Amicus Curiae Brief — AMG Capital Management, LLC, et al., Petitioners v. Federal Trade Commission

Nos. 19-508 & 19-825

IN THE

Supreme Court of the United States

___________

AMG CAPITAL MANAGEMENT, LLC, et al.,

v.

Petitioners,

FEDERAL TRADE COMMISSION,

Respondent.

___________

FEDERAL TRADE COMMISSION,

v.

Petitioner,

CREDIT BUREAU CENTER, LLC, et al.,

___________

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Seventh and Ninth Circuits

___________

BRIEF OF TECHFREEDOM AS AMICUS CURIAE

IN SUPPORT OF PETITIONERS (NO. 19-508)

AND RESPONDENTS (NO. 19-825)

___________

October 2, 2020

ASHEESH AGARWAL

Counsel of Record

CORBIN K. BARTHOLD

TECHFREEDOM

110 Maryland Ave NE

Suite 205

Washington, DC 20002

aagarwal@techfreedom.org

ii

TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................. iii

INTEREST OF AMICUS CURIAE ........................ 1

SUMMARY OF ARGUMENT................................. 2

ARGUMENT ........................................................... 4

I.

THE FTC INDEED NEEDS A QUICK PATH TO

MONETARY RELIEF—BUT THAT DOES NOT

MEAN SUCH A PATH ALREADY EXISTS IN THE

FTC ACT ............................................................ 4

II. ONLY CONGRESS CAN AMEND THE FTC ACT

TO PROVIDE THE FTC THE REMEDIAL

PROCESS IT WANTS; THE JUDICIARY IS

NEITHER AUTHORIZED NOR CAPABLE OF

MAKING SUCH CHANGES ITSELF ........................ 6

A. Only Congressional Amendment

Of Statutes Is Consistent with the

Separation of Powers ............................. 6

B. The Judiciary Is an Unskilled

Statutory Editor ..................................... 7

1. Judicial Statutory Editing

Breeds Confusion ........................... 8

2. Judicial Statutory Editing

Produces Inconsistency ............... 12

C. Only

Congress

Can

Create

Statutes That Successfully Balance Competing Policy Interests ......... 17

CONCLUSION ...................................................... 20

iii

TABLE OF AUTHORITIES

Page(s)

Cases:

Chevron, U.S.A., Inc. v. NRDC, Inc.,

67 U.S. 837 (1984) ............................................ 6, 7

City of Arlington v. FCC,

569 U.S. 290 (2013) .......................................... 6, 7

Franklin v. Gwinnett Cnty. Pub. Sch.,

503 U.S. 60 (1992) .............................................. 12

FTC v. AbbVie Inc.,

2020 WL 5807873 (3d Cir. Sept. 30, 2020) ........ 18

FTC v. Bronson Partners, LLC,

654 F.3d 359 (2d Cir. 2011) ................... 11, 14, 16

FTC v. Cardiff,

2020 WL 3867293 (C.D. Cal. July 7, 2020) ....... 16

FTC v. Commerce Planet, Inc.,

815 F.3d 593 (9th Cir. 2016) ........................ 14, 16

FTC v. H. N. Singer, Inc.,

668 F.2d 1107 (9th Cir. 1982) ............................ 13

FTC v. Noland,

2020 WL 4530459 (D. Ariz. Aug. 6, 2020) ......... 16

FTC v. Stefanchik,

559 F.3d 924 (9th Cir. 2009) ........................ 13, 16

FTC v. Verity Int’l, Ltd.,

443 F.3d 48 (2d Cir. 2006) ..................... 13, 15, 16

Glasser v. Hilton Grand Vacations Co.,

948 F.3d 1301 (11th Cir. 2020) .......................... 16

iv

Page(s)

Great-West Life & Annuity Ins. Co.

v. Knudson, 534 U.S. 204 (2002) ..... 11, 12, 14, 15

Gundy v. United States,

139 S. Ct. 2116 (2019) .......................................... 6

Humphrey’s Executor v. United States,

295 U.S. 602 (1935) ............................................ 20

Liu v. SEC,

140 S. Ct. 1936 (2020) ........................ 7, 14, 15, 16

Mertens v. Hewitt Associates,

508 U.S. 248 (1993) ..................................... passim

Montanile v. Bd. of Trustees,

136 S. Ct. 651 (2016) ........................ 10, 11, 12, 15

Nielson v. Preap,

139 S. Ct. 954 (2019) ............................................ 9

In re Sanctuary Belize Litig.,

2020 WL 5095531 (D. Md. Aug. 28, 2020)......... 16

Seila Law LLC v. CFPB,

140 S. Ct. 2183 (2020) ........................................ 20

Sereboff v. Mid-Atlantic Med. Serv.,

Inc., 547 U.S. 356 (2006) .................................... 11

US Airways, Inc. v. McCutchen,

569 U.S. 88 (2013) .............................................. 11

Util. Air. Reg. Grp. v. EPA,

573 U.S. 302 (2014) .................................... 5, 6, 19

Constitution and Statutes:

