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Federal Trade Commission v. Affordable Media, LLC

179 F.3d 1228 (9th Cir. 1999)

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Federal Trade Commission v. Affordable Media, LLC

United States Court of Appeals for the Ninth Circuit

179 F.3d 1228 (9th Cir. 1999)

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Facts

Denyse and Michael Anderson (defendants) formed Financial Growth Consultants, LLC (Financial) (defendant) to sell media units to investors with the promise that investors would receive a fifty percent return on their investment. The media units were a share of the profits from products sold on late night television, which Financial sold through telemarketing, but not enough of the products could be sold to match the promised returns. Typical of a Ponzi scheme, Financial made up for the media units’ profit shortfalls by paying the profits promised to earlier investors with the investments of later investors. Of the $13,000,000 raised from investors, Financial retained $6,300,000 in commissions. The Federal Trade Commission (plaintiff) brought an action for injunctive relief that required the Andersons, who had placed their assets in an asset protection trust they created in the Cook Islands, to repatriate all assets held outside the United States “(1) by them, (2) for their benefit; or (3) under their direct or indirect control.” After the court issued a temporary restraining order and preliminary injunction against the Andersons, the Andersons sent a letter to their co-trustee, asking for an accounting and repatriation of the assets. The co-trustee denied the request claiming that the request constituted “duress” under the provisions of the trust and removed the Andersons as co-trustees. The Andersons claimed that this rendered them incapable of complying with the injunction. The district court held the Andersons in civil contempt for failing to comply with the court’s order and had them taken into custody after determining following a hearing that the Andersons retained control over the trust. Under the trust terms, the Andersons were “protectors” of the trust. As protectors, the Andersons could determine whether an event of duress had occurred and could have overruled the co-trustee by certifying that that in their opinion no event of duress had occurred. The Andersons appealed.

Rule of Law

Issue

Holding and Reasoning (Wiggins, J.)

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