Federal Trade Commission v. American Screening, LLC, a Louisiana limited liability company

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 23-1616
___________________________
Federal Trade Commission
lllllllllllllllllllllPlaintiff - Appellee
v.
American Screening, LLC, a Louisiana limited liability company; Ron Kilgarlin,
Jr., individually and as an officer of American Screening, LLC; Shawn Kilgarlin,
individually and as officer of American Screening, LLC
lllllllllllllllllllllDefendants - Appellants
____________
Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
____________
Submitted: April 9, 2024
Filed: June 27, 2024
____________
Before BENTON, ARNOLD, and STRAS, Circuit Judges.
____________
ARNOLD, Circuit Judge.
At the outset of the COVID-19 pandemic, American Screening, LLC, promised
buyers that it would ship personal protective equipment, or PPE, more quickly than
it actually did. The Federal Trade Commission sued American Screening, alleging
that its shipping policies and practices had violated the FTC Act and the Mail,

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Internet, or Telephone Order Merchandise Rule—a rule known as MITOR. The
district court1 granted the FTC summary judgment and ordered American Screening
to return almost $14.7 million to consumers and permanently enjoined it from
advertising or selling PPE. American Screening challenges the district court's ordered
remedies on appeal, but we affirm.
American Screening is a Louisiana company that sold much of its products
online. Before the pandemic, it mostly sold medical tests and equipment, though it
also sold some PPE, including masks, gloves, disinfectant, and hand sanitizer. In
March 2020, American Screening advertised PPE on Google and through emails to
consumers, and its volume of PPE sales increased significantly. When customers
purchased PPE from American Screening's website, their accounts were charged as
soon as they submitted their orders. The website contained a shipping policy that
provided that "[o]rders received before 2:00 pm CST will be processed that day and
in some cases orders called in by 4:00 pm CST can be processed that day. All
shipping occurs 24-48 hours after processing, pending product availability." Several
customers referred to this shipping policy in their communications with American
Screening.
At some point, most likely in mid-to-late March 2020 though the exact date is
uncertain, American Screening began to advise on its website that "[p]roducts may
ship 7-10 business days after order has been placed." It told the district court that this
"'7-10 day' language can be seen at the top of every [American Screening] webpage."
But it appears that American Screening did not delete the earlier assertion on its
website that "[a]ll shipping occurs 24–48 hours after processing," meaning that
consumers received mixed messages about when products would ship. An FTC
investigator submitted a declaration that contained screenshots of American
1The Honorable Ronnie L. White, United States District Judge for the Eastern
District of Missouri.
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Screening's website from June 18, 2020, and on the very page that contained
American Screening's 24–48-hour shipping policy, the top of the page asserted that
"[p]roducts may ship 7–10 days after order has been placed." The parties do not point
to any place in the record showing that American Screening ever removed any
reference to its 24–48-hour shipping policy.
American Screening also represented on its website that many products were
in stock and available to ship, but consumers discovered that they weren't. As the
district court noted, the parties dispute how frequently this happened, but American
Screening appears to admit that it received complaints from many consumers about
products being listed "in stock" when the consumer ordered them, only to find out
after payment that the product was not in stock but had been backordered. In addition,
American Screening's website on occasion noted that some items were out of stock,
and for some of those items, American Screening provided estimated shipping dates.
So, for example, on one page of American Screening's website purportedly captured
on June 18, 2020, a specific kind of hand sanitizer gel is listed as out of stock but
could be expected to ship between June 22 to June 27.
American Screening struggled to fill the influx of PPE orders. Its manager of
customer service testified that, despite the company's promises about early shipment,
in practice it took about six weeks for PPE to be shipped after the customer had
purchased it. American Screening also filled some orders for unavailable products
with similar, available items that the buyer didn't order. And for some orders
American Screening simply never shipped anything. Many customers complained.
The customer service manager estimated that, throughout 2020, American Screening
got about 1500 emails and 500 calls daily regarding customer orders. She explained
that "all the customers sa[id] pretty much the same thing: Where is my order?"
American Screening did not call all its affected customers to determine whether
they wanted a refund or would consent to shipping delays in lieu of a refund, nor did
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it cancel orders absent a customer request. But even when a customer requested a
refund American Screening often declined to provide it. One employee testified that
American Screening had denied most refund requests and that, if customers requested
a refund because they hadn't received the products they ordered, American Screening
would ship them the product instead. As founder, CEO, and president Ron Kilgarlin
noted in an email to employees, "we don't won't [sic] cancelled orders." Many
customers attempted to get their money back by pursuing chargebacks with credit
card companies, and the manager of customer service said that there were so many
chargebacks to investigate that it became her "primary focus."
