Contact Our Firm For Skilled Representation

Contact Our Firm For Skilled Representation

Contact Our Firm For Skilled Representation

Contact Our Firm For Skilled Representation

Complex Litigation Defending Against the Federal Trade Commission (FTC)

The firm’s lawyers have extensive experience litigating trademark, copyright, and false advertising matters, for both plaintiffs and defendants. Litigation against the Federal Trade Commission (FTC) involves similar issues, but also involves issues that are unique to FTC matters.

Defending claims brought by the FTC for allegedly unfair or deceptive acts or practices requires expertise and familiarity with the unique legal framework which governs FTC matters. Not only is the relevant legal analysis unique, but the FTC employs particular litigation strategies, including in discovery and with regard to recovery of monies (damages), based upon the legal framework in which it operates. In addition, the FTC successfully seeks and obtains summary judgment on deception, common enterprise, individual liability, and unjust enrichment / disgorgement (i.e., damages) in most of its cases.

The firm is very familiar with these issues, having just completed an intense, two-year litigation, which culminated in a bench trial that spanned five weeks. The FTC has reported that it wins over 99% of its cases on summary judgment, thus avoiding trial. Accordingly, the firm is one of a handful that have actually gone to trial against the FTC.

FTC cases present challenges to legitimate businesses because the FTC may, for example, argue that even a completely truthful advertising disclosure nonetheless creates a “net impression” that is likely to deceive consumers. Accordingly, even businesses that have good-faith and truthful disclosures may be ensnared in a FTC lawsuit.

Such FTC lawsuits present difficult challenges for the defending businesses and their owners. The FTC will often bring claims seeking “equitable” relief under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b). The FTC often (if not always) chooses this strategy in deceptive advertising cases, instead of seeking traditional legal remedies after an administrative adjudication for a cease and desist order under Section 19 of the FTC Act, 15 U.S.C. § 57b. The FTC does so, because pursuit of equitable relief, rather than the legal relief provided for under Section 19, gives the FTC some distinct advantages. These include the ability to deprive defendants of the right to a jury trial. Sometimes even more frustrating for defendants, however, is that by claiming to pursue equitable relief in the form of restitution / disgorgement / unjust enrichment, the FTC can avoid the traditional evidentiary and burden of proof challenges that exist in typical civil cases for proving damages.

The FTC argues that, because its claim for recovering money is in equity, it need only show a “reasonable approximation” of the total amount spent by consumers in relation to the allegedly deceptive or misleading advertising. The burden then shifts to the defendants, to disprove the FTC’s calculations. In addition, under favorable precedent, the FTC also argues that a defendant is not entitled to deductions or offsets from the amounts paid by consumers, except for refunds or instances where a consumer did not actually complete the transaction (such as stop-payments on checks or charge backs on credit cards). This burden shifting and exclusion from offset of costs that would ordinarily apply in a typical, lost-profits damages claim, can be found in cases such as FTC v. Commerce Planet, Inc., 815 F.3d 593, 603 (9th Cir. 2016); FTC v. Bronson Partners, LLC, 654 F.3d 359, 368 (2d Cir. 2011); FTC v. Kuykendall, 371 F.3d 745, 766 (10th Cir. 2004) (en banc); and FTC v. Febre, 128 F.3d 530, 535 (7th Cir. 1997).

By pursuing equitable remedies, the FTC can therefore turn a matter into a “bet-the-company” case, with the prospect of multi-million dollar (or even billion dollar) restitution or disgorgement monetary award that dwarf the net profits a business may have obtained from a practice later determined to have been deceptive.

The firm’s unique experience in FTC litigation also positions it to deal with the current uncertainty and ongoing development of the law governing FTC cases. For example, in June 2017, the Supreme Court of the United States (SCOTUS) released its unanimous decision in Kokesh v. S.E.C., __U.S. __, 137 S. Ct. 1635 (2017), holding that disgorgement awards in favor of the Securities & Exchange Commission constitute penalties, and are thus subject to a five-year statute of limitations under 28 U.S.C. § 2462. In reaching this conclusion, the Kokesh court determined that the remedies sought by the SEC were akin to a “penalty,” and were not equitable in nature. By logic, the reasoning in Kokesh substantially undermines whether disgorgement awards are permitted at all as “equitable” relief, including those in favor of the FTC. The Kokesh court, however, expressly declined to opine as to whether or not its reasoning would apply beyond the statute of limitations issue. The FTC has latched onto this language, to argue that Kokesh does not affect the current, FTC-friendly legal paradigm. Nonetheless, the Kokesh decision raises the prospect that, in a future case, the US Supreme Court will apply the reasoning of Kokesh to the FTC Act, including to the FTC’s strategy of seeking damages under the guise of equitable relief.

Indeed, on December 3, 2018, a three-judge panel of the Ninth Circuit Court of Appeals released an opinion substantially questioning that circuit’s case law permitting disgorgement awards, in F.T.C. v. AMG Capital Mgmt., LLC, ___ F. 3d ___, No. 16-17197, 2018 WL 6273036 (9th Cir. Dec. 3, 2018). Although the three-judge panel held it was bound by previous existing Ninth Circuit precedent, Judge O’Scannlain (joined by Judge Bea) wrote separately to urge the entire Ninth Circuit to rehear the case en banc, and consider whether to overrule prior precedent. Judge O’Scannlain wrote that the interpretation of Section 13(b), that authorization to the FTC for injunctions also empowers courts to impose monetary judgments labeled as “restitution,” was no longer tenable. As stated in that concurrence, the recent decision in Kokesh undermines the reasoning that restitution under Section 13(b) is an equitable remedy at all. Accordingly, the continued availability of such monetary awards is in question, although previously permitted under cases such as FTC v. Commerce Planet, Inc., 815 F.3d 593, 598 (9th Cir. 2016); FTC v. Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir. 1994); and FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1113 (9th Cir. 1982).

The firm stays apprised of these ongoing developments in FTC cases and is situated to argue for the development of the law to reign-in the FTC governmental overreach. As a result, while many fights with the FTC seem unfair, the firm is well suited to make such cases the fairest they can be for the defending businesses and their owners.