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In a Rebuke to Longstanding FTC Approach, Supreme Court Rules FTC Cannot Rely on “Injunction” Provision to Obtain Equitable Monetary Relief

In 1973, Congress amended the FTC Act by adding §13(b), giving the Federal Trade Commission (“FTC”) equitable powers to remediate any violation of any law under its purview.  Using that power, the FTC has sought equitable monetary relief, including restitution and disgorgement. The lower courts routinely authorized such relief and Congress seemingly acknowledged the FTC’s power when it reauthorized the FTC Act. Despite those headwinds, today the Supreme Court unanimously held in a highly-anticipated case, AMG Capital Management, LLC v. FTC, that the FTC cannot seek or obtain equitable monetary relief pursuant to §13(b).

AMG Capital Management was a short-term payday loans company, one of many controlled by Scott Tucker. During the heart of the Great Recession, Tucker used deceptive fine print to implement 5 million payday loans, accruing more than $1.3 billion. The FTC sued AMG and Tucker in 2012, alleging in federal court that the defendants had engaged in unfair and deceptive practices in violation of §5(a) of the FTC Act. Using §13(b) of the FTC Act, which authorizes the Commission to seek temporary, and “in proper cases,” a court-ordered “per­manent” injunction. The FTC won at summary judgment, and the lower court entered an injunction and directed Tucker to pay $1.27 billion in restitution and disgorgement. Tucker appealed to the Ninth Circuit, which rejected Tucker’s argument that §13(b) does not authorize the monetary relief the District Court granted. Tucker then appealed to the Supreme Court.

The Court began its analysis by reviewing the history of the FTC Act, which creates a pathway for enforcement via in-house administrative proceedings brought before an Administrative Law Judge, whose rulings can be reviewed by the Commission and eventually in a court of appeals. Congress amended the FTC Act in 1973, adding §13(b) authorizing the agency to proceed directly to district court to obtain temporary and permanent relief (namely, a “temporary restraining order or a preliminary injunction” and a “permanent injunction”). Several years later, Congress again amended the FTC Act, adding §19 authorizing district courts to grant monetary relief in cases where the person or entity already was bound by a final FTC administrative cease and desist order.

For years, the FTC used §13(b) to obtain restitution and other forms of equitable monetary relief in cases the agency originated in federal court. The Supreme Court’s decision puts an end to this trend, notwithstanding the agency’s consistent success, stripping the agency of a significant enforcement tool. The Court based its decision on the plain language and structure of §13(b), which refers only to injunctions (while other statutory sections address equitable monetary relief) and which the Court found to focus on prospective, not retrospective, relief.

Of the decision, Acting FTC Chair Rebecca Kelly Slaughter issued a strongly worded statement that the Supreme Court had “ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for the illegal behavior.” She lamented that the FTC is now “deprived . . . of the strongest tool [it] had to help consumers when they need it most.” Slaughter stated the FTC has, and will continue to, ask for a legislative fix to the Court’s ruling: “We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.” In the meantime, the FTC staff has signaled to the public that it has been working on a multipronged approach in its everyday casework. That approach includes searching its prior cases for rule violations that go beyond the FTC Act, alleging more rule violations in every case, and using its administrative process.

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XI, Number 112
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About this Author

Phyllis H. Marcus Partner Consumer Products Food Industry Retail Practices
Partner

With 17 years of experience at the FTC, Phyllis brings a unique advertising and children’s privacy vantage point to our clients.

Phyllis heads the firm’s advertising counseling practice, and focuses on all aspects of advertising, from the initial development of a claim to its ultimate defense in the marketplace. Phyllis’s practice includes claim creation and substantiation, pre-acquisition due diligence, dissemination in traditional and digital media, and both offensive and defensive competitor challenges. She also counsels clients on the intricacies of compliance with the Children’...

202-955-1810
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