to

pay $172 million in restitution to the Commission. See

ibid. Under the terms of the judgment, all but $35 million of that amount would be suspended if, among other

conditions, Pukke “cooperate[d] fully” with the Commission’s efforts to gather his assets. Ibid. (citation

omitted). Far from cooperating, Pukke impeded the

FTC’s efforts so blatantly that he was jailed for civil

contempt and was later convicted of obstruction of justice. See id. at 37a, 42a.

2. In the meantime, Pukke, along with petitioners

Peter Baker and John Usher, began to operate a second

scam, known as Sanctuary Belize. See Pet. App. 36a.

That scam involved the use of deceptive telemarketing

to induce consumers to buy real-estate lots in the Central American nation of Belize. See ibid. The telemarketers were “coached to ‘create a sense of urgency and

a fear of loss on the part of prospective purchasers.’ ”

Ibid. (citation omitted). The telemarketers and other

sales agents made “half a dozen material misrepresentations” to consumers: (1) “the lie that Sanctuary Belize

carried no debt”; (2) “the lie that every dollar spent was

reinvested in the property (when actually Pukke stole

roughly $18 million from the project)”; (3) “the false

promise that the completed project would have many

luxury amenities”; (4) “the false promise that the project would be completed within two to five years”; (5)

“the lie that [the development] boasted a healthy resale

market”; and (6) “the ‘crowning deception’ that Pukke,”

a twice-convicted felon, “was not involved” in the

scheme. Id. at 40a, 54a (citation omitted).

4

Those misrepresentations led consumers to purchase “over 1,000 lots,” some of which were sold “more

than once.” Pet. App. 37a. Consumers also spent thousands of dollars on deposits for particular lots and on

trips to Belize. Id. at 36a-37a.

3. In 2018, the FTC sued petitioners and others in

federal district court, alleging that the misrepresentations outlined above had violated Section 5(a) of the

FTC Act, 15 U.S.C. 45(a), and an FTC rule (the Telemarketing Sales Rule, 16 C.F.R. 310.3) that prohibits

deceptive practices in telemarketing. See Pet. App.

37a-38a. The Commission also moved for civil contempt

in AmeriDebt, arguing that the injunction in that case

had forbidden petitioners from using deceptive telemarketing practices and that the Sanctuary Belize scheme

had violated that injunction. See id. at 38a. The district

court consolidated the two proceedings. See ibid.

The district court froze petitioners’ assets to prevent

their dissipation during the pendency of the case. See

Pet. App. 82a-83a. The court authorized Pukke and

Baker to withdraw $3000 per month from the frozen assets, however, to pay for legal and personal expenses.

See id. at 61a. The court also authorized several oneoff withdrawals—ranging from $3000 to $30,000—to

cover legal expenses. See id. at 76a n.3. The remaining

petitioner, Usher, never made an appearance and therefore neither requested nor received frozen assets for legal expenses. See id. at 44a.

After a three-week bench trial, the district court entered judgment for the FTC. Pet. App. 74a-297a. The

court held that petitioners’ misrepresentations had violated the FTC Act and the Commission’s regulations.

See id. at 77a-78a. It also found petitioners in contempt

because (among other reasons) those misrepresentations

5

had violated the injunction issued in AmeriDebt. Id. at

78a.

The district court granted the FTC various remedies. See Pet. App. 77a-78a. As relevant here, the court

awarded the Commission $120.2 million in equitable

monetary relief under Section 13(b) of the FTC Act, 15

U.S.C. 53(b). See Pet. App. 274a. That sum represented petitioners’ revenues from the fraudulent sale of

the Sanctuary Belize lots, reduced by amounts the court

found were not part of the purchase price. See id. at

268a-274a. The court then awarded the Commission the

same sum, $120.2 million, as a sanction for contempt of

court, explaining that “the harm from [petitioners’] contumacious conduct is indeed the same as the harm

caused by their FTC Act violations.” Id. at 68a. The

court’s contempt finding was based on its determination

that petitioners’ deceptive acts in furtherance of the

Sanctuary Belize scheme had violated the AmeriDebt

injunction. See id. at 67a-69a. The district court clarified that the two $120.2 million judgments are “not cumulative,” but “are merely alternative measures of the

same damages.” Id. at 69a.

The district court separately ruled that Pukke owed

the FTC $172 million under the AmeriDebt judgment.

See Pet. App. 293a-294a; 2021 WL 124190, at *1-*2. The

court noted that, under that judgment, Pukke would

owe the Commission $35 million if he cooperated with

it, but $172 million if he did not. See Pet. App. 294a.

