Amicus Brief: AMG Capital Management, LLC v. FTC and FTC v. Credit Bureau Center, LLC
AMICUS BRIEF SUMMARY
For more than 30 years, the Federal Trade Commission claimed imaginary powers to obtain millions, if not billions, of dollars in damages under Section 13(b) of the FTC Act, which only authorizes injunctions against present or future illegal behavior.
In October 2020, NCLA filed an amicus brief in the U.S. Supreme Court admonishing the FTC for its unlawful practice in applying the agency’s statutory provisions. FTC had transformed its limited statutory right to enjoin into an absolute right to secure any “equitable remedy.” NCLA argued that the FTC had chosen this course to avoid the due process protections for monetary remedies provided by Congress in the FTC Act. It did this by a stealthy litigation strategy singling out weak targets and then using consent orders and judgments obtained to move the law in an unauthorized direction.
In a win for NCLA, on April 22, 2021, Justice Stephen Breyer handed down a unanimous decision declaring that section 13(b) of the Federal Trade Commission Act did not authorize the Federal Trade Commission (FTC) “to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”
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COURT: The U.S. Supreme Court
DOCUMENT: Nos. 19-508; 19-825
COUNSEL FOR AMICUS CURIAE: John Vecchione, Richard Samp, Mark Chenoweth
FILED: October 2, 2020
PRESS RELEASES
April 22, 2021 | NCLA Celebrates SCOTUS Win Rejecting FTC Power Grab and Restoring Limits on Rogue Agency
Washington, DC (April 22, 2021) – The New Civil Liberties Alliance celebrates a victory today as amicus curiae in the U.S. Supreme Court case, AMG Capital Management, LLC, et al. v. Federal Trade Commission. Justice Stephen Breyer handed down a unanimous decision declaring that section 13(b) of the Federal Trade Commission Act does not authorize the Federal Trade Commission (FTC) “to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”
Section 13(b) of the Federal Trade Commission Act strictly 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. But the FTC had transformed its limited statutory right to enjoin present or future unlawful conduct into a near-absolute right to secure any “equitable remedy” for past damages under Section 13(b). NCLA’s successful amicus brief admonished FTC for its unlawful practice of applying the agency’s statutory provisions in an unauthorized way to avoid the due process protections for monetary remedies Congress provided in the FTC Act.
For over three decades the agency has been aggrandizing its powers to obtain millions. In this case the Ninth Circuit, bound by its own precedent, acknowledged the problem but allowed the FTC $1.27 billion in equitable monetary relief against Petitioner Scott Tucker and his payday lending companies. It did so without the statutory protections provided by Congress for monetary damages or even a jury trial, which the Seventh Amendment to the Constitution grants all Americans for suits at law for money damages over twenty dollars.
NCLA commends the Court for rejecting the FTC’s arguments and for restoring the limits Congress imposed on the agency.
NCLA released the following statement:
“NCLA is gratified that in a unanimous opinion by Justice Breyer the court recognized that Congress has never given the FTC power to seize all of an individual’s assets simply by using the word ‘injunction.’ This is a great victory because erroneous lower court opinions going back 40 years did not prevent a correct interpretation of law.”
— John J. Vecchione, Senior Litigation Counsel, NCLA
For more information visit the case page here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
October 5, 2020 | NCLA Asks Supreme Court to Stop FTC’s Unlawful Power Grab for Monetary Relief
Washington, DC (October 5, 2020) – For more than 30 years, the Federal Trade Commission has claimed imaginary powers to obtain millions, if not billions, of dollars in damages under Section 13(b) of the FTC Act, which only authorizes injunctions against present or future illegal behavior. The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, has filed an amicus brief in the U.S. Supreme Court admonishing the FTC for its unlawful practice in applying the agency’s statutory provisions. FTC has transformed its limited statutory right to enjoin into an absolute right to secure any “equitable remedy.”
NCLA argues that the FTC has chosen this course to avoid the due process protections for monetary remedies provided by Congress in the FTC Act. It did this by a stealthy litigation strategy singling out weak targets and then using consent orders and judgments obtained to move the law in an unauthorized direction.