The FTC brought suit against American Screening in August 2020, alleging
that it had committed deceptive acts or practices by making "false, misleading, or
unsubstantiated" representations about product availability and shipping times in
violation of the FTC Act. See 15 U.S.C. § 45(a)(1). It also alleged three violations of
MITOR, which imposes certain relevant obligations on sellers. First, MITOR requires
that, when a seller solicits online purchases, it must have "a reasonable basis to expect
that it will be able to ship any ordered merchandise" within the time clearly and
conspicuously stated in the solicitation or, if no such time is stated, within thirty days
after receiving an order. See 16 C.F.R. § 435.2(a)(1). Second, when a seller fails to
ship merchandise within these time requirements, it must offer the buyer, without a
demand, "an option either to consent to a delay in shipping or to cancel the buyer's
order and receive a prompt refund." See id. § 435.2(b)(1). Third, a seller must cancel
an order and promptly refund money to a buyer when it fails to give the buyer the
option to consent to a shipping delay and hasn't shipped the item within the applicable
time requirements. See id. § 435.2(c)(5).
In awarding the FTC summary judgment, the district court held that American
Screening had violated these three provisions of MITOR as well as the FTC Act
itself. American Screening does not appear to challenge these determinations on
appeal. Over American Screening's objection, the district court also ordered that it
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refund $14,651,185.42 to customers, which was the revenue American Screening
generated from PPE sales in 2020 that were shipped more than 48 hours after the
customer's purchase, less refunds that it had already issued. We review the court's
award for an abuse of discretion. See F.T.C. v. Sec. Rare Coin & Bullion Corp., 931
F.2d 1312, 1316 (8th Cir. 1991).
American Screening takes aim at many aspects of this award. We begin with
its contention that the court should not have simply considered whether consumers
were injured in some kind of aggregate but should have instead considered whether
each individual consumer had relied on American Screening's shipping
representations and had sustained an injury as a result. We rejected a similar
contention in Rare Coin, where the FTC alleged that a company had violated the FTC
Act when it "fraudulently marketed rare coins to consumers for investment purposes."
See id. at 1313. In doing so, we directly addressed the company's contention that the
FTC had to show that each individual consumer had relied on false or misleading
statements before he could be reimbursed. We explained that the FTC merely had to
show that the misrepresentations or omissions were of a kind that reasonable and
prudent purchasers rely on, that they were widely disseminated, and that injured
consumers actually purchased the defendant's products. See id. at 1316. Adopting the
company's position, we said, would frustrate the public purposes of an FTC action,
as "[t]his is not a private fraud action, but a government action brought to deter unfair
and deceptive trade practices and obtain restitution on behalf of a large class of
defrauded investors." See id.
There can be no serious contention that the FTC has not made the showing here
that Rare Coin requires. The record shows that American Screening's PPE sales
exploded at the beginning of the pandemic largely because of its representations to
desperate consumers that it had PPE in stock and ready to ship, and American
Screening doesn't seriously contend otherwise. To the extent it argues that reasonable
consumers wouldn't have relied on its express promises as the pandemic set in, we
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disagree. See F.T.C. v. Five-Star Auto Club, Inc., 97 F. Supp. 2d 502, 528 (S.D.N.Y.
2000). Suppliers presumably count on consumers to believe and act on promises of
prompt shipping.
It is true that the FTC in Rare Coin obtained equitable monetary relief under
a different legal provision, 15 U.S.C. § 53(b), from the one it invokes here, see id.
§ 57b(b), and that courts may no longer award equitable monetary relief under
§ 53(b). See AMG Capital Mgmt., LLC v. FTC, 593 U.S. 67, 70 (2021). Though AMG
Capital renders part of our opinion in Rare Coin no longer good law, we draw from
the part of that opinion that AMG Capital did not call into question, namely, the part
that shines light on how courts might shape equitable monetary relief (assuming the
relevant law makes it available) in cases, like this one, where the FTC is seeking a
remedy on behalf of a large class of consumers because of a company's widespread
deceptive trade practices. We note, moreover, that other courts have applied Rare
Coin's principles in § 57b(b) cases. See, e.g., F.T.C. v. Figgie Int'l, Inc., 994 F.2d 595,
605–06 (9th Cir. 1993) (per curiam).
