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Supreme Court Update: Jones v. Mississippi (No. 18-1259), AMG Capital Management LLC v. FTC (No. 19-508), Carr v. Saul (No. 19-1442)

Greetings, Court Fans!

Last Thursday, the Court issued three decisions in argued cases. In Jones v. Mississippi (No. 18-1259), a heavily divided Court pared back its prior decision in Miller v. Alabama (2012), holding that a court could sentence a juvenile to life without the possibility of parole even without specifically finding that the defendant was “permanently incorrigible.” In AMG Capital Management LLC v. FTC (No. 19-508), a unanimous Court held that the FTC’s power to obtain “permanent injunctions” did not allow it to seek equitable monetary relief, like restitution or disgorgement. And in Carr v. Saul (No. 19-1442), the Court unanimously held that applicants for disability benefits could challenge whether the administrative law judges who decided their claims against them were validly appointed, regardless of whether they had raised that argument in their original hearings before the ALJ. We’ll be back later this week with a fuller write-up of Jones, but for now we have summaries of AMG and Carr.

Section 13(b) of the Federal Trade Commission Act authorizes the FTC to obtain a “permanent injunction” in federal court against a person or entity that it believes is currently violating, or is about to violate, any law that the FTC is entitled to enforce. In AMG Capital Management LLC v. FTC (No. 19-508), the Supreme Court addressed whether this authority to seek an injunction also entitles the FTC to obtain equitable monetary relief like restitution or disgorgement. Justice Breyer, writing for a unanimous Court, held that it does not.

Scott Tucker was a pay-day loan tycoon. His online companies employed a scheme to mislead customers by stating that customers could repay a loan by making a single payment including interest, but then burying in small print that the loan would automatically renew regardless unless the customer affirmatively opted out. As a result, a customer who borrowed $300 might think they could make a single payment of $390 to pay off the loan, but if they did not affirmatively opt out, they would be on the hook for another $300 loan (and another, and so on).

Between 2008–2012, Tucker’s businesses made more than $1.3 billion in deceptive charges. In 2012 the FTC sought to enjoin the misleading lending practices in federal court under Section 13(b). Importantly, the FTC also sought monetary relief, including restitution and disgorgement. The district court granted summary judgment in favor of the FTC, entered the injunction, and directed payment of $1.27 billion. The Ninth Circuit affirmed, holding that Section 13(b) empowers federal courts to grant “any ancillary relief necessary to accomplish complete justice, including restitution.”

The Supreme Court unanimously reversed. Justice Breyer’s opinion began by laying out the statutory structure empowering the FTC, including the available administrative remedies. He then laid out the history of Section 13(b). The provision was part of a broader project by Congress to bolster the FTC during the 1970s, including the addition of other provisions that empower courts to impose monetary fines and equitable monetary relief if someone violates a final order from the FTC. In the 1990s, the FTC began to seek monetary relief under Section 13(b), but scaled back in 2003, issuing a policy statement to the effect that it would seek such relief only in “exceptional cases” involving a “clear violation.” Then, in 2012, the FTC revoked that policy statement. The end result was that, right up until this decision, the FTC was using “§13(b) to win equitable monetary relief directly in court with great frequency,” to the tune of “dozens of cases every year,” employing this avenue of enforcement far more frequently than the other administrative remedies available to it under the FTC Act.

Having laid out this history, Justice Breyer then turned to the relatively straightforward question of statutory interpretation: does the phrase “permanent injunction” authorize the FTC to obtain court-ordered monetary relief? The answer for the Court was an easy “no.” For one thing, an injunction is not the same as equitable monetary relief: the former generally offers prospective relief against future harm, whereas the latter typically offers retrospective relief for harm already suffered. The structure of the FTC Act only confirms this: the permanent injunction language appears in a lengthy provision that focuses entirely on prospective relief. The purpose is to stop “seemingly unfair practices from taking place while the [FTC] determines their lawfulness.” Moreover, given that the FTC Act does explicitly provide for monetary relief in other sections when an FTC order has been violated, the absence of such language in Section 13(b) suggests that Congress did not contemplate such remedies in that Section. Finally, Justice Breyer noted that it is unlikely that Congress would surreptitiously undermine the administrative enforcement mechanisms elsewhere in the FTC by providing for the much more powerful remedy of monetary relief in federal court without expressly saying so.

The FTC made several arguments as to why it should be entitled to obtain monetary relief. Most fall into the “this is the way we’ve always done it” and/or “this would lead to unjust policy” categories. It also pointed to some “saving clauses” elsewhere in the FTC Act. The Court did not find any of this compelling in light of the plain statutory language. And it went on to note that the FTC can get restitution in certain circumstances under other sections of Act, and that it could always “ask Congress to grant it further remedial authority” if it thinks that’s required—indeed, the FTC asked for that very authority just last year. The ball is now firmly in Congress’s court to decide if it wants to sharpen the FTC’s claws by further expanding the remedial scope of Section 13(b).

