The Federal Trade Commission and the Consumer Financial Protection Bureau cast a giant regulatory net over all companies operating in the United States with enforcement activities that regulate deceptive trade practices, anti-trust and lending practices by financial institutions.
The power and use of the powers delegated to these two agencies were largely unchallenged for almost four decades until a small Houston-based law firm attacked the FTC’s use of Section 13(b) of the FTC Act to impose preliminary injunctions and receiverships over business and owners of those businesses. That Houston-based firm was the Cochell Law Firm.
In FTC v Credit Bureau Center and Michael Brown, we sought to dismiss the FTC’s claims for monetary relief because the plain language of the FTC Act did not permit the Agency’s draconian use of powers that were never granted, much less contemplated by Congress. The trial court applied long-standing precedent in the Seventh Circuit to enter a $5,000,000 judgment against both Credit Bureau Center and its owner, Michael Brown. The defendants appealed and, much to everyone’s surprise (except us), the Seventh Circuit reversed over three decades of precedent allowing the FTC the ability to close down businesses, seize all the owners’ assets and have a receiver sell everything before judgment to satisfy consumer claims.
The FTC appealed the Credit Bureau Center to the Supreme Court. The Court granted review of Credit Bureau Center and also granted review of AMG Capital Management v. FTC. The two cases were consolidated for oral argument until Amy Coney Barrett was appointed to the Supreme Court. Because of her participation in the Seventh Circuit decision in Credit Bureau Center, she recused herself from that case. The Court decided to hold oral argument in AMG. The Court discussed the issues raised in both AMG and Credit Bureau Center and unanimously held that the FTC lacked the authority to seek monetary relief under Section 13(b) of the FTC Act.
The impact of the decision is yet to be fully evaluated, but the FTC admittedly lost its major enforcement tool in anti-trust and consumer protection cases, and has asked Congress to amend the FTC Act to add these powers. Congress may amend the Act but the bill is currently bogged down in committee.
In the meantime, there have been a number of precedents spawned by the AMG. On June 29, 2021, the Central District Court of California ruled in favor of Steve’s Client, Redwood Scientific Technologies sanctioning the Federal Trade Commission (“FTC”) for discovery abuse in seeking monetary relief under the FTC Act. This appears to be the first time that the FTC has been sanctioned by a court in an FTC case. In another precedent-setting decision, the district court ordered that the FTC pay all fees incurred by a Receiver following the Supreme Court’s ruling in AMG Capital Management v. FTC. www.scotusblog.com/case-files/cases/amg-capital-management-llc-v-federal-trade-commission/
Even the Facebook legal team relied on the FTC v. Credit Bureau Center, as the legal foundation for its win against the FTC. In FTC v. Facebook, the district court dismissed the FTC’s potential trillion dollar allegations against Facebook. https://www.scribd.com/document/513390689/gov-uscourts-dcd-224921-73-0#from_embed
The following is the time line in these significant legal developments:
In summary, the Cochell Law Firm continues to take the lead in raising and winning new arguments on behalf of its client in FTC/CFPB litigation.