The Supreme Court consolidated two cases, AMG Capital Management, LLC v. FTC and FTC v. Credit Bureau Center, LLC, to examine this question. NCLA supports the Petitioner in AMG Capital Management, where the Ninth Circuit sided with the FTC, and the Respondent in Credit Bureau Center, LLC, where the Seventh Circuit correctly noted that the statute gave the FTC no such power. In both cases the FTC sought to manipulate a forward-looking injunction to obtain an award of damages for past injury. Section 13(b) of the FTC Act allows the FTC to obtain an injunction in certain circumstances, but under no circumstances does it authorize the permanent injunctions that include monetary relief.
Recently, in Credit Bureau, the U.S. Court of Appeals for the Seventh Circuit called out the FTC on this atextual interpretation of the law that had wrongly asserted equitable powers for the agency under Section 13(b). The Ninth Circuit, bound by its own precedent, noted the problem but allowed the FTC over a billion dollars of damages against AMG Capital—without the statutory protections provided by Congress for monetary damages or even a jury trial, which the Seventh Amendment to the Constitution grants all Americans for suits at law for money damages over twenty dollars.
This Court should reject the FTC’s arguments and restore the limits Congress imposed on the agency, avoiding further Constitutional challenges based on a denial of due process or jury rights.
NCLA released the following statements:
“The FTC uses Section 13(b) for the same reason and with as little legal justification as Willy Sutton had for robbing banks: ‘That’s where the money is.’ The Supreme Court has to stop this unlawful power grab by an out of control agency.”
— John J. Vecchione, Senior Litigation Counsel, NCLA
“If the FTC believes it has inadequate tools for enforcing its regulatory goals, it should go to Congress and ask for new legislative authority. It is unacceptable for the FTC to invent new enforcement powers that Congress has never granted.”
— Richard Samp, Senior Litigation Counsel, NCLA
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
BLOG
January 15, 2021 | Justices Skeptical of FTC Claim of Vast Powers of Disgorgement in AMG Capital Management, LLC v. FTC
The Supreme Court heard argument in AMG Capital Management, LLC v. FTC this week. The FTC can’t be happy with how it went. On the Covid-required Zoom-call format, Justice Roberts can and does keep much closer rein on time and interruptions. With all the disadvantages for advocates, it does allow a clear and focused analysis of each Justice’s concerns. One fascinating agreement by all the Justices mentioning it, including the Chief Justice and Justice Kagan, is that the Supreme Court’s analysis of statutory powers of agencies has decisively changed since the 1970s. Roberts noted that the “freewheeling” judicial grant of powers to agencies had changed to a more “disciplined” analysis of the powers granted by Congress. Justice Kagan, in a typically savvy understanding of textualism and original meaning scholarship, questioned whether part of the original meaning of Section 13(b) of the FTC Act was Congress’ then understanding of the Supreme Court’s old approach at giving the agencies the powers they asserted.
Justice Kavanaugh touched on the new/old approach when he asked whether the problem for AMG was that its arguments sounded like the dissents in old Supreme Court cases where its position lost. Counsel for AMG stood like a stonewall against the proposition that those cases, known as Porter and Mitchell, had to be overturned—and maintained that the statutory language and the structure of the statute at issue easily allowed those cases to be distinguished. But it seems the real change is that the judiciary has left the New Deal paradigm of letting the agencies assert whatever power they claim when not actually prohibited by statute.
Justice Barrett noted that AMG Capital and its principle did not have clean hands and were even featured on “Netflix’s Dirty Money” which presumably home-bound Justices watch in lieu of Tiger King. To both AMG and FTC counsel, Barrett focused on a key issue in NCLA’s own amicus brief. How can any remedy be termed “equitable” if the monies obtained are not returned to the victims? Justice Breyer, while stating he agreed with the briefs on both sides at the outset, seemed to have another problem with the FTC’s assertion of an extra-statutory disgorgement power allowing it to seize billions of dollars from private entities. “History matters,” he stated to FTC counsel. Didn’t the business community fear this exact outcome and wasn’t that why Sections 5(L) and 19 of the FTC Act were passed? He had a minimum high regard for the proposition that the FTC could tell people what they did wrong after the fact. Echoing the general view of the Justices that AMG was a bad actor, it was clear this power was being used against individuals whose wrongdoing was far less obvious.
