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

Filing 322

ORDER denying 297 Motion to Strike.; granting 312 Motion for Judgment in favor of Plaintiff.; denying 315 Motion in Limine. FURTHER ORDERED that unless a motion to seal is filed by any party within 21 days of the date of this order, plaintiff Federal Trade Commission's motion to exclude testimony of Dr. Armando Levy (ECF No. 297 ) shall be unsealed. Signed by Judge Andrew P. Gordon on 2/1/2017. (Copies have been distributed pursuant to the NEF - JM)

1

UNITED STATES DISTRICT COURT

2

DISTRICT OF NEVADA

3

***

4

FEDERAL TRADE COMMISSION,

5
6
7
8

Plaintiff,
v.
PUBLISHERS BUSINESS SERVICES, INC.,
et al.,
Defendants.

9

Case No. 2:08-cv-00620-APG-GWF
ORDER (1) GRANTING FEDERAL
TRADE COMMISSION’S MOTION
FOR JUDGMENT AND (2) DENYING
AS MOOT THE PARTIES’ MOTIONS
TO EXCLUDE EXPERTS
(ECF Nos. 297, 312, 315)

10

The Federal Trade Commission (FTC) filed this enforcement action seeking injunctive

11

and other equitable relief based on the defendants’ unfair and deceptive practices when selling

12

magazine subscriptions, in violation of Section 5(a) of the Federal Trade Commission Act, 15

13

U.S.C. § 45(a), and the FTC’s Telemarketing Sales Rule, 16 C.F.R. Part 310. Judge Philip Pro

14

entered summary judgment in favor of the FTC on liability and issued a permanent injunction.

15

ECF Nos. 151, 152. He also awarded $191,219.00 in equitable relief against some of the

16

defendants. ECF No. 248. The FTC appealed the monetary award and the Ninth Circuit reversed

17

and remanded for a recalculation of monetary equitable relief. ECF No. 266. Following Judge

18

Pro’s retirement, the case was assigned to me. ECF No. 273.

19

The parties have briefed their respective positions on the proper amount of monetary

20

equitable relief. They also move to exclude each other’s experts. I award monetary equitable

21

relief in favor of the FTC and against defendants Publishers Business Services, Inc.; Ed Dantuma

22

Enterprises, Inc.; Edward Dantuma; Brenda Dantuma Schang; Dries Dantuma; Dirk Dantuma;

23

and Jeffrey Dantuma in the amount of $23,773,147.78.

24

I. BACKGROUND

25

The facts are laid out extensively in the summary judgment order. ECF No. 151. In brief,

26

the defendants operated a magazine subscription service. The defendants would telephonically

27

contact individuals at their place of business and tell them that they would get a “surprise” if they

28

1

participated in a survey. The surprise was that the defendants were selling the consumer

2

magazine subscriptions. The full details of the transaction were spread out over three stages: the

3

initial call with the sales representative, who then transferred the consumer to a shift supervisor,

4

and a later verification call. The transaction was presented in a confusing and misleading manner

5

by fast-talking sales representatives, resulting in a net impression that the consumer was receiving

6

free magazines while having to pay only a nominal shipping and handling fee. In fact, the

7

consumer was agreeing to pay hundreds of dollars in magazine subscription fees. At summary

8

judgment, these practices were found as a matter of law to create a net impression likely to

9

mislead the consumer in a material way.

10

In addition to the deceptive initial sales practices, the defendants also engaged in

11

misleading and abusive collections practices when consumers refused to pay. The defendants

12

would falsely tell consumers their accounts could not be canceled because the defendants had

13

already paid the publishers for the full subscription when in fact the defendants had not done so.

14

They also sent misleading collection letters from their “legal department” even though they had

15

no legal department. Finally, the defendants made harassing and threatening phone calls.

16

Judge Pro entered summary judgment in favor of the FTC on liability and issued a

17

permanent injunction. ECF Nos. 151, 152. The parties then presented evidence regarding

18

monetary equitable relief during a multi-day evidentiary hearing. ECF Nos. 239-41, 252-53, 255.

