In Reversal, SCOTUS Unanimously Rules Against FTC Monetary Relief

On Thursday, in a unanimous decision written by Justice Stephen Breyer, the Supreme Court ruled that the Federal Trade Commission (FTC) does not have the authority to seek equitable monetary relief, reversing a previous Ninth Circuit judgment.

In the lawsuit, the FTC sued AMG Capital Management LLC and others, alleging that the defendants’ payday lending practices were deceptive and violated §5(a) of the Federal Trade Commission Act. The District of Nevada granted the FTC’s request under §13(b) of the act for an injunction to prevent future violations as well as for the defendants to pay $1.27 billion for restitution and disgorgement. The Ninth Circuit rejected defendant AMG Capital Management’s claim that §13(b) does not authorize the award of equitable monetary relief.

However, the Supreme Court concluded that §13(b) “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”

In particular, the Supreme Court stated that “Congress granted the Commission authority to enforce the Act’s prohibitions on ‘unfair or deceptive acts or practices’ … by commencing administrative proceeding pursuant to §5 of the Act.” After the conclusion of this administrative process and after issuing cease-and-desist letters, the FTC may seek civil penalties and district courts may “‘grant mandatory injunction and such other and further equitable relief as they deem appropriate in the enforcement of such final orders of the Commission.’”

In the instant action, the FTC responded to the defendants’ payday lending practices “by seeking equitable monetary relief directly in district court under §13(b)’s authorization to seek a ‘permanent injunction.’ In doing so, the Commission acted in accordance with its increasing tendency to use §13(b) to seek monetary awards without prior use of the Commission’s traditional administrative proceedings.” The Supreme Court noted that the question was whether Congress, through §13(b) “and using the words ‘permanent injunction,’ granted the Commission authority to obtain monetary relief directly from courts and effectively bypass the requirements of the administrative process.”

According to the Supreme Court, §13(b) does not specifically authorize the FTC to “obtain court-ordered monetary relief, and such relief is foreclosed by the structure and history of the Act.” In particular, §13(b) allows the FTC to seek a permanent injunction; thus, the Supreme Court stated that “(b)y its terms, this provision concerns prospective injunctive relief, not retrospective monetary relief.” Therefore, the commission may only seek injunctive relief pending its administrative process or a permanent injunction; Section 19 of the FTC Act with its conditional and limited authorized monetary relief confirmed this assertion. Thus, the FTC cannot sidestep its administrative proceedings.

Lastly, the Supreme Court contended that the FTC’s arguments were unavailing because the mentioned cases, Porter v. Warner Holding Co. and Mitchell v. Robert DeMario Jewelry Inc., “did not adopt a universal rule that statutory authority to grant an injunction automatically encompassed the power to grant equitable monetary remedies.” The Supreme Court added that §19 “did not simply create an alternative enforcement path with similar remedies” as §19 explicitly authorizes monetary relief with conditions and limits; thus, Congress did not intend for §13(b) to implicitly authorize monetary relief. The Supreme Court also noted §19’s saving clause to reach its conclusion and the 1994 and 2006 amendments to the FTC Act, “which did not modify the specific language at issue here, do not demonstrate congressional acquiescence to lower court rulings that favor the Commission’s interpretation of §13(b).” Additionally, the Supreme Court stated that concerns that Sections 5 and 19 do not provide adequate redress to consumers should be brought to Congress.

In sum, the Supreme Court reversed and remanded the Ninth Circuit’s decision. The petitioners are represented by MoloLamken LLP. The FTC is represented by its own counsel.

In response to the decision, FTC acting Chairwoman Rebecca Kelly Slaughter said, “In AMG Capital, the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior. With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”

The commission has requested such relief under §13(b) in many different actions. Recently, the FTC has sought monetary relief under §13(b) in various lawsuits against technology companies, including its lawsuit against Facebook for purported antitrust violations, a settlement it reached with mobile banking app Beam Financial, a settlement with Wellco a TV antenna and amplifier company, and for its suit against online retailers for misleading consumers relating to cleaning products during the COVID-19 pandemic, among other actions the commission has taken under §13(b). Thus, today’s Supreme Court decision has a lasting impact on the FTC across the industries and entities against which it pursues actions.