I was very gratified to see that both Justices Alito and Kavanaugh focused in on a piece written by former FTC official David Fitzgerald explaining the litigation strategy the FTC designed to obtain this untextual and extraordinary power. Kavanaugh had read the entire article! His questions seemed to imply that “when I was in the executive branch I tried this stuff too, but I think a judge’s job is to stop it.” Justices Kagan and Alito were troubled by this as well as they focused on the frequent use of Section 13(b) rather than the other administrative sections that Congress had provided to the FTC. The FTC candidly admitted they use it a lot, and it’s easier to use in many circumstances. In my view, this was good advocacy. Had he implied the explosion in use was sheer happenstance or asked for judicial deference to the agency’s choice of remedies, I think he would have lost credibility with an obviously skeptical court.
Justice Thomas wanted to know why this power wasn’t analogous to ancillary relief approved in the Court’s 19th-century jurisprudence. Most troubling for the FTC I would think was Justice Sotomayor’s question. She stated she believed in the use of legislative history in interpreting statutes…and she saw nothing there to support the FTC’s position.
With the usual caveats about oral argument at the Supreme Court, it sure seems like they are primed and ready to truncate a huge power seized by the FTC without statutory authorization when the opinion in this case comes out in the Spring.
October 15, 2020 | An Insidious Consequence of the FTC’s Use of Section 13(b) Injunctions: Denial of Counsel
I’ve previously written on the Supreme Court’s taking two cases involving the extent of the Federal Trade Commission’s (FTC) ability to seize property of all kinds under Section 13(b) of the FTC Act. Those cases, FTC v. Credit Bureau Center, LLC, CA19-825, and AMG Capital Management, LLC et al. v. FTC, CA19-508, have been combined before the Court, and NCLA submitted an amicus brief supporting Credit Bureau Center, LLC and AMG Capital Management, LLC respectively in the two cases. You can read the brief here.
In our brief we highlight that one of the worst aspects of the administrative state’s overreach and liberation from written law is that it intentionally creates bad law for everybody, not just the litigants in any particular case. Here is how it works. The FTC goes to a Court before it has an opponent. In what is called an ex parte Temporary Restraining Order, it goes to Court and says, “The Defendant is doing all these bad things, and we need to freeze all of their assets so they can be disgorged at the end of the case when we win. Oh, by the way, your honor, the Defendant is so bad he will abscond with all the assets if we let him know we are doing this so let’s not tell him before you rule.” And, incredibly, this works and is allowed. Ex parte means “for the benefit of only one side or faction,” and in these cases truer words were never spoken. These orders are routinely granted. Shortly thereafter, the Court gives the Defendants the chance to come in explain why the injunction—which the Court has already granted and so is temperamentally invested in—should be lifted. How does a defendant in a civil matter, which FTC enforcement is, get a lawyer when all his assets have been seized? The answer is a lawyer is often hard to find, or if available will counsel to settle the matter immediately by giving up all assets to the FTC. A person who has run a business for 20 years and has millions in assets is helpless against this ploy. It is exceptionally difficult to outlast the FTC. This is why defendants have had to surrender even when the very right of the FTC to seize assets under Section 13(b) is under attack and even with thousands of customers complaining they are injured by the FTC action.
It is bad enough that the FTC, without any authorization from Congress, seizes assets so that a defendant is left defenseless. What is even more insidious is that it then uses the settlement orders and default judgments as “precedent” for its next depredations on the property of Americans. And this was the plan! As we said in our brief: “The FTC advanced its agenda against weak defendants, asked for broad equitable relief, beyond injunction, and got it when the defendants defaulted.” We tell the story of the FTC v. Vylah Tec LLC, 378 F.Supp.3d 1134 (M.D. Fla., 2019). In that case the Defendants had two lawyers, paid with small sums released by the court, before they obtained pro bono counsel. While they were found liable by the Court, the FTC when forced to trial could not prove any damages. Zero.
This is one case, but it happens again and again all over the country. If the FTC brings a Section 13(b) case and solvent defendants could use them to hire lawyers how often would the FTC win? First, as these Supreme Court cases reveal, they might have the very power to seize assets challenged. If there is no power of disgorgement, why seize funds? Second, the FTC routinely makes maximalist demands on damages that, without representation, it is very hard to counter. Third, in a “deception/unfairness” claim whether or not the challenged statements were deceptive often turns on expert testimony or legal arguments that a lay person is unlikely to make. The FTC prefers targets without lawyers. Its own liberation from statutory language has too often allowed it to obtain that result.
Photo Credit: Jeffrey Zeldman