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Challenge to the FTC’s Disgorgement Authority to be Heard by Supreme Court

Home / Consumer Protection / Challenge to the FTC’s Disgorgement Authority to be Heard by Supreme Court
January 12, 2021 Consumer Protection, Supreme Court
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  • Todd Leatherman
    Program Counsel
    NAGTRI Center for Consumer Protection

Led by Illinois Attorney General Kwame Raoul, a bipartisan coalition of 30 attorneys general filed an amicus brief in the U.S. Supreme Court supporting the Federal Trade Commission’s (FTC) right to obtain disgorgement and restitution for victims of deceptive practices in cases filed in U.S. district court under Section 13(b) of the FTC Act. The case, AMG Capital Management, LLC v. Federal Trade Commission, No. 19-508, which is set for oral argument on January 13, arose following decisions of the Seventh and Third Circuit Courts of Appeals holding that the FTC Act did not grant the Commission authority to obtain restitution in such cases. The AMG Capital Management case arose from the Ninth Circuit, which, like seven other circuits, held that Section 13(b) does allow for the award of restitution. The FTC has, as the states point out, obtained billions of dollars for consumers in Section 13(b) cases over the years, and in fact has mailed out checks of more than $1 billion since 2016. So, how is this authority suddenly in question?

Section 13(b) explicitly provides the Commission with the authority to seek, and district courts the authority to award, a “permanent injunction. Eight circuit courts have interpreted that language to include the full range of equitable powers, relying on U.S. Supreme Court cases Porter v. Warner Holding Co., 328 U.S. 395 (1946) (interpreting the Emergency Price Control Act of 1942), and Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960) (interpreting the Fair Labor Standards Act). Both of those cases held that statutory language authorizing injunctive relief implicitly authorized restitution. The Seventh and Third Circuits, however, concluded that the language reviewed by the Court in Porter and Mitchell was broader than that in Section 13(b) and noted that the FTC Act provides another avenue for the FTC to obtain restitution through administrative actions before the Commission under Section 5 and Section 19. Both the Third Circuit in FTC v. AbbVie, 976 F.3d 327 (3d Cir. 2020) and the Seventh Circuit in Federal Trade Commission v. Credit Bureau Ctr., LLC, 937 F.3d 764 (7th Cir. 2019) found that these express references to restitution remedies in Section 5 and Section 19 indicated congressional intent to limit equitable remedies under Section 13(b) to injunctions only, not other forms of relief.

Whether the U.S. Supreme Court agrees will greatly affect consumer protection enforcement going forward, as the FTC has sought restitution in Section 13(b) cases routinely at least since 1982. And as the states’ brief points out, the states often file actions as co-plaintiffs with the FTC in such cases. The FTC brief notes that the availability of restitution as an equitable remedy has been repeatedly recognized by the courts, and Congress, through subsequent reauthorizations of the FTC Act, has deemed that interpretation appropriate. That argument was rejected by the Seventh and Third Circuits, however, and commentators have suggested that the shift to textualism on the Supreme Court leaves the continued availability of restitution under Section 13(b) in serious jeopardy.

The decision of the Court in Liu v. Sec. Exch. Comm’n, 140 S.Ct. 1936 (2020), written by Justice Sotomayor, which narrowed the disgorgement remedy available to the SEC, may foreshadow similar action regarding the FTC Act and is further cause for such concern according to some commentators. As the AMG Management decision looms, calls for legislative clarification of Section 13(b) have been growing. The Commission itself directly requested congressional action to preserve the FTC’s ability to obtain restitution under Section 13(b) in August. See 2020 comments to the Senate Committee on Commerce, Science, and Transportation. At least one bill in the 116th Congress, S. 4626, the Setting an American Framework to Ensure Data Access, Transparency, and Accountability (SAFE DATA) Act, included language that would have clarified that Section 13(b) authorized restitution as a remedy. Whether the 117th Congress will grant the FTC’s wish and clarify the law, how the Supreme Court will decide the matter, and what impact all of this will have on current and future FTC cases is one of the most important consumer stories to watch in early 2021.

 

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