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Eleventh Circuit Says FTC Can Seek Asset Freezes and Receivership Under Section 19

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As the dust settles from the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021), which gutted the Federal Trade Commission’s authority to obtain equitable monetary relief in court, the contours of the FTC’s remedial authority continue to be shaped by the lower courts.

Most recently, the Eleventh Circuit weighed in on whether Section 19 of the FTC Act authorizes the FTC to obtain an asset freeze and impose a receiver. Prior to AMG, the FTC routinely obtained such preliminary relief against companies and individuals the FTC believed were engaging, or about to engage, in unfair deceptive business practices. In doing so, the FTC would rely on its authority under Section 13(b) of the FTC Act. However, after AMG, the FTC can only use Section 13(b) to obtain forward-looking injunctive relief.

In an published opinion, the Eleventh Circuit denied a motion to dissolve a preliminary injunction that was entered in 2018 against a company, Simple Health Plans LLC, and its owner. At the time, the FTC invoked Section 13(b) as the basis for the injunction, asset freeze, and receivership. About a year after the lawsuit was filed, the FTC amended its complaint and added Section 19 as an alternative basis for relief.

In denying the motion, the Court concluded that even though Section 19 does not explicitly authorize preliminary measures of relief, the statute gives courts broad authority to grant remedies that are “necessary to redress injury to consumers.” Where, as here, an asset freeze and receivership are necessary to preserve funds for a future monetary judgment, such measures are authorized by Section 19. The Court also reaffirmed that Section 19 applies to the Telemarketing Sales Rule.

This means we can expect the FTC to ramp up its use of ex parte temporary restraining orders and other forms of draconian preliminary relief against companies and individuals who are already under a consent order or who are accused of violating a regulation, such as the TSR.

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