Whatever other courts may have done, we need to ensure that Rare Coin is
compatible with the text of § 57b(b) before using it to guide our decision. Section
57b(b) states that, in cases where the FTC brings suit in federal court against someone
for violating one of its rules (such as MITOR), the court has "jurisdiction to grant
such relief as the court finds necessary to redress injury to consumers," including "the
refund of money or return of property." But the court cannot "authorize the imposition
of any exemplary or punitive damages."
American Screening maintains that the district court's equitable monetary relief
went beyond what was necessary to redress consumers and so amounts to an award
of exemplary or punitive damages, contrary to § 57b(b). We disagree. The court took
pains to ensure that the relief it ordered wasn't punitive. It began with American
Screening's net revenue from its 2020 PPE sales that were shipped over 48 hours after
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purchase (and thus presumably late). But it didn't stop there. It recognized that some
consumers might have been satisfied with their orders, even if they arrived late. So
it ordered the FTC to implement a plan that required customers to request a refund
before receiving one. It also ordered the FTC to hold the money in an escrow account
and, no later than 120 days after consumers are notified of the refund program,
directed the FTC to return the leftover money to American Screening, less the costs
of administering the program. We don't see this as a punitive or unnecessary award,
but one tailored to ensure that dissatisfied consumers are made whole while also
ensuring that American Screening does not have to pay unharmed customers as
punishment. We note that other courts have approved similar plans in cases involving
the FTC and companies that violated MITOR at the outset of the pandemic. See FTC
v. QYK Brands LLC, 2024 WL1526741, at *2 (9th Cir. Apr. 9, 2024) (unpublished);
FTC v. Zaappaaz, LLC, 2024 WL 1237047, at *10 (S.D. Tex. Mar. 21, 2024).
Relatedly, American Screening faults the court for pegging the monetary award
to its net revenue without taking into account that the products consumers received
have value, which, it says, leads to a windfall for consumers. Courts have routinely
rejected this contention. To illustrate why, consider an analogy that the Ninth Circuit
raised in Figgie. That court explained that there's nothing inherently dishonest about
selling rhinestones, and indeed they have some value. But it is dishonest to represent
that a rhinestone is a diamond and then charge a diamond price for it. A customer
who bought a rhinestone on the belief that it was actually a diamond should have the
opportunity to get all his money back, and a court should not limit the customer's
recovery to the difference in value between a diamond and a rhinestone because the
seller's misrepresentation tainted the purchasing decision. If the seller had told the
truth, the buyer might not have bought the rhinestone in the first place. See Figgie,
994 F.2d at 604, 606. In other words, the consumer has lost the chance to avoid the
purchase entirely, see Zaappaaz, 2024 WL 1237047, at *9, and is stuck with one that
he did not intend to make.
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Calculating the award starting with net revenues as a base isn't about punishing
the wrongdoer, as American Screening maintains. It's about restoring the buyer to the
position he was in before the sale and before he was duped into purchasing products.
We've not found a single court that has held to the contrary for pre-purchase
misrepresentations. We also see no reason why misrepresentations about the qualities
of a product should be treated differently from misrepresentations about the time
within which a consumer could expect to receive the product. Had American
Screening's customers known that they would not receive their PPE for over six
weeks, they likely would have made their purchases elsewhere. And if some
customers did not mind the delay, the court's remedial plan is designed to prevent
those customers from recovering a windfall. See QYK Brands, 2024 WL 1526741, at
*3.
But, American Screening says, consumers should at least be required to return
their products before receiving a refund. We doubt that is even feasible for PPE
products that were ordered four years ago, and doing so would arguably reward
American Screening for shipping items late rather than complying with MITOR's
refund-or-consent obligation. In any case, we could hardly fault the district court
since American Screening did not ask it to order consumers to return their purchases.
In the circumstances, the court did not abuse its discretion in not ordering that
consumers return the products before receiving a refund.