Const. Art. I, § 1 ...................................................... 6

15 U.S.C. § 53(b)............................................ passim

v

Page(s)

15 U.S.C. § 53(b)(1) .................................................8

15 U.S.C. § 53(b)(2) .................................................8

15 U.S.C. § 57b(a).................................................. 18

15 U.S.C. § 57b(b).................................................. 17

15 U.S.C. § 57b(d).................................................. 18

29 U.S.C. § 1132(a)(3).................................... passim

Miscellaneous:

Essays of Brutus No. XI (Jan. 31, 1788) ................ 7

David M. FitzGerald, The Genesis of

Consumer Protection Remedies Under

Section 13(b) of the FTC Act,

https://bit.ly/2S10N58 (2004) ......................... 5, 19

F.W. Maitland, Equity: A Court of

Lectures (1936) ................................................... 11

1 J. Pomeroy, Equity Jurisprudence

§ 181 (5th ed. 1941) .............................................. 9

Prepared Statement of the Federal Trade

Commission Before the Senate Committee

on Commerce, Science, and

Transportation, https://bit.ly/3mLUoJr

(Aug. 5, 2020) ....................................................... 4

Charles Alan Wright et al., Federal Practice

and Procedure § 2942 (3d ed. 2013) ..................... 8

1

INTEREST OF AMICUS CURIAE1

Founded in 2010, TechFreedom is a nonprofit,

nonpartisan think tank based in Washington, D.C. It

is dedicated to promoting technological progress that

improves the human condition. It seeks to advance

public policy that makes experimentation, entrepreneurship, and investment possible.

The Federal Trade Commission is at the center

of many major public-policy debates about

competition, consumer protection, innovation,

privacy, and more. TechFreedom has accordingly

developed extensive expertise on the FTC, its

workings, and how the agency and its powers could

be reformed. See, e.g., Comments of TechFreedom,

Hearings on Competition & Consumer Protection in

the 21st Century: Topic 11: The agency’s

investigation, enforcement, and remedial processes,

https://bit.ly/2Gb3LBL (Aug. 20, 2018); Comments of

TechFreedom, Hearings on Competition & Consumer

Protection in the 21st Century: Topic 5: The

Commission’s remedial authority to deter unfair and

deceptive conduct in privacy and data security

matters, https://bit.ly/3j7ltEB (Aug. 20, 2018); Berin

Szóka & Geoffrey A. Manne, The Federal Trade

Commission: Restoring Congressional Oversight of

the Second National Legislature, https://bit.ly/3kUu2D3 (2016).

No party’s counsel authored any part of this brief. No

person or entity, other than TechFreedom and its counsel,

helped pay for the brief’s preparation or submission. Each

party’s counsel of record has consented in writing to the brief’s

being filed.

1

2

TechFreedom believes that the FTC does

important and valuable work. But we also believe

that sound public policy requires a stable rule of

law—a system in which laws are applied as written.

Those two beliefs inform our view of this case.

SUMMARY OF ARGUMENT

We are not here to hurt the FTC. The agency

protects consumers from deceptive or unfair business

practices. As part of that laudable work, it collects

ill-gotten gains from fraudsters and returns them to

ordinary Americans. This is all to the good. No, we

are here merely to insist that the FTC obtain its

powers the proper way—the constitutional way.

When seeking monetary awards in federal court, the

FTC has not done things the proper way. That is

what this case is about.

Section 13(b) of the FTC Act empowers the FTC

to obtain, among other things, a “permanent

injunction.” The FTC has been using Section 13(b)’s

permanent-injunction clause to obtain equitable

monetary relief. We do not object to the FTC’s

obtaining such relief in federal court, nor to its

having an efficient process for doing so. We have a

problem, however, with the FTC using a statute that

says “injunction” to obtain money. An injunction is a

prospective form of relief; it cannot be used as a

substitute for a money judgment. If the FTC wants

to use Section 13(b) to collect assets, our lawmakers

must rewrite the statute.

There are several reasons why only Congress—

not the FTC, not the courts—can do this. First and

most obviously, only Congress has the power to pass

laws. It cannot delegate that power to others.

Although agencies can arguably fill statutory gaps in

3

certain situations, they may not rewrite the law, for

instance by replacing the word “injunction” with the

word “restitution.”

