Chicago Business Litigation Lawyer Blog
In a unanimous ruling, the Supreme Court recently came down hard on the Federal Trade Commission by eliminating its ability to seek monetary relief in court under Section 13(b) of the Federal Trade Commission Act (FTC Act). The ruling comes as quite a blow to the FTC which has been recovering monetary penalties from defendants under Section 13(b) of the FTC Act for nearly half a century. The full impact of this ruling remains to be seen and may not become clear for several years.
Section 13(b) monetary relief is among the FTC’s primary tools for obtaining recovery in the cases it pursues, particularly in consumer protection matters. For instance, in fiscal year 2019 alone, the FTC filed 49 complaints in federal court and obtained 81 permanent injunctions and orders, resulting in more than $723 million in consumer redress or disgorgement. The ruling is also likely to affect antitrust enforcement in the pharmaceutical industry where the FTC has pursued disgorgement amounts as high as $1.2 billion. Going forward, the FTC will be limited to injunctive relief in the vast majority of matters unless it pursues other avenues of recovery available under different sections of the FTC Act.
The case, AMG Capital Management, LLC v. Federal Trade Commission, began when the FTC filed a lawsuit in federal court against payday lender AMG Capital Management, its owner, Scott Tucker, and several other entities under Section 5(a) of the FTC Act for allegedly misleading consumers with certain terms of payday loans. A payday loan is a high-interest, short-term loan, typically marketed to low-income consumers in need of quick cash. They generally come with exorbitantly high interest rates and short repayment schedules and have been called predatory by a number of consumer rights advocacy groups, such as the National Association of Consumer Advocates.
In its complaint, the FTC alleged that AMG Capital Management and other related entities engaged in numerous deceptive acts and practices in connection with how it collected loan payments from borrowers, often resulting in consumers paying hundreds or thousands of dollars more than the cost of the loan disclosed in the loan application documents.
The FTC could have initiated the case by using administrative proceedings available to it under Sections 5 and 19 of the FTC Act. Instead, though the FTC skipped these administrative proceedings and initiated the case directly in federal court seeking a permanent injunction and equitable monetary relief in the form of restitution and disgorgement under Section 13(b) of the FTC Act. The district court directed the defendants to pay $1.27 billion in restitution and disgorgement. On appeal from the judgment, the Ninth Circuit affirmed, citing circuit precedent interpreting the statutory text of Section 13(b) broadly to include the authority to award restitution and other forms of monetary relief as “necessary to accomplish complete justice.” Continue reading ›