AMG Capital Management, LLC v. Federal Trade Commission
T. DANIEL LOGAN & JAQUELINE J. CHAN*
Why It Made the List
On first glance, a case about the Federal Trade Commission’s (FTC’s) remedies against payday lending may not appear relevant to food and drug law and its practitioners. However, in effect, many agencies pull enforcement approaches from the same toolbox; a ruling that shrinks the toolbox for one agency may do so for all others. Both the FTC and the Food and Drug Administration (FDA) have relied on analogous statutory authority to seek injunctions as a means of obtaining a wider array of equitable remedies, including disgorgement.
Section 13(b) of the Federal Trade Commission Act (FTC Act) permits the FTC to file a suit seeking a temporary restraining order or a preliminary or permanent injunction when it has reason to believe that a person or entity is violating or about to violate any law under its purview. Although the statutory text only mentions injunctions, until recently, the prevailing interpretation among courts had been that Section 13(b) permits deployment of the full suite of the court’s remedies in equity. Such interpretation rests on the Supreme Court decisions in Porter v. Warner Holding Co. and Mitchell v. Robert DeMario Jewelry, Inc., the former of which held, in the context of the Emergency Price Control Act, that because the statute at issue authorized injunctive relief, it triggered the court’s equity jurisdiction, which in turn, enables “all the inherent equitable powers of the District Court . . . .” Accordingly, a court sitting in equity may “go beyond the matters immediately underlying its equitable jurisdiction and decide whatever other issues and give whatever other relief may be necessary under the circumstances.”
FTC, FDA, and other agencies have relied on the Porter and Mitchell decisions and subsequent case law to obtain equitable restitution from defendants. For instance, in United States v. Rx Depot, Inc., FDA sought and obtained a preliminary injunction to prevent defendants from facilitating the sale of Canadian prescription drugs to U.S. customers. The parties then agreed to a consent decree of permanent injunction. Subsequently, FDA petitioned for disgorgement of defendant’s profits under 21 U.S.C. § 332(a), which states that “district courts . . . shall have jurisdiction . . . to restrain violations of [21 U.S.C. § 331] . . . .” The district court determined that the disgorgement was not available under the Federal Food, Drug, and Cosmetic Act (FFDCA). On appeal, the Tenth Circuit reversed, stating that 21 U.S.C. § 332(a) “invokes the equity jurisdiction using the same statutory language the Supreme Court construed in Mitchell to authorize all equitable remedies.” It concluded that disgorgement was available under the FFDCA unless the statute contains a “clear legislative command or necessary and inescapable inference prohibiting disgorgement” or “disgorgement is inconsistent with the purposes of the [F]FDCA.” A similar interpretation has also been adopted by the Third Circuit.
F.T.C. v. AMG Capital Management (9th Circuit)
In the case at issue, the FTC initially filed a complaint against a collection of businesses owned by Scott Tucker, alleging that the defendants had violated Section 5 of the FTC Act for deceptive conduct relating to the terms of payday loans, including hidden fees and misleading terms. In 2016, the district court, relying on Section 13(b), permanently enjoined Mr. Tucker from engaging in loan-related activities and ordered a restitution of $1.27 billion, to be paid to the FTC. Defendants appealed to the Ninth Circuit, arguing that, among other things, the district court acted beyond the authority of Section 13(b) by effectively imposing a monetary penalty rather than an equitable form of relief necessary to effectuate the injunction.
On appeal in 2018, the three-judge panel upheld the district court’s order, concluding that Tucker’s argument was compelling but ultimately foreclosed by repeated holdings that Section 13 permits district courts to grant “any ancillary relief necessary to accomplish justice, including restitution.”
In an interesting turn, Judge O’Scannlain, the majority opinion’s author, also elected to write a separate concurrence. In that concurrence, he forcefully concludes that the text and structure of Section 13 do not support the “strained” interpretation that empowers courts to award “equitable monetary relief.” First, Judge O’Scannlain argues that, based on the plain meaning of the term and as used in Section 13(b), the term “injunction” means just that and “cannot reasonably be interpreted to authorize other forms of equitable relief.” Second, the concurrence points out that while Section 13(b) “empowers the [FTC] to stop imminent or ongoing violations, an entirely different provision . . . allows the [FTC] to collect monetary judgements for past misconduct.” The concurrence points to Section 19 of the FTC Act, which separately permits the FTC to seek “such relief as the court finds necessary to redress injury to consumers,” including “the refund of money or return of property, [and] the payment of damages.” Judge O’Scannlain argues that by relying on Section 13(b) to obtain monetary relief, the FTC has effectively sidestepped the procedural hurdles Congress put in place to obtain relief pursuant to Section 19, which requires the FTC to either “promulgate rules that define unlawful practices ex ante, or first to prosecute a wrongdoer in an administrative adjudication that culminates in a cease and desist order.” Finally, the concurrence argues that restitution under Section 13(b) is not a form of equitable relief. In Judge O’Scannlain’s view, because restitution under Section 13(b) has not been limited to the recovery of identifiable assets in the defendant’s possession, it is “indistinguishable from a request to obtain a judgment imposing a merely personal liability upon the defendant to pay a sum of money” and instead “bears the hallmarks of a penalty,” a remedy at law, rather than equity. Joined by another member of the three judge panel, the concurrence urged for rehearing en banc in order to overturn the prior precedent permitting the FTC to seek disgorgement. Ultimately, en banc review was denied and the district court’s disgorgement order was upheld.
