81 F.4th 710
7th Cir.2023Background
- Michael Brown owned Credit Bureau Center, which ran websites offering a “free” credit report but enrolled users in a $29.94/month subscription via a buried “negative option” feature; contractors drove traffic using fake Craigslist rental ads.
- The FTC sued alleging ROSCA and FTCA violations; the district court entered a permanent injunction and ordered about $5.26 million in restitution.
- On first appeal, the Seventh Circuit affirmed liability under ROSCA but held that 15 U.S.C. § 53(b) (FTCA §13(b)) does not authorize monetary relief, overruling Amy Travel.
- The Supreme Court resolved a circuit split in AMG Capital, holding §13(b) does not allow equitable monetary relief, and remanded this case.
- The FTC moved under Rule 59(e) to amend the judgment and reimpose restitution on the alternative statutory basis of ROSCA (and §19 of the FTCA); the district court granted the motion and reinstated the $5.26 million award.
- On this appeal the Seventh Circuit affirmed the amended judgment except it struck a provision requiring any leftover funds to be deposited to the U.S. Treasury as “disgorgement,” because §19 permits only consumer redress.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the amended judgment violates the mandate rule / law of the case | The amended judgment rests on ROSCA/§19, a different statutory basis permitted on remand | The court’s prior decision rejecting monetary relief under §13(b) bars any monetary award on remand | Affirmed: mandate/law-of-the-case not violated because earlier opinion addressed §13(b) only and did not preclude relief under a different statute |
| Whether Rule 59(e) amendment was permissible based on intervening change in law | AMG Capital and the Seventh Circuit’s prior decision overturned long-standing circuit precedent (Amy Travel), constituting an intervening change justifying amendment | No intervening change; Commission should not relitigate remedies | Affirmed: the Supreme Court’s AMG decision and the circuit decision constitute an intervening change supporting Rule 59(e) relief |
| Whether the FTC waived reliance on ROSCA/§19 by originally relying on §13(b) | FTC did not waive; ROSCA violation was litigated and affirmed, and pursuing §13(b)-based restitution tracked then-prevailing precedent | FTC waived or should be estopped from switching remedial bases after litigating under §13(b) | Affirmed: no waiver; ROSCA/§19 was available and properly invoked after intervening change in law |
| Whether post-Liu net-profit/tracing limits apply to the restitution award | §19 authorizes consumer redress including refund of money; award is refundary and need not be limited to net profits/tracing | Liu requires disgorgement be limited to net profits and traceable funds (thus requiring recalculation) | Held for FTC: Liu’s net-profits rule applies to equitable disgorgement claims, but §19 authorizes statutory consumer redress (refunds) not constrained by Liu’s equitable net-profit tracing rule |
| Whether directing leftover funds to U.S. Treasury as “disgorgement” is permissible | (FTC conceded) surplus funds should not be treated as disgorgement under §19 | That provision exceeds §19’s remedial scope | Reversed that part: court modified judgment to remove the Treasury/disgorgement directive because §19 is limited to consumer redress |
Key Cases Cited
- Amy Travel Service, Inc. v. United States, 875 F.2d 564 (7th Cir. 1989) (prior Seventh Circuit precedent holding §13(b) authorized restitution; later overruled)
- FTC v. Credit Bureau Ctr., 937 F.3d 764 (7th Cir. 2019) (Seventh Circuit’s earlier opinion: affirmed liability under ROSCA and held §13(b) does not authorize monetary relief)
- AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021) (Supreme Court: §13(b) does not grant authority to obtain equitable monetary relief such as restitution or disgorgement)
- Liu v. SEC, 140 S. Ct. 1936 (2020) (Supreme Court: equitable disgorgement is limited to a wrongdoer’s net profits and requires traceability)
- CFPB v. Consumer First Legal Grp., LLC, 6 F.4th 694 (7th Cir. 2021) (applied Liu’s principles to other statutes where relief was equitable)
- Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir. 1998) (Rule 59(e) may be granted for an intervening change in controlling law)