FTC Successfully Fends Off AMG Attacks on Judgments

Within hours of the Supreme Court’s landmark decision in AMG Capital Management v. FTC last April overturning forty years of precedent to hold that the FTC cannot get money judgments in a direct federal court action (for discussion, see “Supreme Court Guts FTC’s Enforcement Powers and Clout,” April 2021), the phone began to ring from FTC defendants. Each wanted to know, can I get my judgment  thrown out?  My immediate answer, without the benefit of research, was probably not, given the judicial system’s strong interest in finality, but perhaps not impossible depending on the circumstances.  As it turns out, that was the correct “off the cuff” response, as two recent denials of motions to set aside monetary judgments pursuant to AMG brought in the Central District of California reveal. These decisions, discussed here, show that at least in that district under Ninth Circuit law, and probably in federal courts generally, an FTC defendant seeking to convince a judge to toss a monetary judgment will need an especially compelling set of circumstances to prevail.

If the time to appeal an FTC monetary judgment had not run out as of the date of AMG, such that the judgment was not yet absolutely final, a defendant in that circumstance would have been in luck; indeed, the Ninth Circuit, under well-established principles of judicial retroactivity aimed at ensuring similarly-situated parties are treated the same, has already vacated multiple such appealable judgments on the basis of the change in law in AMG.  If a judgment was no longer appealable, then the only recourse was a “collateral attack” under Rule 60(b) of the Federal Rules of Civil Procedure, which sets out five narrowly prescribed circumstances for granting relief from a final judgment, plus a “catch-all” provision for any “other reason to justify relief” that requires a showing of “extraordinary circumstances” and vests great equitable discretion in the judge to make that determination  Those circumstances are: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that reasonably could not have been discovered in time to move for a new trial; (3) fraud, misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, is based on an earlier judgment that has been reversed or vacated, or applying it prospectively is no longer equitable; and (6) any other reason that justifies relief.  A motion based on any of the first three factors must be brought within one year of entry of the final judgment or order and within a “reasonable time” under the fifth and sixth.  There is no time limit on challenging a judgment as void.

The two motions sought relief under factors 4-6 and involved very different facts. One asked the court to set aside a nearly ten-year old summary judgment of $480 million, affirmed on appeal, for deceptive advertising and telemarketing of a real estate investment product.  The other (which I argued) asked the court to vacate a stipulated judgment for $3.5 million against a payments processor who had processed sales of allegedly deceptive free trial offers of nutraceuticals and other products.  That judgment was only a little more than a year old and remained entirely unpaid as of the AMG decision.  In both cases, the court said that its task in deciding a Rule 60(b) motion was to weigh the competing interests of finality and fairness so as to ensure that justice is done.

Both motions argued that the judgments were void because the court lacked subject matter jurisdiction.  To support this argument, they contended that Section 13(b) of the FTC Act, under which the cases were brought, was jurisdictional. The FTC contended otherwise, and the court in each instance agreed, finding that Section 13(b) was merely remedial, authorizing injunctive but not monetary relief, and that subject matter jurisdiction existed under other federal statutes.  The fact that a judgment may have been erroneous, the court said, did not make it void.

Both motions also sought relief under the fifth factor of Rule 60(b), on the ground that prospective enforcement of the monetary judgments would be inequitable.  While monetary judgments are normally considered to be retroactive in nature, providing redress for a past wrong, the defendant under the unpaid judgment argued that enforcement would still be prospective precisely because the judgment was still unpaid and that the FTC would have to set up an administrative procedure to send refunds to consumers from any payment of the judgment.  The court disagreed, adhering to the general view that monetary judgments are retrospective in application.

