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Supreme Court Delivers Unanimous Repudiation to FTC

Medmarc Insurance Group

May 4, 2021

The U.S. Supreme Court has ruled in a case involving the Federal Trade Commission regarding limits to the agency’s statutory authority to obtain restitution from defendants in a range of enforcement actions. Despite the win for defendants, there are signs that legislation may emerge from the House of Representatives that would overwrite the decision.

 

Justice Stephen Breyer penned the unanimous decision in the case of AMG Capital Management, LLC, et al., v. Federal Trade Commission, which was argued in January 2021. The FTC had filed a complaint against Scott Tucker and AMG, alleging deceptive payday lending practices that violated the Federal Trade Commission Act (FTC Act). A district court agreed with the FTC’s request to permanently enjoin Tucker from any activities that would violate the statute, but the FTC went a step farther and sought to impose a levy for restitution and disgorgement of $1.27 billion.

 

Tucker appealed the determination regarding restitution and disgorgement, an appeal that came up short in the U.S. Court of Appeals for the Ninth Circuit. Despite the outcomes in the lower courts, the Supreme Court determined that the statute did not authorize the FTC to seek monetary relief stemming from a court order as obtained by the agency. Breyer wrote that such relief “is foreclosed by the structure and history” of the FTC Act.

 

The FTC began its pursuit of Tucker in 2012, but the petition for certiorari was not filed until seven years later. The Washington Legal Foundation and the U.S. Chamber of Commerce both filed friend-of-the-court briefs, as did the Pharmaceutical Research and Manufacturers of America (PhRMA), which cited previous FTC cases involving drug manufacturers in its brief.

 

PhRMA Cites ‘Risk of Disproportionate Liability’

 

PhRMA said Section 13(b) of the FTC Act as interpreted by the FTC is the source of market uncertainty, and suggests “a risk of disproportionate liability” that impedes innovation in the pharmaceutical industry. The PhRMA letter argued that the FTC’s approach to the language of the FTC Act suggests the agency can act with few limitations in its pursuit of monetary payments. Both the magnitude of the agency’s demands and the “indiscriminate nature” of those demands were cited as key issues by the PhRMA letter, which added that the FTC had demanded and obtained substantial payments in cases that relied on legal theories that were anything but settled.

 

The Washington Legal Foundation described Section 13(b) of the Act as providing the agency with little or nothing more than injunctive relief, whereas Section 19 offers the authority to impose fines or penalties. However, WLF said the agency can invoke such financial measures only after affording the accused one or more procedural protections. The WLF brief further notes that a decision in the Court of Appeals for the Seventh Circuit highlighted the inappropriateness of awarding restitution under Section 13(b).

 

Acting FTC chairwoman Rebecca Slaughter criticized the Supreme Court’s decision in an April 22 statement urging Congress to “act swiftly” to restore the agency’s ability to “make wronged consumers whole.” That understanding of the outcome was backed by Rep. Frank Pallone, who said in a statement posted prior to an April 27 hearing that the decision “strikes at the very heart of the FTC’s mission” to protect the public from fraudulent business practices.

 

Pallone referenced the Consumer Protection and Recovery Act (H.R. 2668), which was the subject of the April 27 hearing. The legislation was introduced to the House Energy and Commerce Committee and the House Judiciary Committee, and is said to be supported by all members of the Energy and Commerce’s consumer protection subcommittee.

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