September 28, 2021

Volume XI, Number 271

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September 27, 2021

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Does Section 13(b) of the Federal Trade Commission Act Allow the Federal Trade Commission to Seek Equitable Monetary Relief in Federal Court? Supreme Court Rules ‘No’

In AMG Capital Management v. FTC, the Supreme Court unanimously held that Section 13(b) of the FTC Act does not permit the FTC, in federal court actions, to seek equitable monetary relief. 141 S. Ct. 1341 (2021). However, the FTC still can seek monetary relief pursuant to other sections of the Act.

In AMG Capital Management v. FTC, petitioner AMG Capital Management (AMG) offered borrowers short-term payday loans. In marketing these loans, it misled customers by suggesting that they would only need to make a single payment on a loan. This was misleading because customers who did not opt-out of the automatic renewal of such payments would continue to be charged the initial payment amount on their loans. As a result of these deceptive practices, AMG accrued more than $1.3 billion in deceptive charges.

The Federal Trade Commission (FTC) filed suit in federal court against AMG under Section 5(a) of the Federal Trade Commission Act (the Act) (see 15 U. S. C. § 45(a)(1)). Relying on Section 13(b), the FTC sought a permanent injunction and requested that the court order monetary relief in the form of restitution and disgorgement of AMG’s ill-gotten profits. The district court granted the FTC’s request for monetary relief. AMG appealed, arguing that Section 13(b) did not authorize courts to grant, or for the FTC to receive, monetary relief. The US Court of Appeals for the Ninth Circuit affirmed the district court’s decision, relying on precedent that supported the interpretation of Section 13(b) as authorizing courts to grant monetary relief to the FTC. AMG sought and was granted certiorari by the US Supreme Court.

The Court reversed, finding that Section 13(b) does not authorize the FTC to seek monetary relief from companies engaged in deceptive trade practices. In a unanimous opinion, the Court agreed that Section 13(b) cannot be read as authorizing equitable monetary relief, such as the restitution and disgorgement of profits that the FTC sought here. Instead, the Court interpreted the language of Section 13(b) to have its plain meaning — that courts can only grant the FTC an injunction in a civil action, where proper.

Upon its creation, the FTC was only entitled to bring enforcement actions through administrative proceedings. Decades later, Congress enacted Section 13(b) of the FTC Act, which permitted the FTC to bring an enforcement action in federal court and seek temporary and permanent injunctive relief. What followed was a series of decisions interpreting the newly-added section to mean that federal courts adjudicating FTC actions were not limited to granting equitable relief in the form of injunctions but rather could use the full range of their equitable powers to also award other types of equitable relief, such as restitution and disgorgement of profits. In its decision, the Supreme Court rejected this precedent, finding that, when read together with other sections of the Act, the relief available in Section 13(b) was meant to be an exclusive list of options that only concerned “prospective injunctive relief” and not “retrospective monetary relief.”

Although the decision ends the ability for the FTC to seek monetary relief under Section 13(b), it did not result in a blanket prohibition of the FTC’s ability to seek some form of monetary relief. As part of its analysis, the Court recognized that other provisions of the Act specifically authorize the FTC to seek certain forms of monetary relief. For example, the FTC can still seek monetary relief under Section 19 of the Act, which permits federal courts to issue orders “redress[ing] injury to consumers,” such as a “refund of money,” but only after the FTC initiates an administrative proceeding, obtains a cease and desist order in such proceeding, and petitions the federal court to enforce that order under Section 19(d).

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume XI, Number 182
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About this Author

Kristin Lockhart IP Lawyer Katten Law Firm
Associate

Kristin Lockhart offers clients the legal support they need to select and enforce their brands. She frequently advises clients on US and international trademark clearance, prosecution and enforcement matters involving trademarks and related IP claims, such as copyright infringement, false advertising and unfair competition. Kristin also assists in corporate transactions, trademark licensing and other types of IP acquisitions.

A broader perspective on intellectual property issues

Kristin splits her focus between IP prosecution and litigation, which gives her a broader...

202.625.3558
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