“[T]he fact of Pukke’s non-cooperation with the FTC”—

which was “emphatically underscored” by his obstructionof-justice conviction for “concealing assets in AmeriDebt”

—“trigger[ed] the $172 million judgment.” Ibid.; see

2021 WL 124190, at *1. The court rejected as “baseless”

Pukke’s argument that holding him liable “for the entire

6

AmeriDebt judgment” would violate his “Due Process

right to notice and an opportunity to be heard.” 2021

WL 124190, at *2.

4. The court of appeals affirmed in part, vacated in

part, and remanded. Pet. App. 1a-66a. Petitioners

raised “a host of issues,” prompting the court to remark

that they had “throw[n] a bunch of claims at the wall to

see what sticks.” Id. at 35a, 63a. The court rejected all

those arguments, with one exception: It concluded that

this Court’s intervening decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021), required

vacatur of the district court’s award of equitable monetary relief under the FTC Act. Pet. App. 35a, 54a-56a.

As relevant here, petitioners contended that the district court had denied them an opportunity to present

evidence and had “failed to make findings” supporting

its contempt sanction. Pet. App. 51a. In rejecting that

argument, the court of appeals observed that the district court had “hear[d] all the evidence presented at the

bench trial.” Ibid. The court also noted that the record

contained “ample proof ” that petitioners had engaged

in “contumacious conduct,” and it concluded that the

district court had “carefully justified” the $120.2 million

contempt sanction. Id. at 51a-52a.

The court of appeals acknowledged (Pet. App. 55a)

that, under this Court’s decision in AMG, the $120.2

million monetary judgment could not be upheld as an

exercise of the district court’s power under Section

13(b) of the FTC Act, 15 U.S.C. 53(b), which authorizes

the court to grant an “injunction.” The court explained,

however, that “[v]acating that judgment does not help

Pukke * * * because he already has a $120.2 million

judgment against him for contempt of the telemarketing injunction” that had previously been entered

7

against him in AmeriDebt. Pet. App. 55a. The court of

appeals further observed that courts “have inherent

power to enforce compliance with their lawful orders

through civil contempt,” id. at 48a (citation omitted),

and that “AMG did not impair courts’ ability to enter

injunctive relief under Section 13(b),” id. at 55a. The

court concluded that “the $120.2 million order can be

upheld under the contempt judgment, so AMG does not

in fact change the bottom line.” Id. at 55a-56a.

The court of appeals similarly rejected petitioners’

challenges to the district court’s pretrial order freezing

their assets. See Pet. App. 60a-61a, 63a. The court concluded that the order was “an appropriate use of the

[district] court’s discretion, especially given the risk of

Pukke diverting funds to his personal accounts.” Id. at

63a. Petitioners argued that the asset freeze had deprived them of the money needed to pay for counsel.

The court rejected that argument, observing that “the

district court permitted Pukke and Baker to withdraw

$3,000 per month from the [frozen] assets” and “twice

unfroze $30,000 in assets for them to pay for legal counsel.” Id. at 61a. The court of appeals found no abuse of

discretion in the district court’s decisions, stating that

“it was perfectly reasonable for the [district] court to be

cautious about dispensing money” given petitioners’

“deception and dishonesty.” Ibid.

ARGUMENT

Petitioners contend (Pet. 10-14) that the district

court denied them due process by purportedly ruling

for the Commission without receiving any evidence and

without making factual findings in support of its rulings. Petitioners also contend (Pet. 14-15) that the

court’s pretrial asset freeze violated their due-process

right to hire counsel. The court of appeals correctly

8

rejected both contentions, and its decision does not conflict with any decision of this Court or another court of

appeals. Further review is not warranted.

1. The Due Process Clause of the Fifth Amendment

requires a federal court to give a defendant notice and

an opportunity to be heard before depriving him of

property. See Mullane v. Central Hanover Bank &

Trust Co., 339 U.S. 306, 314 (1950). As the district court

observed, however, petitioners’ claim that the court violated that guarantee is “baseless.” 2021 WL 124190, at

*2.

Petitioners assert (Pet. 10) that the district court

held them in contempt and found Pukke liable for the

$172 million AmeriDebt judgment “without receiving

evidence” and “without affording the[m] an opportunity

to contest” the FTC’s claims. The record does not support that characterization of the proceedings below. In

fact, the court held a “three-week bench trial” on the

Commission’s claims. Pet. App. 38a. Petitioners had a

full opportunity to participate in that trial and to call

their own witnesses. See, e.g., id. at 121a (noting that

petitioners “presented witnesses”). Baker, for example, testified at trial. See, e.g., id. at 128a, 170a, 188a.

