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English Language Prevails at Supreme Court

Senior Fellow and Director, Center for the Economics of the Internet
Legal Fellow, Center for the Economics of the Internet
The United States Supreme Court during a warm autumn day on October 22, 2020 in Washington, DC (Photo by Samuel Corum/Getty Images)
The United States Supreme Court during a warm autumn day on October 22, 2020 in Washington, DC (Photo by Samuel Corum/Getty Images)

Does the phrase “permanent injunction” actually mean “monetary damages?”

No, it doesn’t. The Supreme Court unanimously ruled as much in a recent victory for both the rule of law and the English language.

The case before the Court involved §13(b) of the Federal Trade Commission Act. For decades, the FTC relied upon this section, which by its text empowers it to seek permanent injunctions against accused parties, to also seek monetary damages against them—a power that the section does not explicitly grant. Doing so allowed the FTC to skirt administrative procedural protections for accused parties and to pre-emptively seize their assets before any finding of wrongdoing.

No more. In a unanimous opinion authored by Justice Breyer, the Court reviewed the history of the law in question. Breyer explained that §13(b) of the FTC Act, crafted by Congress in 1973, was never designed to address monetary damages. Rather, Congress explicitly addressed monetary damages with §19 of the Act, which it authored two full years after §13(b). Crucially, §19, unlike §13(b), affords accused parties certain due process rights before the FTC can seek damages in court.

Yet, as the Court details, the FTC began to rely upon §13(b) in the 1990s to seek monetary damages from accused parties. The FTC stopped this practice in 2003, save for “extraordinary circumstances.” But the pause was short-lived, and the Commission resumed the practice in 2012. It has brought cases seeking monetary damages under §13(b) ever since.

Thanks to the Court, that will have to change. Per its unanimous opinion, Congress meant what it said in 1973. Simply put, “permanent injunction” does not mean “monetary damages.” By interpreting otherwise, the FTC gave itself powers that weren’t granted to it by Congress. As the Court noted, “Congress . . . does not hide elephants in mouseholes.”

Absent these administrative proceedings, the prior §13(b) interpretation devised by the FTC allowed it to go directly to federal court and request monetary relief from an accused party. An accused party never had the opportunity to present a defense before the FTC sought these damages. Sometimes the damages sought were in excess of the total assets a party had, leaving it scant resources with which to mount a legal defense.

Unsurprisingly, the FTC discovered that by utilizing this tactic, it gained substantial negotiating leverage. As a result, accused parties routinely settled with the FTC, agreeing to financial penalties before any formal finding of wrongdoing.

Perhaps some—or even most—parties were guilty as charged. But surely others were innocent yet saw no chance of survival when confronted by a federal government agency imbued with such awesome powers, unbound by the typical restraints of due process.

Courts, for good reason, often avoid blocking the actions of federal agencies. The FTC consists of five Senate-confirmed commissioners responsible for implementing a federal statute designed to protect American consumers. No judge wants to impede it. Most of its judgments are correct, and courts should generally support it.

But federal law is not based on a presumption that government agencies are infallible in their actions. The possibility of governmental mistakes is precisely why the Constitution protects individuals and firms from the mistakes of government, whether intentional or not. The Fifth Amendment right to due process, as well as the Fourth Amendment’s prohibition of unreasonable government searches and seizures of property, are necessary not because government agencies are always right, but precisely because they are not.

In its opinion, the Supreme Court notes that the FTC could ask Congress to create the statutory authority that it presumed it already had. But doing so would be a mistake.

The Supreme Court did not address the constitutionality of statutory language that might support the FTC’s strong-arm tactics of seizing assets before formal findings of wrongdoing. But it is difficult to comprehend how such a statute would be constitutional.

Under the Constitution, an executive cabinet agency cannot unilaterally seize assets before a proceeding to determine wrongdoing. Neither can Congress. Nor can courts by themselves. Thus, it is difficult to see how a statute could confer on the FTC a power that no other part of government could constitutionally execute.

At least for the moment, the English language has triumphed at the Supreme Court. One day, it may be the Constitution’s turn.

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