19

Judge Pro ruled that the FTC had not shown that complete disgorgement of profits was necessary

20

to redress consumer injury. ECF No. 248 at 3. He considered full reimbursement to complaining

21

customers but concluded it would be impossible or impracticable to locate and reimburse those

22

customers. Id. at 3-4. He thus concluded disgorgement of net revenues the defendants received as

23

a result of their violations was the proper remedy, and he adopted the analysis of the defendants’

24

expert, Dr. Gregory Duncan, to impose monetary equitable relief in the amount of $191,219.00.

25

Id. at 4. Finally, Judge Pro ruled that there was insufficient evidence to hold defendants Persis

26

Dantuma, Brenda Dantuma Schang, Dirk Dantuma, and Jeffrey Dantuma individually liable. Id.

27

He therefore entered judgment in the amount of $191,219.00 against defendants Publishers

28
Page 2 of 13

1

Business Services, Inc.; Ed Dantuma Enterprises, Inc.; Edward Dantuma; and Dries Dantuma. Id.

2

at 4-5.

3

The FTC appealed the monetary award and the Ninth Circuit reversed and remanded. ECF

4

No. 266. As to individual liability, the Ninth Circuit directed that individual liability be imposed

5

on Dirk, Brenda, and Jeff, as well as Edward and Dries. Id. at 8. As to the amount of monetary

6

relief, the Ninth Circuit ruled that Judge Pro “applied an incorrect legal standard when [he]

7

focused on the defendants’ gain rather than the loss to the consumers.” Id. at 3. Judge Pro also

8

erred by relying on the fact that it may be impossible to locate and reimburse individual

9

customers. Id. at 4.

10

The Ninth Circuit found further error in the reliance on the defendants’ expert, Dr.

11

Duncan, because his report was based on two flawed assumptions. Id. at 5. First, Duncan

12

assumed most customers heard all the terms of the magazine subscriptions so they were not

13

misled. Id. But the defendants’ “fraud . . . was not simply the failure to disclose all pertinent

14

terms.” Id. Rather, they violated Section 5 “by the misrepresentations that launched the process,

15

among other reasons.” Id. Second, Duncan assumed the magazine subscriptions were not

16

valueless. Id. But the Ninth Circuit stated this “assumption is not relevant even if true” because

17

restitution may be appropriate where the consumer injury “arises out of misrepresentations made

18

in the sales process, which lead to a tainted purchasing decision.” Id. at 5-6 (quotation omitted).

19

Thus, consumers are entitled to a full refund where, as here, the “fraud is in the selling, not in the

20

value of the thing sold . . . .” Id. (quotation omitted).

21

The Ninth Circuit vacated the award and remanded for recalculation. Id. at 6. In doing so,

22

the Ninth Circuit stated that the court “should base its calculation on the injury to the consumers,

23

not on the net revenues received by defendants.” Id. But “[t]hat does not mean that the district

24

court must accept the calculation proposed by the FTC”:

25
26
27

PBS has argued, for example, that a customer who renewed subscriptions
necessarily knew the actual terms of the transaction at the time of renewal. A
similar argument was made regarding customers who added on to a subscription
order. The district court may consider these and other arguments in determining
the appropriate amount of damages to be awarded.

28
Page 3 of 13

1
2

Id.
Following remand, the parties attempted to settle, and when that failed they engaged in

3

another round of expert discovery and briefing on the issue of monetary equitable relief. In

4

relation to that briefing, the FTC moves to exclude the defendants’ expert, Dr. Armando Levy.

5

The defendants move to exclude the FTC’s psychological expert, Dr. Alan D. Castel. The parties

6

also filed competing analyses of how the monetary equitable relief ought to be calculated.

7

II. ANALYSIS

8

The FTC contends I should enter judgment in the amount of $23,773,147.78 based on the

9

presumption that all first-time orders were made in reliance on the deceptive practices. The FTC

10

argues it is entitled to the presumption that every first-time customer relied on the deceptive sales

11

practices because the summary judgment order established the defendants’ deceptive practices

12

were material and widely disseminated. The FTC excluded from its calculation payments by

13

customers who renewed or added on to their subscriptions, consistent with the Ninth Circuit’s

14

remand order. However, the FTC did not exclude those same customers’ initial subscriptions

15

because it takes the position that all first-time orders were tainted by the misleading practices,

16

even for those customers who later renewed or added on.