Second, the judiciary is unauthorized, and illequipped, to “adjust” statutory language. This case

proves the point. By effectively writing the word

“equitable” into Section 13(b), the courts have

needlessly exposed that section to several hard

questions about how to distinguish law and equity,

as well as to a tricky overarching debate about what

the word “equitable” should mean to our postdivided-bench courts. The judicial expansion of the

statute has also produced the more predictable

problem of inconsistency. Once the courts depart

from statutory text, nothing is left to keep them on

the same page (as it were). Irreconcilable outcomes

are almost sure to arise—and so it has proven here.

For these reasons, Congress is not only

authorized, but also the body best equipped, to write

the law. By expanding Section 13(b), the judiciary

has let the FTC bypass other statutory sections that

empower it to obtain monetary awards while

affording defendants protections Section 13(b) does

not contain. By changing Section 13(b), the courts

have in effect broken those other parts of the FTC

Act. Congress, by contrast, can consider the FTC Act

as a whole. It can tweak this or that section while

making sure the full statute works harmoniously.

4

ARGUMENT

I.

THE FTC INDEED NEEDS A QUICK PATH TO

MONETARY RELIEF—BUT THAT DOES NOT

MEAN SUCH A PATH ALREADY EXISTS IN THE

FTC ACT.

“An essential part” of the FTC’s “mission,” the

agency recently told Congress, “is getting back to

consumers money wrongly taken from them.”

Prepared Statement of the Federal Trade

Commission Before the Senate Committee on

Commerce, Science, and Transportation (“FTC

Prepared Statement”) at 3, https://bit.ly/3mLUoJr

(Aug. 5, 2020). We agree. We applaud the FTC for

“return[ing] more than $975 million directly to

consumers” over “the past four fiscal years.” Id.

But the FTC may not take an “any means

necessary” approach to the pursuit of monetary

awards. Obtaining “equitable monetary relief” under

Section 13(b), specifically, has become a “cornerstone

of the FTC’s enforcement program.” FTC’s Mot. to

Stay, FTC v. Credit Bureau Ctr., LLC, No. 18-2847,

Dkt. 61 at 5 (7th Cir. Sept. 17, 2019). “Over the

years, the FTC has utilized Section 13(b) to return

billions of dollars to victimized American

consumers.” Id. Yet Section 13(b) says nothing about

“equitable monetary relief.” The provision the FTC

has used to obtain such relief says only that the FTC

may obtain a “permanent injunction.” 15 U.S.C.

§ 53(b).

The FTC complains that this case “threatens” its

ability to continue using Section 13(b) as its

“principal means of securing judicial orders that

require [equitable monetary] relief.” FTC Prepared

Statement, supra, at 3. “A ruling adverse to the

5

FTC,” the agency warns, “would have dire

consequences for consumer redress and other forms

of monetary relief.” Id. at 4.

But this is a problem for Congress. Congress

chose not to add the words “equitable monetary

relief,” or something like them, to Section 13(b).

Nevertheless, the FTC has embarked on a litigation

strategy to persuade the courts to imply those words

into the statute. See David M. FitzGerald, The

Genesis of Consumer Protection Remedies Under

Section 13(b) of the FTC Act, https://bit.ly/2S10N58

(2004). That was not the proper course. Even if it

believes that a statutory scheme has “turn[ed] out

not to work in practice,” an “agency may not rewrite

clear statutory terms to suit its own sense of how the

statute should operate.” Util. Air. Reg. Grp. v. EPA,

573 U.S. 302, 327-28 (2014). Nor may it have a court

do so on its behalf.

The FTC thinks there should be an efficient

process by which it can obtain money from

wrongdoers in federal court. We do too. But agencies

must obtain their powers the right way. The FTC is

now “request[ing] that Congress clarify the agency’s

statutory authority to obtain complete equitable

monetary relief under Section 13(b).” FTC Prepared

Statement, supra, at 3-4. In going to Congress, the

FTC is now doing what it needed to do all along.

6

II. ONLY CONGRESS CAN AMEND THE FTC ACT TO

PROVIDE THE FTC THE REMEDIAL PROCESS IT

WANTS;

THE

JUDICIARY

IS

NEITHER

AUTHORIZED NOR CAPABLE OF MAKING SUCH

CHANGES ITSELF.

Someone who thinks judges are adept at

“fulfilling” legislative intent through “loose

construction” would do well to study this case. It is a

cautionary tale. The courts have departed so far

from Section 13(b)’s words as to have rewritten

them, in violation of the separation of powers. In

doing so, they have brought confusion to the statute

where none need exist, and, no longer guided by the

text, they are unable to agree on how much atextual

expansion is warranted. This case shows why

lawmaking should be left to Congress, the body best

able to produce a statute that functions well as a

whole.

