Supreme Court Weighs Whether FTC Law Allows Consumer Redress

Jan. 13, 2021, 5:09 PM

Supreme Court justices struggled to balance precedent allowing the FTC to pursue consumer redress from fraudsters against limitations in the agency’s governing statute on a case involving a payday lender’s $1.3 billion penalty.

The high court heard arguments Wednesday in AMG Capital Management LLC v. FTC, a case that could constrain the commission from seeking monetary relief for fraud victims under section 13(b) of the Federal Trade Commission Act. Section 13(b) was a 1973 amendment to the 1914 law that created the commission.

The language of the statute only says that the FTC could seek injunctive relief, but does not say whether the commission can seek equitable relief, including consumer redress. Still, appellate courts for decades have upheld the FTC’s power to seek consumer redress until 2019.

Several justices asked whether decades of court rulings were more important than the current court’s more textualist interpretation of statutes.

Why should the Supreme Court “adopt a view that is current today but wasn’t current then?” Chief Justice John Roberts said, referring to the 1973 amendment to the 191`4 law.

Decades of Precedent

AMG Capital is attempting to overturn decades of appellate court precedent that have backed the FTC’s pursuit of restitution alongside court injunctions to immediately stop alleged consumer scams and antitrust violations.

The company, owned by payday loan impresario and former race car driver Scott Tucker, is appealing a December 2018 decision in the U.S. Court of Appeals for the Ninth Circuit that upheld the FTC’s $1.27 billion restitution order against Tucker.

Tucker is currently serving a 16-year prison sentence following his conviction on racketeering charges for illegally violating state interest rate caps.

AMG Capital’s attorney, Michael Pattillo of MoloLamken LLP, said that Section 13(b) of the FTC Act only gives the agency the authority to pursue injunctive relief, blocking the FTC from seeking restitution through litigation.

Justice Neil Gorsuch said that granting a power beyond what was explicitly allowed in Section 13(b) could lead to an unwarranted extension of power to an independent agency, particularly since other parts of the FTC statute allows the commission to seek consumer redress in the agency’s administrative processes.

“It’s just another step away from what Congress anticipated would be a regulatory regime that never materialized,” he said.

The U.S. Court of Appeals for the Seventh Circuit reached the same conclusion in a 2019 decision in favor of a credit monitoring service that fought a $5.3 million FTC order alleging the company tricked consumers into a $30 monthly subscription. The decision in FTC v. Credit Bureau Center, LLC overturned Seventh Circuit precedent and broke with eight other circuits that have held that the FTC may seek restitution awards.

FTC Responds

The FTC petitioned the Supreme Court for a review of that case, and it was initially paired with the AMG Capital litigation. But the Supreme Court dropped the Credit Bureau Center litigation in order to allow Justice Amy Coney Barrett, who previously sat on the Seventh Circuit, to consider the FTC’s powers.

FTC deputy general counsel Joel Marcus told the justices that Congress was operating under the typical understanding of the time when it included the injunction language in Section 13(b). That included the ability to seek equitable relief.

That argument was met with some skepticism by several members of the court, including Justice Stephen Breyer. But Breyer began his questioning by stating that both sides could be correct in their arguments, and asked whether stability in the law was more important after decades of support for the FTC’s consumer restitution powers.

“The lower courts, at least, have been uniform for 50 years,” Breyer said to AMG’s attorney Pattillo.

The case is AMG Capital Management LLC v. Federal Trade Commission, U.S., No. 19-508, Oral Arguments 1/13/21

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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