CoA Institute Urges Supreme Court to Rein In FTC’s Unconstitutional Pursuit of Money Damages

Washington, D.C. (November 13, 2019) – Today, Cause of Action Institute (“CoA Institute”) filed an amicus brief in the U.S. Supreme Court supporting cert petitions filed by AMG Capital Management and Publishers Business Services. The petitions urge the Court to review the Federal Trade Commission’s (“FTC”) claim that Section 13(b) of the FTC Act, which authorizes injunctions, also grants the agency power to obtain money damages, raid businesses, and impose asset freezes and receiverships.

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FTC v. Qualcomm: FTC Oversteps its Section 13(b) Authority . . . Again

On August 30, 2019, Cause of Action Institute (CoA) filed an amicus brief in the Ninth Circuit in support of Qualcomm in FTC v. Qualcomm, Inc., No. 19-16122.  This unprecedented, highly controversial case of international importance represents FTC’s latest ultra vires attempt to expand its powers.  It does so here by seeking to transmogrify an alleged breach of contract into an antitrust violation.  A former FTC Commissioner, a current FTC Commissioner, the U.S. Department of Justice, numerous other federal agencies, a former Chief Judge of the Federal Circuit, leading antitrust scholars, and others all publicly oppose FTC’s wayward lawsuit against Qualcomm. Learn More

The D-Link Systems’ Consent Order Explained

On Tuesday, August 6, 2019, the U.S. District Court for the Northern District of California entered a consent order between the Federal Trade Commission (“FTC”) and D-Link Systems, Inc., a U.S. company that is a global leader in connectivity for home, small business, mid- to large-sized enterprise environments, and service providers, resolving an FTC lawsuit alleging that D-Link Systems’ security practices violated Section 5 of the FTC Act.  The D-Link Systems order marks the close of the first ever litigated FTC action over the application of Section 5 to the security practices used for Internet of Things (“IoT”) devices.  This result is good for D-Link Systems, and good for the FTC.

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Court Approves Consent Agreement in Federal Trade Commission v. D-Link Systems

WASHINGTON D.C. (August 6, 2019) – Today, the U.S. District Court for the Northern District of California entered a consent order between the Federal Trade Commission (“FTC”) and D-Link Systems, Inc. Cause of Action Institute has represented D-Link Systems throughout this matter. This joint resolution resolves the FTC’s allegations about the security practices D-Link Systems used for its products. D-Link Systems is an industry leader in Internet of Things (“IoT”) and networking solutions.

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Settlement in Federal Trade Commission v. D-Link Systems Includes No Finding of Liability

WASHINGTON D.C. – Today, Cause of Action Institute (CoA Institute) announced the resolution its client, D-Link Systems, Inc., has reached with the Federal Trade Commission (FTC) regarding the FTC’s allegations about the security practices D-Link Systems used for its products. D-Link Systems is an industry leader in Internet of Things (IoT) and networking solutions.

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Small business owners prevail, Court denies all damages sought by FTC

WASHINGTON D.C. (May 10, 2019) – In a major victory, Cause of Action Institute (CoA Institute) today, celebrated the decision by the U.S. District Court Middle District of Florida denying all damages against its client, small business owners Robert and Angelo Cupo and their business Vylah Tec LLC. In January 2019, the Court found Messrs. Cupo and Vylah Tec liable, however the Court denied all financial damages, decrying the government’s failure to support its demand and writing in its opinion, “[a]s this Court stated in trial, it is obvious that the disgorgement (financial penalty) total is a moving target.” The decision repeatedly chided the government for continually changing both the total damages sought and the basis for the calculations – both of these “moving targets” make it impossible for small business owners like the Cupos to defend. Today’s decision is a major blow to the Federal Trade Commission’s (FTC), which had sought millions of dollars from the small business.

“Today’s decision serves as a rebuke to the Federal Trade Commission’s attempt to confiscate a small business owners’ property while completely ignoring the legal standards required to do so.” said John Vecchione, president and CEO of Cause of Action Institute. “While the Cupos and Vylah Tec may be the named parties, this victory should be celebrated by all small business owners and entrepreneurs who fear the Federal Trade Commission’s wrath, which too often treats small businesses more harshly than larger corporations, and by all supporters of the rule of law.”

