SCOTUS Rules FTC Can’t Pursue Equitable Relief

In AMG Capital Management, LLC v. FTC, 593 U.S. ____ (2021), the U.S. Supreme Court held that the Federal Trade Commission (FTC or Commission) is not authorized to pursue equitable monetary relief such as restitution or disgorgement. The Court’s decision, which represents a blow to the FTC’s enforcement strategy, was unanimous.

Facts of the Case

In 2012, the FTC filed suit against Scott Tucker and his companies, alleging deceptive payday lending practices in violation of Section 5(a) of the Federal Trade Commission Act. In asserting that Tucker’s practices were likely to mislead consumers, the Commission did not first use its own administrative proceedings. Rather, the Commission filed a complaint against Tucker directly in federal court. The Commission, relying upon Section 13(b) of the FTC Act, asked the court to issue a permanent injunction to prevent Tucker from commit- ting future violations of the Act. Relying on the same provision, the Commission also asked the court to order monetary relief, in particular, restitution and disgorgement. Section 13(b) 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 District Court granted the Commission’s request pursuant to §13(b) of the Act for a permanent injunction to prevent Tucker from committing future violations of the Act, and relied on the same authority to direct Tucker to pay $1.27 billion in restitution and disgorgement. On appeal, the Ninth Circuit Court of Appeals rejected Tucker’s argument that §13(b) does not authorize the award of equitable monetary relief.

Supreme Court’s Decision

The Supreme Court reversed, holding that Section 13(b) does not authorize the FTC to seek, or a court to award, equitable monetary relief such as restitution or disgorgement. Justice Stephen Breyer wrote on behalf of the unanimous Court.

As Justice Breyer explained, the central question was whether Congress, by enacting §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. The Court concluded it did not.

“Several considerations, taken together, convince us that §13(b)’s ‘permanent injunction’ language does not authorize the Commission directly to obtain court-ordered monetary relief,” Justice Breyer wrote. The Court first noted that Section 13(b) provides that the

“Commission may seek . . . a permanent injunction.” As Justice Breyer explained, “An ‘injunction’ is not the same as an award of equitable monetary relief.”

The Court further concluded that the “language and 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.” In support, Justice Breyer cited language, such as “is violating” and “is about to violate” (not “has violated”), suggesting that the provision focuses upon relief that is prospective, not retrospective, i.e. stopping seemingly unfair practices from taking place while the Commission determines their lawfulness.

[T]o read those words as allowing what they do not say, namely, as allowing the Commission to dispense with administrative proceedings to obtain monetary relief as well, is to read the words as going well beyond the provision’s subject matter,” Justice Breyer wrote. “In light of the historical importance of administrative proceedings, that reading would allow a small statutory tail to wag a very large dog.”

The Court also found that the structure of the Act beyond §13(b) confirmed its conclusion. Justice Breyer wrote:

Congress in §5(l) and §19 gave district courts the authority to impose limited monetary penalties and to award monetary relief in cases where the Commission has issued cease and desist orders, i.e., where the Commission has engaged in administrative proceedings. Since in these provisions Congress explicitly provided for “other and further equitable relief,” 15 U. S. C. §45(l), and for the “refund of money or return of property,” §57b(b), it likely did not intend for §13(b)’s more cabined “permanent injunction” language to have similarly broad scope.

The Court went on to reject the FTC’s arguments as to why it should be entitled to obtain monetary relief. In so ruling, the Court emphasized that the FTC can still seek restitution and disgorgement under other provisions of the FTC Act.

“Nothing we say today, however, prohibits the Commission from using its authority under §5 and §19 to obtain restitution on behalf of consumers,” Justice Breyer wrote. “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.” Legislation has already been introduced in Congress that would authorize the FTC to seek monetary equitable relief.