A. Only Congressional Amendment of

Statutes Is Consistent with the

Separation of Powers.

“All legislative Powers” are “vested” in Congress.

Const. Art. I, § 1. Congress may not transfer that

power to another branch of government. Gundy v.

United States, 139 S. Ct. 2116, 2121 (2019).

Agencies like the FTC exercise the “executive

Power” in Article II. City of Arlington v. FCC, 569

U.S. 290, 304 n.4 (2013). Although some cases

suggest that agencies may, within certain bounds,

make “policy choices” that “Congress has delegated”

to them, Chevron, U.S.A., Inc. v. NRDC, Inc., 467

U.S. 837, 865 (1984), there is no dispute that

agencies may not deviate from the instructions

Congress sets forth for them in a statutory text, Util.

7

Air. Reg. Grp., 573 U.S. at 327-28. Equally, courts,

which “are not part of either political branch of the

Government,” Chevron, 467 U.S. at 865, may not

rewrite a statute, see Arlington, 569 U.S. at 304-05.

Congress’s laws are binding on the courts and the

agencies alike. The text of the law is what governs.

It is especially pernicious when a court or an

agency introduces the word “equity” into a statute

whose text has not invited it. The Anti-Federalist

Brutus worried that judges would use equity to

“explain . . . the reasoning spirit” of the law, “without

being confined to the words or letter.” Essays of

Brutus No. XI (Jan. 31, 1788). Although this Court

(as we’ll see in a moment) has tried to place

workable limits on equitable principles, the judiciary

has tended to wield equity the way Brutus feared.

Judges often treat the word “equitable” as a “license

to expand their own power.” Liu v. SEC, 140 S. Ct.

1936, 1954 (2020) (Thomas, J., dissenting).

Fundamentally, introducing the word “equitable”

into a statute that says only “injunction” “contravenes the basic separation-of-powers principle that

leaves to Congress the power to authorize (or to

withhold) rights and remedies.” No. 19-508 Pet. App.

37a (O’Scannlain, J., specially concurring).

B. The Judiciary

Statutory Editor.

Is

an

Unskilled

By treating Section 13(b) as though it contains

the word “equitable,” the courts have invited

ceaseless debate about what the word “equitable”

means. No longer in agreement about simply

applying the word “injunction” as written, moreover,

the courts lack a common point of textual reference

8

they can use to ensure that Section 13(b) is applied

consistently—and so they haven’t.

1. Judicial

Statutory

Breeds Confusion.

Editing

Judicial statutory “fixes” tend to create more

problems than they resolve—especially when various

courts of appeals offer their different “fixes” at once.

The judicial expansion of Section 13(b) illustrates

this pernicious dynamic.

Applied as written, Section 13(b) is a simple

provision. It empowers a court, in “proper cases,” to

grant the FTC a “permanent injunction.” 15 U.S.C.

§ 53(b)(2). Such an injunction is meant to provide the

FTC with prospective relief. We know this not only

because “injunctive relief” by nature “looks to the

future,” No. 19-825 Pet. App. 15a (quoting 11A

Charles Alan Wright et al., Federal Practice and

Procedure § 2942 at 47 (3d ed. 2013)), but also

because Section 13(b) applies only when someone

“is violating, or is about to violate,” the FTC Act, 15

U.S.C. § 53(b)(1) (emphasis added). The permanentinjunction clause in Section 13(b) is no more (and no

less) than a tool the FTC can use to promptly stop a

violation of the FTC Act.

By expanding the word “injunction” in

Section 13(b) to mean “equitable relief,” the courts

have created knotty interpretive problems where

none need exist. In particular, they have needlessly

plunged the statute into the protracted and messy

debate over how modern courts should navigate the

ancient divide between law and equity.

To understand the headaches that introducing

the seemingly benign term “equitable” into

Section 13(b) has caused, consider first the

9

judiciary’s struggles to define the word “equitable” as

it is used in Section 502(a)(3) of ERISA (the

Employment Retirement Income Security Act).

Various parties affiliated with an ERISA plan may

use Section 502(a)(3) “to enjoin” violations of ERISA

or the plan or “to obtain other appropriate equitable

relief.” 29 U.S.C. § 1132(a)(3). The section’s reference

to “appropriate equitable relief” has been a constant

source of trouble.

Start with Mertens v. Hewitt Associates, 508 U.S.

248 (1993), where the issue was whether a party

may invoke Section 502(a)(3)’s “appropriate

equitable relief” clause to obtain an award of money

damages. “Equitable relief,” Mertens notes, can mean

at least two things. On the one hand, it could mean

“whatever relief a court of equity is empowered to

provide in the particular case at issue.” Id. at 256.

