## Facts

- Corporate defendants marketed discount vacation “certificates” or “vacation passports,” primarily through telemarketing scripts and sales calls.
- The Federal Trade Commission alleged the sales pitches misrepresented the nature and true cost of the travel packages, including failing to disclose significant additional charges such as airfare.
- The FTC asserted that consumers were led to believe the certificate price covered a complete vacation package, but later faced charges that made the total cost substantially higher than expected.
- The FTC sued under § 5 of the Federal Trade Commission Act, alleging unfair or deceptive acts or practices, and sought injunctive and monetary equitable relief, including rescission and restitution.
- After a bench trial before a magistrate by consent, the court entered a permanent injunction, ordered rescission and restitution, and held two corporate owners/directors (Thomas P. McCann II and James F. Weiland) personally liable.
- Defendants appealed, challenging (among other points) the court’s authority to order rescission and restitution under § 13(b) and the basis for individual liability.

## Issues

1. Whether § 13(b) of the Federal Trade Commission Act permits courts to award monetary equitable relief, including rescission and restitution, ancillary to injunctive relief.
2. What showing is required to impose personal monetary liability on corporate officers for a corporation’s deceptive acts or practices under § 5.
3. Whether the telemarketing representations and omissions about the vacation certificates were deceptive under § 5.

## Decision

- The Seventh Circuit affirmed the judgment.
- The court held that § 13(b)’s authorization of injunctive relief carries with it the court’s traditional equitable powers, including ancillary remedies such as rescission and restitution.
- The court upheld findings that defendants’ pricing and package representations, including omissions regarding airfare and total cost, were deceptive under § 5.
- The court affirmed personal liability against McCann and Weiland because they had authority to control, and participated in, the challenged practices and had sufficient knowledge of the deception.

## Legal Principles

- In an action seeking injunctive relief under FTC Act § 13(b), a federal court may employ traditional equitable powers to grant complete relief, including consumer redress through restitution and rescission.
- A practice is deceptive under FTC Act § 5 if it is likely to mislead reasonable consumers under the circumstances and is material.
- Corporate officers may be personally liable for monetary equitable relief for § 5 violations when: (1) the corporation engaged in deceptive acts or practices; (2) the officer participated directly in the practices or had authority to control them; and (3) the officer had knowledge of the deception, including awareness, reckless indifference, or intentional avoidance of the truth.
- Remedies may be imposed against both corporate entities and responsible individuals to restore consumers to their pre-transaction position.

## Conclusion

The Seventh Circuit affirmed broad equitable remedial authority under FTC Act § 13(b) to order restitution and rescission in addition to injunctive relief and upheld individual monetary liability for corporate officers who controlled or participated in deceptive telemarketing with adequate knowledge of the misconduct.


Federal Trade Commission v. Amy Travel Serv., Inc., 875 F.2d 564 (7th Cir. 1989)