There are currently three petitions for cert pending before the Supreme Court that seek review of the FTC’s practice, under Section 13(b) of the FTCA, of seeking monetary awards dubbed “equitable restitution” or “equitable disgorgement.” This extra-statutory practice coopts the power of a court sitting in equity to garner monetary judgments not conferred by Congress, violating separation of powers principles to the detriment of the regulated community and those who rely on agencies to enforce their statutes as written. The agency’s response to these three petitions reveals a split within the government about the strategy of when and how the Supreme Court should address these issues and highlights the alacrity with which the agency will recast its position to preserve its extra-statutory practices.
Defendants in FTC enforcement actions filed the first two petitions based on the theory that Section 13(b) does not allow the FTC to seek monetary awards such as restitution. The Solicitor General responded on behalf of the FTC, as is common practice, by arguing the petitions should either be denied or held pending the Court’s decision in Liu v. SEC, which presents an analogous issue under securities law. The third petition, filed by the FTC without the assistance of the Solicitor General, insists the Court must immediately decide whether Section 13(b) provides for injunctions ordering the return of funds, i.e. restitution. If these questions sound different, but feel alike, that’s because they all arise from a single decision of the Seventh Circuit in FTC v. Credit Bureau Center LLC, 987 F.3d 764 (7th Cir. 2019), which created the circuit split that is the catalyst for review.
Publishers Business Services, Inc. v. FTC, No. 19-507
In October 2019, Publishers Business Services (PBS) filed a petition for cert asking:
- Whether a district court can award monetary relief under § 13(b) of the FTC Act, consistent with separation-of-powers principles; and
- Whether a monetary disgorgement award under § 13(b) of the FTC Act is a penalty and therefore outside a district court’s inherent equity powers.
As one would expect from a well-crafted question presented, resolution of these questions would squarely address the case on appeal as well as broadly illuminating the guardrails in FTC enforcement actions.
PBS arose out of the Ninth Circuit, which has been a leader in expanding FTC authority under the guise of “equity power.” In addition to the facial dichotomy between the authority granted to the FTC under the FTCA and the associated separation of powers issues, PBS’s pursuit of review was spurred by the decision in Credit Bureau, which held the FTC does not have authority to seek monetary awards in federal court under Section 13(b). That ruling created a circuit split.
AMG Capital Management LLC v. FTC, No. 19-508
Also, in October 2019, AMG Capital Management (AMG) filed a petition for cert asking:
Whether § 13(b) of the Act, by authorizing “injunction[s],” also authorizes the Commission to demand monetary relief such as restitution—and if so, the scope of the limits or requirements for such relief.
The AMG petition relied on the same circuit split as PBS, and, although the question presented is styled differently, raised the same principle as PBS: whether the FTC can pursue monetary awards under Section 13(b) in federal court. The FTC, represented by the Solicitor General, filed briefs in response to both petitions, restyling the questions presented:
Whether Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b), empowers a district court to award equitable monetary relief in a civil enforcement action brought by the Federal Trade Commission.
This pithy rendering fairly captures the questions presented by the parties, the holdings of the lower courts, and the broader issue that merits review. Both Solicitor General briefs also forthrightly acknowledge that, “The question whether Section 13(b) of the FTC Act authorizes district courts to award equitable monetary relief has divided the courts of appeals and would ordinarily warrant this Court’s review.”
Typically, this concession would signal that the Solicitor General believes the Court should grant the petitions. But here the Solicitor General argued the Court should deny cert, or at least hold the petitions pending disposition in Liu v. SEC for the limited reason that Liu presents analogous issues relating to securities law. The Solicitor General’s office wrote:
The relevant statutory schemes are not identical, and the FTC’s and the SEC’s authority to seek monetary relief will not necessarily rise and fall together. Nevertheless, the question presented in this case and the question presented in Liu overlap.
The Solicitor General indisputably took two positions on behalf of the government and the FTC. First, the justiciable issue is whether the FTC can obtain monetary awards under Section 13(b). Second, the Court should not take up that issue until Liu is decided.
Both PBS and AMG were distributed for conference in early January and have since been “rescheduled” without a replacement date.