17

The defendants argue this court is not authorized to award monetary relief. The

18

defendants also assert the FTC is not entitled to a presumption of consumer reliance because the

19

FTC has not shown the defendants’ revenues were the result of widespread deception. Rather, the

20

defendants contend, they had many satisfied customers. Alternatively, the defendants argue their

21

expert has provided three different formulas for determining relief that more accurately reflect

22

consumer injury resulting from the violations.

23

A. Authority to Grant Monetary Equitable Relief

24

District courts have the authority under Section 13(b) of the FTC Act to “grant any

25

ancillary relief necessary to accomplish complete justice, including restitution.” F.T.C. v.

26

Commerce Planet, Inc., 815 F.3d 593, 598 (9th Cir. 2016) (quotation omitted), cert. denied sub

27

nom. Gugliuzza v. F.T.C., 2017 WL 69198 (U.S. Jan. 9, 2017); see also F.T.C. v. Stefanchik, 559

28
Page 4 of 13

1

F.3d 924, 931 (9th Cir. 2009). The defendants’ argument that I lack authority to enter monetary

2

equitable relief is foreclosed by controlling authority.
Moreover, the defendants waived this argument in this case. They did not appeal Judge

3
4

Pro’s prior order entering a monetary award against them. Nor did they raise the issue in their

5

briefs opposing the FTC’s appeal before the Ninth Circuit. See F.T.C. v. Publishers Business

6

Services, Inc., et al., No. 11-17270, ECF Nos. 22 (Answering Br.), 24 (Answering Br.), 57 (Pet.

7

for R’hrg En Banc). Consequently, I have authority to enter monetary equitable relief in this

8

case.

9
10

B. Reliance
The defendants argue that to order relief redressing consumer injury, there must be proof

11

that customers were injured by the deceptive practices, meaning the customers relied on the

12

deceptive practices in making their decision to purchase the magazines. The defendants

13

acknowledge that under certain circumstances, the FTC is entitled to a presumption of consumer

14

reliance. However, they contend the FTC has not met its burden of showing it is entitled to the

15

presumption, and, even if the presumption arises, the defendants argue they have rebutted it.

16

The FTC responds that it is entitled to the presumption of consumer reliance because the

17

summary judgment order established that the defendants’ deceptive practices were material and

18

widespread. Additionally, the FTC contends that the presumption was not rebutted, as the

19

evidence showed consumers were confused about the transaction.

20

“[P]roof of individual reliance by each purchasing customer is not needed” under

21

Section 13 of the FTC Act. F.T.C. v. Figgie Int’l, Inc., 994 F.2d 595, 605 (9th Cir. 1993).

22

Requiring a showing of individual reliance in FTC enforcement actions “would thwart effective

23

prosecutions of large consumer redress actions and frustrate the statutory goals of the section.” Id.

24

(quotation omitted). Thus, in such cases, the FTC is entitled to a “presumption of actual reliance”

25

once it “has proved that the defendant made material misrepresentations, that they were widely

26

disseminated, and that consumers purchased the defendant’s product.” Id. at 605-06. If the FTC

27
28
Page 5 of 13

1

makes this showing, “the burden shifts to the defendant to prove the absence of reliance.” Id. at

2

606.

3

1. The FTC is Entitled to the Presumption
There is no dispute that consumers purchased the defendants’ magazine subscriptions and

4
5

that the misleading practices were material. The summary judgment order made a specific

6

materiality finding. ECF No. 151 at 30. The defendants contend, however, that the FTC has not

7

shown the misleading practices were widespread.
The summary judgment order, which the defendants did not appeal, describes the

8
9

widespread nature of the misleading practices. The evidence showed the defendants made

10

approximately 25 million calls during the relevant period. ECF No. 151 at 11. The defendants’

11

sales representatives, shift supervisors, and verifiers were directed to follow scripts for these calls

12

and those scripts comprised the misleading sales pitch. Id. at 3-5, 7-8, 27-30. Although some

13

employees deviated from the scripts, the evidence showed those deviations made the sales pitches