Whether intending to do so or not, Judge O’Scannlain’s strident concurrence provoked a circuit split that led to the Supreme Court considering and ultimately reversing the majority opinion.
F.T.C. v. Credit Bureau Center (7th Circuit)
In 2019, following Judge O’Scannlain’s concurrence in F.T.C. v. AMG Capital Management, a Seventh Circuit panel overruled thirty-year-old precedent, holding that the plain language of Section 13(b) “does not authorize restitutionary relief.” The majority decision explained “the prevailing interpretation of [S]ection 13(b) developed in the shadow of . . . decisions that took a capacious view of implied remedies.” However, in the intervening years, the Supreme Court has adopted a more restrained approach to statutory interpretation and has instructed courts to “consider whether an implied equitable remedy is compatible with a statute’s express remedial scheme.” In addition to the plain language rationale put forth by the Ninth Circuit concurrence, the opinion also notes that two other provisions within the FTC Act expressly authorize equitable remedies, Sections 5(l) and 19(b), whereas Section 13(b) does not. After denial of en banc review by the Seventh Circuit, the Supreme Court initially granted certiorari and consolidated the case with AMG Capital Management, but ultimately vacated the order granting certiorari and un-consolidated the cases, opting to hear arguments in the Ninth Circuit case alone.
F.T.C. v. AMG Capital Management (Supreme Court)
In April 2021, following oral arguments earlier in the year, the Supreme Court issued a unanimous decision holding that Section 13(b) of the FTC Act does not authorize monetary relief. The opinion, authored by Justice Breyer, hews closely to the arguments made by Judge O’Scannlain’s concurrence. Justice Breyer’s opinion concludes that the text and structure of Section 13(b), as well as the structure of the FTC Act itself, make clear that Congress intended for the term “permanent injunction” to have a limited meaning that “does not extend to a grant of monetary relief.” Rather, reading the statute to permit the FTC to dispense with the “historically important” administrative proceedings required by Sections 5 and 19 of the FTC Act to obtain monetary relief “would allow a small statutory tail to wag a very large dog.” The decision notes that, in addition to the administrative process, Sections 5 and 19 of the FTC Act impose conditions and limitations on when a court may award monetary relief; therefore, it is highly unlikely that Congress would have enacted a provision implicitly permitting the FTC to obtain monetary relief sans such constraints. Ultimately, Justice Breyer determines that interpreting Section 13(b) as authorizing injunctive but not monetary relief “produces a coherent enforcement scheme.” Addressing the FTC’s arguments that the precedent set by Porter and Mitchell should apply, Justice Breyer notes that “the scope of equitable relief that a provision authorizes remains a question of interpretation for each case.” He further explains that Porter and Mitchell involved different statutes and neither decision “purport[ed] to set forth a universal rule of interpretation.”
Aside from the textual and precedential arguments, it seems apparent that policy concerns may have animated the outcome. For one, the Court appears to be concerned that in practice, the FTC is circumventing the administrative process with greater frequency, noting that the FTC brings more cases in court (forty-nine complaints filed and eighty-one permanent injunctions obtained in fiscal year 2019) than via the administrative process (twenty-one new administrative complaints and twenty-one final orders in the same period). Moreover, the Court suggests that the FTC is aware of the limits of Section 13(b), as it has recently requested Congress revise that provision to expressly authorize restitution and disgorgement.
Impact of the Decision
The Supreme Court’s decision in AMG Capital Management clarifies that a statute’s injunction authority does not, without more, permit a district court to root around in the toolbox of equity. While the decision will have an immediate impact on the manner by which FTC seeks monetary remedies, it grants other similarly situated agencies a minor reprieve. By taking the position that the scope of equitable remedies available under statute is a case-by-case determination, agencies seeking monetary relief under similar statutes will not necessarily be forced to look elsewhere but will have to be fairly cautious unless those statutory authorities explicitly provide for such relief. While the FTC has express authorities under which it can request monetary penalties, the FFDCA, outside of 21 U.S.C. § 332, does not contain provisions that expressly permit FDA to obtain equitable remedies, such as disgorgement. FDA has sought and obtained equitable remedies to great effect, but it is likely that it would be unable to do so under a more restrictive view of 21 U.S.C. § 332. The decision here may not hobble FDA’s enforcement efforts, but it could certainly make it more difficult for the agency to put forward more “creative” approaches to obtaining funds from violators of the FFDCA.
* T. Daniel Logan is an associate at Kleinfeld, Kaplan & Becker LLP. He counsels clients on a variety of Food and Drug Administration (FDA) regulatory issues relating to the food, cosmetic, drug, dietary supplement, and tobacco company industries. Mr. Logan previously served as an Associate Chief Counsel in the Office of Chief Counsel of the FDA. Jacqueline J. Chan is a partner at Kleinfeld, Kaplan & Becker, LLP. She advises FDA-regulated companies throughout the product lifecycle, including labeling, advertising/promotion, enforcement risk assessment, post-marketing obligations, and regulatory strategy and compliance.
