Opposition Brief — Publishers Business Services, Inc., et al., Petitioners v. Federal Trade Commission

No. 19-507

In the Supreme Court of the United States

PUBLISHERS BUSINESS SERVICES, INC., ET AL.,

PETITIONERS

v.

FEDERAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

NOEL J. FRANCISCO

Solicitor General

Counsel of Record

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTION PRESENTED

Whether Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b), empowers a district court

to award equitable monetary relief in a civil enforcement action brought by the Federal Trade Commission.

(I)

TABLE OF CONTENTS

Page

Opinions below .............................................................................. 1

Jurisdiction .................................................................................... 1

Statement ...................................................................................... 2

Discussion ...................................................................................... 4

Conclusion ..................................................................................... 8

TABLE OF AUTHORITIES

Cases:

FTC v. AMG Capital Mgmt., LLC, 910 F.3d 417

(9th Cir. 2018), petition for cert. pending,

No. 17-508 (filed Oct. 18, 2019) ............................................ 6

FTC v. Amy Travel Serv., Inc., 875 F.2d 564

(7th Cir.), cert. denied, 493 U.S. 954 (1989) ....................... 7

FTC v. Bronson Partners, LLC, 654 F.3d 359

(2d Cir. 2011) ......................................................................... 6

FTC v. Commerce Planet, Inc., 815 F.3d 593

(9th Cir. 2016), cert. denied, 137 S. Ct. 624 (2017) .... 3, 5, 6

FTC v. Credit Bureau Ctr., LLC, 937 F.3d 764

(7th Cir. 2019) ........................................................................ 7

FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1

(1st Cir. 2010) ........................................................................ 6

FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192

(10th Cir. 2005) ...................................................................... 7

FTC v. H. N. Singer, Inc., 668 F.2d 1107

(9th Cir. 1982) ........................................................................ 5

FTC v. Ross, 743 F.3d 886 (4th Cir.), cert. denied,

574 U.S. 819 (2014)................................................................ 6

FTC v. Security Rare Coin & Bullion Corp.,

931 F.2d 1312 (8th Cir. 1991) ............................................... 7

FTC v. United States Oil & Gas Corp.,

748 F.2d 1431 (11th Cir. 1984) ............................................. 7

(III)

IV

Cases—Continued:

Page

Kokesh v. SEC, 137 S. Ct. 1635 (2017) ............................... 4, 6

Mitchell v. Robert DeMario Jewelry, Inc.,

361 U.S. 288 (1960)................................................................ 5

Porter v. Warner Holding Co., 328 U.S. 395 (1946) ............. 5

Statutes:

Federal Trade Commission Act,

15 U.S.C. 41 et seq................................................................. 2

15 U.S.C. 45(a)(1)............................................................... 5

15 U.S.C. 45(b) ................................................................... 5

15 U.S.C. 53(b) (§ 13(b))........................................ 3, 4, 5, 6

In the Supreme Court of the United States

No. 19-507

PUBLISHERS BUSINESS SERVICES, INC., ET AL.,

PETITIONERS

v.

FEDERAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-7a)

is not published in the Federal Reporter but is reprinted at 748 Fed. Appx. 735. The order of the district

court granting the Commission’s motion for judgment

(Pet. App. 45a-62a) is not published in the Federal Supplement but is available at 2017 WL 451953.

JURISDICTION

The judgment of the court of appeals was entered on

August 31, 2018. A petition for rehearing was denied on

June 19, 2019 (Pet. App. 63a). On September 5, 2019,

Justice Kagan extended the time within which to file a

petition for a writ of certiorari to and including October

18, 2019, and the petition was filed on that date. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

1. From 2004 to 2008, petitioners operated a deceptive telemarketing scheme. Pet. App. 1a. Petitioners

would call consumers “and tell them that they would get

a ‘surprise’ if they participated in a survey.” Id. at 46a.

“The surprise was that [petitioners] were selling the consumer magazine subscriptions.” Ibid. “[F]ast-talking

sales representatives” would use “confusing and misleading” scripts to give the consumer the impression

that he “was receiving free magazines,” when in fact

“the consumer was agreeing to pay hundreds of dollars

in magazine subscription fees.” Ibid. When consumers

refused to pay, petitioners “engaged in misleading and

abusive collections practices,” including “falsely tell[ing]

consumers their accounts could not be canceled” and

making “harassing and threatening phone calls.” Id. at

46a-47a. Petitioners obtained nearly $24 million through

their scheme. Id. at 60a.

2. In 2008, the Federal Trade Commission (FTC)

brought this civil enforcement action in federal district

court, charging petitioners with violating the Federal

Trade Commission Act (FTC Act), 15 U.S.C. 41 et seq.,

and other consumer-protection laws. Pet. App. 1a-2a,

45a. The district court awarded the FTC summary

judgment on liability. Id. at 47a.

The district court initially ordered petitioners to pay

$191,219 in equitable monetary relief. Pet. App. 2a, 47a.

