Federal Trade Commission v. Publishers Business Services, Inc. et al

Filing 248

ORDERED that Defendants Publishers Business Services, INc., a corporation; Ed Dantuma Enterprises, INc., a corporation, also dba Publisher Direct Services and Publisher Business Services; Edward Dantuma; and Dries Dantuma shall pay to Plaintiff Federal trade Commission (FTC) the sum of $191,219.00 and and for equitable damages. Signed by Judge Philip M. Pro on 7/25/11. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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2:08-CV-00620-PMP-PAL

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Plaintiff,
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vs.
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PUBLISHERS BUSINESS SERVICES, )
INC., a corporation; ED DANTUMA )
ENTERPRISES, INC., a corporation, )
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also dba PUBLISHERS DIRECT
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SERVICES and PUBLISHERS
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BUSINESS SERVICES; PERSIS
DANTUMA; EDWARD DANTUMA; )
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BRENDA DANTUMA SCHANG;
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DRIES DANTUMA; DIRK
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DANTUMA; and JEFFREY
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DANTUMA, individually and as
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officers or managers of publishers
Business Services, Inc., or Ed Dantuma )
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Enterprises, Inc.,
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Defendants.
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FEDERAL TRADE COMMISSION,

ORDER RE:
EQUITABLE DAMAGES

Plaintiff FTC commenced this action on May 14, 2008, by filing a

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Complaint for Injunctive and other Equitable Relief (Doc. #1). FTC amended its

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Complaint (Doc. #62) on February 5, 2009. Named as Defendants are Publishers

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Business Services, Inc., a corporation; Ed Dantuma Enterprises, Inc., a corporation,

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also dba Publishers Direct Services and Publishers Business Services; Persis

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Dantuma; Edward Dantuma; Brenda Dantuma Schang; Dries Dantuma; Dirk
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Dantuma; and Jeffrey Dantuma, individually and as officers, directors, or manager of

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Publishers Business Services, Inc., or Ed Dantuma Enterprises, Inc.
FTC alleges that between January 1, 2004 and August 31, 2008,

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Defendants garnered $34,419,363.00 in gross revenues through consistent,

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widespread, deceptive, and abusive sales and collection practices relating to

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telemarketing sales of magazine subscriptions. Pursuant to Sections 13(b) and 19 of

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the FTC Act, 15 U.S.C. §§ 53(b) and 57b, Section 6(b) of the Telemarketing Act, 15

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U.S.C. § 6105(b), FTC sought a permanent injunction to prevent future violations of

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the FTC Act and the Telemarketing Sales Rule (“TSR”) by Defendants. FTC also

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sought restitution, the refund of monies paid, and the disgorgement of profits to

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redress injury to consumers resulting from Defendants’ alleged violations of the FTC

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Act and the TSR.
On June 3, 2008, the Court approved the Stipulation reached by the parties

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for a Preliminary Injunction enjoining Defendants from, directly or indirectly,

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engaging in deceptive or abusive sales and collection practices in relation to the sale

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of magazine subscriptions. This Preliminary Injunction effectively caused

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Defendants to cease their telemarketing business.
Following the completion of discovery in this action, the Court entered

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Orders granting FTC’s Motion for Summary Judgment (Doc. #151) and for

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Permanent Injunction (Doc. #152) on April 7, 2010. The Orders contained a detailed

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statement of the allegations of the parties and the Court’s findings, and need not be

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repeated here. In its Order on Summary Judgment (Doc. #151) the Court furthered

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ordered an evidentiary hearing on the issue of equitable damages to be awarded, if

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any.

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Considerable disagreement ensued between the parties concerning the
scope of permissible additional discovery, and evidence to be presented at the
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hearing on damages. As a result, the evidentiary hearing on equitable damages did

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not commence until March 30, 2011, and after an interruption due to scheduling

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issues, was completed June 9, 2011. (See documents #233, #234, #243, #244, and

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#245).

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Restitution is a form of ancillary equitable damages relief available to

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effect complete justice under Section 13(b) of the FTC Act for violation of Section 5

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of the Act and the TSR. FTC v. Gill, 265 F.3d 944, 958 (9th Cir. 2001); FTC v.

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Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009). Complete disgorgement of

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Defendants entire gross revenues between January 1, 2004 and August 31, 2008 is

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not appropriate, however, unless FTC proves that such gross revenue is a

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“reasonable approximation” of Defendants’ gains from violations of Section 5 of the

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FTC Act. FTC v. Verity, Intern., Ltd., 443 F.3d 48, 67 (2nd Cir. 2006); FTC v.

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Figgie Intern., Inc., 994 F.2d 595, 607 (9th Cir. 1993).

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The Court finds that FTC has not proved that relief in the form of

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restitution by complete disgorgement of profits is necessary to redress injury to the

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consuming public demonstrated in this case.

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The evidence adduced during five days of testimony did not establish the

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necessary link between Defendants acts in violation of Section 5, and PBS’s entire

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gross revenues between January 1, 2004 and August 31, 2008. Instead, a

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preponderance of the evidence shows that although Defendants’ conduct in violation

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of Section 5 of the FTC Act warranted issuance of the Permanent Injunction in this

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case, FTC has failed to establish that all, or even a significantly quantifiable number

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of sales or collections warrant wholesale disgorgement.

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Additionally, although full reimbursement to all complaining customers

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might provide a reasonable approximation of revenues received by Defendants in

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violation of Section 5, the evidence adduced demonstrates that it is either impossible
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or impracticable to locate and reimburse those individual customers. FTC v. Pantron

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I Corp., 33 F.3d 1088 (9th Cir. 1944).

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In granting Summary Judgment and issuing the Permanent Injunction in

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this case, the Court found Defendants’ sales process violated Section 5 of the FTC

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Act. The Court did not find, however, that Defendants’ customers did not receive

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the magazines ordered, nor did it find that most of the complaining customers ever

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paid any money to Defendants. Indeed, the record before the Court strongly suggests

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that most customers who complained of misrepresentation by Defendants elected to

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withhold payment even after Defendants collection efforts.
The Court concludes disgorgement here is warranted only to the extent of

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net revenues received by PBS as a result of its violation of Section 5 of the FTC Act.

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After considering all of the evidence presented, the Court finds that the analysis

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provided by Defendants expert, Dr. Gregory Duncan, that $191, 219.00 is a

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reasonable measure of equitable damages to which Plaintiff FTC is entitled to

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recover on behalf of Publishers customers. Not all Defendants in this action are,

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however, jointly and severely liable for payment of equitable damages.
With respect to the knowledge of individual Defendants of deceptive acts

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or practices in violation of Section 5, the Court finds insufficient evidence to hold

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Defendant’s Persis Dantuma, Brenda Dantuma Schang, Dirk Dantuma and Jeffrey

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Dantuma individually liable for equitable monetary relief in this case. The record is

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sufficient, however, show that in addition the corporate Defendants, and individual

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Defendants’ Edward Dantuma and Dries Dantuma had actual knowledge or were

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recklessly indifferent to the alleged violations of Section 5.

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IT IS THEREFORE ORDERED that Defendants’ Publishers Business

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Services, Inc., a corporation; Ed Dantuma Enterprises, Inc., a corporation, also dba

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Publishers Direct Services and Publishers Business Services; Edward Dantuma; and

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Dries Dantuma shall pay to Plaintiff Federal Trade Commission (FTC) the sum of

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$191, 219.00 as and for equitable damages.

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IT IS FURTHER ORDERED that Clerk of Court shall forthwith enter
JUDGMENT accordingly.

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DATED: July 25, 2011.

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PHILIP M. PRO
United States District Judge

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