May 26, 2021
AMG Capital Management, LLC v. FTC, 593 U.S. ____ (2021) (Breyer, J.)
Response by Caprice Roberts & David Levintow
Geo. Wash. L. Rev. On the Docket (Oct. Term 2020)
Slip Opinion | SCOTUSblog
AMG Capital Management, LLC v. FTC—It’s Unanimous: Injunction Means Injunction (and Nothing More)
The Supreme Court’s unanimous pronouncement that statutory authority to seek an injunction means just that, and nothing more, is perhaps not earth-shattering—unless you are the Federal Trade Commission (“FTC”). The Court’s narrow interpretation of injunction is deeply consequential to consumers and will severely limit the scope of equitable remedies, including restitution-based remedies such as disgorgement of unjust profits. It effectively declaws the Commission’s frequent and extremely effective practice of disgorging wrongdoer profits. This limitation on the FTC’s power is significant at least in the short run—unless and until legislative reforms cure the agency’s predicament from the ruling. In AMG Capital Management, LLC v. FTC,1 the Court unanimously rejected the FTC’s longstanding practice of seeking restitution and disgorgement pursuant to the power granted to it in § 13(b) of the Federal Trade Commission Act (“FTC Act”), which authorizes the agency to obtain “permanent injunction[s]” in “proper cases.”2 In an opinion authored by Justice Stephen Breyer, the Court upended a decades-long practice of the agency, one that until 2019 had been uniformly accepted by appellate courts and supported by Supreme Court precedent.3 This agency practice had returned $11.2 billion to defrauded consumers over the past five years.4
The relevant statutory scheme is complex and arduous. The statutory intricacy includes options that may have led the agency to strategically maneuver toward judicial equitable remedies—a route now severely limited by the Court’s curtailment of disgorgement relief. The FTC, tasked with preventing anticompetitive, fraudulent, and deceptive business practices, effectively has its choice of two enforcement routes—administrative or judicial. Under Section 5 of the FTC Act, the agency may challenge an act or practice it deems to be unfair or deceptive in an administrative proceeding.5 These proceedings take place before an administrative law judge (“ALJ”), and if the ALJ determines that the practice is unfair or deceptive, the FTC issues a cease-and-desist order to the defendant.6 If the defendant later knowingly violates the cease-and-desist order, the FTC may impose penalties against the defendant.7 Even if the defendant does not violate the order, the FTC may still be able to obtain monetary redress under Section 19 by filing a complaint in district court and proving that the conduct was of the sort that “a reasonable man would have known under the circumstances was dishonest or fraudulent.”8
This is a cumbersome route to consumer redress. It first requires an administrative proceeding, the finding of which is appealable. Then, it requires either a subsequent administrative proceeding (if the defendant has knowingly violated the order) or a subsequent action in district court (to determine whether the conduct was obviously fraudulent). Under this approach, consumers who have suffered pecuniary harm as a result of deceptive conduct would likely have to wait years to obtain recompense, and then only would be compensated if the perpetrator violated a cease-and-desist order or engaged in objectively fraudulent conduct.
Alternatively, Section 13(b) of the FTC Act permits the agency to directly file for an injunction in district court, with no requirement of a prior administrative proceeding. In such cases, the Court may “in proper cases” grant a “permanent injunction.”9 The expedience of this enforcement route proved attractive to the FTC and, beginning in the 1970s, the agency began to use Section 13(b) to seek monetary relief complementary to a permanent injunction. Solid results and fewer administrative hurdles stimulated agency path dependency on the Section 13(b) enforcement route. Over time, the agency broadened its efforts protect against a greater variety of schemes and increased profit-based awards for more consumers.