The real battle ground was the “any other reason” catch-all clause of Rule 60(b)(6).  As noted, judges have wide discretion under this provision, with some characterizing it as a “grand reservoir of equitable power,” the exercise of which may be justified by an “intervening change of controlling law,” and others strictly construing the “extraordinary circumstances” needed to show that enforcement of a final judgment would result in a “manifest injustice.” In considering a Rule 60(b)(6) motion, courts, on a case-by-case basis, must “intensively balance numerous factors, including the competing policies of the finality of judgments and the incessant command of the court’s conscience that justice be done in light of all the facts.” In the Ninth Circuit, those factors, known as the “Phelps factors,” are: 1) the nature of the intervening change in the law; 2) the movant’s interest in pursuing relief; 3) the parties’ reliance interest in the finality of the case; 4) the delay between the judgment and the Rule 60(b) motion; and the 5) the relationship between the original judgment and the change in the law.    

In the motion seeking to set aside the much older summary judgment, the defendant did not really rely on the Phelps factors, but simply argued that it would be manifestly unfair to enforce a judgment now shown to have been legally unauthorized.  The court countered, however, that while a change in the controlling law can justify relief, it is not automatic and other interests must be considered, too.  In that case, the facts that: (1) the judgment was nearly a decade old; (2) the defendant had not challenged the FTC’s monetary authority at trial; and (3) the FTC had an alternative statutory path to monetary relief even if the Section 13(b) judgment were set aside, were enough to convince the judge that there were no “extraordinary circumstances” warranting a lifting of the judgment and no “manifest injustice” to prevent.

In the case of the much more recent, unpaid stipulated judgment, the defendant vigorously argued that the Phelps factors were in its favor, arguing that: (1) the change in law, reversing as it did decades old precedent, was historic, profound, and directly undercut the legal basis upon which the FTC had sought, and defendant had agreed to, a monetary remedy; (2) it had a strong and timely interest in pursuing relief; (3) the FTC had no real reliance interest in finality since it had not even pursued collection; (4) it moved for relief almost immediately after the change in the law; and there was a direct nexus between the original judgment, which was predicated on the prior, erroneous view of Section 13(b) monetary relief, and the change in the law. Indeed, the defendant testified that despite one lone, recent circuit court decision that went against the grain of that long-standing precedent, at the time of settlement he was not aware of any petition to the Supreme Court to consider the issue, much less a decision to hear it, and the law thus seemed so settled in the FTC’s favor that he never even considered litigating the issue.   

While the FTC argued that the Phelps factors were on its side, the principal thrust of its opposition zeroed in on the weak link in the motion, namely, that the judgment was agreed to by the defendant.  Even though there was no evidence that the defendant thought a change in law was possible at the time of settlement or that he ever considered going to trial to challenge the law, the FTC, citing what it considered to be controlling Supreme Court authority, argued that he had made a “conscious litigation choice” to give up the opportunity to litigate the issue in favor of settlement and thus had to live with the consequences of his decision. The court accepted this argument, quoting from the Supreme Court that when “a party makes a conscious and informed choice of litigation strategy, [that party] cannot seek extraordinary relief [under Rule 60(b)(6)] merely because his assessment of the consequences was incorrect.”  The court did not accept defendant’s counter-argument that this authority was distinguishable because he had not consciously weighed or even seen the possibility of the law changing and chose to settle for entirely other reasons.  The Court also felt the defendant’s awareness of the single appellate decision rejecting the FTC’s authority was enough to put him on notice that the issue was no longer settled, even though it was still the law in the Ninth Circuit, he did not know the Supreme Court had been asked to hear the case, and certiorari would not be granted until months after his settlement.

As these cases reveal, using the AMG decision to try to overturn a monetary judgment under Section 13(b) is indeed an uphill task, not impossible, but hard.  The circumstances must line up nearly perfectly: a fairly recent judgment; no alternative statutory path to monetary relief; in the case of a contested judgment, showing that a challenge had been made to the FTC’s Section 13(b) monetary authority in the original case; in the case of a stipulated judgment, a complete unawareness of any legal challenge to that monetary authority at the time of settlement; and in the case of either an adjudicated or stipulated judgment, the lack of, or only partial, execution of the judgment.  Certainly, if a judgment has been paid, it would be even harder to get a judge to “unscramble the egg” and thus unleash a potential floodgate of FTC defendants rushing into court to try to get their money back.  Finally, almost six months after AMG, any FTC defendant considering a Rule 60(b) motion must move fast to meet the “reasonable time” requirement. Since AMG, the FTC has been scrambling itself to get Congress to restore its Section 13(b) monetary authority.  A bill to do so has passed the House but is presently languishing in the Senate.

