Temporary working capital

SCOTUS FTC rules cannot rely on injunction provision

In 1973, Congress amended the FTC Act by adding §13 (b), giving the Federal Trade Commission (“FTC”) fair powers to remedy any violation of any law within its jurisdiction. Using this power, the FTC demanded fair monetary redress, including restitution and restitution. Lower courts regularly authorized such measures, and Congress apparently recognized the power of the FTC when it re-authorized the FTC law. Despite these headwinds, the Supreme Court today ruled unanimously in a much anticipated case, AMG Capital Management, LLC v FTC, that the FTC cannot seek or obtain equitable pecuniary relief under section 13 (b).

AMG Capital Management was a short-term payday loan company, one of several companies controlled by Scott Tucker. In the midst of the Great Recession, Tucker used deceptive fine print to implement 5 million payday loans, totaling more than $ 1.3 billion. The FTC sued AMG and Tucker in 2012, alleging in federal court that the defendants engaged in unfair and deceptive practices in violation of Section 5 (a) of the FTC Act. By using Section 13 (b) of the FTC Act, which authorizes the Commission to seek a temporary “permanent” injunction and “in appropriate cases”. The FTC won in a summary judgment, and the lower court issued an injunction and ordered Tucker to pay $ 1.27 billion in restitution and restitution. Tucker appealed to the Ninth Circuit, which rejected Tucker’s argument that section 13 (b) does not allow monetary relief granted by the district court. Tucker then appealed to the Supreme Court.

The Court began its analysis by examining the history of the FTC Act, which creates a means of enforcement through an internal administrative procedure initiated before an administrative judge, whose decisions can be reviewed by the Commission and possibly before a court of call. Congress amended the FTC Act in 1973, adding Section 13 (b) allowing the agency to apply directly to the district court for temporary and permanent relief (i.e., an “order of temporary ban or preliminary injunction ”and a“ permanent injunction ”). Several years later, Congress again amended the FTC Act, adding § 19 allowing district courts to grant pecuniary relief in cases where the person or entity was already bound by a final administrative order of FTC cease and desist.

For years, the FTC has used section 13 (b) to seek restitution and other forms of fair monetary relief in cases where the agency originated in a federal court. The Supreme Court ruling puts an end to this trend, despite the agency’s continued success, stripping the agency of an important enforcement tool. The Court based its decision on the plain language and structure of paragraph 13 (b), which refers only to injunctions (while other legislative articles deal with equitable pecuniary relief) and which the Court held focus on prospective, not retrospective, repair.

Of the ruling, Acting FTC President Rebecca Kelly Slaughter released a strongly worded statement that the Supreme Court had “ruled in favor of crooks and dishonest companies, letting average Americans pay for the illegal behavior.” She lamented that the FTC is now “private”. . . the most powerful tool [it] had to help consumers when they needed it most. Slaughter said the FTC has demanded and will continue to demand a legislative solution to the court’s ruling: “We urge Congress to act quickly to restore and strengthen the agency’s powers so that we can redress aggrieved consumers. ” In the meantime, FTC staff have reported to the public that they are working on a multi-pronged approach in their day-to-day work. This approach includes looking into its previous cases for rule violations that go beyond the FTC law, alleging more rule violations in each 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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