The Supreme Court ruled that the FTC cannot rely on an “injunction” to receive fair monetary aid
As reported on the Hunton Retail Law Blog, on April 22, 2021, in a highly anticipated case, AMG Capital Management, LLC v FTC, the US Supreme Court unanimously ruled that the FTC did not provide fair monetary relief under Section 13 (b) of the FTC law.
AMG Capital Management was a short-term payday loan company, one of many controlled by Scott Tucker. In the heart of the great recession, Tucker deployed 5 million payday loans totaling more than $ 1.3 billion in misleading fine print. The FTC sued AMG and Tucker in 2012, alleging in federal court that the defendants committed unfair and misleading practices in violation of Section 5 (a) of the FTC Act. Using Section 13 (b) of the FTC Act, which empowers the FTC to seek temporary and “permanent” court-ordered “permanent” injunctions, the FTC reached a summary judgment and the lower court issued issued an injunction directing Tucker to pay $ 1.27 billion in refunds and disgorgations. Tucker appealed to the U.S. Court of Appeals for the Ninth Circuit, which dismissed Tucker’s argument that Section 13 (b) did not approve the district court’s pecuniary relief. Tucker then appealed to the Supreme Court.
The Supreme Court decision
The Supreme Court began its analysis by reviewing the history of the FTC law, which provides a path for enforcement through internal administrative proceedings before an administrative judge whose decisions can be reviewed by the FTC and ultimately before an appeals court. Congress amended the 1973 FTC Act to add Section 13 (b), which authorized the FTC to go directly to the District Court for temporary and permanent relief (namely, an “injunction or injunction” and a “permanent Available “). Several years later, Congress again amended FTC law, adding Section 19, which empowered district courts to grant monetary relief if the person or organization was already bound by a definitive order to cease or desist FTC administration.
The FTC used Section 13 (b) for years to get a refund and other forms of fair monetary relief in cases where the agency originated in federal court. The Supreme Court decision puts an end to this trend, despite the continued success of the FTC, and robs the authority of a significant enforcement tool. The Court based its decision on the simple language and structure of Section 13 (b), which relates only to injunctions (while other sections of the law deal with fair monetary relief) and which focused on prospective, non-retroactive relief.
Regarding the decision, incumbent FTC Chairman Rebecca Kelly Slaughter issued a statement that the Supreme Court “ruled in favor of fraudsters and dishonest companies and that the average American had to pay for the illegal behavior”. She added that the FTC is now “deprived of the most powerful tool … [it] had to help consumers when they need it most. Slaughter said the FTC has and will continue to seek a legislative correction to the Court’s decision: “We urge Congress to act swiftly to restore and empower the agency so that we can do this to unjust consumers . ” In the meantime, the FTC staff have been signaling to the public that they have been working on a multi-faceted approach in their day-to-day work. This approach includes looking for rule violations in previous cases beyond FTC law, claiming more rule violations in each case, and using the administrative process.