AMG v. FTC: A Moot Court-Worthy Conflict at the Supreme Court

With a legal question that led to a classic oral argument where all nine Justices refused to tip their hands on how the case will turn out, the U.S. Supreme Court this week heard oral arguments in AMG Capital Management v. Federal Trade Commission.  The sole issue before the Court is the FTC’s authority to seek and obtain equitable relief from a court with regard to the meaning of a statutory scheme that both sides acknowledged is not expressly resolved by the wording of Section 13(b) of the FTC Act, 15 U.S.C. 53(b).  The operative language of that provision simply authorizes the FTC to seek, and a court to issue, “a permanent injunction.”

You can read more about the background of this case in our previous posts here, here, and here.  At its base, though, the Justices clearly recognized that this issue is the classic – and moot court-worthy – conflict between a pure textual reading of the statute, versus examining the historical context of the provision built on decades of enforcement actions and court decisions both before and after the provision was enacted by Congress in 1973.  AMG primarily argued that because Congress explicitly included equitable relief in Sections 19 and 5(l), the failure to include that language in 13(b) must mean that Congress intended to exclude such relief from that provision. The FTC asserted that while the legislative history of the 13(b) is sparse, Congress employed the facially unclear “injunction” language in 13(b) with a backdrop that Congress intended that two pre-enactment Supreme Court rulings involving other federal agencies gave the FTC the same powers to seek equitable relief.  However, several Justices noted that soon after 13(b) was enacted, the FTC itself did not believe that this section authorized the FTC to seek equitable relief.

Joel Marcus, Deputy General Counsel for Litigation argued for the FTC, and Michael Pattillo of MoloLamken argued for AMG.  One interesting sidenote is that the case is one of the extremely rare cases where the FTC is representing itself before the Court, rather than relying on the Solicitor General of the United States.

Both sides’ arguments were excellent, as were their briefs, and as Justice Breyer commented during the argument, “Blue brief I think you’re right. Red brief I think you’re right. You can’t both be right. That’s right. Alright. You see, that’s the old joke but that’s where I am.”  Many commentators are right there with you, Justice Breyer.

Chief Justice Roberts noted that the Court has changed over time the way that it interprets statutes.  He stated (and other justices agreed) that the Court interprets statutes in a “more disciplined” way than its prior approach, which he described as “freewheeling.” While he made this comment in the course of asking if the court should construe the statute in the environment in which it was passed, the Chief Justice did not explain what he meant by these terms.

While we could look into a crystal ball and try to guess where the Court will land, we won’t – mainly because it would be a wild guess. We do, however, want to address an oversimplification that came up a few times during the argument, that being that employing 13(b) as a means to get relief is the “easier” or “more attractive” path for the FTC to take to get equitable relief when the FTC is deciding to choose among Section 13(b), Section 19 (15 U.S.C. § 57b) or Section 5(l) (15 U.S.C. § 45(l)) of the FTC Act.

In contrast to Section 13(b), Sections 19 and 5(l) expressly authorize the government to obtain equitable relief.  The first provision requires the FTC to first obtain an administrative cease and desist order against a company or other person, before the FTC can go to court to get equitable relief.  The second provision is also quite limited because it too requires a prior cease and desist order or administrative rule before the FTC can go to court to seek equitable relief.  In contrast, 13(b) allows the FTC to go to court to enjoin allegedly unlawful conduct without providing any notice at all to the alleged violator.  This “lack of prior notice” contrast was noted by a number of the Justices in this week’s argument.

Speaking as a former FTC staff attorney (Karin) and the former Director of the DOJ’s Office of Consumer Litigation (now called the Consumer Protection Branch) (John), we believe this contrast oversimplifies the strategic analysis that FTC Staff conducts when assessing which provision to employ to determine the path forward on every case.  We have clearly seen that FTC Staff considers a multitude of factors in their strategic analysis of whether to proceed against an alleged offender by bringing a 13(b) action in court as opposed to seeking an administrative cease and desist order without first resorting to a court.  For example, the FTC weighs primarily which of the two actions is most conducive to discovery issues and an expedited resolution.  In addition, the FTC considers how forthcoming the target of the investigation has been with information, whether the case presents a novel theory or otherwise complex issues or whether it’s “run of the mill”, what injunctive relief is necessary and how quickly it is needed, what equitable relief might be available, where assets are located (here or abroad).  In other words, FTC lawyers do not necessarily agree in every case that a 13(b) action, which the Court seemed to believe is always the faster and better alternative for the FTC, is the path the agency wants to follow.  And for defendants, there are other important distinctions between the two paths.  For example, injunctions obtained by the FTC in court are generally much more detailed and onerous on the defendants than most cease and desist administrative orders.

Additionally, the concept that 13(b) is “easier” or “more attractive” seems to ignore the reality of the hundreds of cases the FTC has decided administratively.  See, e.g., In re POM Wonderful, LLC, 155 F.T.C. 1 (2013), aff’d as modified, 777 F.3d 478 (D.C. Cir. 2015) (FTC order clarifying policy on health claim substantiation); In re 1-800 Contacts, 2018 WL 6078349 (F.T.C. 2018) (FTC order resolving antitrust case alleging anticompetitive practices in the online contact lens market).

As noted above, this is a case where it is impossible to predict the outcome.  It is possible that the Court will overrule its earlier precedent dealing with agencies’ authority to seek and obtain equitable relief.  It is also possible that the Court will decide to follow that precedent.  We also do not know if the Court will use this case as a vehicle to reexamine long standing precedent regarding what is and is not appropriate equitable relief.  But one thing is crystal clear: a ruling against the FTC will put a dagger in the agency’s enforcement of the FTC Act.  Absent a subsequent amendment of that statute, the FTC would lose what is probably its main enforcement weapon, namely obtaining monetary relief, to combat alleged violations of the FTC Act.

As we have written before, this is not solely an issue for those dealing with the FTC.  Other federal agencies such as the SEC and FDA have also sought to obtain equitable relief under statutory schemes that authorize the agencies to bring lawsuits seeking injunctions.  It may well be true that the parameters of agencies’ authority to obtain such relief will depend on the specific wording of their governing statutes.  Nevertheless, the Court’s ruling could well impact other agencies.

In light of the developing case law, FDA may also need to be more circumspect in seeking equitable relief when it (through the Department of Justice) files an injunction action under 21 U.S.C. § 332.  That provision authorizes courts to “restrain violations” of the Federal Food, Drug, and Cosmetic Act, but is silent on the court awarding equitable relief as part of the injunction.  We will let you know what the Supreme Court decides.

An historical note.  Over fifty-five years ago, on November 8, 1965, the Supreme Court decided a false advertising case entitled FTC v. Mary Carter Paint Co.  The Beatles were in their heyday, at least in terms of performing concerts in this country.  The Selma to Montgomery freedom marches had occurred earlier that year.  And alas, the Cleveland Browns had won their last championship less than one year earlier.  It is hard to believe that this ruling was probably the last case decided by the U.S. Supreme Court involving the scope and powers of the Federal Trade Commission’s Bureau of Consumer Protection relating to deceptive practices.  The Court’s decision in AMG will likely come down sometime between mid-March and the end of June.