AMG Capital Management, LLC v. Federal Trade Commission

No. 19-508 - Argued January 13, 2021
At Issue

Whether statutory authorization for the FTC to seek injunctions includes judicial power to grant equitable remedies incident to injunctions, including restitution and disgorgement of ill-gotten gains.

  • Michael Pattillo, for the petitioner
  • Joel R. Marcus, for the respondent
Background and Case Commentary

As noted by Justice Barrett, the petitioner lacked clean hands: he’s been convicted on charges including racketeering, wire fraud, and money laundering, and he “has the dubious distinction of being the subject of an episode of ‘Dirty Money’ on Netflix.”

Michael Pattillo, on behalf of the petitioner, insisted that the FTC Act’s authorization of injunctions is limited to injunctions—not other equitable relief, and decidedly not retrospective monetary relief for past harms. Petitioner’s counsel focused on three limits: (i) the requirement that the violation be ongoing; (ii) Section 13(b)’s lack of any language addressing additional equitable relief, despite the FTC Act’s explicit authorization of other equitable relief in different provisions such as Section 5(l); (iii) Section 13(b)’s lacking other broader remedial sections, such as Section 19’s authorization of monetary relief for past consumer injury. Pattillo distinguished any precedent broadly construing injunction power and emphasized that the FTC doesn’t seek to use an injunction to enforce an earlier right to restitution.

Joel Marcus, on behalf of the Commission, relied on a foundational principle of equity that a wrongdoer should not profit from their own wrongdoing. It is not plausible that Congress empowered the FTC to go to federal court to merely stop the violations while letting the violator keep the stolen money. Precedent supports the view that the statutory use of injunction includes ancillary equitable relief such as restitution and disgorgement. Once a court exercises its injunction power, the answer in centuries of law is pretty clear: the court can authorize the return of wrongful gains.

Justice Highlights:

  • When Congress drafted Section 13(b), it did so with the backdrop of cases like Porter, Mitchell, and other cases that broadly construed equitable injunctive power and that were liberal in finding rights and remedies. (Roberts, C.J., and Kagan, J.)
  • Assuming that the jurisprudence favorable to disgorgement incident to injunctions is a mistake, it’s been around for fifty years and all circuits except the Seventh Circuit have a uniform interpretation, so shouldn’t the Court keep it? (Breyer, J.)
  • Most members of Congress aren’t lawyers and even those who are probably never heard of the word “equity” in law school. When legislating, they would have seen in Black’s Law Dictionary a definition of injunction as “a judicial process operating in personam and requiring a person to whom it is directed to do or refrain from doing a particular thing.” If the member read that definition, wouldn’t they think that it would authorize exactly what was done here? (Alito, J.)
  • Why did the Commission choose Section 13 rather than Section 19? (Thomas, J.)
    • Why would Congress use different language for injunctive relief in the two Sections? (Sotomayor, J.)
    • If Section 13(b) is such a clearly better path from the agency’s perspective, is that the kind of choice Congress really gave to the agency? (Kagan, J.)
    • What incentive does the FTC have today to use Section 19? (Gorsuch, J.)
  • History matters. The FTC Act involved compromises between too much and not enough power for the agency. Congress mediated between the business community, which was suspicious of FTC power, and a progressive community that saw the FTC as essential to control unsavory business practices. What if the FTC’s Section 13(b) route and remedy are right for the instant transgressions but not for less clear cases of abuse? (Breyer, J.)
  • When you work in the Executive Branch or an independent agency, you want to do good and sometimes your authority is borderline. So, with good intentions, the agency pushes the envelope and stretches the statutory language. The problem is that it results in a transfer of power from Congress to the Executive. Why isn’t the answer for the agency to seek this new authority from Congress, and for the courts to maintain the separation-of-powers principle that the agency should stick to the authority in the text and not go beyond that? (Kavanaugh, J.)

Below, I respond to Justice Barrett’s question to Petitioners. Both Justice Alito and Justice Barrett expressed concern with the ultimate consequences of an equitable remedy—specifically whether the money would actually go back to the victims—and my answer assuages this concern.

AMG Capital Management, LLC v. Federal Trade Commission on Oyez:

Key Questions from Oral Argument

Justice Barrett to Petitioners (58:56): Counsel, the – the damages award here or the money at stake here was 1.3 billion dollars and then the 27 million dollars collected from Mr. Tucker’s wife. And when Justice Alito asked Mr. Pattillo how much of that had been distributed to the victims, he said about 500 million dollars. So I – I take it the rest of that is in the Treasury, or does the FTC have it right now?

Caprice Roberts: This Court is wise to focus on the ultimate consequences of the instant litigation and the exercise of the FTC’s power under Section 13(b). The disgorgement remedy orders the wrongdoer to surrender ill-gotten profits, and the FTC Act authorizes this equitable restitutionary remedy incident to injunctive relief. If this Court rules in the Commission’s favor, we will return to the victims the unjust gain—specifically, as much of the 1.3 billion judgment that we are able to collect. The FTC has a strong record of returning any monies collected to the victims. We know each victim and the amount defrauded. Until this ruling is final, the government holds in trust all monies and assets already collected. Ultimately, in keeping with this Court’s recent ruling in Liu, we will, as far as practicable, restore the victims to their pre-defrauded state with the monies collected. There is no need to uproot the long line of cases that comport with traditional equitable and unjust enrichment principles.