U.S. Supreme Court Unanimously Rejects FTC’s Authority to Recover Equitable Monetary Relief Under the FTC Act

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The Supreme Court recently held that Section 13(b) of the Federal Trade Commission (FTC) Act does not authorize the FTC to seek, or a court to award, equitable monetary relief such as restitution or disgorgement. 

In this case, the FTC filed a complaint against a Defendant-business owner and his companies, alleging deceptive payday lending practices in violation of Section 5(a) of the FTC Act.  The District Court granted the Commission’s request pursuant to Section 13(b) of the Act for a permanent injunction to: (1) prevent Tucker from committing future violations of the Act; and (2) direct the business owner to pay $1.27 billion in restitution and disgorgement.  Defendants appealed the decision.  The Ninth Circuit affirmed the lower court decision, rejecting the Defendants’ argument that Section 13(b) does not authorize the award of equitable monetary relief.

The Supreme Court reversed the Ninth Circuit’s decision, explaining that Section 13(b) of the FTC Act only allows the commission to file a case in federal court – without conducting administrative proceedings or obtaining a cease-and-desist order – for the purposes of obtaining an “injunction” against a business that “is violating, or is about to violate, any provision of law enforced by [the commission].”  However, since the 1990s, the FTC has used the section’s injunction authority to seek monetary awards—such as restitution and disgorgement —without pursuing the proper administrative proceedings traditionally required to receive such awards pursuant to Sections 5 and 19 of the FTC Act.  Writing for the Court, Justice Stephen Breyer explained that Sections 5 and 19 gave the FTC explicit “authority to … award monetary relief in cases where the Commission has issued cease and desist orders,” and that other sections of the Act provide the FTC with explicit authority to seek further equitable relief—such as the refund of money or return of property.  He also stated that Congress “likely did not intend for §13(b)’s more cabined ‘permanent injunction language to have similarly broad scope.’”  Breyer also emphasized that the text of the statute is plainly interpreted as allowing the FTC to seek a prospective preliminary injunction – not any retrospective monetary relief.  

The Court stated that the FTC may still use its authority under Sections 5 and 19 to obtain restitution on behalf of consumers.  It opined further that the FTC is free to ask Congress to grant it further remedial authority if it considers its existing authority “too cumbersome” to pursue.  The Court reversed and remanded the matter.

The case is AMG Capital Management, LLC, et al. v. Federal Trade Commission, No. 19-508 (SCOTUS Apr. 22, 2021).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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