On the other hand, it could mean “those categories of

relief that were typically available in equity (such as

injunction, mandamus, and restitution, but not

compensatory damages).” Id. The problem with the

first definition is that an equity court, to do complete

justice, would often award legal remedies that

“would otherwise be beyond the scope of its

authority.” Id. (quoting 1 J. Pomeroy, Equity

Jurisprudence § 181 at 257 (5th ed. 1941)). Yet

“‘equitable’ relief,” Mertens observes, “must mean

something less than all relief.” Id. at 258 n.8. To hold

otherwise would effectively scratch the word

“equitable” out of the statute, in defiance of “the

interpretative canon against surplusage—the idea

that every word and every provision is to be given

effect and that none should needlessly be given an

interpretation that causes it . . . to have no

consequence.” Nielson v. Preap, 139 S. Ct. 954, 969

(2019) (cleaned up). Mertens therefore adopts the

10

second definition, and holds that only traditional

forms of equitable relief are available under Section

502(a)(3).

The downside of reading “equitable relief” to

mean “traditional forms of equitable relief,” however,

is that it triggers an inquiry into what those

“traditional forms” are. “[M]emories of the divided

bench,

and familiarity with its technical

refinements,” Mertens acknowledges, are “reced[ing]”

ever “further into the past.” 508 U.S. at 256. Courts

unfamiliar with equity practice must rely on their

dusty copies of Story’s Commentaries on Equity

Jurisprudence (1836), Pomeroy’s Equity Jurisprudence (1881-83), and the first Restatement of

Restitution (1937) to navigate procedural niceties

that were confusing even before they became extinct.

What’s more, “typical equitable remedy” does

not operate well as a standalone concept. Equity

arose as a system for petitioning the chancellor of

England to afford relief that the law courts, with

their abstruse array of writs, circuitous procedures,

and cramped rules of evidence, would not supply.

The equity courts were merely a supplementary piece

of the legal system. They often dismissed pleas that

sounded in law, and they often afforded even legal

relief for pleas that sounded in equity. It makes little

sense, therefore, to detach traditional equitable

remedies from traditional equity practice. Doing so is

sure to lead to “bizarre conclusion[s].” Montanile v.

Bd. of Trustees, 136 S. Ct. 651, 662 (2016) (Ginsburg,

J., dissenting).

Equitable tracing rules, especially, seem to

perplex modern courts. The liability that undergirds

many monetary equitable remedies is “premised on

the fiction that the victim at all times retained title

11

to the property in question, which the defendant

merely holds in trust for him.” FTC v. Bronson

Partners, LLC, 654 F.3d 359, 373 (2d Cir. 2011).

Equity therefore limited most recoveries to “money

or property identified as belonging in good

conscience to the plaintiff [that] could clearly be

traced to particular funds or property in the

defendant’s possession.” Great-West Life & Annuity

Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002). If a

cheat uses money he holds in trust to buy a horse

that dies, F.W. Maitland noted in his lectures on

equity, the equitable fund is represented by

the carcass. F.W. Maitland, Equity: A Court of

Lectures 220 (1936).

The quirks and vagaries of equity being what

they are, this Court repeatedly has had to revisit

Section 502(a)(3) and further clarify what Mertens

meant by “typical equitable remedy.” These decisions

deal at length with arcane, and often obsolete,

equitable concepts. See Knudson, 534 U.S. 204

(drawing a “fine distinction between restitution at

law and restitution in equity”); Sereboff v. MidAtlantic Med. Serv., Inc., 547 U.S. 356 (2006)

(holding that an equitable lien by agreement

qualifies as equitable restitution); US Airways, Inc.

v. McCutchen, 569 U.S. 88 (2013) (holding that the

common-fund doctrine can limit a plaintiff’s recovery

in equity); Montanile, 136 S. Ct. 651 (confirming that

the tracing requirement is an element of equitable

restitution). And there will presumably have to be

more such decisions in the future. Called upon to

apply “the obsolete distinctions between law and

equity,” Knudson, 534 U.S. at 222 (Stevens, J.,

dissenting), the lower courts keep falling into

disagreement, if not befuddlement. The difficulty

and uncertainty are exacerbated by the fact that

12

some judges continue, somewhat understandably, to

insist that “appropriate equitable relief” means

simply “that the courts are free to craft whatever

relief is most appropriate.” Mertens, 508 U.S. at 269

(White, J., dissenting); see Knudson, 534 U.S. at 222

(Stevens, J., dissenting); Montanile, 136 S. Ct. at 662

(Ginsburg, J. dissenting).