Our second case for today is Carr v. Saul (No. 19-1442), a slightly messy but stillunanimous opinion holding that disability-benefit claimants could challenge whether the administrative law judges (“ALJs”) who decided their claims were constitutionally appointed even if they had not raised that argument in their hearings before their ALJs.

Carr and five others had separately applied for disability benefits under the Social Security Act. Their applications were denied, so they sought administrative review, getting a hearing before different ALJs. When each of them lost, they appealed to the Social Security Administration’s Appeals Council, where they lost again. But then the Court decided Lucia v. SEC (2018), holding that the ALJs of the Securities and Exchange Commission had been unconstitutionally appointed (i.e., they were not appointed in the manner required by the Constitution’s Appointments Clause). Because the ALJs of the SSA look a lot like the ALJs of the SEC (and so probably weren’t constitutionally appointed either), the SSA “reappointed” all its ALJs to comply with Lucia. Its then issued a ruling that the Appeals Council should vacate earlier ALJ decisions and provide fresh review before a now-properly-appointed ALJ. But that remedy was only made available to claimants who had raised an appointments clause challenge in their administrative hearings in the first place. For those who didn’t, the SSA gave them no relief.

Each of the petitioners fell in this last category. At the time of Lucia, they had filed suits in federal court asking the courts to overturn the SSA’s adverse decisions. Relying on the newly decided Lucia, each claimant thenasked their courts to vacate their ALJs’ decisions because the ALJ lacked authority to decide their claims. But the Eighth and Tenth Circuits (in decisions that covered all six petitioners) held that they had forfeited these claims by not raising them in their administrative hearing. Since the Third, Fourth, and Sixth Circuits had reached the opposite result, the Court granted cert.

Justice Sotomayor, writing for a unanimous Court (in outcome, anyway), began with principles of judicial review of administrative action. Generally, before challenging an administrative agency’s actions in court, you have to give it the chance to address the issue through its administrative process. This requirement, known as issue exhaustion, plays out differently based on the statutes governing each agency. But some agencies’ statutes—the SSA among them—don’t say anything about issue exhaustion. When that’s so, courts decide whether to require exhaustion by analogizing to the rule that appellate courts will generally decline to consider arguments not previously raised in the trial court.

With that background out of the way, Justice Sotomayor made quick work of the SSA’s arguments that the Court should impose a judicially created exhaustion requirement. In a prior case, Sims v. Apfel (2000), the Court had held that issue-exhaustion rules were ill-suited to the non-adversarial structure of SSA hearings. Because social security claimants don’t have the same obligations to develop issues and prove their case as parties would in court, it made little sense to impose issue exhaustion requirements that punish them when they fail to do so. True, Sims had dealt with slightly different phases of administrative review (namely, proceedings before the SSA’s Appeals Council, not before ALJs). But Justice Sotomayor concluded that trial-level proceedings before an ALJ were still mostly non-adversarial, making it unwise to apply a different rule. Moreover, established rules of issue-exhaustion contain exceptions where exhaustion would be futile, and what could be more futile than asking an ALJ to hold their own appointment to be unconstitutional? The Court thus agreed that petitioners could raise their appointment clause challenges to their ALJs’ appointment for the first time in federal court.

Though the result was unanimous, the analysis was not. Justice Thomas, joined by Justices Gorsuch and Barrett, concurred in the judgment. And they concurred in most of the Court’s opinion. But they found the Court’s discussion of futility unnecessary, reasoning that Sims resolved the case, so why go any further. Justice Breyer, conversely, had dissented in Sims, and he still thought he was right about that. But he agreed with the majority that requiring claimants to raise constitutional challenges to an agency’s structure before an ALJ would be futile. So he concurred in the result and joined the parts of the opinion the three concurring conservative justices declined to join. 

That’s all for this Update. We’ll be back later this week to talk about Jones and update you on other recent happenings at the Court (including cert grants and possible additional decisions on Thursday).

© 1998-2021 Wiggin and Dana LLPNational Law Review, Volume XI, Number 117
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Tadhg Dooley Appelate Attorney Wiggin Dana New Haven, CT
Partner

Tadhg is a Partner in the firm’s Litigation Department, where his practice focuses on appellate and complex civil litigation. He has extensive experience handling appeals in state and federal courts throughout the country and has obtained favorable results for a diverse range of clients, from federal prisoners to foreign presidents, big companies to small towns. Among other recent successes, Tadhg helped a municipality overturn a $6.8 million verdict in the Connecticut Appellate Court, and helped a dental practice overturn a $3.7 million verdict in the Georgia Supreme Court. Tadhg has also...

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David Roth Litigation lawyer Wiggin Dana
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David is Counsel in Wiggin and Dana’s Litigation Department and a member of the firm’s Appellate, Art and Museum Law, and Intellectual Property Litigation practice groups. He has assisted insurers, universities, large companies, cultural institutions, and sovereign nations in a variety of complex civil litigation and appeals. Representative matters include trademark, copyright, and patent cases; insurance class-actions; art-ownership disputes; and high-stakes business litigation. David has also represented private individuals and companies in several criminal matters and...

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