In recent years, independent agencies have continued to face a number of constitutional and statutory challenges before the Supreme Court. AMG Capital Management struck down the Federal Trade Commission’s authority to obtain equitable monetary relief under Section 13(b). Seila Law severed the Consumer Finance Protection Bureau (CFPB) commissioner’s for-cause removal protections. This term, the Supreme Court will determine whether the CFPB’s funding structure is constitutional in CFPB v. CFSA. And, as we’ve previewed earlier this year, the Court will weigh three constitutional challenges to the SEC in SEC v. Jarkesy.

A quick primer: The Supreme Court will review three constitutional infirmities that the Fifth Circuit determined that the SEC suffered. First, the Fifth Circuit held that when the SEC brought claims for civil penalties in administrative proceedings, it deprived Jarkesy of its Seventh Amendment right to a jury trial. Second, the Fifth Circuit held that Congress unconstitutionally delegated legislative powers to the SEC without an “intelligible principle” by providing it with the discretion to choose whether to bring an enforcement action for monetary penalties in Article III courts or before an administrative law judge (ALJ). Finally, the Fifth Circuit determined that the statutory removal restrictions for SEC ALJs are unconstitutional.Continue Reading Tracking the Impact of Securities and Exchange Commission v. Jarkesy and Other Constitutional Challenges Against the FTC

On October 3, the Supreme Court heard oral argument in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited, where the Court is reviewing the Fifth Circuit’s opinion that struck down the Payday Lending Rule because the Fifth Circuit found that the Consumer Financial Protection Bureau’s (the “Bureau”) funding structure is unconstitutional. While the Fifth Circuit decision was limited to the Payday Lending Rule, a ruling upholding the Fifth Circuit’s decision would have severe ramifications for the Bureau and could potentially lead to the demise of the agency without congressional action.

As a refresher, the Fifth Circuit held that the Bureau’s “unique” funding structure violates Article I of the Constitution—vesting Congress with appropriation power—because the agency is not funded through congressional appropriations. Rather, the Bureau receives its funding from the Federal Reserve, which is funded through bank assessments. In short, the Fifth Circuit found that Congress had abdicated its “power of the purse” and had run afoul of the nondelegation doctrine where it has no involvement in the CFPB’s ongoing funding.Continue Reading C[FPB] You Later? Agency’s Future Hangs in the Balance After Oral Argument

Cybersecurity and data protection is front and center on the Federal Communications Commission’s (FCC) agenda. The latest manifestation of this is the FCC’s issuance of a Notice of Proposed Rulemaking (NPRM) on August 25, 2023, which seeks comments on a proposed voluntary cybersecurity labeling program for Internet of Things (IoT) devices or products.

Companies that volunteer to join the proposed program would have their qualifying products bear a new “U.S. Cyber Trust Mark,” which the agency believes would help consumers identify trustworthy products and make informed purchasing decisions, incentivizing better cybersecurity standards. There are a couple of aspects of the NPRM that are worth highlighting.Continue Reading What’s in a Label? FCC Begins Rulemaking Procedure for Cybersecurity Labeling on IoT Devices

As we covered previously, courts are coming around to reading Section 19 of the FTC Act more narrowly than the Federal Trade Commission may hope. In the latest instance, on June 9, 2023, a magistrate judge in the Southern District of Texas issued a report and recommendation rejecting the FTC’s claim for consumer redress, even after finding there was consumer injury. The report and recommendation were adopted by the district judge on August 3.

In Federal Trade Commission v. Zaappaaz, LLC, the FTC argued at summary judgement, and the court agreed, that the defendants violated the Merchandise Rule by falsely advertising shipping speeds of personal protective equipment and refusing to offer refunds. For these rule violations, the FTC further argued that the appropriate measure of consumer redress under Section 19 was net revenue of the PPE sales—$37,549,472.14. In denying the FTC’s request for net revenue, the court distinguished between requiring the agency to demonstrate individual reliance as a means of proving consumer injury and the amount of compensation necessary to redress that consumer injury.Continue Reading Following Noland: Another District Court Tightens the Reins on the Scope of Consumer Redress

With the end of the Supreme Court’s term in June, most eyes have been on the release of the last remaining merits decisions. In the midst of issuing the final opinions of the term, the Court also granted certiorari on a number of cases, one of which—Securities and Exchange Commission v. Jarkesy—might have implications for the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

