U.S. Supreme Court Says Act Doesn’t Authorize FTC to Recover Equitable Monetary Relief

Loan Agreement

The United States Supreme Court recently held that Section 13(b) of the Federal Trade Commission Act’s permanent injunction language did not authorize the FTC directly to obtain court-ordered monetary relief. The language in that section referred only to injunctions—the language and structure of § 13(b), taken as a whole, indicated that the words permanent injunction had a limited purpose which didn’t extend to the grant of monetary relief.

Background

Scott Tucker controlled several companies that provided borrowers with short-term payday loans. These online companies would show a potential customer a loan’s essential terms; however, when the companies explained those terms, they misled many customers. The written explanations appeared to state that customers could repay a loan by making a single payment, but the fine print said that the loan would be automatically renewed unless the customer took affirmative steps to opt-out. As a result, unless the customer who borrowed $300 was aware of the fine print and actively prevented the loan’s automatic renewal, he or she potentially owes $975, rather than $390.

Tucker’s businesses made more than five million payday loans, amounting to more than $1.3 billion in deceptive charges between 2008 and 2012.

The Federal Trade Commission filed suit in 2012, claiming that Tucker and his companies were engaging in “unfair or deceptive acts or practices in or affecting commerce,” in violation of §5(a) of the Federal Trade Commission Act. The District Court for the District of Nevada granted the FTC’s request pursuant to §13(b) for a permanent injunction to prevent Tucker from committing future violations of the Act. The FTC relied on the same authority to direct Tucker to pay $1.27 billion in restitution and disgorgement. On appeal, the Ninth Circuit rejected Tucker’s argument that §13(b) doesn’t authorize the award of equitable monetary relief.

The Supreme Court Opinion

In an opinion joined by Justices Roberts, Thomas, Breyer, Alito, Sotomayor, Kagan, Gorsuch, Kavanaugh, and Barrett, Justice Breyer wrote that Section 13(b) of the Federal Trade Commission Act authorizes the Commission to obtain, “in proper cases,” a “permanent injunction” in federal court against “any person, partnership, or corporation” that it believes “is violating, or is about to violate, any provision of law” that the Commission enforces.

The Court found this statutory language does not authorize the FTC to seek, and a court to award, equitable monetary relief such as restitution or disgorgement.

Justice Breyer explained that the FTC used §13(b)’s “permanent injunction” authority in antitrust cases to seek monetary awards, such as restitution and disgorgement without prior use of traditional administrative proceedings. Now, the FTC frequently uses §13(b) to win equitable monetary relief directly in court.

The Supreme Court found that §13(b)’s “permanent injunction” language doesn’t authorize the FTC directly to obtain court-ordered monetary relief because the language refers only to injunctions. It says, “in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” An “injunction,” Justice Breyer explained, isn’t the same as an award of equitable monetary relief.

Further, this language and the structure of §13(b), taken as a whole, indicate that the words “permanent injunction” have a limited purpose—a purpose that does not extend to the grant of monetary relief. Taken as a whole, the provision focuses upon relief that is prospective, not retrospective, the Supreme Court said.

Justice Breyer opined that it’s highly unlikely that Congress would have enacted provisions expressly authorizing conditioned and limited monetary relief if the Act, via §13(b), if it already implicitly allowed the FTC to obtain that same monetary relief and more without satisfying those conditions and limitations. Likewise, Breyer said it’s unlikely that Congress, without mentioning the issue, would have granted the Commission authority so readily to circumvent its traditional §5 administrative proceedings.

At the same time, to read §13(b) to mean what it says, as authorizing injunctive but not monetary relief, Justice Breyer wrote, produces a coherent enforcement scheme: the FTC may obtain monetary relief by first invoking its administrative procedures and then §19’s redress provisions (which include limitations). Plus, the FTC may use §13(b) to obtain injunctive relief while administrative proceedings are foreseen or in progress, or when it seeks only injunctive relief. The FTC’s broad reading would allow it to use §13(b) as a substitute for §5 and §19, Justice Breyer said. Thus, that couldn’t have been Congress’ intent.

The Supreme Court held that the decision didn’t prohibit the FTC from using its authority under §5 and §19 to obtain restitution on behalf of consumers.

“If the Commission believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority,” Justice Breyer wrote.

The Ninth Circuit’s judgment was reversed. AMG Capital Mgmt., LLC v. FTC, — U.S. –, 209 L. Ed. 2d 361, 141 S. Ct. 1341 (April 22, 2021).

Contact Us

Contact Eanet, PC to learn more about this decision and how it may impact your business. Contact Matt Eanet or (310) 997-4185. Our experienced California employment law attorneys can help your business with all your employment issues and questions.

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