14

more misleading, not less so. Id.; see also ECF No. 94 at 25 (former employee stating that when

15

representatives deviated from the script, they “said whatever they felt they needed to say in order

16

to make a sale” and no employees were disciplined for deviating); id. at 31-32 (former employee

17

stating some telemarketers went off script to increase sales, telemarketers were not disciplined for

18

going off script, and even when off script, “the basic message of the script remained the same”);

19

id. at 38-39 (former employee stating it was “an open secret” that “supervisors subtlety [sic]

20

encouraged the experienced telemarketers to go off script in order to increase sales”). The

21

defendants do not point to any evidence that the deviations cured the misleading statements in the

22

scripts or that the deviations were the norm. Indeed, when it suited them, the defendants argued

23

at summary judgment that the deviations were rare. ECF No. 131 at 8. The FTC thus is entitled

24

to a presumption that all consumers who purchased magazine subscriptions did so in reliance on

25

the misleading sales practices.

26

////

27

////

28
Page 6 of 13

1

2. The FTC Has Shown Reliance

2

The defendants argue that even if the FTC is entitled to the presumption, they have

3

rebutted that presumption through evidence that some customers were satisfied. The FTC

4

responds that even those customers who testified they were satisfied were still confused about the

5

terms of the transaction.

6

Under Federal Rule of Evidence 301, “[i]n a civil case, unless a federal statute or these

7

rules provide otherwise, the party against whom a presumption is directed has the burden of

8

producing evidence to rebut the presumption. But this rule does not shift the burden of

9

persuasion, which remains on the party who had it originally.” The Ninth Circuit has adopted the

10

“so-called ‘bursting bubble’ approach to presumptions” in some contexts. See Nunley v. City of

11

L.A., 52 F.3d 792, 796 (9th Cir. 1995) (finding bursting bubble approach appropriate in the

12

context of Federal Rule of Appellate Procedure 4(a)(6) in relation to the presumption that a

13

document that was mailed was received). Under the bursting bubble approach, “a presumption

14

disappears where rebuttal evidence is presented.” Id. Upon presentation of evidence rebutting the

15

presumption, the district judge “must then weigh the evidence and make a considered factual

16

determination . . ., rather than denying the motion out of hand . . . .” Id. I may find consumer

17

reliance, despite the presentation of rebuttal evidence, based on all the evidence including the

18

very facts that support the presumption. Id.

19

Assuming the bursting bubble theory would apply to the presumption of consumer

20

reliance in an FTC enforcement action, it is questionable the defendants’ evidence even rebuts the

21

presumption. The fact that some customers were ultimately satisfied with the magazines they

22

purchased does not necessarily mean their original decision to purchase was free from the taint of

23

the defendants’ deceptive sales practices. “The injury to a consumer occurs at the instant of a

24

seller’s misrepresentations, which taint the consumer’s subsequent purchasing decisions.” F.T.C.

25

v. BlueHippo Funding, LLC, 762 F.3d 238, 244 (2d Cir. 2014); see also Figgie Int’l, Inc., 994

26

F.2d at 606 (stating the “seller’s misrepresentations tainted the customers’ purchasing decisions”

27

and the “fraud in the selling . . . is what entitles consumers . . . to full refunds”).

28
Page 7 of 13

1

Even if the presumption bubble has burst, the FTC has met its burden of showing

2

consumer reliance. The evidence underlying the presumption supports the conclusion that every

3

initial order was tainted by the defendants’ Section 5 violations. The defendants made millions of

4

sales calls using scripts that were materially misleading as a matter of law. The FTC has

5

presented evidence from consumers that they were misled into giving money to the defendants by

6

the misleading sales pitch. See ECF Nos. 5 at 10-11, 35-401; 5-2 at 1-3; 96 at 39-43, 69-70, 87-91;

7

241 at 4, 7-16, 90. The defendants’ witnesses who testified they were satisfied nevertheless

8

appeared to be confused about, or unaware of, the terms of the transaction.2 The FTC therefore

9

has shown reliance on the Section 5 violations to support an award of monetary equitable relief.

