District Court rules FTC cannot seek monetary relief in false advertising action under Section 19 of the FTC Act

Courts FTC Enforcement ROSCA FTC Act U.S. Supreme Court

On June 29, the U.S. District Court for the Central District of California granted in part and denied in part parties’ motions for summary judgment with respect to remedies, and in doing so, considered whether the FTC may seek monetary relief under Section 19 of the FTC Act. In 2018, the FTC alleged that the defendants violated the FTC Act, Restore Online Shoppers’ Confidence Act (ROSCA), EFTA, and the Telemarketing Sales Rule by engaging in false advertising and participating in an unauthorized billing scheme. In 2020, the court granted summary judgment in favor of the FTC on all counts, but reserved ruling on the appropriate remedies until after the Supreme Court issued decisions in the consolidated appeals in AMG Capital Management v. FTC. On April 22, the Supreme Court unanimously held that while Section 13(b) of the FTC Act “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement,” nothing in its opinion prohibits the FTC “from using its § 5 or § 19 authority to obtain restitution on behalf of consumers.” (Covered by InfoBytes here.) Following the AMG decision, the FTC stated it was no longer seeking monetary relief under Section 13(b) but argued that it may still seek monetary relief under Section 19 for the defendants’ violations of ROSCA. The defendants countered that remedies for the ROSCA violations were unavailable because the FTC failed to specifically invoke Section 19 remedies in its complaint or timely disclose damage calculations or new witnesses under procedural rules, among other things.

The court observed that Section 19 authorizes the FTC to “seek equitable monetary relief to redress consumer injury resulting from ROSCA violations.”  However, the court concluded in this case that the “FTC may proceed to trial on damages for ROSCA violations based only on evidence and witnesses that have been properly disclosed. Because none of the FTC's prior disclosures described its computation of damages for ROSCA violations, however, it appears that the FTC has no evidence to present at trial to support its nascent theory of damages. In the absence of any other theory of monetary relief after AMG, the Court concludes that the FTC cannot recover damages for consumers in this action.” While the court granted the defendants’ motion for summary judgment to the extent that the FTC cannot obtain monetary relief, it stated that “because the FTC has authority to pursue a permanent injunction and has shown the likelihood of recurrence of violations of the FTC Act,” it was granting in part the FTC’s motion for summary judgment “to the extent it seeks a permanent injunction against future enumerated unfair and deceptive acts or practices by the [defendants].”