FTC files own petition, suggesting divide in federal government
on Jan 3, 2020 at 1:57 pm
It has been nearly a half-century since Congress gave the Federal Trade Commission the right to represent itself before the Supreme Court, at least when the U.S. solicitor general, who normally represents the federal government before the court, declines to do so. That right is rare among federal agencies, and the FTC has exercised it sparingly – between 1975 and November of 2019, it had represented itself before the court only four times. In December of 2019, it did so for the fifth time, asking the justices to review a ruling by the U.S. Court of Appeals for the 7th Circuit that, according to the agency, “threatens the FTC’s ability to carry out its mission by eliminating one of its most important and effective enforcement tools.” At the same time, the FTC’s petition undermined the argument made by Solicitor General Noel Francisco on behalf of the federal government in two other cases involving the same issue, and it hints at a divide within the government on the central question in the petitions.
Section 5 of the Federal Trade Commission Act bars “unfair methods of competition,” as well as “unfair or deceptive acts or practices” that affect business or trade, and it gives the FTC the power to “prevent” such conduct. Until 1973, the FTC could only enforce the act through administrative proceedings, by issuing an order directing the violator to stop its illegal conduct. But in 1973, Congress passed Section 13(b) of the act, which gives the FTC the power to go to district court to seek a permanent injunction to enforce Section 5. The question in three petitions for review now before the justices is whether Section 13(b) also authorizes courts to require defendants to return the money that they obtained through their illegal activities.
The first petition, in Publishers Business Services v. FTC, was filed in October of 2019. The company asked the justices to review a ruling by the U.S. Court of Appeals for the 9th Circuit that upheld an award to the FTC of nearly $24 million in “equitable monetary relief” for the company’s operation of a telemarketing scheme. Although its eight-page brief was styled as a “brief in opposition,” the government – represented by U.S. Solicitor General Noel Francisco – did not defend the 9th Circuit’s ruling that a district court’s authority under Section 13(b) to issue a permanent injunction includes the power to award restitution. Instead, the government merely described both the 9th Circuit’s holding and the reasoning of the dissent and acknowledged that the issue “has divided the courts of appeals and would ordinarily warrant this Court’s review.” However, the government continued, because the company had not raised the question of the district court’s power to order restitution during the initial proceedings in the district court or the court of appeals, the company had failed to preserve the issue. At most, the government argued, the justices should wait to act on the company’s petition until after the court has ruled on Liu v. SEC, which asks whether district courts can award repayment of profits to the SEC in civil enforcement cases; that case will be argued on March 3.
The second petition, in AMG Capital Management v. FTC, was filed the same day as Publishers Business Services last October. AMG is asking the Supreme Court to review a decision by the 9th Circuit that upheld a district court order requiring the company to pay the FTC over a billion dollars in “restitution.” The government’s brief in this case is styled as a “brief for the respondent” – rather than a “brief in opposition” – but it is otherwise largely the same as its brief in Publishers Business Services; the only real difference is that the government appears to concede that AMG properly raised the question of the district court’s authority to order restitution. As in the Publishers Business Services brief, the government suggests that the justices should hold this petition pending their decision in Liu.
Shortly after the two petitions were filed, Francisco – on behalf of the FTC – asked the Supreme Court for a 30-day extension of time to file a petition seeking review of a decision by the 7th Circuit. That decision reversed a district court order requiring Credit Bureau Center to pay the FTC over five million dollars after the company offered consumers a “free” credit report but then enrolled them in a credit-monitoring service for $30 per month. In his five-page filing, Francisco told Justice Brett Kavanaugh (who fields extension applications from the 7th Circuit) that the solicitor general’s office had “not yet determined whether to file a petition for a writ of certiorari on behalf of the FTC.”
The answer to that question was revealed on December 19, when the FTC – with general counsel Alden Abbott as counsel of record – filed its own petition for certiorari in FTC v. Credit Bureau Center, asking the Supreme Court to review the 7th Circuit’s ruling. And while the solicitor general’s briefs may not have defended the lower-court rulings in favor of the FTC, the FTC left no doubt that it regards the 7th Circuit’s ruling against it as “incorrect.”
Section 13(b), the FTC told the justices, is a key weapon in the FTC’s arsenal to protect consumers. The FTC “brings dozens of cases each year seeking a permanent injunction and the return of illegally obtained funds,” resulting in billions of dollars being restored to consumers. Until the 7th Circuit’s ruling in this case, the FTC explained, the courts of appeals had consistently held that “a district court’s authority to grant a permanent injunction under Section 13(b) includes the authority to require wrongdoers to return money that they illegally obtained.” “The resolution of that question,” the FTC concluded, “is critically important to the Commission’s ability to carry out its consumer protection and antitrust enforcement missions.”
In its reply brief in AMG Capital Management, filed one day after the FTC filed its petition, AMG used the FTC petition to bolster its case for review. In its “own petition,” AMG stressed, the FTC agreed with AMG that the Supreme Court should not hold the petitions while it decides Liu because the question presented in these cases “is distinct from the question in Liu, will not be resolved in that case, and warrants independent review.” Moreover, AMG noted, the FTC’s petition cautioned that unless the Supreme Court intervenes promptly, the division among the courts of appeals “would likely persist for years with little prospect of righting itself.”
The brief in opposition to the FTC’s petition is due on January 30, although that deadline could be extended. However, the petitions in Publishers Business Services and AMG Capital Management have been distributed for consideration at the justices’ private conference on January 10, so we could have a better sense much sooner of how the court plans to deal with this question – and the intra-government divide that the petitions reveal.
This post was originally published at Howe on the Court.