In May 2019, the FTC obtained a preliminary injunction against the defendant that resulted in a freeze of his assets and a receivership over his businesses.  Following the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021), the defendant sought to dissolve that injunction. The defendant argued that the Supreme Court had curtailed the FTC’s enforcement powers under Section 13(b) of the FTC Act, which rendered this asset freeze unlawful.  The district court denied that relief because the asset freeze also had been issued under Section 19 of the FTC Act. The Eleventh Circuit affirmed the district court’s order, holding that AMG Capital limited the FTC’s power only under Section 13(b) and did not apply to Section 19.  The Court concluded that Section 19 covers all rule violations under Title 15 of the U.S. Code that are encompassed by the FTC’s unfair or deceptive acts or practices (UDAP) authority, including, for example, violations of the Telemarketing Sales Rule.  Where the matter related to violations of the Telemarketing Sales Rule, the Eleventh Circuit held that the FTC had the authority to seek and the district court had the authority to impose an asset freeze under Section 19.

Key takeaways

• The Eleventh Circuit Court of Appeals has narrowly interpreted the Supreme Court’s limitations on the FTC’s powers in AMG Capital to restrict only relief under Section 13(b) of the FTC Act.
• Even after the Supreme Court’s limitations, the FTC can still obtain monetary relief from defendants, at least for violations that fall under the FTC’s UDAP authority.
• According to the Eleventh Circuit Court of Appeals, Section 19 of the FTC Act broadly permits a district court to fashion any relief “necessary to redress injury to consumers,” including forms of relief the Supreme Court has ruled are unavailable under Section 13(b) (e.g., relief that relates to monetary damages, such as the freezing of assets).
• Relief under Section 19 is available in all actions alleging violations under Title 15 of the U.S. Code, including, for example, violations of the Telemarketing Sales Rule, the Restore Online Shoppers’ Confidence Act (“ROSCA”), and the Children’s Online Privacy Protection Act.

In depth

In May 2019, the district court issued a preliminary injunction, relying on Section 13(b) and 19 of the FTC Act.  The injunction froze the defendant’s assets and imposed a receivership over his businesses in order to preserve the assets in the event of a future judgment for money damages. 

For many years, courts interpreted Section 13(b) to include the power to grant forms of equitable relief other than injunctions—notably, monetary awards. But on April 22, 2021, the Supreme Court held in AMG Capital that Section 13(b) is limited exclusively to forward-looking injunctive relief, which necessarily does not include the award of retrospective monetary damages.

Following the Supreme Court’s decision in AMG Capital, the defendant in Simple Health filed an emergency motion to dissolve the preliminary injunction, arguing that pursuant to AMG Capital, the restraints the district court imposed on his assets at the behest of the FTC were unconstitutional.  On September 5, 2021, the district court denied the emergency motion relying on Section 19 of the FTC Act, and the individual defendant appealed. 

The Eleventh Circuit Court of Appeals affirmed the district court’s denial of the defendant’s emergency motion.  The Eleventh Circuit determined that, although AMG Capital limited the FTC’s authority under Section 13(b) and prevented the FTC from obtaining retrospective monetary damages from defendants under that statutory provision, AMG Capital did not require the dissolution of the preliminary injunction in Simple Health.  Looking to the plain language of Section 19, the Court of Appeals reasoned that the statutory provision permits for broader remedies than Section 13(b). It held that under Section 19, a district court  has “broad authority” to grant any relief that is “necessary to redress injury to consumers,” which can include the freezing of a defendant’s assets and appointment of a receiver.  Because the FTC’s second amended complaint relied upon Section 19—which authorizes a court to grant relief “necessary to redress injury”—(in addition to Section 13(b)), the asset-freeze and the receivership requirement were properly granted.

Relying on well-settled, decades-old case law, the Eleventh Circuit reasoned that asset freezes and receiverships are forms of relief that may be necessary in FTC enforcement actions “to ensure that if the court awards final monetary relief, assets will still be available to redress consumers’ injuries.  Otherwise, the district court would be unable to provide any meaningful relief.”  Thus, the Court concluded that “if preliminary measures like an asset freeze or a receivership are necessary to preserve funds for a future monetary judgment, they are authorized under Section 19(b).”

The Court further held that Section 19 covers all rule violations under Title 15 of the U.S. Code that constitute UDAP, including violations of the Telemarketing Sales Rule and ROSCA.   Finally, under Section 13(b), the Eleventh Circuit affirmed the portions of the preliminary injunction that enjoined the defendant from making future misrepresentations and disclosing or using customer information.¹

In sum, the Eleventh Circuit has announced a rule, based on the language of Section 19 of the FTC Act, that when the FTC brings an action in reliance on Section 19 the FTC may seek and a district court may grant relief related to monetary damages, notwithstanding the limitations placed on the FTC’s power in AMG Capital.   Applying this rule, the FTC may once again seek monetary relief from individual defendants—at least in cases brought under its UDAP authority.  Corporate executives should be aware of this interpretation of Section 19 of the FTC Act given that they may face an asset freeze premised on their potential financial liability for the anticompetitive practices of the entities they oversee.  Corporations, too, should be mindful that following this decision, which reinforced the FTC’s power to obtain monetary relief, the FTC will continue to pursue monetary damages against corporations.

1 AMG Capital only jettisoned the FTC’s ability to seek equitable monetary relief under 13(b); it did not touch the FTC’s ability to get prospective injunctive relief.