Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Friday, July 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

Payday Fraudster Slams FTC Claw-Back Powers Against the High Court Ropes

Spurning other statutes that explicitly guide how the agency can recoup money, the Federal Trade Commission has leaned on its injunctive-relief powers to return almost $1 billion to consumers over the last three years.

WASHINGTON (CN) — A professional racecar driver given a 16-year prison sentence for running payday lending schemes fought at the Supreme Court on Wednesday to upend a $1.27 billion restitution order.

It was a Las Vegas federal judge who awarded the Federal Trade Commission a sweeping 2016 injunction against Scott Tucker, who ran loan-servicing companies through AMG Capital Management that injured roughly 4.5 million consumers.

About $500 million has been given back to victims so far, but Tucker’s attorney Michael Pattillo told the high court Wednesday that the order to restore money to Tucker’s victims was faultily premised on Section 13B of the Federal Trade Commission Act.

“The phrase in 13B itself refers to permanent injunction,” argued Pattillo, a Florida-based private attorney. “You wouldn’t normally think of a one-time order to turn over property as a permanent injunction. … Consumers don’t become more or less worthy of redress for their injuries depending on whether or not the conduct is ongoing.”

Justice Sonia Sotomayor pressed.

“The more important question for me is why would Congress authorize the FTC to seek a permanent injunction if no other equitable remedies were available,” she asked. “It seems under your understanding of the statute, why would FTC ever pursue permanent injunction under 13B rather than a cease-and-desist order that could lead to monetary relief?”

Pattillo replied that it is because the section at issue is a “narrow supplement” to all other provisions.

“13B exists for situations where there is threatened or ongoing harm and it let the commission come to court to stop conduct quickly,” he said.

Sotomayor skeptically questioned whether a temporary injunction was sufficient. A temporary injunction would stop the actual or intended harm and would still allow an agency to pursue the administrative processes it has at its disposal for monetary relief. 

Section 13b allows the FTC to seek injunctive relief whenever the body has “reason to believe that a person, partnership or corporation” is in violation of a law upheld by the commission, but nowhere does the statute explicitly grant permission for the commission to seek monetary relief.

While other FTC statutes like Section 19 and Section 5L guide how the agency would recoup money, those clauses are largely collecting dust as the FTC has returned almost $1 billion to consumers through the provision challenged by Tucker in just the last three years.

Under Section 19, only after all judicial review of its order is complete, the FTC is authorized to “seek consumer redress from the respondent in federal district court for consumer injury caused by the conduct that was at issue in the administrative proceeding.” Under Section 5L, there are specific penalties for violations and permission granted to the federal government to recover its losses in court and U.S. district courts are “empowered to grant mandatory injunctions and such other and further equitable relief as they deem appropriate.”

FTC attorney Joel Marcus argued Wednesday that Section 19 and Section 5L are complementary, and that Congress never intended to limit additional equitable powers.

“A cease-and-desist order is like a prohibitive injunction and Congress had to specify certain remedies,” he said. “It did not do that in Section 13B but understood, together, 13B, 19, and 5L work in harmony to give a choice for meaningful relief for the victimized consumer.”

Chief Justice John Roberts was critical of the FTC’s reading.

“The cases you support in a broad reading of injunctive and equitable powers, most of them involve courts, not agencies. And courts have broad inherent equitable power that you don’t, sort of, parse and construe their authority very carefully, at least I don’t think so,” Roberts said. “But this involves an agency and an agency only has the authority delegated to it by congress and I’m not sure we can assume those precedents involving courts apply so smoothly in context of an agency.”

The FTC has whatever power Congress affords it, Marcus countered.

“Which is why Congress had to be more specific when it was talking about remedies for agencies own adjudicatory orders. But Section 13B says the commission may seek, as the court may grant, a permanent injunction,” Marcus said. “So what Congress is saying is there is a commission that can invoke the courts equitable authority and that then puts the issue squarely within the court’s authority as you just alluded.”

Justice Brett Kavanaugh too seemed apprehensive about the scope of authority granted to the FTC.

“With good intentions the agency pushes the envelope and stretches the statutory language to do the good or prevent the bad," he said. “The problem is this results in a transfer of power from Congress to the executive branch on whether to exercise this authority.” 

With the efficiency of 13B heavily critiqued Wednesday, justices seemed keen on limiting the provision to its plain language. A decision is expected later this year.

Categories / Appeals, Criminal, Financial, Government

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.