10

C. Calculation of the Restitution Amount

11

Following the remand in this case, the Ninth Circuit adopted a “two-step burden-shifting

12

framework . . . for calculating restitution awards under § 13(b).” Commerce Planet, Inc., 815 F.3d

13

at 603. “Under the first step, the FTC bears the burden of proving that the amount it seeks in

14

restitution reasonably approximates the defendant’s unjust gains, since the purpose of such an

15

award is ‘to prevent the defendant’s unjust enrichment by recapturing the gains the defendant

16

secured in a transaction.’” Id. (quoting 1 Dobbs, Law of Remedies § 4.1(1), at 552). Unjust gains

17

“are measured by the defendant’s net revenues (typically the amount consumers paid for the

18

product or service minus refunds and chargebacks), not by the defendant’s net profits.” Id.

19

Unjust gains are not measured by “the consumers’ total losses” because “that would amount to an

20
1

21
22
23
24
25
26
27
28

This customer made payments but received a refund. Her injury therefore would not be part of
the monetary relief award, but her testimony supports the conclusion that consumers relied on the
Section 5 violations to make payments.
2

See ECF Nos. 241 at 147-54 (customer Benjamin Ryne testifying he understood the defendants
were selling magazines, the magazines were not free, he was a satisfied customer, but he was unaware of
the total price of the magazines); id. at 162-77 (customer Jodi Cairo testifying she understood she would
have to pay for the magazines and she was a satisfied customer, but she did not know how many months or
years she had agreed to pay); 253 at 116-25 and Evid. Hrg. Ex. 48 (customer Wendy Goken testifying she
understood she would have to pay and she was satisfied but she did not know how much the payments
were for, she did not know for how long the payments would need to be made, and she did not understand
what the total cost was); Recording of Hrg. from June 8, 2011, testimony of Shannon Meehan (testifying
she knew how much she was paying and thought she was getting a good deal but she did not comparison
shop and could not identify on what basis she thought the defendants’ magazines were a good deal; she
just liked the convenience).

Page 8 of 13

1

award of damages, a remedy . . . precluded under § 13(b).” Id. However, in many cases, like this

2

one, “the defendant’s unjust gain will be equal to the consumer’s loss because the consumer buys

3

goods or services directly from the defendant,” without a middleman. Id. (quotation omitted).

4

If the FTC meets its burden, “the burden then shifts to the defendant to show that the

5

FTC’s figures overstate the amount of the defendant’s unjust gains.” Id. at 604. “Any risk of

6

uncertainty at this second step fall[s] on the wrongdoer whose illegal conduct created the

7

uncertainty.” Id. (quotation omitted).

8
9

1. The FTC Has Met Its Initial Burden
The parties agree the defendants collected $24,038,392.03 from first-time orders. ECF

10

Nos. 312-5 at 12; 316-1 at 5-6, 16-17. The parties also agree that the defendants issued

11

$265,244.25 in chargebacks and refunds. ECF Nos. 132-2 at 19; 312 at 14-15. Under Commerce

12

Planet, the defendants’ net revenues of $23,773,147.78 reasonably approximate the defendants’

13

unjust gains ($24,038,392.03 paid by consumers minus refunds and chargebacks of $265,244.25,

14

equaling $23,773,147.78).

15

In light of the Ninth Circuit’s remand order, the FTC has not requested any revenues from

16

renewal or add-on orders. The defendants argue the initial order for any customer who later

17

renewed or added on to their orders should also be removed from the restitution amount.

18

However, the fact that a customer was satisfied with the product or service does not mean that

19

customer’s initial purchasing decision was not induced by the defendants’ misleading practices.

20

Indeed, the Ninth Circuit suggested that renewals or add-ons may be excluded from restitution if

21

those customers “necessarily knew the actual terms of the transaction at the time of renewal.”

22

ECF No. 266 at 6. The Ninth Circuit did not suggest that those customers necessarily knew the

23

terms at the time of the original purchase, nor did it suggest that the defendants’ misleading

24

tactics did not taint the initial purchase decision for these customers. To the contrary, the Ninth

25

Circuit noted that the defendants violated Section 5 “by the misrepresentations that launched the

26

process, among other reasons.” Id. at 5. The FTC’s calculation thus reasonably approximates the

27

defendants’ unjust gains by including the first-time orders for all customers. As discussed above,

28
Page 9 of 13

1

the FTC has met its burden of showing that all first-time orders were tainted by the defendants’

2

Section 5 violations.

