                                      In the

      United States Court of Appeals
                     For the Seventh Circuit
                          ____________________  

No.  15-­‐‑3472  
FEDERAL  TRADE  COMMISSION,  
                                                              Plaintiff-­‐‑Appellee,  
                                         v.  

KEVIN  TRUDEAU,  
                                                                       Defendant.  
Appeal  of:  
         HOGAN   MARREN   BABBO   &   ROSE,   LTD.,   and   FARUKI  
         IRELAND  &  COX,  P.L.L.  
                          ____________________  

            Appeal  from  the  United  States  District  Court  for  the  
              Northern  District  of  Illinois,  Eastern  Division.  
              No.  03  C  3904  —  Robert  W.  Gettleman,  Judge.  
                          ____________________  

 ARGUED  SEPTEMBER  14,  2016  —  DECIDED  DECEMBER  29,  2016  
                 ____________________  

    Before  POSNER,  EASTERBROOK,  and  SYKES,  Circuit  Judges.  
      EASTERBROOK,  Circuit  Judge.  This  decision  marks  the  end  
of   litigation   about   Kevin   Trudeau’s   frauds—or   so   we   hope.  
Earlier   decisions   affirmed   his   criminal   conviction   and   sen-­‐‑
tence  and  his  adjudication  in  civil  contempt  after  he  refused  
2                                                                 No.  15-­‐‑3472  

to   surrender   the   profits   made   from   violating   orders   of   the  
Federal  Trade  Commission.  See  United  States  v.  Trudeau,  812  
F.3d  578  (7th  Cir.  2016);  FTC  v.  Trudeau,  662  F.3d  947  (7th  Cir.  
2011).  The  contempt  judgment  is  approximately  $38  million,  
and  Trudeau  claims  to  be  destitute.  Believing  that  this  is  just  
another  of  his  lies,  the  FTC  demanded  that  firms  it  thought  
to  be  affiliated  with  Trudeau  turn  over  business  records.  
     Website   Solutions,   one   of   these   entities,   hired   Hogan  
Marren  Babbo  &  Rose,  Ltd.,  and  Faruki  Ireland  &  Cox,  P.L.L.  
(collectively  the  Law  Firms)  to  represent  it  in  responding  to  
the  FTC’s  demand.  After  considering  some  of  the  documents  
ultimately   revealed,   the   district   judge   concluded   that   Web-­‐‑
site   Solutions   is   under   Trudeau’s   control   and   that   all   of   its  
assets   are   available   to   satisfy   his   obligations.   The   judge   ap-­‐‑
pointed  a  receiver  to  marshal  the  assets  of  Website  Solutions  
and  Trudeau’s  other  entities.  The  receiver  collected  a  net  of  
approximately  $8  million,  which  the  FTC  wants  to  distribute  
to  Trudeau’s  defrauded  customers.  In  October  2015  the  dis-­‐‑
trict   court   approved   the   receiver’s   plan;   this   order   also   re-­‐‑
jected   the   Law   Firms’   request   for   compensation   from   funds  
in  the  receiver’s  custody.  In  November  the  judge  authorized  
the  receiver  to  send  $4  million  to  the  FTC;  in  December  the  
judge   approved   the   receiver’s   compensation;   in   February  
2016   the   judge   accepted   the   receiver’s   final   report   and   au-­‐‑
thorized  the  receiver  to  send  all  remaining  funds  to  the  FTC.  
That  order  closed  the  receivership  estate.  
   The   Law   Firms   have   appealed—but   from   the   October  
2015  order  rather  than  any  of  the  later  orders.  This  led  us  to  
question  whether  the  order  is  appealable,  because  as  of  Oc-­‐‑
tober   2015   all   $8   million   remained   in   the   receiver’s   control.  
The   Law   Firms   could   have   waited   until   the   estate-­‐‑closing  
No.  15-­‐‑3472                                                                      3  