FTC v. Credit Bureau Center LLC, No. 19-825
Notwithstanding the clear representations in PBS and AMG, in December 2019, six days after the Solicitor General filed the briefs quoted above, the FTC, this time representing itself—without the Solicitor General—filed a petition for cert in FTC v. Credit Bureau Center LLC, presenting the following question:
Whether Section 13(b) authorizes district courts to enter an injunction that orders the return of unlawfully obtained funds.
The FTC thus sought review of the case petitioners in PBS and AMG cited for the circuit split in their own petitions. The FTC also relied on the circuit split—now presenting it as sufficient rationale for granting cert immediately. But unlike the responses in PBS and AMG, the FTC claims in support of its own petition, “[t]he question here is distinct from the question in Liu, will not be resolved in that case, and warrants independent review.” The FTC has thus switched positions in briefs that are before the Court simultaneously. The question is why?
One clue may lie in the FTC’s innovative portrayal of how it, and courts at its behest, apply Section 13(b). In Credit Bureau, the FTC reinvents its practice of obtaining billions of dollars in monetary awards as “injunctions” commanding the return of funds to victims—rather than monetary judgments in favor of the FTC. But, as shown in PBS and AMG, and the amicus briefs in support of those petitions, that is not the practice at issue, was not the decision made by the lower courts, is not the legal issue presented to the Supreme Court in those petitions, and does not represent the extreme steps the FTC routinely takes—including shuttering businesses and imposing millions of dollars in personal liability—to obtain monetary awards payable to itself.
The district court order in PBS, for example, states: “Plaintiff Federal Trade Commission is awarded the sum of $23,773,147.78 as monetary equitable relief.” Fed. Trade Comm’n v. Publishers Bus. Servs., Inc., No. 08-620, 2017 WL 451953, at *7 (D. Nev. Feb. 1, 2017) (emphasis added). Similarly, the district court order in AMG states that “[j]udgment in the amount of $1,301,897,652 is entered in favor of the Commission against the Defendants as equitable monetary relief.” Fed. Trade Comm’n v. AMG Servs., Inc., No. 12-536, 2016 WL 5791416, at *14–15 (D. Nev. Sept. 30, 2016) (emphasis added). The order in AMG is especially instructive because it is typical of the format the FTC uses in cases that settle as well as in cases that are adjudicated and thus illustrates the FTC’s customary approach to its monetary demands. Even the trial court opinion in Credit Bureau states that “[j]udgment in the amount of . . . [$]5,260,671.36 is entered in favor of the Commission against Defendants, jointly and severally, as equitable monetary relief.” FTC Petition for Cert, No. 19-825 at 126a (emphasis added).
Thus, the question of whether a court sitting in equity could enter an injunction ordering the “return” of unlawfully obtained funds has no bearing on the FTC’s established practice of obtaining awards to itself—including in the case for which it seeks cert. Nor is it in synch with the Seventh Circuit’s opinion in Credit Bureau, whose statutory interpretation was built on two crucial concepts. First, “[r]estitution isn’t an injunction.” Second, “the Court now recognizes the importance of Congress’s choice to specify the forms of relief.”
The FTC’s recasting of monetary awards appears to be an attempt to prophylactically limit the forthcoming decision in Liu by evading the issue of whether disgorgement orders are penal in nature and thus not equitable relief under Kokesh v. SEC, 137 S. Ct. 1635 (2017). Whether the Court’s decision in Liu will fully resolve analogous debates regarding FTC monetary awards seems unlikely—but the Liu decision will almost certainly have some effect on how courts interpret the FTCA. And, a holding in Liu that penalties are not equitable relief, coupled with the holding in Kokesh that SEC disgorgement awards are penalties, would flow through to FTC disgorgement/restitution actions that bear the characteristics of SEC monetary awards.
This perhaps explains the FTC’s break with the Solicitor General’s position that PBS and AMG should be held in abeyance pending Liu, its decision to assert its own litigating authority to seek Supreme Court review of Credit Bureau on the agency’s own terms, and its odd recasting of the question presented and the holding below.