3
4

2. The Defendants Have Not Shown the Amount is Overstated
The burden thus shifts to the defendants to show that the FTC’s requested amount

5

overstates the amount of their unjust gains. The defendants rely on their expert, Dr. Levy. In

6

response, the FTC seeks to exclude Dr. Levy under Daubert because his opinions contradict the

7

Ninth Circuit’s remand order and unjustifiably exclude large numbers of consumers from the

8

restitution calculation.

9

Dr. Levy gives three alternative amounts by which to measure monetary equitable relief.

10

First, he proposes that the amount of economic harm suffered by misled consumers is

11

approximately $465,000. ECF No. 316-1 at 16-17, 24-25. I reject this proposed calculation

12

because it conflicts with the Ninth Circuit’s remand order in this case. This calculation involves

13

an assumption that consumers valued the magazines they received and discounts consumer injury

14

by approximately ninety-five percent based on the magazines’ value. See ECF No. 316-1 at 9, 21-

15

24. The Ninth Circuit’s remand order specifically rejected the prior expert’s opinion because he

16

assumed the magazine subscriptions had value. ECF No. 266 at 5. The Ninth Circuit stated this

17

“assumption is not relevant even if true” because restitution may be appropriate where the

18

consumer injury “arises out of misrepresentations made in the sales process, which lead to a

19

tainted purchasing decision.” Id. at 5-6 (quotation omitted). Thus, consumers are entitled to a full

20

refund, with no discount for the value of the magazines, where, as here, the “fraud is in the

21

selling, not in the value of the thing sold . . . .” Id. (quoting Figgie Int’l, Inc., 994 F.2d at 606).

22

Dr. Levy also does not adequately support his assumption that 67.5 percent of customers

23

who were unhappy called the defendants to cancel or complained to a third party. See ECF No.

24

316-1 at 24. Although Dr. Levy extrapolated from studies on complaint rates, those studies had

25

rather unhelpful complaint-rate ranges from 10 to 84 percent. Id. at 14-15. Dr. Levy explained

26

that he leaned toward the high end because the defendants offered a service component and

27

because the deception involved the price to be paid, which was the core of the bargain between

28
Page 10 of 13

1

the parties. Id. at 15. But he does not explain why this leads to the assumption of 67.5 percent as

2

opposed to some other number. Dr. Levy also confined his group of complaining customers to

3

those who complained to a third party or called the defendants to cancel. ECF No. 316-1 at 16.

4

He does not explain why he did not attempt to capture complaints unaccompanied by a request to

5

cancel. See ECF No. 102 at 138-66 (first payment coupons from customers showing complaints

6

that consumers preferred not to be called at work, sales representatives talked too fast, consumers

7

were rushed into the decision, were “forced into buying,” and did not understand or received a

8

poor explanation of the transaction’s terms). Nor does he explore whether the defendants’

9

deceptive sales practices themselves contributed to a lower cancellation rate from unhappy

10

customers where customers were told they could not cancel. ECF No. 151 at 17, 30-31 (part of

11

deceptive practices was telling customers they could not cancel).

12

Moreover, Dr. Levy assumes a certain percentage of the defendants’ customers were

13

“satisfied” and thus suffered no or de minimis injury. ECF No. 316-1 at 17. But the mere fact that

14

some customers renewed or added on does not show that the initial purchasing decision for these

15

customers was not induced by the Section 5 violations. The defendants bear the risk of

16

uncertainty as to whether there were some customers who were not deceived and did not have

17

their original purchasing decision tainted by the defendants’ misleading practices. They have not

18

provided me a reliable method of determining how many customers fall into this category. I

19

therefore make no deduction from first-time orders based on so-called “satisfied” customers.3

20

Dr. Levy’s second proposal suggests the amount of relief be bounded by the defendants’

21

profits of $698,446 based on Dr. Duncan’s prior analysis. ECF No. 316-1 at 12-13. I reject this

22

analysis because the Ninth Circuit’s remand order makes clear that relying on Dr. Duncan’s

23

profits analysis is error. ECF No. 266 at 3.