For his part, Pukke had “invoked his Fifth Amendment

privilege against self-incrimination” in response to “effectively all questions asked of him” during pre-trial

depositions, and thus was precluded from testifying on

those subjects at trial. Id. at 196a n.45; see Raffel v.

United States, 271 U.S. 494, 496-497 (1926) (explaining

that a witness may not selectively invoke the privilege

by testifying but refusing to submit to cross-examination

related to that testimony). Apart from that, the district

court did not reject any specific attempt by petitioners

to introduce evidence.

9

Petitioners likewise had a full opportunity to crossexamine the Commission’s witnesses and to respond to

its legal arguments. See, e.g., Pet. App. 147a n.31 (discussing “Pukke’s cross-examination of the FTC’s witness”); id. at 291a (discussing petitioners’ “questions to

witnesses”). The district court also assured Pukke that

he could “object to evidence that the FTC has offered

for whatever reason,” C.A. App. 796; that he could argue that his conduct “doesn’t amount to” a violation of

the conditions of the AmeriDebt judgment, id. at 797;

and that he could raise his legal contentions in closing

argument and post-trial briefing, see id. at 796-797.

There also is no merit to petitioners’ assertion (Pet.

10) that the district court ruled for the FTC “without

making specific factual findings supporting” its rulings.

As the court of appeals recounted, the district court “issued a detailed opinion of over one-hundred pages in

which it set forth its comprehensive findings.” Pet.

App. 38a. In support of its contempt finding, the court

found that “[t]here was a valid decree in the AmeriDebt

proceeding”; that petitioners “had actual knowledge” of

that decree; and that petitioners had knowingly “violated the terms of the decree” by continuing to engage

in the forbidden telemarketing practices. Id. at 278a279a.

In determining that $120.2 million was the appropriate contempt sanction, the district court calculated

Sanctuary Belize’s revenues based on the testimony of

an “expert witness” who had conducted a “thorough

analysis of bank statements,” and it deducted amounts

that it found “should not be included in the calculation.”

Pet. App. 272a-273a. The court likewise made appropriate findings in support of its ruling that Pukke owed

$172 million under the AmeriDebt judgment. See id. at

10

294a. The court observed that “the $35 million figure

appli[ed] only if Pukke ‘cooperate[d]’ with [the FTC],”

and it recited facts (such as Pukke’s conviction for obstruction of justice) that “conclusively establish[ed]

* * * Pukke’s non-cooperation.” Ibid.

Petitioners argue (Pet. 10-14) that the decision below

conflicts with the decisions in FTC v. Trudeau, 579 F.3d

754 (7th Cir. 2009), and FTC v. Kuykendall, 371 F.3d

745 (10th Cir. 2004) (en banc). That is incorrect. In

Trudeau, the Seventh Circuit vacated an order imposing monetary sanctions for civil contempt because the

order had “fail[ed] to explain how the court arrived at

the [sanctions] figure.” 579 F.3d at 770. In Kuykendall,

the Tenth Circuit similarly vacated such an order because “the district court failed to provide * * * an adequate record of how it arrived at the [sanctions] figure.”

371 F.3d at 764. Here, in contrast, the Fourth Circuit

determined that the district court had “carefully justified” the “$120.2 million amount.” Pet. App. 52a. Although petitioners assert (Pet. 14) that the district

court’s calculations were inadequate, that fact-bound

challenge does not warrant this Court’s review. See

United States v. Johnston, 268 U.S. 220, 227 (1925)

(“We do not grant a certiorari to review evidence and

discuss specific facts.”); Sup. Ct. R. 10 (“A petition for a

writ of certiorari is rarely granted when the asserted

error consists of erroneous factual findings or the misapplication of a properly stated rule of law.”).

2. Petitioners’ challenge to the district court’s pretrial order freezing their assets likewise does not warrant this Court’s review.

District courts hearing claims for equitable relief

have the power to issue appropriate preliminary injunctions, including injunctions that prevent defendants

11

from dissipating assets during the pendency of the case.

