23-7808-cr United States v. Brown
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 29th day of October, two thousand twenty-four.
PRESENT: BARRINGTON D. PARKER, GERARD E. LYNCH, RAYMOND J. LOHIER, JR., Circuit Judges. ------------------------------------------------------------------ UNITED STATES OF AMERICA,
Appellee,
v. No. 23-7808-cr
MICHAEL BROWN,
Defendant-Appellant,
ANDREW LLOYD,
Defendant. ------------------------------------------------------------------ FOR APPELLEE: Matthew Weinberg, Olga I. Zverovich, Assistant United States Attorneys, for Damian Williams, United States Attorney for the Southern District of New York, New York, NY
FOR DEFENDANT-APPELLANT: Stephen R. Cochell, The Cochell Law Firm, P.C., Houston, TX
Appeal from an order of the United States District Court for the Southern
District of New York (Katherine Polk Failla, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the order of the District Court is AFFIRMED.
Defendant-Appellant Michael Brown appeals from an order denying his
motion to dismiss an indictment entered on November 15, 2023 in the United
States District Court for the Southern District of New York (Failla, J.). This
matter stems from a 2017 civil action filed in the Northern District of Illinois
(“NDIL”) by the Federal Trade Commission (“FTC”) against Brown, alleging
violations of certain consumer protection statutes. The FTC eventually referred
Brown’s conduct to the United States Attorney’s Office for the Southern District
of New York (“SDNY”), which opened a criminal investigation. Brown was first
indicted on October 1, 2020, and a superseding indictment was filed on 2 November 10, 2022. He moved to dismiss the superseding indictment on double
jeopardy grounds. The District Court denied Brown’s motion. This interlocutory
appeal followed. We assume the parties’ familiarity with the underlying facts
and the record of prior proceedings, to which we refer only as necessary to
explain our decision to affirm.
I. Background
The FTC’s lawsuit in the NDIL charged Brown, several co-conspirators,
and the Credit Bureau Center, LLC (“CBC”), which Brown owned and operated,
with violating provisions of the Federal Trade Commission Act (FTCA), 15
U.S.C. § 45(a), and the Restore Online Shoppers’ Confidence Act (ROSCA), 15
U.S.C. § 8403. After preliminarily enjoining the defendants, the NDIL court
granted summary judgment in favor of the FTC and ordered Brown and his co-
defendants to pay $5,260,671.36 in restitution, pursuant to section 13(b) of the
FTCA. 15 U.S.C. § 53(b). On appeal, the Seventh Circuit vacated the restitution
order, holding that “section 13(b) does not authorize restitutionary relief.” F.T.C.
v. Credit Bureau Ctr., LLC, 937 F.3d 764, 767 (7th Cir. 2019). In doing so, the
Seventh Circuit acknowledged that it was abrogating its longstanding precedent
that section 13(b) authorized such relief. Id. On remand to the NDIL court, the
3 FTC moved to amend the judgment in light of the change in law. Fed. R. Civ. P.
59(e). The NDIL court reimposed restitution under section 5 of ROSCA, 15
U.S.C. § 8404, and section 19 of the FTCA, 15 U.S.C. § 57b, in lieu of section 13(b).
The Seventh Circuit affirmed the amended judgment in relevant part. F.T.C. v.
Credit Bureau Ctr., LLC, 81 F.4th 710, 714 (7th Cir. 2023).
II. Discussion
In moving to dismiss the indictment against him in the criminal action in
the SDNY, Brown argues that the criminal prosecution was foreclosed by the
FTC’s prior civil proceeding in the NDIL action and the nature of the penalties
originally imposed in that action. We review “de novo the district court’s denial
of a motion to dismiss an indictment on double jeopardy grounds.” United States
v. Leyland, 277 F.3d 628, 631 (2d Cir. 2002). The Double Jeopardy Clause “does
not prohibit the imposition of all additional sanctions that could, in common
parlance, be described as punishment.” Hudson v. United States, 522 U.S. 93, 98–
99 (1997) (quotation marks omitted). It “protects only against the imposition of
multiple criminal punishments for the same offense.” Id. at 99.
To determine whether the penalty in the NDIL action is civil or criminal,
we first ask “whether the legislature, in establishing the penalizing mechanism,
4 indicated either expressly or impliedly a preference for one label or the other.”
S.E.C. v. Palmisano, 135 F.3d 860, 864 (2d Cir. 1998) (quotation marks omitted). If
the legislature intended a civil penalty, we “must then ask whether the statutory
scheme is ‘so punitive either in purpose or effect,’ as to ‘transfor[m] what was
clearly intended as a civil remedy into a criminal penalty.’” Id. (quoting Hudson,
522 U.S. at 99).
Although the District Court determined that the penalties authorized by
section 19 of the FTCA and section 5 of ROSCA and reflected in the amended
civil judgment are civil in nature, Brown urges us to focus on section 13(b) of the
FTCA, the provision under which the NDIL court originally imposed restitution.