24
25
26
27
28

3

The Ninth Circuit has suggested there is no authority to reduce an equitable restitution award for
“satisfied” customers. See Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1195-96 (9th Cir. 2016)
(“Gordon argues that the district court should not have included fees paid by ‘satisfied’ consumers. There
is no precedent for this proposition.”). Even if I interpret “satisfied” to mean the customer was neither
misled nor had their purchasing decision tainted, the defendants have not presented a reliable method for
determining how many customers fall into this category.

Page 11 of 13

1

Finally, Dr. Levy estimates the defendants’ revenues from the Section 5 violations

2

amounts to $1.15 million. I reject this analysis because Dr. Levy assumes misled customers

3

would seek to cancel before making any payment and he thus excludes from this number revenue

4

from customers who never contacted the defendants to cancel and never complained to a third

5

party. ECF Nos. 316-1 at 17-18, 20; 297-3 at 25-26. Dr. Levy does not provide an adequate basis

6

for this assumption and it contradicts his own statement elsewhere in his report that he “expect[s]

7

that there are customers who were unhappy but nevertheless failed to complain.” ECF No. 316-1

8

at 15; see also ECF No. 297-3 at 32 (Dr. Levy’s deposition testimony in which he cites no studies

9

or literature to support his assumption that dissatisfied customers would cancel before their first

10

payment). Moreover, it contradicts the evidence in this case, which shows some consumers

11

complained but still paid the defendants without canceling or complained after they made

12

payments. See ECF Nos. 5 at 10-11, 35-40; 5-2 at 1-3; 96 at 39-43, 69-70, 87-91; 102 at 138-66.

13

Thus, even if I consider Dr. Levy’s report, the defendants have not met their burden of

14

showing the FTC’s calculation overstates their unjust gains. Accordingly, I will award the FTC

15

$23,773,147.78 in monetary equitable relief against defendants Publishers Business Services,

16

Inc.; Ed Dantuma Enterprises, Inc.; Edward Dantuma; Brenda Dantuma Schang; Dries Dantuma;

17

Dirk Dantuma; and Jeffrey Dantuma. Because I reach this conclusion while considering Dr.

18

Levy’s report and without considering Dr. Castel’s report, I deny the parties’ respective motions

19

to exclude as moot.

20

III. CONCLUSION

21

IT IS THEREFORE ORDERED that plaintiff Federal Trade Commission’s motion for

22

judgment (ECF No. 312) is GRANTED. Plaintiff Federal Trade Commission is awarded the

23

sum of $23,773,147.78 as monetary equitable relief against defendants Publishers Business

24

Services, Inc.; Ed Dantuma Enterprises, Inc.; Edward Dantuma; Dries Dantuma; Brenda Dantuma

25

Schang; Dirk Dantuma; and Jeffrey Dantuma, joint and several. The Clerk of Court shall enter

26

judgment accordingly.

27
28
Page 12 of 13

1
2
3
4
5

IT IS FURTHER ORDERED that plaintiff Federal Trade Commission’s motion to
exclude the testimony of Dr. Armando Levy (ECF No. 297) is DENIED as moot.
IT IS FURTHER ORDERED that the defendants’ motion to exclude putative expert Alan
Castel (ECF No. 315) is DENIED as moot.
IT IS FURTHER ORDERED that unless a motion to seal is filed by any party within 21

6

days of the date of this order, plaintiff Federal Trade Commission’s motion to exclude testimony

7

of Dr. Armando Levy (ECF No. 297) shall be unsealed. If any party determines that any portion

8

of the filing should remain sealed, that party must file a renewed motion to seal along with a

9

proposed redacted version of the filing. Any motion to seal must set forth compelling reasons to

10
11

support sealing those portions.
DATED this 1st day of February, 2017.

12
13
14

ANDREW P. GORDON
UNITED STATES DISTRICT JUDGE

15
16
17
18
19
20
21
22
23
24
25
26
27
28
Page 13 of 13