order  without  jeopardizing  their  claim  to  reimbursement.  At  
oral   argument   we   directed   the   parties   to   file   supplemental  
memoranda   addressing   appellate   jurisdiction.   After   receiv-­‐‑
ing   these   submissions,   we   conclude   that   the   October   2015  
order  functioned  as  approval  of  the  receiver’s  proposed  plan  
of   distribution.   If   this   were   a   bankruptcy   proceeding   rather  
than  a  receivership,  the  October  2015  order  would  have  been  
labeled  a  plan  of  reorganization  (or  perhaps  a  plan  of  liqui-­‐‑
dation).  And  in  bankruptcy  the  confirmation  of  such  a  plan  
is  appealable  as  a  “final  decision”  even  though  funds  remain  
in   the   estate.   See   Bullard   v.   Blue   Hills   Bank,   135   S.   Ct.   1686  
(2015)  (recognizing  that  an  order  confirming  a  plan  of  reor-­‐‑
ganization  is  appealable,  while  holding  that  an  order  declin-­‐‑
ing   to   approve   such   a   plan   is   not).   So   we   conclude   that   the  
October   2015   order   is   “final”   under   28   U.S.C.   §1291   and  
move  to  the  merits.  
      No  one  has  appealed  from  the  district  court’s  conclusion  
that   Trudeau   controls   Website   Solutions   and   that   all   of   its  
assets   are   available   to   reimburse   the   persons   he   defrauded.  
Nor  has  anyone  appealed  from  the  district  court’s  approval  
of   the   plan   of   distribution.   The   Law   Firms,   the   sole   appel-­‐‑
lants,   contend   only   that   their   fees   should   be   paid   ahead   of  
compensation  for  Trudeau’s  victims.  
     The   Law   Firms   depict   their   role   as   helping   the   receiver  
understand   Website   Solutions’   business   and   recover   its   as-­‐‑
sets;   the   FTC,   by   contrast,   contends   that   the   Law   Firms   did  
little  but  obstruct  discovery  in  an  effort  to  keep  the  FTC  from  
laying  hands  on  assets  that  Trudeau  was  trying  to  hide.  We  
need   not   decide   which   characterization   is   correct,   because  
either   way   the   Law   Firms   face   an   insuperable   hurdle:   well  
before  they  were  hired  by  Website  Solutions  to  deal  with  the  
4                                                              No.  15-­‐‑3472  

FTC’s  discovery  demands,  the  federal  judiciary  had  directed  
Trudeau  to  turn  over  all  proceeds  of  his  improper  commer-­‐‑
cial  activities.  That  order  created  a  lien  on  Website  Solutions’  
assets  (once  the  judge  found  that  they  were  under  Trudeau’s  
control)   that   was   senior   to   any   claim   created   later.   As   a  
proxy  for  Trudeau,  Website  Solutions  had  no  right  to  make  
commitments   to   pay   third   parties   with   funds   belonging   to  
Trudeau’s  victims.  Cf.  Caplin  &  Drysdale,  Chartered  v.  United  
States,  491  U.S.  617  (1989);  United  States  v.  Monsanto,  491  U.S.  
600  (1989).  And  lawyers,  particularly,  had  to  understand  that  
their   claims   to   compensation   would   be   junior   to   those   as-­‐‑
serted  by  the  FTC  on  the  victims’  behalf.  
    In  bankruptcy,  law  firms  that  represent  the  estate  (or  the  
trustee)   can   be   compensated   ahead   of   other   creditors,   but  
only  if  they  receive  the  court’s  approval  for  their  hiring  and  
demonstrate   that   their   activities   are   necessary   and   benefit  
the  estate.  See  11  U.S.C.  §§  327,  330,  1103;  Baker  Botts  L.L.P.  v.  
ASARCO  LLC,  135  S.  Ct.  2158  (2015).  Neither  the  Law  Firms  
nor  Website  Solutions  obtained  the  court’s  approval  for  their  
engagement   and   proposed   course   of   conduct,   nor   did   they  
demonstrate  to  the  district  judge’s  satisfaction  afterward  that  
what  they  had  done  was  necessary  or  helped  the  estate.  (The  
judge  implied  agreement  with  the  FTC’s  submission  that  the  
Law   Firms   did   more   to   obstruct   the   discovery   than   to   pro-­‐‑
mote  it.)  Indeed,  the  Law  Firms  have  not  even  tried  to  show  
that  they  would  have  satisfied  the  requirements  for  compen-­‐‑
sation  had  this  been  a  bankruptcy  rather  than  a  receivership.  
We  don’t  see  why  the  use  of  the  receivership  device  should  
make  the  Law  Firms  better  off.  
  There   was   another   potential   route   to   compensation:  
Website  Solutions  might  have  asked  the  district  court  to  or-­‐‑
No.  15-­‐‑3472                                                                 5  

der  the  FTC  to  ensure  that  Website  Solutions  would  be  rea-­‐‑
sonably   compensated   for   its   expenses   in   responding   to   the  
subpoenas.   See   Fed.   R.   Civ.   P.   45(d)(3)(C)(ii).   But   Website  
Solutions  did  not  make  such  a  request.  
    The   Law   Firms   stress   that   Rule   45   is   not   the   only   way  
that   lawyers   may   be   paid   for   their   work   in   civil   litigation,  
and  that  is  correct.  But  Website  Solutions  was  holding  other  
people’s   money   and   so   could   not   make   financial   commit-­‐‑
ments  to  third  parties.  That’s  why  the  Law  Firms  needed  the  
district   court’s   approval.   They   concede   that   the   judge   had  
discretion   to   say   yes   or   no.   And   given   the   fact   that   anyone  
hired  by  Website  Solutions  presumptively  stands  in  line  be-­‐‑
hind  Trudeau’s  victims,  the  district  court  did  not  abuse  that  
discretion  by  saying  “no.”  
                                                                     AFFIRMED  
