December 1, 2021

Volume XI, Number 335

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Court Considers FTC’s Ability to Seek Monetary Relief Post-AMG

Earlier this year, we blogged about the Supreme Court’s decision in AMG v. FTC, which significantly curtailed the FTC’s ability to seek monetary restitution under Section 13(b) of the FTC Act.  One quick update there: The U.S. House of Representatives recently voted to restore the FTC’s Section 13(b) disgorgement powers.  For now, though, in the absence of any action by the Senate, the FTC remains without that power.

Recently, Judge Dolly M. Gee of the District Court of the Central District of California considered the FTC’s post- AMG ability to seek monetary relief under a different provision of the Act. Though the court ultimately found the FTC could not do so on the particular facts of the case, Judge Gee’s decision left open the possibility that the FTC may, in theory, seek monetary relief under Section 19 of the FTC Act for violations of the Restore Online Shoppers’ Confidence Act (“ROSCA”). FTC v. Cardiff, No. 18-cv-2104 (C.D. Cal. June 29, 2021). However, because ROSCA claims are fairly limited in scope, this decision does not create the possibility of rendering the Supreme Court’s AMG decision a dead letter; there still exist substantial categories of FTC suits for which monetary relief is not permitted, absent an act of Congress.

The FTC alleged defendants, the marketers of smoking cessation products, enrolled consumers who purchased their products in a “monthly autoship program,” through which defendants shipped (and charged customers for) products without their consent. Based on these allegations, the FTC sued defendants under ROSCA, which prohibits charging consumers for goods sold online through an opt-out program unless consumers receive clear notice and a simple mechanism to cancel. Noting “[c]onsumers had to take an affirmative step to cancel the autoship program, and even when they took this step, they were not always able to effectuate a cancellation,” the court previously granted summary judgment to the FTC on its ROSCA claim. In the instant proceeding, the court considered damages owed to the FTC.

While the Supreme Court’s decision in AMG curtailed the FTC’s ability to seek restitution under Section 13(b), the FTC argued it could still seek monetary relief under Section 19. Section 19 authorizes the FTC to sue directly in federal court to obtain relief for unfair or deceptive acts or practices. Observing that Section 19 defines the available relief broadly, so as to include “the refund of money or return of property” and “the payment of damages,” the court agreed that the language in Section 19 plainly authorizes the FTC to seek equitable monetary relief to redress consumer injury resulting from ROSCA violations. It also noted that the Supreme Court’s decision in AMG explicitly stated that “[n]othing” in the decision “prohibits the Commission from using its authority under § 5 and § 19 [of the FTC Act] to obtain restitution on behalf of consumers.”

However, the court nonetheless denied the FTC’s ability to recover monetarily under Section 19 in this particular case, on the ground that the FTC failed to timely disclose its only evidence in support of its computation of ROSCA damages. The court noted that in its papers, the FTC only cited to Section 13(b) of the Act (not Section 19), and did not offer a separate calculation of damages for violations of ROSCA or any other statutes or rules. Finding that the FTC had put “all its eggs in the Section 13(b) basket,” the court determined it was too late for the FTC to pivot to Section 19 to recover damages.

Although the FTC did not succeed in obtaining monetary relief, it did succeed in obtaining injunctive relief against the defendants. The Court held that the FTC was permitted to seek a permanent injunction against defendants under Section 13(b) without first initiating administrative proceedings, because AMG only curtailed its ability to seek monetary relief under Section 13(b). Watch this space for further developments.

© 2021 Proskauer Rose LLP. National Law Review, Volume XI, Number 217
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About this Author

Lawrence I Weinstein, False Advertising and Trademark Copywright Law, Proskauer
Partner

Larry Weinstein is a Partner in Proskauer's Litigation Department. He is co-head of the firm’s Intellectual Property Litigation Group, and also co-head of the firm’s False Advertising & Trademark Practice. Larry is both a distinguished trial lawyer and counselor, whose practice covers a broad spectrum of intellectual property law, including Lanham Act false advertising and trademark cases, consumer class action cases, NAD and FTC proceedings, and trade secret and copyright litigations, as well as sports, art and other complex commercial cases.

212-969-3240
Jennifer Yang, Litigation Law, Proskauer Law Firm
Associate

Jennifer Yang is an associate in the Litigation Department. She is a commercial litigator with a particular emphasis on false advertising and other intellectual property disputes, including Lanham Act and consumer class action false advertising litigation, advertising challenges before the National Advertising Division, as well as trademark, trade secret and copyright litigation. She has experience representing clients in a variety of industries, including medical device companies, consumer products companies, fashion retailers and art foundations.

212-969-3394
Associate

Amy Gordon is an associate in the Litigation Department.

212-969-3129
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