FTC Act Section 13b for Just Money Relief
In AMG Capital Management versus FTC, the Supreme Court unanimously ruled that Section 13 (b) of the FTC Act does not allow the FTC to seek fair monetary relief on lawsuits in federal courts. 141 S.Kt. 1341 (2021). However, the FTC may still seek financial relief under other sections of the law.
In AMG Capital Management versus FTC, the petitioner AMG Capital Management (AMG) offered short-term payday loans to borrowers. In marketing these loans, it misled customers by suggesting that they only had to make a single payment for a loan. This was misleading because customers who did not choose to automatically renew such payments would continue to be billed the original payment amount for their loans. As a result of these fraudulent practices, AMG has accrued more than $ 1.3 billion in fraudulent charges.
The Federal Trade Commission (FTC) has filed a lawsuit against AMG in federal court under Section 5 (a) of the Federal Trade Commission Act (the Act) (see 15 USC Section 45 (a) (1)). Citing Section 13 (b), the FTC filed for an injunction and requested that the court order monetary compensation in the form of the refund and siphon off of AMG’s ill-gotten gains. The district court granted the FTC’s request for financial relief. AMG appealed, arguing that Section 13 (b) does not empower courts to grant cash relief or to grant the FTC. The U.S. Court of Appeals for the Ninth District upheld the District Court’s decision and relied on precedents to support the interpretation of Section 13 (b) as empowering courts to empower the FTC. AMG applied for Certiorari and was granted by the US Supreme Court.
The court reversed, ruling that Section 13 (b) does not authorize the FTC to seek financial relief from companies involved in fraudulent trading practices. In a unanimous statement, the court agreed that Section 13 (b) cannot be construed as authorizing fair monetary relief, such as the refund and siphoning off of profits, that the FTC has requested here. Instead, the court interpreted the wording of Section 13 (b) to have its clear meaning – that courts of the FTC can only issue an injunction in a civil action where appropriate.
When the FTC was founded, it was only authorized to take enforcement measures in administrative proceedings. Decades later, Congress passed Section 13 (b) of the FTC Act, which allowed the FTC to bring enforcement action in federal court and seek temporary and permanent injunctive relief. What followed was a series of decisions interpreting the newly added section so that federal courts ruling FTC lawsuits were not limited to providing just relief in the form of injunctions, but rather were using the full range of their just powers were able to get other types of equitable relief, such as refunds and skimming of profits. In its ruling, the Supreme Court dismissed this precedent, stating that the remedy available in Section 13 (b) in conjunction with other sections of the Act was intended to be an exclusive list of options that only concerned “prospective injunctions”. and not “subsequent monetary relief”.
While the decision allows the FTC to apply for Section 13 (b) financial relief, it did not result in a blanket ban on the FTC from seeking any form of financial relief. As part of its analysis, the Court recognized that other provisions of the law expressly empower the FTC to request certain forms of monetary relief. For example, under Section 19 of the Act, the FTC can continue to seek monetary relief, which allows federal courts to issue “redress”[ing] Consumer Injury ”such as a“ Money Refund ”, but only after the FTC has initiated administrative proceedings, obtained a cease and desist order in such proceeding, and petitioned federal court to enforce that order under Section 19 (d).