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Tuesday, December 15, 2020
Housing Clinic Files SCOTUS Brief on Behalf of Consumers
The Mortgage Foreclosure track of the Housing Clinic at Yale Law School filed an amicus brief on December 7, 2020 arguing that courts should be able to give ill-gotten profits back to the Federal Trade Commission for distribution to consumers. The Clinic, the hub for consumer law at the Law School, submitted the brief in support of respondents at the Supreme Court in AMG Capital Management, LLC v. Federal Trade Commission, which the Court will hear on January 13, 2021.
In the case, the Housing Clinic, along with the National Consumer Law Center, the Center for Consumer Law and Education, the Berkeley Center for Consumer Law and Economic Justice, and Professor Craig Cowie, Director of the Blewett Consumer Law & Protection Program at the University of Montana, supported the FTC in a conflict over statutory interpretation and court power to award restitution to wronged consumers.
AMG Capital Management, represented by MoloLamken, targeted low-income customers offering loans with unclear terms. These loans would purport to be for one amount, but could end up being many times that amount in the fine print. Its affiliated websites, like 500FastCash, OneClickCash, Ameriloan, and others, originated more than five million payday loans, each generally disbursing between $150 and $800 at a triple-digit interest rate, according to the clinic. Its founder, Scott Tucker, received a 200-month sentence as a result of his activities.
AMG challenges the district court’s right to give the illegal profits to the FTC to disburse to consumers. After the FTC prevailed in the Ninth Circuit Court of Appeals, AMG Capital Management filed a cert petition, pointing to a circuit split with the Seventh Circuit. If the FTC loses the case, courts will lose their right to award money damages to the FTC under 13(b) of the Federal Trade Commission Act (FTC Act), according to members of the clinic.
“Losing this case would be really detrimental to the FTC,” said Morgan Savige ’22, a student in the Clinic. “They wouldn’t really be able to remedy harm done by refunding consumers, and they wouldn’t be able to prevent future fraud. Scammers would potentially leave these cases financially intact, so they could start new companies and defraud a new set of consumers.”
The amici argue that based on the historic definition of equity and equitable relief, profits remedies should be permitted under Section 13(b). They point out that when Section 13(b) invokes injunctive relief, it opens the door for a court to use any of its equitable powers necessary to fully remedy the injustice. The amici state that these full equitable powers are crucial for the FTC to be able to remedy the harm done to fraud victims. Equitable relief has allowed millions of dollars to return to veterans who were deceived by for-profit colleges and hundreds of thousands to elderly consumers who were misled into purchasing medications to treat arthritis and other conditions but that do not live up to the claims made by the companies, according to members of the clinic.
“Without equitable relief, people who have lost hundreds of dollars or invested thousands into their education would get nothing back, despite being taken advantage of by a scam that the FTC has cracked down on,” said Clinic member Sophie Laing ’21.
Finally, the amici assert that these equitable powers were never specifically curtailed by Congress, and so courts still have them at their disposal. For decades, Congress has witnessed courts award these profits remedies to the FTC and has never intervened.
“The courts and the FTC have been providing critical consumer redress to impacted individuals, especially in vulnerable populations, for nearly forty years,” said Clinic member Chaaru Deb ’21. “Congress has ratified this meaning of the FTC Act on multiple occasions and the Supreme Court should not now rewrite the statute to disrupt decades of precedent.”
The Housing Clinic maintains an active appellate caseload and has participated in 15 different appellate matters in Connecticut alone as counsel or amicus since 2014. This is the fourth time since 2015 that the Housing Clinic has participated as amicus in a consumer law case in front of the U.S. Supreme Court.
“Working with the students and our friends across the country was a great experience,” said George W. and Sadella D. Crawford Visiting Clinical Lecturer Jeff Gentes. “We did more than defend the administrative state from another corporate attack; we helped shine a spotlight on the unsavory characters targeted by the FTC for much needed enforcement.”
Housing Clinic members who worked on the brief are Chaaru Deb ’21, Sophie Laing ’21, Morgan Savige ’22, Isabel Echarte ’21, and Natasha Khan ’21 along with supervisors Nathan Baker Clinical Professor of Law J.L. Pottenger, Jr. ’75 and George W. and Sadella D. Crawford Visiting Clinical Lecturer Jeff Gentes.