Defendants in these cases objected to the FTC’s burgeoning practice of bypassing Section 5’s lengthier administrative process, but courts largely upheld the agency’s authority to obtain disgorgement under Section 13(b).10 For example, in fiscal year 2019, the FTC obtained 81 permanent injunctions, compared to only 21 administrative orders.11 Then came AMG Capital Management (AMG), a firm owned by Scott Tucker, payday lender of Netflix’s Dirty Money fame.12 As viewers of the series will recall, Tucker’s firm provided consumer loans that contained fine print stating that the loan would be automatically renewed unless the borrower affirmatively opted out.13 Between 2008 and 2012, AMG made over five million payday loans, and the fine print generated over $1.3 billion in deceptive charges.14
To stop AMG’s practices, the FTC opted for the judicial route over the administrative, suing AMG in district court under Section 13(b) and seeking both an injunction and disgorgement.15 The district court awarded the injunction as well as a staggering $1.27 billion in restitution and disgorgement.16 The Ninth Circuit, pointing to its own precedent, affirmed.17 Before the Supreme Court, AMG argued that Section 13(b) of the FTC Act, which expressly authorizes injunctions, is limited to just that, and does not encompass other forms of equitable relief such as disgorgement.18 During oral argument, several justices—including Justice Breyer, who wrote the opinion—expressed concerns about the agency’s potential for abuse by bypassing Section 5 with Section 13.19
The Supreme Court unanimously agreed with AMG,20 grounding its decision on several considerations. First, the Court looked to the plain text of the statute, observing that “[a]n injunction is not the same as an award of equitable monetary relief.”21 In addition, given that Section 13(b) permits the FTC to obtain an injunction when a defendant “is violating, or is about to violate” the FTC Act, the Court concluded that Congress designed the provision to operate prospectively, not retrospectively to remedy past consumer harm.22 While these observations possess logic in a strictly literal sense, they are in tension with a court’s traditional equitable authority to order monetary redress, such as restitution, along with an injunction in order to achieve complete relief.23
Second, the Court observed that to permit such an expansive reading of Section 13(b) would render Sections 5 and 19 superfluous.24 While both Sections 5 and 19 permit the FTC to obtain monetary relief, they first require the agency to conduct an administrative proceeding. Moreover, monetary relief under Section 5 further requires a knowing violation of a cease-and-desist order, while Section 19 requires that the conduct be obviously deceptive or fraudulent. The Court found it “highly unlikely” that Congress would authorize the FTC to obtain monetary relief in such limited and conditional circumstances in Sections 5 and 19 if it had already granted the agency the power to seek monetary relief without such showings in Section 13(b).25
In its conclusion, the Court advised that if the FTC finds the administrative enforcement route too cumbersome, it is “free to ask Congress to grant it further remedial authority.”26 Without wasting any time, the FTC has indeed asked,27 and Congress appears poised to answer.28 Should Congress explicitly authorize the FTC’s disgorgement authority in subsequent legislation, it will put a powerful arrow back in the agency’s quiver.
There are several possible conclusions to draw from the AMG decision. One could observe that the Supreme Court would rather misconstrue the common law of Remedies than let go unchecked decades of enforcement overreach by an executive agency, even if such overreach might be “desirable”29 as a matter of policy. Or perhaps this cycle of congressional authorization, administrative creep, and judicial constraint is an inevitable and necessary exercise of the separation of powers. The Supreme Court took a similar tack last term in Liu v. SEC,30 in which it upheld the SEC’s authority to seek disgorgement but imposed significant limitations to the agency’s practice.31 Notably, after Liu, Congress swiftly affirmed the SEC’s disgorgement power.32 Congress also appears likely to do so for the FTC after AMG. So, while the AMG decision appears disruptive in the short term, the roadblock may ultimately be short-lived. And while this separation of powers cycle is unavoidable and somewhat symbolic, it may nonetheless be valuable.
The AMG and Liu decisions constitute another portent in a long series of reminders to Congress that ambiguous drafting does not serve the regulated community well and often invites agency overreach. Certainly, congressional inaction in the face of agency enforcement overreach is a poor basis33 upon which to uphold extratextual agency powers. In any event, federal agencies that routinely seek disgorgement of ill-gotten gains, such as the FDA, CFTC, and FERC, are now on notice. But that’s an article for another day—stay tuned! For now, the Supreme Court is willing, if not eager, to check an agency’s enforcement actions if exercised in a manner inconsistent with its statutory scheme, even if wholly consistent with the statute’s objectives.