 15 U.S.C. § 53(b).
 328 U.S. 395, 398 (1946).
 361 U.S. 288 (1960).
 361 U.S. at 291.
 See, e.g., F.T.C. v. Com. Planet, Inc., 815 F.3d 593, 599 (9th Cir. 2016) (FTC); United States v. Rx Depot, Inc., 438 F.3d 1052 (10th Cir. 2006) (FDA).
 438 F.3d at 1054.
 Id. at 1058 (citing Mitchell, 361 U.S. at 291–92).
 See United States v. Lane Labs-USA Inc., 427 F.3d 219 (3d Cir. 2005).
 15 U.S.C. § 45(a)(1).
 See Press Release, Fed. Trade Comm’n, FTC Charges Payday Lending Scheme with Piling Inflated Fees on Borrowers and Making Unlawful Threats when Collecting (April 2, 2012), https://www.ftc.gov/news-events/press-releases/2012/04/ftc-charges-payday-lending-scheme-piling-inflated-fees-borrowers.
 F.T.C. v. AMG Services, Inc., et al., 2016 WL 5791416 at *14, Case No. 2:12-cv-00536 (D. Nev. Sept. 30, 2016).
 F.T.C. v. AMG Capital Management, LLC, 910 F.3d 417, 426 (9th Cir. 2018) (hereinafter AMG Capital Management).
 Id. (quoting F.T.C. v. Com. Planet, Inc., 815 F.3d 593, 598 (9th Cir. 2016)).
 Id. at 429 (O’Scannlain, J., concurring).
 Id. at 430 (O’Scannlain, J., concurring) (emphasis in original).
 Id. at 431 (O’Scannlain, J., concurring) (emphasis in original).
 Id. (O’Scannlain, J., concurring) (citing 15 U.S.C. § 57b(b)).
 Id. at 432 (O’Scannlain, J., concurring).
 Id. at 433–34 (O’Scannlain, J., concurring) (citing Kokesh v. S.E.C., 137 S. Ct. 1635, 198 L. Ed. 2d 86 (2017)).
 Id. at 434–35 (O’Scannlain, J., concurring) (quoting Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 212–13 (2002) (internal quotation marks omitted)).
 F.T.C. v. Credit Bureau Ctr., LLC, 937 F.3d 764, 767 (7th Cir. 2019), cert. granted, 141 S. Ct. 194, 207 L. Ed. 2d 1118 (2020), vacated, 141 S. Ct. 810 (2020), and cert. denied, 141 S. Ct. 195, 207 L. Ed. 2d 1118 (2020) (overruling F.T.C. v. Amy Travel Serv., Inc., 875 F.2d 564, 570 (7th Cir. 1989)).
 Id. at 776 (citing Porter v. Warner Holding Co, 328 U.S. 395, 398 (1946); Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960)).
 Id. at 767 (citing Meghrig v. KFC W., Inc., 516 U.S. 479, 486 (1996)).
 Id. at 783 (citing 15 U.S.C. §§ 45(l), 57b(b)).
 F.T.C. v. Credit Bureau Ctr., LLC, 141 S. Ct. 194, 207 L. Ed. 2d 1118, vacated, 141 S. Ct. 810 (2020).
 F.T.C. v. Credit Bureau Ctr., LLC, 141 S. Ct. 810 (2020).
 Transcript of Oral Argument at 26–28, 34–36, AMG Capital Management, LLC v. F.T.C., 141 S. Ct. 194, 207 L. Ed. 2d 1118 (2020) (No. 19-508), available at https://www.supremecourt.gov/oral_arguments/argument_transcripts/2020/19-508_3f14.pdf.
 AMG Capital Management, LLC v. F.T.C., No. 19-508, 593 U.S. __, 141 S. Ct. 1341, slip op. at 1 (2021), available at https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf.
 Id. at 7.
 Id. at 8.
 Id. at 9–10.
 Id. at 10.
 Id. at 11 (citing Mertens v. Hewitt Associates, 508 U.S. 248, 257 (1993) (internal quotation marks omitted)).
 Id. at 11.
 Id. at 6 (citing Fed. Trade Comm’n, Fiscal Year 2021 Congressional Budget Justification 5 (Feb. 10, 2020), https://www.ftc.gov/system/files/documents/reports/fy-2021-congressional-budget-justification/fy_2021_cbj_final.pdf).
 Id. at 14 (citing Hearing before the Senate Committee on Commerce, Science, and Transportation on Oversight of the Federal Trade Commission, 116th Cong., 2d Sess., 3–5 (2020) (prepared Statement of the FTC)).
 21 U.S.C. §§ 45(l), 57b(b).
 See, e.g., United States v. Universal Mgmt. Servs., Corp., 191 F.3d 750, 754 (6th Cir. 1999) (upholding district court’s injunction order mandating restitution by way of full refunds for 800,000 devices sold for $88.30 each).