Questioning Disgorgement Remedies in Light of the U.S. Supreme Court’s AMG Capital Management, LLC v. FTC Decision

31 August 2021 Consumer Class Defense Counsel Blog
Authors: Charles W. Niemann Erik K. Swanholt

In a unanimous decision in AMG Capital Management, LLC v. FTC, the U.S. Supreme Court held that the Federal Trade Commission (FTC) lacks authority under Section 13(b) of the FTC Act to seek restitution or disgorgement. The FTC had frequently used Section 13(b) to compel monetary payment, collecting $5.29 billion in disgorgement and restitution in 2019 alone. While the Supreme Court’s decision may curtail one of the FTC’s preferred enforcement mechanisms, the FTC still retains several avenues for executing its mandate. AMG Capital Management’s legacy for other consumer protection statutes may prove more influential than the holding’s impact on FTC enforcement directly.

The FTC filed a complaint against Scott Tucker and multiple companies he ran (including AMG Capital Management, LLC) in 2012, alleging their short-term payday lending practices were deceptive and unfair, and seeking an injunction under Section 13(b) of the FTC Act. Section 13(b) provides that when the Commission “has reason to believe that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission . . . in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” The district court granted summary judgment in favor of the FTC, granting an injunction and ordering Tucker to pay $1.27 billion in restitution and disgorgement. Tucker appealed to the Ninth Circuit, arguing that the language of Section 13(b) does not authorize monetary relief. The Ninth Circuit abided by its precedent, holding that Section 13(b) “empowers district courts to grant any ancillary relief necessary to accomplish complete justice, including restitution.” The Supreme Court granted certiorari to address the recent circuit split over the “scope of Section 13(b).” (This split originated from the Seventh Circuit’s August 2019 decision in FTC v. Credit Bureau Center, LLC, where it broke with eight other circuits and its own precedent in holding that restitution is not available under Section 13(b) of the FTC Act.)

Writing for a unanimous bench, Justice Breyer explained that Section 13(b) does not authorize the FTC to obtain monetary relief. While acknowledging the “policy-related importance of allowing the Commission to use §13(b) to obtain monetary relief,” the unanimous Court held that Section 13(b)’s reference to “injunctions” did not encompass monetary relief. Although other FTC Act sections allow the FTC to pursue relief “necessary to redress injury to consumers,” including the “refund of money,” those sections contemplate the FTC will “file a complaint against the claimed violator,” “adjudicate its claim,” and “issue an order requiring the party to cease and desist from engaging in the unlawful conduct.” Because Section 13(b) lacks these requirements, the Court recognized the potential for misuse. The Court noted it was “highly unlikely” that Congress intended Section 13(b) to include monetary relief when compared with Section 19, which only provides for monetary relief when particular circumstances and limitations have been satisfied. (e.g., after issuance of a cease and desist order under Section 5 of the FTC Act). The opinion also highlighted that the FTC issued nearly four times as many permanent injunctions under Section 13(b) as cease-and-desist orders under Section 5.

While the decision eliminates one arrow from the FTC’s arsenal, the quiver is far from empty; the FTC’s range of enforcement options remains broad. As former acting Chairwoman Rebecca Kelly Slaughter noted, following the AMG Capital Management decision: “[A] word about the FTC’s other authorities: we will use them all — administrative proceedings, penalty offense authority, more rule-violation cases, more rulemaking, more civil penalty cases where we have specific statutory authority.” Absent Congressional action, FTC targets are likely to encounter more administrative proceedings and alternative routes for pursuing monetary relief no longer available under Section 13(b).

Outside of the FTC, practitioners should expect this case to raise questions concerning the mandates of other agencies and the interpretation of consumer protection statutes. For agencies like the U.S. Food and Drug Administration, which have claimed broad enforcement powers under similar statutory schemes, litigators may challenge their authority to act in a proscribed manner based on AMG Capital Management. Litigators may also challenge claims for monetary relief brought under consumer protection statutes where appropriate. In a recent case before the U.S. District Court for the Central District of California, Hope Medical Enterprises, Inc. v. Fagron Compounding Services, the district court relied on AMG Capital Management to determine that other consumer protection statutes, like the Telephone Consumer Protection Act and the Florida Deceptive and Unfair Trade Practices Act, do not authorize disgorgement of profits obtained from unfair competition. We will continue to monitor the impact of AMG Capital Management on FTC enforcement and other consumer protection statutes.

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