Client Alert

AMG Capital v. FTC – SCOTUS Strips the FTC of a Critical Enforcement Tool

30 Apr 2021

Overview

In a unanimous decision reversing the Ninth Circuit, the Supreme Court in AMG Capital v. FTC ended a federal circuit split and squarely held that the FTC lacks authority to pursue equitable monetary relief in federal court under Section 13(b) of the Federal Trade Commission Act (the “Act”). The Ninth Circuit had upheld a permanent injunction against defendant Scott Tucker’s payday loan business for engaging in unfair and deceptive practices, holding that Section 13(b) allowed for “ancillary relief,” including restitution, and affirming a $1.27 billion restitution and disgorgement award. But the Supreme Court held that Section 13(b), by its language and structure, does not give the FTC the power to seek equitable monetary relief such as restitution or disgorgement. The justices stressed that the FTC remains free to seek restitution through the powers originally granted by the Act (pursuant to Sections 5 and 19), but only after conducting a more onerous proceeding before an agency in-house administrative law judge.

The Decision

In reaching its holding, the Supreme Court focused on the plain language and structure of Section 13(b). Section 13(b) of the Act authorizes the FTC to seek preliminary injunctions in federal district court whenever “the Commission has reason to believe” a target company is violating or “is about to” violate the Act. The Court noted that Section 13(b) refers only to injunctions, not monetary relief. Further, the Supreme Court held that the words “permanent injunction” have a limited purpose in the structure of Section 13(b). Those words are buried in a lengthy provision that focuses solely on prospective injunctive relief, not retrospective monetary relief.

The Court then looked to the general structure of the Act, holding that Sections 5(l) and 19 gave district courts the authority to impose limited monetary penalties and award monetary relief where the FTC has issued cease and desist orders. Congress expressly provided a broad scope for the equitable relief in Sections 5 and 19, whereas Section 13(b) had more limited “permanent injunction language.” Moreover, the Court found that Section 19 did not create an alternative enforcement path with similar remedies to Section 13. Congress would not have enacted Section 19, which includes certain conditions and limitations, if Section 13(b) already implicitly allowed the FTC to obtain the same monetary relief. Thus, Section 13(b) could not be interpreted broadly, as the FTC argued, to provide a substitute for Sections 5 and 19. The Supreme Court also rejected the FTC’s other arguments, including that:

  • Porter v. Warner Holding Co. did not adopt a universal rule that statutory authority to grant an injunction automatically encompasses the power to grant equitable monetary remedies. The Court emphasized that the scope of equitable relief that a provision authorizes remains a question of interpretation in each case.
  • Section 19’s savings clause does not help answer whether the FTC has authority to obtain monetary relief. The question is not one of preserving pre-existing remedies given by other statutory provisions. The question is whether Section 13(b) gave that remedy in the first place—the Supreme Court found that it does not.
  • The 1994 and 2006 amendments to the Act, which do not address the specific language at issue here, do not demonstrate congressional acquiescence to lower court rulings that favor the FTC’s interpretation of Section 13(b). The 1994 amendments relate solely to Section 13(b)’s venue, joinder, and service rules, not its remedial provisions. The 2006 amendments modified the scope of Section 5 to include “[a]ll remedies available to the Commission” including restitution, but this amendment did not impact Section 13(b)—restitution was already available to the FTC through its administrative process.
  • The FTC’s policy arguments were unavailing. The Supreme Court noted that its decision does not impact the FTC’s ability to pursue restitution under Sections 5 and 19. If the FTC finds this process too cumbersome or otherwise inadequate, it should request that Congress grant it further remedial authority. Indeed, the FTC has already requested such authority from Congress.

FTC Response

Following the AMG decision, Rebecca Slaughter, acting chair of the FTC, issued a statement that “the Court has deprived the FTC of the strongest tool [it] had to help consumers,” and she “urge[d] Congress to act swiftly to restore and strengthen the powers of the agency [under 13(b)].”

The FTC is pursuing multiple options to continue to exercise its restitution and disgorgement powers. In the immediate aftermath of AMG, the agency may be forced to rely more on administrative proceedings under Sections 5 and 19 if it wishes to seek restitution, which impose a slower process and higher bar to monetary relief. The FTC may also coordinate with the Consumer Financial Protection Bureau and/or state attorneys general to obtain monetary relief under their respective consumer protection laws. The FTC is also actively petitioning Congress for remedial action. Even before oral argument in AMG, all five FTC commissioners (both Democratic and Republican) urged Congress to enact legislation cementing the FTC’s interpretation of its equitable authority under Section 13(b) in October 2020. And two days before AMG was decided, Representative Tony Cárdenas introduced House bill 2668 to address the judicial limitations to Section 13(b) by authorizing the FTC to seek restitution, disgorgement, and court-ordered permanent injunctions. As of April 30, 2021, the bill is pending in the House and has been referred to the Committee on Energy and Commerce. On April 27, 2021, Acting Chairwoman Slaughter testified before the Committee on Energy and Commerce in support of the bill.

Takeaway

The AMG decision significantly limits the FTC’s ability to threaten immediate and hefty monetary penalties in federal court, but does not remove restitution or disgorgement from the agency’s arsenal of enforcement powers. The impact of AMG may be temporary, however, as it is likely to galvanize ongoing congressional efforts to restore the FTC’s power to pursue equitable monetary remedies under Section 13(b).

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