Judge Tells FTC That It Can’t Have Its Part III and Eat It, Too

I’ve never really understood the saying “You can’t have your cake and eat it, too,” but I was reminded of it when I read U.S. District Judge Amy Totenberg’s opinion rejecting the FTC’s efforts to stay or voluntarily dismiss the federal court action brought against Fleetcor and its CEO.

Some background: The FTC sued Fleetcor in December 2019 in federal court in Georgia, alleging the fleet leasing company failed to adequately disclose the fees it charged and made deceptive claims about the money that businesses could save by using its services The case was litigated furiously, but then the Supreme Court gutted the FTC’s claim for relief in AMG. When a quick congressional fix did not occur, the FTC engaged in an “inventive” litigation strategy. The agency filed an administrative (Part III) action before its ALJ and asked the district court to stay or dismiss without prejudice the district court proceeding. The FTC indicated it intended to return to the district court after the conclusion of the administrative proceeding to recover redress under Section 19(a)(2). The defendants opposed the motion.

On February 7, 2022, Judge Totenberg denied the FTC’s motion. Summary judgment and Daubert motions had been fully briefed before the FTC filed its administrate complaint and sought a stay. The FTC urged the stay, arguing that the administrative proceeding could essentially pick up where district court litigation left off and be completed quickly.

In rejecting the stay, the court noted that no court had ever adopted the approach urged by the FTC, nor was the FTC taking that approach in any other proceedings. While sympathetic to the FTC’s stated desire to preserve redress claims that would be extinguished by Section 19’s three-year statute of limitations if the action was dismissed rather than stayed, the court ultimately ruled that the most efficient course was to adjudicate the matter before it to conclusion. The court did not accept the FTC’s assertion that the administrative proceeding could be concluded in a few months.

For similar reasons, the court denied the request for dismissal without prejudice. Fleetcor argued such a request was made by the FTC in bad faith and violated due process. Fleetcor asserted that the administrative proceeding was inherently unfair without a neutral decision maker and that the FTC would have gained the benefit of knowing how Fleetcor would defend the case. Fleetcor also attacked the FTC’s reasons for seeking the dismissal as pretextual.

Judge Totenberg rejected the attacks on the FTC’s motives and on the fairness of the administrative proceedings. On the question of whether the FTC administrative proceedings provided due process, the court followed Supreme Court precedent, finding that the combination of investigation and litigation functions in an agency, without more, does not violate due process.

In refusing to dismiss without prejudice, however, the court found that, given that discovery was closed and summary judgment and Daubert briefing concluded, judicial efficiency pointed to having the court resolve the matter through motion practice or trial.

Interestingly, Judge Totenberg indicated that after the court issues its decision on liability, the FTC could commence an administrative proceeding for its own administrative cease and desist order. Indeed, the defendants committed that they would not argue that the issuing of an administrative cease and desist order was rendered moot by the district court adjudication. Of course, a defense verdict or decision would seem to render that exercise impossible, given issues of res judicata and collateral estoppel. For now, the battle over liability will be fought in the district court.

The decision here highlights how much the FTC’s litigation playbook was torn up by the decision in AMG. The FTC continues to be aggressive and creative in working around that roadblock, but with mixed results. Here, the court found the FTC’s effort to be half-baked.