Caprice L. Roberts is a scholar of both the judicial role and the law of remedies. Professor Roberts is the co-author of the seminal treatise Dobbs and Roberts’s Law of Remedies, the 9th edition of a leading Remedies casebook with Doug Rendleman, and a Federal Courts casebook with Michael Allen and Michael Finch. The United States Supreme Court cited Professor Roberts for accurately predicting novel application of unjust enrichment principles to contract law.
Professor Roberts is an elected member of the American Law Institute and has served on the Consultative Group for the Restatement (Third) of Restitution and Unjust Enrichment. She is the Chair of the AALS Remedies Section and the Deputy Executive Director and Vice-Chair of Programming for the Southeastern Association of Law Schools. She is a Remedies Section Editor for JOTWELL and periodic guest blogger at PrawfsBlawg.
David Levintow is a 2021 graduate of The George Washington University Law School. His writings have been featured in George Washington’s Business and Finance Law Review, the PIABA Bar Journal, The FCPA Blog, National Law Review, and Corporate Counsel.
1 No. 19-508 (U.S. Apr. 22, 2021).
2 15 U.S.C. § 53(b); see also FTC v. Surescripts, LLC, 424 F. Supp. 3d 92, 98 (D.D.C. 2020) (stating the “Court’s task is not to define the term ‘proper cases’ for all scenarios, but to determine whether [each] case is proper.”).
3 See, e.g., Porter v. Warner Holding Co., 328 U.S. 395, 399 (1946); FTC v. Ross, 743 F.3d 886, 890–92 (4th Cir. 2014).
4 Press Release, FTC Acting Chairwoman Rebecca Kelly Slaughter on the U.S. Supreme Court Ruling in AMG Capital Management LLC v. FTC (Apr. 22, 2021), https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us [hereinafter April 2021 FTC Press Release].
5 See 15 U.S.C. § 45(b).
6 Id.
7 Penalties include monetary fines as well as court-granted injunctions and other equitable relief as is “appropriate in the enforcement of such final orders of the Commission.”15 U.S.C. § 45(l).
8 15 U.S.C. § 57b(a)(2).
9 Should the FTC have cause to believe that a person or entity is in violation of FTC enforcement, the agency’s attorneys may bring suit in district court “to enjoin any such act or practice.” 15 U.S.C. § 53(b).
10 See FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1112–13 (9th Cir. 1982) (upholding the district court’s authority to issue an order to freeze assets to protect the option of a future equitable remedy); FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1432, 1434 (11th Cir. 1984) (per curiam); FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 571–72 (7th Cir. 1989) (citing 15 U.S.C. § 53(b) (upholding the district court’s authority to “grant ancillary relief, including freezing assets and appointing a Receiver, as an incident to its express statutory authority to issue a permanent injunction under Section 13 of the Federal Trade Commission Act” because “all the inherent equitable powers of the District Court are available for the proper and complete exercise of that jurisdiction”); FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312, 1314–15 (8th Cir. 1991) (holding that “[S]ection 13(b) empowers district courts to grant the type of ancillary equitable relief entered by the district court in this case” because Section 13(b) “does not limit the full exercise of the district court’s inherent equitable power”); FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192, 1202 n.6 (10th Cir. 2005) (holding that “[a]lthough § 13(b) does not expressly authorize a court to grant consumer redress (i.e., refund, restitution, rescission, or other equitable monetary relief), § 13(b)’s grant of authority to provide injunctive relief carries with it the full range of equitable remedies, including the power to grant consumer redress”); FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 15 (1st Cir. 2010) (upholding the district court’s use of gross rather than net profits as an permissible exercise of discretion under the court’s ability to grant an equitable remedy); FTC v. Bronson Partners, LLC, 654 F.3d 359, 365 (2d Cir. 2011) (stating that “courts have consistently held that ‘the unqualified grant of statutory authority to issue an injunction under [S]ection 13(b) carries with it the full range of equitable remedies, including the power to grant consumer redress and compel disgorgement of profits.’” (quoting FTC v. Gem Merch. Corp., 87 F.3d 466, 468 (11th Cir.1996))); Ross, 743 F.3d at 890–92 (noting that Section 13(b) does not expressly allow for the district court to grant consumer redress, but that according to the Supreme Court’s long-held precedent, “Congress’ invocation of the federal district court’s equitable jurisdiction brings with it the full ‘power to decide all relevant matters in dispute and to award complete relief even though the decree includes that which might be conferred by a court of law.’” (quoting Porter v. Warner Holding Co., 328 U.S. 395, 399 (1946))).