Supreme Court Guts FTC’s Enforcement Powers and Clout

Last Thursday morning, Eastern Daylight Time, the world of the FTC shook like never before.  At that time, the Supreme Court of the United States, in a unanimous but unsurprising decision with seismic consequences for the potency of the FTC’s enforcement mission, ruled that the FTC no longer has the authority to obtain asset disgorgement and consumer restitution from wrongdoers in an action filed in federal court.

Recognizing, and alarmed by, the enormous blow the Court’s ruling would deal to the FTC’s enforcement capabilities, its Acting Chair, Rebecca Slaughter, mincing no words, immediately blasted the decision reached in AMG Capital Mgmt. v. FTC, saying that “the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior. With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”

As I wrote in “Supreme Court To FTC: We Doubt Your Monetary Authority” (January 2021), following oral argument in the case, a defeat of this magnitude for the FTC was not unexpected from this conservative “textualist” court, based on the lack of any express monetary authority in the FTC statute, referred to as Section 13(b), which authorizes it to bring only injunction cases in federal court. The Court potentially could have narrowed but not eliminated the FTC’s monetary powers, as it had done in the Liu decision last year involving the authority of the Securities and Exchange Commission to seek monetary relief.  But there it found some basis in the SEC’s statute to indicate that Congress intended it to have the power to obtain equitable monetary relief, such as disgorgement or restitution.  In Section 13(b), the Court, in the 9-0 decision written by Justice Breyer (hardly a conservative textualist himself, which underscores the Court’s analytical unanimity in the case), simply could find none.

The questioning of the justices at the oral argument, and in particular that of Justice Breyer, foreshadowed their decision and its reasoning.  The problem the FTC had to confront was two-fold.  First, Section 13(b) by its express terms authorizes only a temporary injunction to stop ongoing or imminent violations of the FTC’s prohibition on unfair and deceptive business practices, and a permanent injunction in “proper cases.” The term “injunction,” in its plain and historical meaning, means just that, an injunction – a command to do or not do something – as opposed to all equitable relief, and does not look backward to redress past harm. 

Second, another provision of the FTC Act, Section 19, which was enacted only two years after Section 13(b), authorizes the FTC to seek monetary relief in federal court, but only after initiating and prevailing in an administrative adjudication, and then only after a showing that the defendant’s misconduct was “dishonest or fraudulent.”  Section 19 also has a statute of limitations which Section 13(b) does not have, a troubling omission if in fact Section 13(b) was meant to award retrospective monetary relief, since there would be no limit in how far back the FTC could go in seeking redress.  It made little sense to Justice Breyer and some of his brethren at the argument that Congress would enact such a carefully drawn up scheme for the FTC to obtain consumer redress within certain guardrails, such as a statute of limitations and restriction of redress to cases of fraud, so soon after enacting Section 13(b), if it nonetheless still meant the FTC to have virtually uncircumscribed power to secure redress as an ancillary remedy under Section 13(b).            

Justice Breyer’s opinion striking down the FTC’s Section 13(b) monetary authority rests squarely on these two main concerns.  He notes that the language of the provision:

refers only to in­junctions and that an ’injunction’ is not the same as an award of equitable mon­etary relief….Taken as a whole, the provision focuses upon relief that is prospective, not retrospective….Further, the structure of the Act beyond §13(b) confirms this conclusion. 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…in administrative proceedings. Since in these provisions Congress explicitly provided for ‘other and further equitable relief ’… and for the ‘refund of money or return of property’…it likely did not intend for §13(b)’s more cabined ‘permanent injunc­tion’ language to have similarly broad scope. More than that… §19 comes with cer­tain important limitations that are absent in §13(b)….In addition, Con­gress enacted these other, more limited, monetary relief provisions at the same time as, or a few years after, it en­acted §13(b)….It is highly unlikely that Congress would have enacted provisions expressly authorizing conditioned and limited monetary relief if the Act, via §13(b), had already implicitly allowed the Commission to obtain that same monetary re­lief and more without satisfying those conditions and limi­tations.”

