District Court denies FTC’s stay bid in $550 million suit

Courts FTC Enforcement FTC Act Deceptive

On February 7, the U.S. District Court for the Northern District of Georgia denied the FTC’s motion to stay, or in the alternative, voluntarily dismiss its $550 million consumer deception case against a technology company and its CEO (collectively, “defendants”). The FTC filed the motion to stay (or voluntarily dismiss) after a recent U.S. Supreme Court decision altered the agency’s ability to obtain equitable monetary relief.

The FTC filed a suit in 2019 alleging the defendants made deceptive representations to customers and charged hidden, unauthorized fees in connection with the company’s “fuel card” products, which was in violation of Section 5 of the FTC Act. In 2019, when the agency filed its lawsuit, legal precedent held that the FTC could obtain restitution for consumers directly through such civil proceedings in federal court. However, in April of 2021, the Supreme Court held in AMG Capital Management, LLC v. FTC, that the FTC does not have statutory authority to obtain equitable monetary relief under Section 13(b) of the FTC Act. (Covered by InfoBytes here.)

As a result, the FTC filed its motion to stay or voluntarily dismiss in an attempt to preserve the possibility of obtaining monetary relief for injured consumers in federal court, while it pursues claims against the defendants through the agency’s administrative process. The defendants argued they would be harmed by a dismissal of the FTC’s suit in federal court since the defendants have spent money and resources on their case to date. The defendants also claimed that the FTC’s request was done to seek a more favorable forum, and that the FTC’s four-month delay in pursuing this new course after the Supreme Court’s AMG decision demonstrates bad faith. The court noted that “[i]n filing this lawsuit in federal court in December of 2019, the FTC was acting in reliance on the state of the law as it existed at that time in this circuit and all others except the Seventh Circuit,” and “[t]here is no fault, and nothing unreasonable, in the FTC’s decision.” Nevertheless, in denying the FTC’s motion, the court concluded that the “balance of equities does not weigh in favor of a stay or dismissal without prejudice.”