Case background

After obtaining a secret court order in early 2017, the FTC targeted, Vylah Tec, LLC, a small family-run tech company and conducted an hours-long raid of the company’s headquarters on suspicion of “deceptive” sales practices because it bore a superficial resemblance to companies with illegitimate practices. The raid was initiated as part of a politically-hyped campaign known as Operation Tech Trap headed by the FTC in conjunction with the Florida Attorney General’s office. Failing to take into account Vylah Tec’s substantial well-regarded services, the government sought to shut the company down, depriving thousands of customers of pre-paid technical support services.

Not only did the FTC demand a freeze of assets of the defendants, but it also went so far as to demand a freeze of the jointly held marital assets of the wife of one of the defendants. After the 11th Circuit Court of Appeals reversed this freeze, the FTC filed a new motion to recapture the same personal assets without the evidence needed in equity. The Court strongly rebuked the motion. In September, the government prevailed in finding Messrs Cupo and V-Tec liable for damages. However, as the Court found today, the government was unable to prove these damages.

The Vylah Tec case demonstrates the vast power of the federal government and the ability of the FTC to use a court order obtained in secret to deny a family-run company due process by swooping in and seizing assets—including the money they needed to hire a lawyer and mount a defense. Cause of Action Institute firmly believes a prosperous society allows all individuals, entrepreneurs, and companies an opportunity to succeed, but far too often when facing the FTC, companies or individuals have their livelihoods threatened and must defend themselves against a regulatory authority with near endless resources and no motive to render justice.

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Media ContactMatt Frendewey, matt.frendewey@causeofaction.org | 202-699-2018

CoA Institute Files Amicus Brief in FTC v. AMG Capital Management

On March 14, 2019, Cause of Action Institute (CoA Institute) filed an amicus brief in the Ninth Circuit in support of an en banc petition to rehear a three-judge panel ruling for the Federal Trade Commission (FTC) in FTC v. AMG Capital Management, LLC, et al., No. 16-17197.

This case addresses the important issue of the power of the FTC to take businesses’ property without the due process protections Congress has placed around such confiscation. Here, for example, the FTC used Section 13(b) of the FTC Act to obtain a judgement of over one billion dollars against AMG Capital Management, LLC (AMG) for practices that the FTC (which began its investigation in 2002) never notified AMG were, in the FTC’s view, unlawful until it sued a decade later in 2012. Congress, however, only provided the FTC with power to obtain such relief under Section 19 of the FTC Act, which established a number of procedural safeguards that ensure companies’ ability to defend themselves, including a requirement that the FTC must prove that the defendant knew or should have known its actions were wrongful and a three-year statute of limitations. Section 13, on the other hand, was enacted so that the FTC could quickly get preliminary injunctive relief to stop a company from doing harm to consumers if it could show an ongoing, current violation.

The FTC, in keeping with the tropism of agencies to aggrandize their power beyond Congressional limitations, set out to persuade the judiciary that Section 13(b) allowed the agency, through “ancillary” relief under equity, to get the same confiscations Congress allowed under Section 19. The Ninth Circuit long ago accepted this argument. In this case, however, two Judges ruling for the FTC stated that they had to rule that way as precedent demanded it, but that the larger Ninth Circuit (by an en banc panel) should review the case and change that Circuit’s precedent in light of subsequent Supreme Court rulings, notably, Kokesh v. Securities and Exchange Commission, 137 S. Ct. 1637 (2017).

The amicus brief focuses on the long-term strategy of the FTC to lead the Courts astray on what Congress had allowed and not allowed by enacting specific sections of the FTC Act to do different things. The Washington Legal Foundation and the Chamber of Commerce also urged in amicus briefs that the Ninth Circuit take up this case to right a legal error of the past.

Our full amicus brief can be view here.

John J. Vecchione is President and CEO at Cause of Action Institute.