(Emphasis in original)

Breyer said that if the FTC believes its Section 19 authority to obtain consumer restitution is “too cumbersome or otherwise inade­quate, it is, of course, free to ask Congress to grant it further remedial authority.”

That is exactly what the FTC is doing, and has been doing for months in anticipation of a loss at the Supreme Court.  It is difficult to predict what the currently divided Congress will do on anything these days, but it is hard to imagine that it will not respond to FTC leadership’s plea for restoration of its authority to pursue justice for economically harmed consumers directly in federal court, without having to go through the laborious two-step process of Section 19.  But even if Congress does pass a legislative fix, the Liu decision, which significantly curbed the SEC’s equitable monetary authority (see “Did the Supreme Court Just Save the FTC’s Disgorgement Authority?,” June 2020), could similarly restrict the FTC’s monetary powers as well, limiting recoveries, for example, to only net profits instead of gross revenues. It is also conceivable that Congress could graph the Section 19 safeguards, such as a statute of limitations and maybe even a fraud proof requirement, onto Section 13(b) as well.

The FTC’s ability to shut down enforcement targets with asset freezes and strip them of their alleged “ill-gotten gains” has been the hammer that has made it such a formidable and feared business regulator for decades, and undergirded its efforts to achieve greater deterrence of anti-consumer and anti-competitive conduct.  Until and unless Congress restores its Section 13(b) monetary authority, the FTC, as a law enforcement entity, will be a shadow of its former self, if not a paper tiger.  Advertisers and marketers, however, still have a duty to obey the law and an ethical as well as legal duty to be truthful and fair with consumers, and they would be foolish to think there is no longer a “cop on the beat.”  Aggressive state and local regulators with monetary powers and opportunistic class action attorneys are still looking for targets every day, and it is more likely than not that the FTC will regain at least some measure of its enforcement clout from Congress, and sooner rather than later.

Meanwhile, as the FTC’s frenetic lobbying effort continues, FTC defendants who have had to pay past monetary judgments are already calling, wondering how they can “get their money back.”  That is a complicated legal question, and surely one the FTC will litigate vigorously if necessary.  For anyone in that position who is interested in exploring their rights, if any, to return of their disgorged assets, or who has or may have an FTC enforcement issue and wants to understand the meaning of the AMG decision for them, they should seek guidance from appropriate FTC counsel.

To Be or Not To Be an Autodialer? The Supreme Court Gives the Answer

In “To Be or Not To Be an Autodialer” (October 2018), I discussed the technical, yet raging, legal controversy in the telemarketing world over the meaning of an “autodialer” under the Telephone Consumer Protection Act (“TCPA”), the federal law governing marketing calls and texts using an Automatic Telephone Dialing System, or ATDS.  The implications of this fierce debate for telemarketers have been huge because the TCPA, including, most crucially, its requirement to have prior consent from every consumer to whom a commercial call or text is placed, and the class action and civil penalty risk of violating the statute, apply only to marketing messages sent via an ATDS.  The debate, which has played out in the federal appellate courts and now, in the Supreme Court, has centered on the meaning of an ATDS.  

The TCPA defines an ATDS as “equipment which has the capacity: (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”  The central controversy surrounding the definition is whether it encompasses “predictive dialing,” a system which makes automated calls to a pre-loaded list of telephone numbers using algorithms to predict the best times to connect with the called parties. Because predictive dialers have come into such prolific use, whether they are an ATDS under the TCPA, and thus subject to the law’s calling restrictions and private right of action permitting class actions, is a question of enormous import to all TCPA stakeholders – sellers, call centers, consumers, predictive dialer makers, and, last but not least, plaintiff’s lawyers who have been feasting on an epidemic of TCPA litigation for years.