See Grupo Mexicano de Desarrollo S.A. v. Alliance

Bond Fund, Inc., 527 U.S. 308, 324-325 (1999); Deckert

v. Independence Shares Corp., 311 U.S. 282, 289 (1940);

Pet. App. 63a. Petitioners suggest (Pet. 8) that the sole

justification for the district court’s asset freeze was to

ensure that the funds would remain available to pay equitable monetary relief under Section 13(b) of the FTC

Act. Petitioners further contend (Pet. 14) that, under

this Court’s intervening decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021), the FTC

“was not entitled to monetary relief in this case and the

district court wrongfully froze petitioners’ assets.” Petitioners assert that “[t]he district court’s now-wrongful

denial of access to petitioners’ own funds was a ‘structural error’ of constitutional magnitude.” Pet. 15 (citation omitted).

Those arguments are incorrect. As the court of appeals explained, Pukke agreed to the AmeriDebt judgment, and that judgment long ago became final. See

Pet. App. 42a, 48a, 50a. In any event, nothing in AMG

casts doubt on the portion of the AmeriDebt judgment

that enjoined petitioners from making false representations to carry out future telemarketing scams. See id.

at 42a. Nor does AMG cast doubt on the district court’s

authority to impose monetary sanctions for violations of

that injunction. See id. at 48a, 55a; see also Taggart v.

Lorenzen, 139 S. Ct. 1795, 1801 (2019) (“Under traditional principles of equity practice, courts have long imposed civil contempt sanctions to * * * ‘compensate the

complainant for losses’ stemming from the defendant’s

noncompliance with an injunction.”) (citation omitted).

Thus, whether or not the asset freeze entered in this

case was justified by the prospect of equitable monetary

12

relief under the FTC Act, it was independently justified

by the need to preserve the assets to pay potential contempt sanctions.

There is also no merit to petitioners’ contention (Pet.

14-15) that the asset freeze violated their constitutional

right to pay for counsel of choice. The Sixth Amendment guarantees the right to “Assistance of Counsel”

only in “criminal prosecutions.” U.S. Const. Amend. VI.

That guarantee “does not govern civil cases.” Turner v.

Rogers, 564 U.S. 431, 441 (2011). And although the Due

Process Clause of the Fifth Amendment protects a right

to counsel in civil cases in certain limited circumstances,

that right is significantly narrower than its criminal

counterpart. See id. at 442-443.

Even in criminal cases, moreover, a court may freeze

assets that a defendant would prefer to use for paying

legal expenses. See, e.g., Kaley v. United States, 571

U.S. 320, 322 (2014). The Sixth Amendment at most requires a court to release enough “untainted assets” to

enable a criminal defendant to pay “a reasonable fee for

the assistance of counsel.” Luis v. United States, 578

U.S. 5, 23 (2016) (plurality opinion). The court retains

responsibility for “determining how much money is

needed to cover the costs of a lawyer.” Id. at 22-23.

Those limits do not apply in civil cases, but even if

they did, the district court satisfied them here by releasing enough money to allow petitioners to pay “a reasonable fee for the assistance of counsel.” Luis, 578

U.S. at 23 (plurality opinion). As the court of appeals

recounted, the district court “permitted Pukke and

Baker to withdraw $3,000 per month” to pay personal

and legal expenses, and “twice unfroze $30,000 in assets

to pay for legal counsel.” Pet. App. 61a. The district

court’s caution in “dispensing money” appropriately

13

reflected Pukke’s history of “purloin[ing] funds from his

previous business” and the need to compensate the victims of petitioners’ misconduct. Ibid.

The court of appeals’ decision is consistent with the

decisions of other circuits, which have held that district

courts in civil cases have broad discretion to “forbid or

limit payment of attorney fees out of frozen assets.”

CFTC v. Noble Metals Int’l, Inc., 67 F.3d 766, 775 (9th

Cir. 1995), cert. denied, 519 U.S. 815 (1996); see, e.g.,

FTC v. World Wide Factors, Ltd., 882 F.2d 344, 347-348

(9th Cir. 1989); CFTC v. Morse, 762 F.2d 60, 63 (8th Cir.

1985). Petitioners cite (Pet. 15) the Ninth Circuit’s decision in Adir International, LLC v. Starr Indemnity &

Liability Co., 994 F.3d 1032 (2021), cert. denied, 142

S. Ct. 861 (2022). That decision recognized, however,

that “courts have construed the due process right to retain counsel very narrowly,” and that the right “does

not require the release of frozen assets so that a civil

defendant can hire an attorney.” Id. at 1039.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

ANISHA S. DASGUPTA

General Counsel

JOEL MARCUS

Deputy General Counsel for

Litigation

BRADLEY GROSSMAN

Counsel

Federal Trade Commission

JUNE 2023

ELIZABETH B. PRELOGAR

Solicitor General