Brown argues, first, that section 13(b) does not authorize restitution at all, and
second, that the FTC acted in “bad faith” when it moved for restitution under
section 13(b) and thereby rendered the restitution order a criminal penalty.
Brown’s argument fails for three primary reasons. First, as the District
Court noted, the double jeopardy inquiry turns on Congress’s intent in enacting
the punitive scheme, not the FTC’s intent in seeking the restitution order against
Brown under section 13(b). Id. Second, even if the FTC’s intent were relevant,
Brown fails to show that the FTC acted in bad faith. To the contrary, the FTC
5 relied on a longstanding legal consensus, including in this Court, that section
13(b) authorized restitution. See F.T.C. v. Bronson Partners, LLC, 654 F.3d 359, 365
(2d Cir. 2011). Though the Supreme Court ultimately approved the Seventh
Circuit’s revised view of section 13(b), AMG Cap. Mgmt., LLC v.
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23-7808-cr United States v. Brown
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 29th day of October, two thousand twenty-four.
PRESENT: BARRINGTON D. PARKER, GERARD E. LYNCH, RAYMOND J. LOHIER, JR., Circuit Judges. ------------------------------------------------------------------ UNITED STATES OF AMERICA,
Appellee,
v. No. 23-7808-cr
MICHAEL BROWN,
Defendant-Appellant,
ANDREW LLOYD,
Defendant. ------------------------------------------------------------------ FOR APPELLEE: Matthew Weinberg, Olga I. Zverovich, Assistant United States Attorneys, for Damian Williams, United States Attorney for the Southern District of New York, New York, NY
FOR DEFENDANT-APPELLANT: Stephen R. Cochell, The Cochell Law Firm, P.C., Houston, TX
Appeal from an order of the United States District Court for the Southern
District of New York (Katherine Polk Failla, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the order of the District Court is AFFIRMED.
Defendant-Appellant Michael Brown appeals from an order denying his
motion to dismiss an indictment entered on November 15, 2023 in the United
States District Court for the Southern District of New York (Failla, J.). This
matter stems from a 2017 civil action filed in the Northern District of Illinois
(“NDIL”) by the Federal Trade Commission (“FTC”) against Brown, alleging
violations of certain consumer protection statutes. The FTC eventually referred
Brown’s conduct to the United States Attorney’s Office for the Southern District
of New York (“SDNY”), which opened a criminal investigation. Brown was first
indicted on October 1, 2020, and a superseding indictment was filed on 2 November 10, 2022. He moved to dismiss the superseding indictment on double
jeopardy grounds. The District Court denied Brown’s motion. This interlocutory
appeal followed. We assume the parties’ familiarity with the underlying facts
and the record of prior proceedings, to which we refer only as necessary to
explain our decision to affirm.
I. Background
The FTC’s lawsuit in the NDIL charged Brown, several co-conspirators,
and the Credit Bureau Center, LLC (“CBC”), which Brown owned and operated,
with violating provisions of the Federal Trade Commission Act (FTCA), 15
U.S.C. § 45(a), and the Restore Online Shoppers’ Confidence Act (ROSCA), 15
U.S.C. § 8403. After preliminarily enjoining the defendants, the NDIL court
granted summary judgment in favor of the FTC and ordered Brown and his co-
defendants to pay $5,260,671.36 in restitution, pursuant to section 13(b) of the
FTCA. 15 U.S.C. § 53(b). On appeal, the Seventh Circuit vacated the restitution
order, holding that “section 13(b) does not authorize restitutionary relief.” F.T.C.
v. Credit Bureau Ctr., LLC, 937 F.3d 764, 767 (7th Cir. 2019). In doing so, the
Seventh Circuit acknowledged that it was abrogating its longstanding precedent
that section 13(b) authorized such relief. Id. On remand to the NDIL court, the
3 FTC moved to amend the judgment in light of the change in law. Fed. R. Civ. P.
59(e). The NDIL court reimposed restitution under section 5 of ROSCA, 15
U.S.C. § 8404, and section 19 of the FTCA, 15 U.S.C. § 57b, in lieu of section 13(b).
The Seventh Circuit affirmed the amended judgment in relevant part. F.T.C. v.
Credit Bureau Ctr., LLC, 81 F.4th 710, 714 (7th Cir. 2023).