The federal circuits have split on the question, which teed it up for resolution by the high court.  The first decision, in ACA International v. FCC in 2018 out of the D.C. Circuit, rejected an interpretation of the TCPA’s ATDS definition by the Federal Communications Commission that would have included dialing equipment with not only the “present” but also the “potential” (through reconfiguration) capacityto randomly or sequentially generate numbers, and dial them, even if it is not presently used for such purposes.  This interpretation was broad enough to encompass predictive dialers and other technology that may have the potential capacity to randomly or sequentially generate numbers even though they are not presently using it but instead are using pre-loaded calling lists.  By including predictive dialers, the FCC felt it was carrying out Congress’s intent to apply the definition of ATDS to new technology so that the millions of consumers who would be automatically dialed by that technology would have the protections of the TCPA against unwanted telemarketing messages.    

The court rejected the FCC’s ATDS interpretation as impermissibly overbroad, saying it was expansive enough to apply to smartphones which could be modified to gain ATDS functionality.  An ATDS definition of such “eye-popping sweep,” which would make nearly every American a “TCPA-violator-in-waiting, if not a violator-in-fact,” was simply a bridge too far.

Since ACA, three other circuits have addressed the question.  The Second Circuit, in King v. Time Warner Cable, and the Third Circuit, in Dominguez v Yahoo, concurred with the D.C. Circuit that to be an ATDS within the meaning of the TCPA, a dialing system must have the current capacity to randomly or sequentially generate numbers and to dial those numbers. The Ninth Circuit, however, in Marks v. Crunch San Diego, took a broader view and a different analytical path, holding that a dialing system designed to send promotional text messages to a list of stored telephone numbers was an ATDS under the TCPA, even though it lacked a random or sequential number generator. Viewing the text and structure of the TCPA holistically, it concluded that while Congress focused on regulating the use of equipment that dialed blocks of sequentially or randomly generated numbers—a common technology at that time of the TCPA’s enactment in the early 1990s – “language in the statute indicates that equipment that made automatic calls from lists of recipients was also covered by the TCPA.” Accordingly, it concluded that the definition of an ATDS is “not limited to devices with the capacity to call or text numbers stored or produced by a ‘random or sequential number generator,’ but also includes devices with the capacity to dial stored numbers automatically.  Citing Marks, the Ninth Circuit reached the same result later in 2019 in Facebook v Duguid.    

On April Fool’s Day this month, the Supreme Court, in a unanimous “non-joking” decision in Facebook v Duguid, settled the circuit split, holding unequivocally that an auto-dialer is exactly what the TCPA expressly says it is, a device that must have the capacity to randomly or sequentially generate numbers to be stored, produced, and dialed.  The Court reached this result in a classic case of statutory interpretation, utilizing various canons of interpretation to parse the language of the law’s ATDS definition to derive its meaning. Applying the “series-qualifier canon,” the Court said the modifying phrase, “using a random or sequential number generator,” related to both “store” and “produce” telephone numbers to be called, rather than only to one or the other, as Facebook had argued under another canon of interpretation. Thus, a pre-loaded and stored list of numbers that is not randomly or sequentially generated, as might be found in a predictive dialer or a modern cell phone, would not be an ATDS under the TCPA. The presence of a comma separating the preceding phrase from the modifier, “using a random or sequential number generator,” further supported the Court’s interpretation, as “‘[a] qualify­ing phrase separated from antecedents by a comma is evi­dence that the qualifier is supposed to apply to all the ante­cedents instead of only to the immediately preceding one….’ The comma…thus fur­ther suggests that Congress intended the phrase “using a random or sequential number generator” to apply equally to both preceding elements, “store” and “produce.” Based on these principles of statutory construction, the Court held that “Congress’ definition of an autodialer requires that in all cases, whether storing or producing numbers to be called, the equipment in question must use a random or sequential number generator.”  

