been sensitive to the fact that the FTC can not be expected to carry out its legislative mandate if actions under § 13(b) are treated the same as private fraud actions. See Amy Travel Service, 875 F.2d at 574 ("We find that imposing a requirement that the FTC prove subjective intent on the part of defendants to defraud would be inconsistent with the policies behind the FTC Act and impose too great a burden on the FTC").
The court thus concludes that the Defendants use of deceptive advertisements supports an award for consumer redress. The Eighth Circuit reasoned similarly when it ruled that the FTC did not have to show actual reliance on the false statements in an advertisement in order to obtain consumer redress:
This is not a private fraud action, but a government action brought to deter unfair and deceptive trade practices and obtain restitution on behalf of a large class of investors. It would be inconsistent with the statutory purpose to require proof of subjective reliance by each individual consumer.
F.T.C. v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991).
In other cases brought under Section 13(b), the proper amount of restitution has been held to be the purchase price of the relevant product or business opportunity, less any refunds or money earned. As the court in F.T.C. v. Atlantex Associates, 1987-2 Trade Cas. (CCH) para. 67,788, at 59,256 (S.D. Fla. 1987), stated:
It is an appropriate remedy authorized by this Court's equitable powers to require the individual and corporate Defendants to pay consumer redress in the form of a cash refund measured by amounts previously paid less any amounts returned to consumers who invested in the . . . partnerships.
See also F.T.C. v. Atlantex Associates, 872 F.2d 966 (11th Cir. 1989) (awarding consumer redress in an amount equal to total amounts paid by investors).
Consequently, the court finds that consumer redress in the amount of $ 9,129,243.84 is called for. This $ 9 million figure is the sum of the total money spent by consumers on 1-900-HOT-CARS and 1-900-VISA-123. The two defendants, the US sales Corporation and Dean Vlahos, are jointly and severally liable for this sum. The undispute evidence has shown that Vlahos knew or should have known of the acts at issue and that Vlahos both participated in them directly and had the authority to control them. Vlahos ran his business first as a sole proprietorship and then was the President and sole sharehoder of US Sales. He controlled the daily operations of the corporation, negotiated contracts, and even was the voice used in the 900 recordings. Thus, under F.T.C. v. Amy Travel Services, 875 F.2d at 573, Vlahos is individually liable for the consumer redress ordered in this action.
The court further rules that ancillary equitable relief is necessary to accomplish complete justice in this case. Merely prohibiting the advertisements discussed in this opinion is insufficient, especially considering Defendants' contemptuous behavior in violating the Preliminary Injunction Order. Ancillary equitable relief will be necessary to effectuate enforcement of Section 5 of the FTC Act and to deter future violations by these Defendants.
The court concludes therefore that the permanent injunction should require Defendants to obtain a performance bond for any future sales of credit card or auction information. The order should also require Defendants to report their addresses and places of employment or business, and any subsequent changes in this information to the F.T.C.
Parties Ordered to Submit Proposed Orders
The parties are ordered to submit proposed orders taking into consideration the court's discussion of remedy in the previous section. The proposed orders must be filed within one week of the issuance of this memorandum opinion, with a copy sent to the other party. The parties will then be given one week to write a memorandum not to exceed five pages in which each side is to argue in favor of its proposed order and against the other side's proposed order. There will be no responses or reply memoranda.
The court requests that this procedure be followed in order to tailor effective equitable relief in this relatively complex case, a case which may require a sustained period of monitoring by the F.T.C. to ensure adequate compliance. Until an order is entered, the preliminary injunction issued in this case remains in effect.
Plaintiff Federal Trade Commission's motion for summary judgment on counts II and III is granted. The parties are ordered to submit their proposed orders consistent with this opinion within one week. Supporting memoranda are due within one week of the proposed orders.
BRIAN BARNETT DUFF, JUDGE
UNITED STATES DISTRICT COURT