Supreme Court Argument Analysis: AMG Capital Management v. FTC

The Supreme Court today heard oral arguments in AMG Capital Management v. FTC, a case in which the Court will decide whether the Federal Trade Commission (FTC or Commission) is able to obtain equitable monetary relief when it sues in federal court under Section 13(b) of the FTC Act. As we previewed last summer, the Supreme Court granted certiorari to consider this question in two consolidated cases: (i) AMG Capital Management, out of the Ninth Circuit, and (ii) FTC v. Credit Bureau Center, out of the Seventh Circuit. In November, the Court issued an order briefly announcing that the cases were no longer consolidated and vacating the grant of certiorari for the Seventh Circuit’s Credit Bureau Center decision, leaving only AMG Capital Management before the Court. Here, we take a look at the arguments and provide some tentative insights on how the Justices may be thinking about the case based on today’s argument.

Background and Overview of Arguments

Section 13(b) of the FTC Act, codified at 15 U.S.C. § 53(b), authorizes the FTC to seek—and federal courts to grant—“a permanent injunction” to enjoin acts or practices that violate the FTC Act. Courts had for decades held that this provision authorizes equitable monetary relief, based on historical notions of equity. That all changed in 2019 when the Seventh Circuit in FTC v. Credit Bureau Center held that the term “permanent injunction” did not encompass “[a]n implied restitution remedy,” based on the text and structure of the Act. The Third Circuit—in FTC v. Abbvie et al.—issued a similarly-reasoned decision in September finding that the FTC was not authorized to seek disgorgement as a remedy under Section 13(b) (our summary of that decision is available here). Predating those decisions, the Ninth Circuit, adhering to precedent, had come to the opposite conclusion in AMG Capital Management v. FTC—marking a clear circuit split. The Ninth Circuit’s AMG Capital decision is now pending before the Court.

In AMG, the Petitioners argue that the text and structure of Section 13(b) forecloses the FTC from seeking monetary relief pursuant to that provision. The thrust of their argument is that an “injunction” is a traditional equitable tool in which a court orders a party to engage or not engage in specific activities—not an order to pay money.  Buttressing the text, Petitioners argue, is the structure of the FTC Act. They note that Section 5(l) of the FTC Act—enacted as the same time as Section 13(b)—authorizes “injunctions and such other and further equitable relief as [district courts] deem appropriate[.]” Likewise, Section 19 of the Act explicitly authorizes monetary remedies when the FTC seeks relief for violation of a cease and desist order. Thus, the Petitioners argue that an “injunction” alone cannot encompass other forms of equitable relief—such as the monetary equitable relief at issue here—as that reading would render the additional language in Section 5(l) and Section 19 superfluous.

The FTC’s arguments rely more on historical practice and understanding. The agency argues that “three centuries of equity jurisprudence establish” that the authority to grant an injunction includes the authority to “order[] the return of ill-gotten gains.” It highlights that a pair of decades-old Supreme Court cases—Porter v. Warner Holding Co. and Mitchell v. Robert DeMario Jewelry, Inc.—applied this principle to analogously-worded statutes to find that equitable relief provisions also authorized monetary relief. According to the FTC, Congress passed Section 13(b) with this understanding in mind. The agency also argues that Congress “ratified” this interpretation by substantively amending the FTC Act after courts held that Section 13(b) authorized restorative monetary relief.

Ultimately, the stakes in this case are high. The FTC Act authorizes the Commission to seek civil penalties only in limited circumstances (such as an order violation), and the agency often uses Section 13(b) as a way to obtain monetary remedies under a restitution, disgorgement, or other theory of relief. An adverse decision by the Supreme Court would significantly limit its enforcement approach. For example, it may push the FTC in the direction of issuing cease-and-desist orders under Section 19, which provide additional procedural protections for a defendant prior to obtaining any monetary remedy. It may also push the FTC toward attempting to issue more industry-wide rules.

Oral Argument Analysis

The Justices were highly attuned to the central tension in the case between Petitioners’ strong textual arguments and the FTC’s reliance on historical practice at the time that Section 13(b) was passed. Starting the argument off, Chief Justice Roberts addressed this theme by asking Petitioners whether the Court should look at the case (i) under a modern textual approach, or (ii) under the more “free-wheeling” approach to statutory interpretation the Court had applied in 1973 when Section 13(b) was enacted. This question was later echoed by Justice Kagan. Unsurprisingly, Petitioners argued that the textual approach should apply and contended that the structural clues in the FTC Act supported their interpretation in any event.

Justices Breyer, Gorsuch, and Kavanaugh similarly pressed Petitioners on whether this was a situation in which too much time had passed, given that the courts of appeals had long authorized monetary relief under section 13(b). As Justice Breyer put it, should the Court just let bygones be bygones? Petitioners pushed back, arguing that a longstanding error is still an error.

As expected, the FTC was peppered with questions around how it could get around the statutory language and structure. In particular, Justices Kagan, Sotomayor, and Thomas pressed the FTC on how Sections 5 and 19—with their broader language—could have independent meaning if the term “injunction” implicitly included the entire spectrum of equitable relief. The agency contended that minor variations in the statute required Congress to be more specific in some sections than others and emphasized that the sections were designed to work in harmony to give the FTC discretion to choose from several different enforcement options.

Justices Breyer, Alito, Kagan, Gorsuch, and Kavanaugh also questioned whether the FTC’s policy rationales made sense. These Justices observed that the FTC’s reading seemed to make Section 13(b) a far more attractive approach than the other enforcement options and allowed the agency to avoid some of the procedural safeguards in the provisions that explicitly authorize monetary remedies. While the FTC conceded that its reading rendered Section 13(b) the most appealing enforcement mechanism from the agency’s perspective, it stressed that the other provisions could still be used in other circumstances, demonstrating that they still had independent meaning under the statute.

Conclusion

Reading tea leaves from oral arguments is always risky, but there are reasons to think that the FTC is facing headwinds in persuading the Court of its position. For one, none of the Justices seemed to seriously question the strength of the Petitioners’ primary arguments—stemming from the text and structure of the statute. In contrast, the Justices seemed skeptical of the strength of the FTC’s statutory purpose arguments. If the FTC’s arguments are to prevail, it likely would need to be based on a theory that Congress meant to include equitable monetary relief in Section 13(b) under caselaw in force at the time, even though that no longer reflects the Court’s current approach to close textual statutory interpretation. The pointed questioning about the FTC Act’s structure—combined with the Court’s relatively strict textual approach in recent years—points to a decision that may significantly affect FTC enforcement going forward. A decision is expected in the coming months, and industry and other stakeholders will be closely watching.