Addressing Duguid’s warning that accepting the Court’s interpreta­tion would “unleash” a “torrent of robocalls,” the Court said his “quarrel is with Con­gress, which did not define an autodialer as malleably as he would have liked…This Court must interpret what Congress wrote, which is that “using a random or sequential number generator” modifies both “store” and “produce.”

Indeed, as the Court spoke, Congress was already considering different bills to respond to consumer and consumer organization complaints about a “torrent of robocalls.” The clear message from the Supreme Court is that the problem is Congress’s to fix, not the judiciary’s.  Telemarketing reform has bipartisan support, and the Facebook decision should provide fresh impetus for a legislative solution.   Meanwhile, until and unless that happens, the predictive dialing industry and the many telemarketers that use that technology can breathe easier, although best practice has been, and remains, to have prior permission to tele-market to consumers, whether using a dialer with random or sequential generating capacity, or not.

Supreme Court to FTC: We Doubt Your Monetary Authority

The moment of truth for the survival of the Federal Trade Commission’s most powerful and effective enforcement weapon – the ability to separate alleged FTC violators from their money – is now here.   On January 13, 2021, following two years of legal challenges with mixed results in the lower courts to long-standing judicial precedent holding that the FTC has such authority, the Supreme Court heard oral argument on the question.  Based on the questioning of the justices, the FTC cannot be confident it will still have that authority after the Court renders its decision by the end of June.

As explained in several prior posts in this space, the issue before the Court is a fairly straightforward one: does the authority granted to the FTC under Section 13(b) of the FTC Act to seek an “injunction” against ongoing or imminent violations of the Act encompass the further right to obtain equitable monetary relief, and even if it does not, is it still appropriate for the Court to toss aside an entire body of jurisprudence, developed over decades in the lower appellate courts, that has construed Section 13(b) to authorize monetary relief.  More simply put, what about Section 13(b) controls:  its text, and place within the overall structure of the FTC Act, or its history.

Opening the argument, counsel for AMG Capital Management, which is appealing a Ninth Circuit ruling that upheld the FTC’s monetary authority, naturally argued that the text and statutory structure govern.  The term “injunction,” in its plain and historical meaning, means just that, an injunction – a command to do or not do something – as opposed to all equitable relief, and does not look backward to redress past harm.  This meaning is underscored by Section 13(b)’s limitation to seeking an injunction only against an ongoing or impending violation.  Within the context of this temporal restriction, the argument goes, a retrospective monetary remedy would make no sense.  Further, another provision of the FTC Act, Section 19, authorizes the FTC to seek monetary relief, such as restitution or disgorgement, in federal court, but only after initiating and prevailing in an administrative adjudication, and then only after a showing that the defendant’s misconduct was “dishonest or fraudulent.”  Section 19 also has a statute of limitations which Section 13(b) does not have, an omission that would be “truly striking” if in fact Section 13(b) was meant to award retrospective monetary relief, since there would be no limit in how far back the FTC could go in seeking redress.  If Congress wanted the FTC to be able to obtain money in addition to injunctive relief when it passed Section 13(b), it could have said so and properly included a statute of limitations, but it did not.  Finally, anticipating and attempting to preempt the FTC’s “historical” argument, counsel for AMG observed that decades of legal error in the lower courts is still error.

The essence of AMG’s argument, thus, is that the text and structure of the FTC Act draws a clear line between the agency’s injunctive power and restitutionary power.  It has express and important statutory authority to stop unfair and deceptive trade practices in their tracks, in order to prevent future consumer harm, but if it wants to make defendants pay for past harm by taking away their property, it must first prove their violations in an administrative proceeding and show they had fraudulent intent.      

