California Federal Court Suspends Trial Pending Supreme Court Ruling On Scope Of Section 13 (b) Of The FTC

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On August 20, a Northern District Court of California stayed the trial of an action FTC sued against Lending Club in 2018 pending a Supreme Court ruling on the FTC’s power to seek monetary restitution under Section 13 (b) of the FTC Act. The question of whether the FTC has the power to seek pecuniary relief under section 13 (b) was submitted to the Supreme Court in two certiorari applications which were consolidated and accepted for consideration by the High Court in July. These cases, FTC c. Credit Bureau Center and AMG Capital Management, LLC v. FTC, will be debated in October.

In his Loan Club complaint, the FTC had requested substantial monetary relief from LendingClub in accordance with its authority under section 13 (b), in the form of “termination or reform of contracts, restitution, reimbursement of monies paid and restitution of ill-gotten monies. . “The trial in Loan Club was scheduled for October. In concluding that the stay of this trial was justified, the Loan Club The court noted that the FTC’s power to seek pecuniary relief under Section 13 (b) (or lack thereof) is “a matter of considerable importance to this case.” The court explained: “[g]moving forward with the lawsuit would unnecessarily force LendingClub to present a lawsuit defense only so that the entire company would eventually be raised by the FTC’s inability to seek monetary relief under Section 13 ( b).

The FTC had argued that the difficulty of making a meritorious defense while the Supreme Court’s 13 (b) decision was pending did not merit a stay. The Loan Club The court vigorously rejected the FTC’s argument, ruling that the issue was not simply a question of hardship, but “the viability of the remedy underlying the case.” Given that the remedy itself has the potential to be extinguished in the coming months, the court concluded that holding a trial before the Supreme Court ruling questions “is fundamentally unfair.” The Loan Club The court noted that a Supreme Court ruling limiting the powers of the FTC under section 13 (b) “would greatly simplify[y]”the case,” because no monetary relief will be involved. “The court predicted that” the elimination of monetary relief will likely facilitate a negotiated resolution. “


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