When it comes to Section 502(a)(3), at least,

courts’ struggles with equity jurisprudence have a

statutory grounding: this Court has said to take the

word “equitable” in “appropriate equitable relief”

seriously. Mertens, 508 U.S. at 256. As we are about

to see, however, the courts’ expansion of the relief

available under Section 13(b) has needlessly

introduced the same sorts of intractable law-versusequity puzzles into the FTC Act. Difficult, drawnout, and expensive disputes are arising, in cases

involving a remedy clause that says only

“injunction,” over the meaning of the word

“equitable.” This was quite avoidable.

2. Judicial

Statutory

Editing

Produces Inconsistency.

It is “hardly surprising” that, when courts start

granting rights and remedies not “expressly

create[d]” by Congress, the “usual sources” of

statutory construction “yield no explicit answer”

about how those judicially concocted rights and

remedies should be applied. Franklin v. Gwinnett

Cnty. Pub. Sch., 503 U.S. 60, 76 (1992) (Scalia, J.,

concurring). When result-oriented judicial intuition,

rather than statutory text, guides statutory

interpretation, results are detached from any

common touchstone. Courts will constantly reach

conflicting results.

13

The debate over the meaning of Section 13(b) is

an especially stark illustration of this point.

Concluding that “injunction,” in Section 13(b), means

“equitable relief,” the courts of appeals introduced

into Section 13(b) the issue of what “equitable”

means. Then, having introduced the issue, those

courts proceeded to splinter between precisely the

two potential meanings of “equitable”—equity as

traditional equitable remedies; equity as doing full

justice—that this Court identified in Mertens.

The Second Circuit, for its part, has looked to

this Court’s typical-equitable-remedies ERISA jurisprudence. “Because the availability of restitution

under § 13(b) of the FTC Act, to the extent it exists,

derives from the district court’s equitable

jurisdiction,” says FTC v. Verity International, Ltd.,

443 F.3d 48, 67 (2d Cir. 2006), after discussing one of

this Court’s ERISA cases, “it follows that the district

court may award only equitable restitution,” id. at

65. And equitable restitution, Verity continues, is a

measure not of a plaintiff’s loss (as it is with

compensatory damages), but of a defendant’s unjust

gains. Id. at 68.

The Ninth Circuit, by contrast, has said

that Section 13(b) gives “the district court authority

to grant any ancillary relief necessary to accomplish

complete justice.” FTC v. H. N. Singer, Inc., 668 F.2d

1107, 1113 (9th Cir. 1982). This has at times

included awards of “equitable monetary relief”

measured by “the full amount lost by consumers

rather than . . . [just] the defendant’s profits.” FTC

v. Stefanchik, 559 F.3d 924, 931 (9th Cir. 2009).

Inherent in the Ninth Circuit’s do-full-justice view of

equity is a rejection of the notion that “courts

proceeding under § 13(b) must make the same ‘fine

14

distinction’ between legal and equitable restitution

required

under

ERISA

§ 502(a)(3).” FTC

v.

Commerce Planet, Inc., 815 F.3d 593, 601 (9th Cir.

2016) (quoting Knudson, 534 U.S. at 214).2

Adding to the confusion and inconsistency, the

Second Circuit, the court on the traditionalequitable-remedy side of the divide, has claimed that

the FTC can obtain money under Section 13(b)

without satisfying equitable tracing requirements.

Bronson, 654 F.3d at 371-72. According to the

Second Circuit, a court may use Section 13(b) to

award equitable disgorgement, a remedy “available

only to government entities” that “does not require

the district court to apply tracing rules.” Id. at 37273.

But “disgorgement,” Justice Thomas objected in

dissent in Liu, 140 S. Ct. 1936, is a term “with no

fixed meaning” and “no history in equity

jurisprudence,” id. at 1953-54. Applying the Court’s

2

In the Ninth Circuit, therefore, the word “injunction”

in Section 13(b) of the FTC Act has a wider meaning than do

the words “appropriate equitable relief” in Section 502(a)(3) of

ERISA. Hence this eyebrow-raising passage:

The interpretive constraints facing the

[Supreme] Court in [ERISA cases] are wholly

absent here. We do not have before us a statute

that limits the court to providing “equitable

relief.” Section 13(b) invokes a court’s equity

jurisdiction by authorizing issuance of

injunctive relief.

Commerce Planet, 815 F.3d at 602. In the Ninth Circuit, the

broad word “equitable” limits a court to providing traditional

equitable relief, while the narrow word “injunction” empowers a

court to provide traditional equitable relief and more.