In Jarkesy, the SEC sued talk radio host George Jarkesy and his two hedge funds (collectively, “the Jarkesy Parties”) through an administrative action before an SEC administrative law judge (ALJ). After an evidentiary hearing, the ALJ determined that the Jarkesy Parties committed securities fraud, and the Commission affirmed the ALJ’s decision, imposing a civil penalty, disgorgement of ill-gotten gains, and enjoining Jarkesy from various securities industry activities. The Jarkesy Parties proceeded to appeal the Commission’s decision to the U.S. Court of Appeals for the Fifth Circuit. The Jarkesy Parties appealed on several constitutional grounds previously raised and denied during the ALJ and Commission proceedings:Continue Reading Supreme Court Case Watch: Securities and Exchange Commission v. Jarkesy and Its Impact on Independent Agencies

Last month, Florida Gov. Ron DeSantis signed the much-anticipated amendment to the Florida Telemarketing Solicitation Act (FTSA) into law, significantly limiting the ability of private plaintiffs to file telemarketing lawsuits under the FTSA. While this will undoubtedly stem the tide of lawsuits under Florida’s law, class action plaintiffs’ attorneys have wasted no time in finding new states to file suit.

Less than a week before Florida amended the FTSA, a plaintiff filed the first lawsuit under Oklahoma’s Telephone Solicitation Act (OTSA), Streater v. WhaleCo, Inc. The lawsuit challenges text messages sent by WhaleCo., the operator of an online marketplace, alleging violations of the Telephone Consumer Protection Act and the OTSA. According to the complaint, the defendant sent multiple texts with coupon codes to the plaintiff to “advertise and call attention to Defendant’s products and related services,”Continue Reading Florida Limits Its Telemarketing Law, but Other State Laws Continue to Gain Traction

In the wake of AMG Capital Management v. FTC and Liu v. SEC, uncertainty has loomed as to how courts should measure the consumer redress available to the FTC under Section 19 of the FTC Act. Earlier this month, a court in the District of Arizona squarely addressed this issue.

Before AMG, the FTC used its ability to obtain injunctive relief in federal court under Section 13(b) of the FTC Act for violations of Section 5 of the FTC Act to also obtain equitable monetary relief. As we’ve previously discussed, the Supreme Court’s decision in AMG put an end to that. As a result, the FTC turned to its authority under Section 19 to obtain redress for rule violations.

The Supreme Court’s decision in Liu, which we also previously covered, held that equitable monetary relief cannot exceed a defendant’s gains after legitimate business expenses. This results in the quandary of how to reconcile this with the text of Section 19, which provides for “such relief as the court finds necessary to redress injury to consumers.”Continue Reading Addressing the Redress: District Court Limits the Scope of FTC Consumer Redress for Rule Violations

The Supreme Court’s opinion last week in National Pork Producers Council v. Ross raises more questions than it answers regarding what state laws might violate the dormant Commerce Clause. California prohibits the in-state sale of pork that comes from pigs raised in “cruel” conditions—even though nearly all the pork sold in California is raised in other states. The Court upheld that law in the face of a dormant Commerce Clause challenge. But the Court’s fractured reasoning makes it hard to predict how other laws might fare.

As a refresher, the Dormant Commerce Clause stems from Congress’s Article 1, Section 8 authority to regulate commerce “among the several States.” In contrast to preemption, which limits states’ authority in an area where Congress has acted, the Dormant Commerce Clause limits states’ ability to regulate even when there is no relevant congressional action. Continue Reading Could Texas Ban the Sale of Union-Made Goods? After National Pork Producers, We Still Don’t Know

In what could be a seminal case of the Internet age, the U.S. Supreme Court this week heard arguments in Gonzalez v. Google, its first case concerning the hotly debated Section 230 of the Communications Decency Act. The case’s potential ramifications might be gleaned from the 70-plus amicus briefs filed by major companies, states, elected officials, and organizations.

Section 230 provides immunity to Internet platforms from liability arising out of third-party content posted to the platform’s websites.  The statute prevents a “provider or user of an interactive computer service” from being treated as “the publisher or speaker of any information provided by another information content provider.” In this case, the Gonzalez family sued YouTube for making targeted recommendations of recruitment videos created by the terrorist organization ISIS. The Gonzalez’s daughter died in an ISIS terrorist attack, and they claim that Section 230 should not shield YouTube from civil liability when its algorithms recommended harmful content such as these videos.Continue Reading For the First Time, Supreme Court Considers Section 230 Immunity for Third-Party Content on Internet Platforms Such as Google and YouTube

FTC investigations require companies to act quickly. Failure to do so can have draconian consequences. Read more for recent case examples.
Continue Reading Spoliation and Failure to Disclose: What Gets Swept Under the Rug in FTC Investigations Lands in a Dangerous Pit