Public Compensation for Public EnforcementPDF Download
Public enforcement actions frequently result in the distribution of money to people affected by violations of market protection laws. This “public compensation” returns billions of dollars to consumers, investors, and others each year. The law of public compensation appears confusing at first impression because of inconsistent use of nomenclature and conceptual confusion. However, courts have developed a discernible set of principles that allow for presumptions and loosened proof standards in awarding this relief. This buried, but clear, doctrine held for decades despite repeated challenges by business defendants. Supreme Court decisions in Liu v. SEC in June 2020 and FTC v. AMG Capital Management, LLC in April 2021 have unsettled the law.
This Article offers two contributions to the development of the law of public compensation. First, we analyze decades of judicial decisions across federal and state public enforcement agencies and identify consensus legal principles for awarding two different forms of public compensation: disgorgement and public restitution. We extend the less-developed doctrine of public restitution by suggesting a proportionality test to provide guidance for more difficult cases. Second, we propose legislation to create uniform statutory authority for public enforcers that would reverse restrictions that have been or may be imposed on public compensation by recent and pending Supreme Court decisions. Both the doctrine and the proposed legislation are grounded in the unique position and authority of public enforcers, including discretion to select between civil penalties and public compensation as monetary remedies, as well as the deterrence rationale of public enforcement. An appendix includes model legislation Congress could adopt to clarify and restore public compensation authority across enforcement agencies.