11 FTC, Fiscal Year 2021 Congressional Budget Justification 5 (Feb. 10, 2020), https://www.ftc.gov/system/files/documents/reports/fy-2021-congressional-budget-justification/fy_2021_cbj_final.pdf.
12 See Dirty Money: Payday (Netflix 2018).
13 See id.
14 AMG Capital Mgmt., LLC v. FTC, 593 U.S. ____, slip op. at 2 (2021) (hereinafter AMG).
15 Id. (noting that the FTC did not first pursue an administrative route).
16 Id.
17 FTC v. AMG Capital Mgmt., LLC, 910 F.3d 417, 428 (9th Cir. 2018).
18 See AMG, slip op. at 2–3.
19 See, e.g., Transcript of Oral Argument at 37–39, AMG Capital Mgmt., LLC v. FTC, 593 U. S. ____ (2021) (No. 19-508); Ronald Mann, Argument Analysis: Justices Doubt FTC’s Authority to Compel Monetary Relief, SCOTUSblog (Jan. 14, 2021, 3:16 PM), https://www.scotusblog.com/2021/01/argument-analysis-justices-doubt-ftcs-authority-to-compel-monetary-relief/ (predicting defeat for the FTC based on the justices’ skeptical reception and noting that “[i]f you’re arguing on behalf of a federal regulatory agency’s authority to protect consumers from businesses and Justice Stephen Breyer sets his face against you, then chances are your day is not going well.”).
20 AMG, slip op. at 1.
21 Id. at 6.
22 Id. at 7.
23 See Brief of Amici Curiae Remedies, Restitution, Antitrust, and Intellectual Property Law Scholars in Support of Respondent Federal Trade Commission, AMG Capital Mgmt., LLC v. FTC, 593 U.S. ____(2021) (No. 19-508) (drafted by Phillip Malone & Caprice Roberts) (urging that the longstanding history of injunctive power necessarily includes the ancillary power for a court also to order restitutionary disgorgement of a defendant’s ill-gotten gains, among other forms of equitable monetary relief), available at: https://ssrn.com/abstract=3763256.
24 AMG, slip op. at 9.
25 Id.
26 Id. at 14.
27 See April 2021 FTC Press Release, supra note 3.
28 The agency, and the potential for a Section 13(b) fix, received bipartisan support in recent Senate and House hearings. See generally Strengthening the Federal Trade Commission’s Authority to Protect Consumers: Hearing Before the S. Comm. on Commerce, Sci., & Transp., 117th Cong. (2021); Safeguarding American Consumers: Fighting Fraud and Scams During the Pandemic, Hearing Before the Subcomm. on Consumer Protection and Commerce of the H. Comm. on Energy and Com., 117th Cong. (2021).
29 AMG, slip op. at 6 (noting that the task before the Court was “not to decide whether this substitution of §13(b) for the administrative procedure contained in § 5 and the consumer redress available under § 19 is desirable.”).
30 140 S. Ct. 1936 (2020).
31 Id. at 1947–49.
32 David Levintow, Sorry, But the NDAA Did Not Just Redefine Disgorgement, FCPA Blog (Feb. 23, 2021), https://fcpablog.com/2021/02/23/sorry-but-the-ndaa-did-not-just-redefine-disgorgement/.
33 See AMG, slip op. at 13.
Recommended Citation
Caprice Roberts & David Levintow, Response, AMG Capital Management, LLC v. FTC: It’s Unanimous: Injunction Means Injunction (and Nothing More), Geo. Wash. L. Rev. On The Docket (May 26, 2021), https://www.gwlr.org/its-unanimous-injunction-means-injunction-and-nothing-more/.