15

ERISA jurisprudence to Section 13(b)—as the

Second Circuit claims to do, Verity, 443 F.3d at 67—

means requiring the FTC to “seek a remedy

traditionally viewed as ‘equitable,’” Mertens, 508

U.S. at 255; yet “disgorgement is not a traditional

equitable remedy,” Liu, 140 S. Ct. at 1950 (Thomas,

J., dissenting).

Odder still, the majority in Liu, applying the

ERISA cases to the securities laws, id. at 1942

(discussing Mertens, Knudson, and Montanile),

declared that disgorgement passes the traditionalequitable-remedy test. Although disgorgement was

not itself available in equity, the majority explained,

it resembles remedies that were. Id. at 1943. If this is

the ERISA standard, it’s been watered down. See id.

at 1953 (Thomas, J., dissenting). Not completely

watered down, however: disgorgement, the Court

said, is still subject to various limits. Disgorgement

must (to some unspecified degree) benefit specific

victims rather than just the public at large, id. at

1948; it is “sometimes . . . at odds” (in ways yet to be

fleshed out) with the imposition of joint-and-several

liability, id. at 1949; and it does not require a

defendant to return money spent on legitimate

expenses, id. at 1950.

One might think that Liu’s words on equity

should inform the scope of equitable remedies

purportedly available under Section 13(b). Like

those sued by the SEC, after all, those sued by the

FTC object when recoupments don’t go to victims,

when joint-and-several liability is imposed, or when

expenses aren’t deducted from remedial awards. At

this point, however, the district courts can be

forgiven for throwing up their hands. Rather than

try to apply Liu to Section 13(b), they have, thus far,

16

declared that Liu governs only securities cases. In re

Sanctuary Belize Litig., ___ F. Supp. 3d ___, 2020

WL 5095531 *69 (D. Md. Aug. 28, 2020); FTC v.

Noland, 2020 WL 4530459 *4-*5 (D. Ariz. Aug. 6,

2020); FTC v. Cardiff, 2020 WL 3867293 *5-*6 (C.D.

Cal. July 7, 2020), appeal docketed, No. 20-55858

(9th Cir.).

If this all seems deeply perplexing, that’s

because it is. The courts of appeals can’t agree on

what Section 13(b) means. They can’t even keep

their intra-circuit interpretations straight. Compare

Stefanchik, 559 F.3d at 931-32 (9th Cir.) (the FTC

can use Section 13(b) to recover the consumers’ loss)

with Commerce Planet, 815 F.3d at 603 (9th Cir.)

(actually, it can recover only the defendant’s gain);

compare Verity, 443 F.3d at 67 n.10 (2d Cir.)

(assuming that Section 13(b) is subject to tracing

rules) with Bronson, 654 F.3d at 373 (2d Cir.)

(holding that it isn’t).

This is what happens when statutory text is

discarded. Once adherence to text is abandoned,

statutory “interpretation” has a way of turning into

statutory “surgery.” Glasser v. Hilton Grand

Vacations Co., 948 F.3d 1301, 1311 (11th Cir. 2020)

(Sutton, J., visiting). The courts’ gloss on the statute

prompts satellite disputes about what the gloss

means, which lead to further glosses, which lead to

further disputes—none resolvable by what the

statute actually says. Nothing in Section 13(b) can

help resolve the many questions that now surround

that section.

Limit Section 13(b)’s use of “injunction” to mean

“injunction,” however, and the whole baffled mess

disappears.

17

C. Only Congress Can Create Statutes

That Successfully Balance Competing

Policy Interests.

Expanding Section 13(b), so that the FTC can

use it to obtain money, is bound to produce a

confused jurisprudence and to generate needlessly

tortured litigation. Yet it might still seem tempting,

to some adjudicators in some cases, to accept that as

the price of getting to what looks like a sensible

result: letting the FTC invoke Section 13(b) as a

quick route to a monetary recovery. That result,

enacted by Congress, would indeed be our preferred

policy outcome. The FTC (or some other federal

agency) should have the proper tools to deter, and

remedy, instances of genuine consumer fraud. But

letting the FTC short-circuit the existing statutory

scheme is not the answer.

Distorting Section 13(b), to reach what might

seem like a desirable outcome in a discrete case, does

far more harm than good. Congress has carefully

designed the litigation process set forth in the FTC

Act. The Act contains important substantive and

procedural protections for defendants. When a court

lets the FTC use Section 13(b) to obtain money,

those protections are lost.

Consider, for instance, that Section 19 explicitly

empowers the FTC to obtain among other things the

“refund of money,” the “return of property,” or the

“payment of damages.” 15 U.S.C. § 57b(b).

“Read[ing]” Sections 13(b) and 19 “together”

confirms that Section 13(b) “functions as a simple

stop-gap measure that allows the Commission to act

quickly to prevent harm,” while Section 19 ensures

that “the Commission can collect ill-gotten gains.”