Counsel for the FTC understandably argued the history.  Given the decades of jurisprudence on the topic, with every federal appellate court in the country recognizing the FTC’s monetary authority under Section 13(b) until the recent revisionist “textualist” assault against it, the FTC’s reliance on that body of law, and the importance of monetary relief to its enforcement mission, including deterrence, it is simply too late to upset the apple cart.  Or, in the words of Justice Stephen Breyer, playing devil’s advocate with AMG’s counsel, in light of that history, shouldn’t we just let “bygones be bygones.”  Further, the FTC argued, injunctions traditionally have been understood to encompass other forms of equitable relief, including restitution, and it is within the broad equitable powers of a federal court to grant such relief.  While Section 13(b) does not expressly provide for equitable relief beyond an injunction, in authorizing the FTC to ask a court to grant injunctive relief, the FTC argued, it is simply asking it to deploy its full arsenal of equitable remedies, including restitution and disgorgement, as it deems appropriate.

While the justices’ questioning tested both sides, not surprisingly, coming from a conservative “textualist” court, it seemed to lean harder against the FTC’s position.  The toughest question AMG’s counsel got, which he seemed to stumble over, was from Justice Sotomayor, who wanted to know why Congress would authorize the FTC to seek not only a temporary but also a “permanent” injunction, but not permit any other remedies to accompany it.  If the purpose of the statute is simply to stop an ongoing or imminent violation, wouldn’t a temporary injunction be enough, while the FTC pursued administrative processes to lay the foundation for obtaining monetary relief.  The inclusion of permanent injunctive relief in Section 13(b), without other equitable remedies, seemed superfluous and made “no sense” to her. 

Several justices expressed skepticism about the FTC position.  Chief Justice Roberts didn’t buy the argument of broad judicial equitable authority, noting that it is usually exercised in non-governmental litigation and that a federal agency’s powers derive exclusively from, and are circumscribed by, Congress.  Justice Thomas observed that Section 13(b) is “forward-looking,” not concerned with what has “already happened.” 

Justice Breyer expressed concern, after the FTC attorney had admitted that Section 13(b) was preferable to Section19 because it was “easier” to use, that the FTC’s heavy use of Section 13(b) would unfairly penalize businesses for engaging in conduct that they did not know was wrong because the FTC had not used its expertise in agency proceedings to tell them what was wrong.  

Justice Alito cited evidence that FTC officials in the early days of Section 13(b) didn’t think arguments that it authorized monetary relief would be successful in court as “pretty damaging to the [FTC’s] position.”  Justice Sotomayor was bothered that there is nothing in the legislative history of Section 13(b) to indicate that Congress intended it to authorize monetary relief, a fact which the FTC conceded. 

Justice Kagan conveyed a concern that the FTC’s “choice” to use Section 13(b) far more often that Section 19, also a fact the FTC conceded, made the legal protections in Section 19, including the requirement to show dishonesty or fraud to get money, “pretty much entirely irrelevant.”  Echoing Justice Breyer, Justice Gorsuch voiced the concern that the FTC’s reliance on Section 13(b), because Section 19 is “inherently difficult and Section 13 is so comparatively easy,” undermined the original intent of Congress that the FTC be primarily a regulatory body that elucidated and educated the business community on the meaning of deceptive conduct through administrative cases and rules. 

Justice Kavanaugh said the problem the FTC has is the “text” and that the FTC’s reading of it raised separation of powers concerns over an agency’s exercise of undelegated powers.                                                  

Reading tea leaves in judges’ questions and comments at an oral argument is a favorite pastime of litigants and court observers, but hardly a surefire predictor of how they will rule.  Nevertheless, if an informed observer had to guess, AMG felt more pleased walking out of the (virtual) courtroom than did the FTC.  If, as seems foreseeable, it also will be more pleased than the FTC with the Court’s decision, and if the FTC wishes to assure the preservation of its most potent enforcement weapon, it would do well to heed Justice Kavanaugh’s advice to ask Congress for clear monetary authority under Section 13(b).  Indeed, in anticipation of a possible adverse ruling, the FTC had already gone to Congress even before the hearing.  Following it, the agency should be – and no doubt will be – intensifying its lobbying effort.  With President Biden soon to be naming a new chairperson of the FTC, this issue is sure to be front and center at the nominee’s confirmation hearing and a singular focus of his or her attention and legislative agenda after taking office.

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