The FTC appealed, arguing that the court had applied

the wrong legal standard in calculating the monetary

award. Id. at 47a-48a. Petitioners did not cross-appeal,

and they did not argue before the district court or the

court of appeals that the district court lacked authority

to award monetary relief. Id. at 50a. To the contrary,

petitioners stated that “it was well within the District

3

Court’s discretion to choose a monetary remedy rooted

in the facts of this case.” 11-17270 C.A. Doc. 22, at 35

(Apr. 13, 2012); see id. at 29. The court of appeals,

agreeing with the FTC’s contention that the district

court had miscalculated the monetary award, vacated

the judgment and remanded the case to the district

court for a recalculation. Pet. App. 47a-48a.

3. On remand, the district court awarded the Commission approximately $23.8 million in equitable monetary relief. Pet. App. 60a. For the first time, petitioners

contested the court’s authority to award monetary relief. The court held that petitioners’ argument was

“foreclosed by controlling authority” from the Ninth

Circuit holding that “[d]istrict courts have the authority

under Section 13(b) of the FTC Act to ‘grant any ancillary relief necessary to accomplish complete justice, including restitution.’ ” Id. at 50a (quoting FTC v. Commerce Planet, Inc., 815 F.3d 593, 598 (9th Cir. 2016),

cert. denied, 137 S. Ct. 624 (2017)). The court further

held, in the alternative, that petitioners had “waived

this argument” by failing to “appeal [the] prior order

entering a monetary award against them” and by failing

to “raise the issue in their briefs opposing the FTC’s

appeal before the Ninth Circuit.” Ibid.

4. The court of appeals affirmed. Pet. App. 1a-7a.

As relevant here, the court rejected petitioners’ contention that the FTC lacked the authority to obtain monetary relief in a civil enforcement action. Id. at 2a-3a.

The court invoked Section 13(b) of the FTC Act, which

provides that “in proper cases the Commission may

seek, and after proper proof, the court may issue, a permanent injunction,” 15 U.S.C. 53(b).

4

The court of appeals explained that it had “repeatedly held that Section 13(b) of the FTC Act grants district courts the power to impose equitable remedies, including restitution and disgorgement of unjust gains.”

Pet. App. 3a. The court rejected petitioners’ request to

revisit those precedents in light of this Court’s holding

in Kokesh v. SEC, 137 S. Ct. 1635 (2017), that disgorgement of money obtained in violation of federal securities

laws qualified as a penalty for purposes of federal statutes of limitations. In that regard, the court of appeals

noted the Kokesh Court’s statement that “nothing in

[its] opinion should be interpreted as an opinion on

whether courts possess authority to order disgorgement.” Pet. App. 3a (quoting Kokesh, 137 S. Ct. at 1642

n.3) (brackets omitted).

DISCUSSION

The question whether Section 13(b) of the FTC Act

authorizes district courts to award equitable monetary

relief has divided the courts of appeals and would ordinarily warrant this Court’s review. In this case, however, petitioners have failed to preserve the contention

that district courts lack such authority. In addition, the

Court recently granted the petition for a writ of certiorari in Liu v. SEC, cert. granted, No. 18-1501 (Nov. 1,

2019), to decide whether district courts may award disgorgement to the Securities and Exchange Commission

(SEC) under analogous provisions of the securities

laws. In light of petitioners’ failure to preserve their

argument, the Court should deny the petition. In the

alternative, in light of the overlap between this case and

Liu, the Court should hold this petition pending the disposition of Liu.

1. The FTC Act prohibits “[u]nfair methods of competition” and “unfair or deceptive acts or practices” in

5

or affecting commerce. 15 U.S.C. 45(a)(1). The statute

empowers the FTC to enforce that prohibition through

administrative proceedings in which the agency may order violators to cease and desist from unlawful practices. See 15 U.S.C. 45(b). In addition, Section 13(b),

which Congress added to the FTC Act in 1973, authorizes the FTC to enforce that prohibition through civil

actions in federal district court. See 15 U.S.C. 53(b). As

relevant here, Section 13(b) states that “in proper cases

the Commission may seek, and after proper proof, the

court may issue, a permanent injunction.” Ibid.

Like almost every other court to consider the issue,

the Ninth Circuit has held that a district court’s authority under Section 13(b) to award a permanent injunction

includes the authority to award restitution and other

forms of monetary relief. See, e.g., FTC v. Commerce

Planet, Inc., 815 F.3d 593, 598 (9th Cir. 2016), cert. denied, 137 S. Ct. 624 (2017); FTC v. H. N. Singer, Inc.,

668 F.2d 1107, 1112 (9th Cir. 1982). In reaching that

conclusion, the Ninth Circuit has primarily relied on

this Court’s decisions in Porter v. Warner Holding Co.,

328 U.S. 395 (1946), and Mitchell v. Robert DeMario

Jewelry, Inc., 361 U.S. 288 (1960). In those cases, the

Court stated that a legislative grant of authority to “enjoin[]” statutory violations presumptively encompasses

the power to order a violator “to disgorge profits * * *

acquired in violation” of the relevant statutory provisions. Porter, 328 U.S. at 398-399. The Court also

stated that, “[w]hen Congress entrusts to an equity

court the enforcement of prohibitions contained in a

regulatory enactment, it must be taken to have acted

cognizant of the historic power of equity to provide complete relief.” Mitchell, 361 U.S. at 291-292. The Ninth

Circuit has concluded that, because Congress enacted

6

Section 13(b) against the backdrop of those decisions,

the equitable power “to enjoin future violations” conferred by Section 13(b) “carries with it the inherent

power to deprive defendants of their unjust gains from

past violations.” Commerce Planet, 815 F.3d at 599.