No. 19-508 Pet. App. 26a-27a (O’Scannlain, J.,

18

specially concurring). But Section 19 does not allow

the FTC to head directly to court—as it can when

proceeding under Section 13(b)—to enforce the

“unfair or deceptive acts or practices” clause in

Section 5 of the FTC Act. Instead, the FTC must

either (1) prosecute based on an already-issued rule

that “define[s] with specificity” the “unfair or

deceptive” behavior that the defendant has

purportedly engaged in, or (2) conduct an

administrative adjudication, obtain a cease-anddesist order there, and then prove in court that a

reasonable person would know the defendant’s

conduct was not just “unfair or deceptive,” but

downright “dishonest or fraudulent.” 15 U.S.C.

§ 57b(a); see No. 19-508 Pet. App. 27a; No. 19-825

Pet. App. 11a. Section 19 provides a defendant more

process, and more notice of what conduct is

forbidden, than does Section 13(b). Letting the FTC

ignore Section 19, and instead obtain money under

Section 13(b), “wrongly allows [it] to avoid the

administrative processes that Congress directed it to

follow.” Pet. App. 28a (O’Scannlain, J., specially

concurring); see also FTC v. AbbVie Inc., ___ F.3d

___, 2020 WL 5807873 *33-*34 (3d Cir. Sept. 30,

2020) (citing Section 19 as support for its holding

that disgorgement is not available under

Section 13(b)).

Notice, too, that Section 19 is subject to a statute

of limitations, while Section 13(b) is not. 15 U.S.C.

§ 57b(d). A key limit in Section 19 is that the

Commission will usually be allowed to collect only

three years’ worth of damages. Id. A key limit

in Section 13(b) is that it is supposed to apply only

when a defendant “is violating, or is about to

violate,” the FTC Act, id. § 53(b)(1)—a limit that

makes sense in a clause about injunctions, but that

19

means little in a clause about damages. Once the

FTC convinces a court to award damages under

Section 13(b), nothing stops the FTC from collecting

damages going as many years back as it

wants. Again, expanding the scope of Section 13(b)

lets the FTC evade the processes and protections put

in place by Congress.

It should hardly need saying that courts are not

allowed “to adopt unreasonable interpretations of

statutory provisions and then edit other statutory

provisions to mitigate the unreasonableness.” Util.

Air Reg. Grp., 573 U.S. at 328 (cleaned up). Nor

would they be any good at such projects if they tried.

Only Congress can study a matter, hold hearings,

weigh competing interests, and then design a law in

which all the moving pieces fit together. Congress

can decide, for example, that the FTC should be able

to head straight to court to collect money damages—

that, in other words, the procedural hurdles of

Section 19 have proven too high—but that the

agency must be subject to a statute of limitations

when it does so. Congress can also clarify the proper

measure of damages (defendants’ gains or

consumers’ losses), the scope of liability (joint and

several—or not), the types of expenses that are

deductible, when executives may be held personally

liable, when penalties or punitive damages are

available, and so on. Only Congress can adjust all

the dials in a way that strikes the best balance.

It bears repeating, in closing, that the FTC was

the driving force behind the courts’ atextual

expansion of Section 13(b). See FitzGerald, supra. It

is anathema to our constitutional system for

legislative power to be wielded by an agency—

especially by an independent one. An agency’s

20

independence—its comparative lack of accountability

and insulation from democratic oversight—must be

premised on, indeed, conditional on, rigorous

adherence to the law.

The Court recently made clear that Humphrey’s

Executor v. United States, 295 U.S. 602 (1935), the

decision that blessed the FTC’s independent

structure, should be “take[n] . . . on its own terms,”

Seila Law LLC v. CFPB, 140 S. Ct. 2183, 2200 n.4

(2020). Humphrey’s Executor stands on the

assumption that the FTC is merely a “legislative . . .

aid” that “mak[es] reports and recommendations to

Congress.” 140 S. Ct. at 2200. This case presents an

opportunity to make the FTC aware that when it

goes to the courts, rather than to Congress, to push

for statutory amendments, it undermines the

legitimacy of its independence.

CONCLUSION

The judgment of the Seventh Circuit (No. 19825) should be affirmed. The judgment of the Ninth

Circuit (No. 19-508) should be reversed.

Respectfully submitted,

October 2, 2020

ASHEESH AGARWAL

Counsel of Record

CORBIN K. BARTHOLD

TECHFREEDOM

110 MARYLAND AVE NE

SUITE 205

WASHINGTON, DC 20002

aagarwal@techfreedom.org