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WBK Industry News - Litigation Developments

9th Circuit: FTC Can Get Injunction in Court Without Showing Irreparable Harm

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a preliminary injunction freezing assets and prohibiting defendants from engaging in certain business practices without a showing of irreparable harm (ordinarily required for preliminary injunctions) because the action was brought by the FTC under the Federal Trade Commission Act, which explicitly authorizes injunctive relief.

The defendants operated a loan modification program, and according to the FTC, deceived consumers by misrepresenting the likelihood of obtaining a successful loan modification, charging consumers advance fees, suggesting they were affiliated with government programs, and instructing consumers to stop making mortgage payments.  Defendants also allegedly failed to perform the services they promised, sometimes failing to contact lenders entirely.  Defendants were charged with two violations of the FTC Act and four violations of the Mortgage Assistance Relief Services (MARS) rule.  The FTC sought injunctive and other equitable relief under the FTC Act, arguing that it was likely to succeed on the merits of its claims and that the injunction was in the public’s interest.  The FTC also argued that the FTC Act allows injunctive relief without a showing of the likelihood of irreparable harm should the injunction not be granted, and therefore that the FTC was not required to make such a showing.  The district court agreed and granted the preliminary injunction.

Defendants appealed, arguing that the FTC Act permits the granting of an injunction without a showing of irreparable harm only when such relief is pursued alongside an administrative action, which was not the case here.  The appeals court disagreed and cited previous Ninth Circuit cases holding that irreparable harm is presumed any time an agency pursues injunctive relief under statutory authority.

The panel applied this precedent despite the appellants’ argument that these cases were overturned by a 2008 Supreme Court case, Winter v. Natural Resource Defense Council, Inc., which requires a plaintiff seeking injunctive relief to demonstrate the likelihood of irreparable harm.  The panel claimed that the holding of Winter is not “clearly irreconcilable” with Ninth Circuit precedent despite there being “some tension” between the holdings, because Winter did not mandate a new standard for injunctive relief in the statutory context but merely “clarified application of the well-established equitable test for a preliminary injunction.”  In support of its position, the panel cited a D.C. Circuit case from 1981 which describes Congress’s intent in drafting the portion of the FTCA authorizing injunctive relief as “lighten[ing] the agency’s burden by eliminating the need to show irreparable harm.”  Therefore, the panel explained, while an injunction traditionally requires a showing of irreparable harm, as reinforced by Winter, the exception for statutorily-authorized injunctive relief still stands, and the district court did not err in granting injunctive relief in this case.