II. Discussion
In moving to dismiss the indictment against him in the criminal action in
the SDNY, Brown argues that the criminal prosecution was foreclosed by the
FTC’s prior civil proceeding in the NDIL action and the nature of the penalties
originally imposed in that action. We review “de novo the district court’s denial
of a motion to dismiss an indictment on double jeopardy grounds.” United States
v. Leyland, 277 F.3d 628, 631 (2d Cir. 2002). The Double Jeopardy Clause “does
not prohibit the imposition of all additional sanctions that could, in common
parlance, be described as punishment.” Hudson v. United States, 522 U.S. 93, 98–
99 (1997) (quotation marks omitted). It “protects only against the imposition of
multiple criminal punishments for the same offense.” Id. at 99.
To determine whether the penalty in the NDIL action is civil or criminal,
we first ask “whether the legislature, in establishing the penalizing mechanism,
4 indicated either expressly or impliedly a preference for one label or the other.”
S.E.C. v. Palmisano, 135 F.3d 860, 864 (2d Cir. 1998) (quotation marks omitted). If
the legislature intended a civil penalty, we “must then ask whether the statutory
scheme is ‘so punitive either in purpose or effect,’ as to ‘transfor[m] what was
clearly intended as a civil remedy into a criminal penalty.’” Id. (quoting Hudson,
522 U.S. at 99).
Although the District Court determined that the penalties authorized by
section 19 of the FTCA and section 5 of ROSCA and reflected in the amended
civil judgment are civil in nature, Brown urges us to focus on section 13(b) of the
FTCA, the provision under which the NDIL court originally imposed restitution.
Brown argues, first, that section 13(b) does not authorize restitution at all, and
second, that the FTC acted in “bad faith” when it moved for restitution under
section 13(b) and thereby rendered the restitution order a criminal penalty.
Brown’s argument fails for three primary reasons. First, as the District
Court noted, the double jeopardy inquiry turns on Congress’s intent in enacting
the punitive scheme, not the FTC’s intent in seeking the restitution order against
Brown under section 13(b). Id. Second, even if the FTC’s intent were relevant,
Brown fails to show that the FTC acted in bad faith. To the contrary, the FTC
5 relied on a longstanding legal consensus, including in this Court, that section
13(b) authorized restitution. See F.T.C. v. Bronson Partners, LLC, 654 F.3d 359, 365
(2d Cir. 2011). Though the Supreme Court ultimately approved the Seventh
Circuit’s revised view of section 13(b), AMG Cap. Mgmt., LLC v. FTC, 593 U.S. 67,
70 (2021), the FTC cannot be found to have acted in bad faith for seeking a
remedy that existing law approved, particularly since the relief sought was
justified, albeit under different statutory authority. Third, the NDIL court’s
amended judgment imposes restitution on Brown under section 19 of the FTCA
and section 5 of ROSCA, not section 13(b). F.T.C. v. Credit Bureau Ctr., LLC, No.
17-CV-194, 2021 WL 4146884, at *1–2 (N.D. Ill. Sept. 13, 2021). Although Brown
contends that the FTC’s mere initial attempt to rely on section 13(b) to impose
restitution constitutes punishment that implicates double jeopardy, we disagree.
It is true that in “cases where the civil proceeding follows the criminal
proceeding,” and where the civil proceeding imposes what amounts to a
criminal punishment, the very attempt to do so may implicate double jeopardy.
Hudson, 522 U.S. at 102. But here the FTC’s civil proceeding ultimately resulted
in a civil rather than a criminal penalty, and the fact that the restitution order
was originally imposed under section 13(b) is irrelevant to our inquiry.
6 That Congress intended to create a civil sanction does not end the inquiry,
however. We must also ask “whether the statutory scheme is ‘so punitive either
in purpose or effect,’ as to ‘transfor[m] what was clearly intended as a civil
remedy into a criminal penalty.’” Palmisano, 135 F.3d at 864 (quoting Hudson, 522
U.S. at 99). The District Court applied the factors listed in Kennedy v. Mendoza-
Martinez, 372 U.S. 144, 168–69 (1963), and concluded that Brown failed to show
by “the clearest proof” that the NDIL court’s orders constituted criminal
punishment, Hudson, 522 U.S. at 100 (quotation marks omitted).
Brown argues that the financial restrictions imposed as part of the District
Court’s preliminary injunction amounted to “house arrest.” Appellant’s Br. 30.
But the injunction entitled Brown to ask the court to loosen the financial
restrictions if he found them too severe, and he elected not to do so. Brown
separately argues that there is no rational justification for granting an injunction
or for restitution under the relevant provisions of the FTCA and ROSCA other
than to impose a criminal penalty. But he ignores the fact that these statutory
provisions have as their objectives to “redress injury to consumers,” 15 U.S.C. §
57b(b), and to protect consumer confidence, 15 U.S.C. § 8401(2)-(3), not to exact
7 criminal punishment. The injunction and the restitution order further these civil
objectives.
III. Conclusion
We have considered Brown’s remaining arguments and conclude that they
are without merit. For the foregoing reasons, the order of the District Court is
AFFIRMED.
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court