In contrast, Judge O’Scannlain concluded in a special

concurrence in a companion case to this one that Section

13(b) does not authorize a district court to award restitution. See FTC v. AMG Capital Mgmt., LLC, 910 F.3d

417, 429-437 (9th Cir. 2018), petition for cert. pending,

No. 19-508 (filed Oct. 18, 2019). Judge O’Scannlain

stated that “ ‘injunction’ means only ‘injunction’ ” and

does not include monetary relief such as restitution. Id.

at 430. He also concluded that his interpretation

“makes good sense in the context of the ‘overall statutory scheme,’ ” reasoning that, “[w]hile § 13(b) empowers the Commission to stop imminent or ongoing violations, an entirely different provision of the FTC Act allows the Commission to collect monetary judgments for

past misconduct.” Id. at 431 (citation omitted). Finally,

Judge O’Scannlain stated that, under this Court’s decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017), “restitution under § 13(b) would appear to be a penalty—not a

form of equitable relief.” AMG Capital, 910 F.3d at 433.

2. The question whether Section 13(b) authorizes a

district court to award the FTC monetary relief such as

restitution has divided the courts of appeals. In addition to the Ninth Circuit, seven other courts of appeals

have held that Section 13(b) authorizes a district court

to award the FTC monetary remedies. See FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 15 (1st Cir. 2010);

FTC v. Bronson Partners, LLC, 654 F.3d 359, 365

(2d Cir. 2011); FTC v. Ross, 743 F.3d 886, 890-892

7

(4th Cir.), cert. denied, 574 U.S. 819 (2014); FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 13141315 (8th Cir. 1991); FTC v. Freecom Commc’ns, Inc.,

401 F.3d 1192, 1202 n.6 (10th Cir. 2005); FTC v. United

States Oil & Gas Corp., 748 F.2d 1431, 1432-1434

(11th Cir. 1984) (per curiam).

The Seventh Circuit previously reached the same

conclusion. See FTC v. Amy Travel Serv., Inc., 875 F.2d

564, cert. denied, 493 U.S. 954 (1989). Recently, however, that court overruled its prior circuit precedent

and concluded that Section 13(b) does not authorize an

award of restitution. See FTC v. Credit Bureau Ctr.,

LLC, 937 F.3d 764, 767 (7th Cir. 2019). The Seventh

Circuit recognized that its decision “creates a circuit

split.” Id. at 767 n.1.

3. Petitioners have forfeited their current argument

that the district court lacked authority to grant the FTC

monetary relief. Pet. App. 50a. As the district court

explained, petitioners did not cross-appeal the court’s

initial monetary award, and they did not argue on the

FTC’s appeal that the court lacked the authority to

award monetary relief. Ibid. The Ninth Circuit has “repeatedly held that [it] ‘need not * * * consider a new

contention that could have been but was not raised on

the prior appeal,’ ” and “that even parties who were satisfied with the district court’s judgment must file a

cross-appeal to preserve issues for review in subsequent appeals following a remand.” Id. at 6a (citation

omitted).

In addition, this Court recently granted the petition

for a writ of certiorari in Liu to decide whether analogous provisions of the securities laws authorize an

award of disgorgement to the SEC. The relevant statutory schemes are not identical, and the FTC’s and the

8

SEC’s authority to seek monetary relief will not necessarily rise and fall together. Nevertheless, the question

presented in this case and the question presented in Liu

overlap. For example, the petitioners in this case describe (Pet. 3) “disgorgement in * * * SEC enforcement actions” as “analogous” to the award of monetary

relief here. Conversely, the petitioners in Liu have argued that “[t]he issue [t]here [wa]s significant * * * not

only to the statutory limits of the SEC’s enforcement

powers, but also to the appropriate limits on the power

of other agencies,” including “the FTC.” Pet. at 19-20,

Liu, supra (No. 18-1501).

In light of petitioners’ failure to preserve the issue

on which they seek review, this Court should deny the

petition. In the alternative, in light of the overlap between this case and Liu, the Court should hold this petition pending the disposition of Liu.

CONCLUSION

The petition for a writ of certiorari should be denied.

In the alternative, the petition should be held pending

the disposition of Liu v. SEC, cert. granted, No. 18-1501

(Nov. 1, 2019), and then disposed of as appropriate in

light of that decision.

Respectfully submitted.

NOEL J. FRANCISCO

Solicitor General

DECEMBER 2019