Finally, American Screening takes issue with the court's presumption that all
PPE orders that shipped more than 48 hours after purchase were late. But this is just
a repackaging of the argument that the FTC had to show that each individual
consumer was injured, which we've already addressed. Further, we don't think the
court abused its discretion in presuming that items shipped 48 hours after purchase
were late since that representation appears to have been made when most, if not all,
purchases were made. Even if American Screening made other shipping
representations at the same time, we do not believe it was an abuse of discretion for
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the court not to reward American Screening for its mixed messages. As the district
court explained, American Screening should bear the risk of uncertainty that its
deception (and lack of recordkeeping) created, as "[t]he most elementary conceptions
of justice and public policy require that the wrongdoer shall bear the risk of the
uncertainty which his own wrong has created." See Bigelow v. RKO Radio Pictures,
Inc., 327 U.S. 251, 265 (1946). And again, to the extent that consumers relied on, say,
the "7–10 business days" representation instead of the "24–48 hour" representation
(and American Screening actually shipped the order within 7–10 business days), the
structure of the court's award is meant to weed out satisfied customers from recovery.
In sum, we affirm the court's grant of equitable monetary relief.
We turn next to American Screening's challenge to the district court's decree
permanently enjoining it from advertising or selling PPE. The district court held that
"[t]he egregious nature" of American Screening's conduct warranted the injunction,
as it "made several misrepresentations regarding shipping and availability of PPE
during a global pandemic." It also found that the injunction would not unduly harm
American Screening. "The decision to grant or deny permanent injunctive relief is an
act of equitable discretion by the district court, reviewable on appeal for abuse of
discretion." SD Voice v. Noem, 60 F.4th 1071, 1077 (8th Cir. 2023).
The FTC sought the injunction under 15 U.S.C. § 53(b), which says that when
the FTC has reason to believe that a company "is violating, or is about to violate, any
provision of law" that the FTC enforces, it may obtain a temporary restraining order
or preliminary injunction from a federal court while the FTC pursues an
administrative claim against the company. That provision goes on to include a
proviso that says, "[p]rovided further, That in proper cases the [FTC] may seek, and
after proper proof, the court may issue, a permanent injunction." The relationship
between the proviso and the rest of § 53(b) is less than crystaline. See Republic of
Iraq v. Beaty, 556 U.S. 848, 858 (2009); see also Antonin Scalia & Bryan A. Garner,
Reading Law: The Interpretation of Legal Texts 154–55 (2012). It is unclear whether
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the FTC must show that American Screening "is violating, or is about to violate" the
FTC Act again before a court enters a permanent injunction. But the parties do not
discuss the point, and American Screening does not contend that the district court
misunderstood § 53(b). So we leave it for another day.
American Screening maintains that the injunction is broader than necessary to
target the harm that the FTC complains of. It says that the court should have simply
enjoined it from violating the FTC Act or MITOR again. Though the scope of the
district court's injunction is wide, we do not detect an abuse of discretion here.
First, we agree with the court that the egregiousness of American Screening's
conduct weighs in favor of the injunction. See F.T.C. v. Kitco of Nev., Inc., 612 F.
Supp. 1282, 1296 (D. Minn. 1985). American Screening capitalized on the public's
fear during the early stages of the pandemic, attracting customers with promises of
fast shipping that it had no reason to believe it could perform and then pocketing the
money despite literally thousands of complaints and refund requests. The
egregiousness of American Screening's conduct suggests that it wouldn't hesitate to
take advantage of another national emergency calling for PPE should the conditions
arise, or that it wouldn't perform deceptive acts to move PPE off its shelves.
We also agree with the district court that the injunction's effect on American
Screening is more modest than its breadth might suggest. PPE sales were not a
significant part of American Screening's business until the pandemic erupted and it
misled consumers into believing it would deliver PPE quickly. In addition, PPE is
now widely available in stores across the country and online, so there's no indication
that customers would flock to American Screening for PPE as they were misled to do
during the pandemic. We also do not fault the court for declining to enjoin only new
law violations; the law already prohibited American Screening from doing so, yet it
was not deterred. Courts have issued similar injunctions to other companies in similar
circumstances, see, e.g., QYK Brands, 2024 WL 1526741, at *4; Zaappaaz, 2024 WL
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1237047, at *8, meaning that the injunction here isn't an aberration but a relatively
common means of securing future compliance with the FTC Act. We therefore reject
American Screening's challenge to the scope of the permanent injunction barring it
from advertising or selling PPE.
Two loose ends remain. First, in addition to finding American Screening liable
for the violations, the court found Ron Kilgarlin and his wife, Shawn Kilgarlin,
individually liable. Shawn contends that the court should not have found her
individually liable because she did not participate directly in the wrongful acts or
have authority to control the company. She notes that the record doesn't show that she
was an owner, president, or CEO of American Screening, that she had authority to
hire or fire employees, or that she had authority to sign contracts or even checks on
the company's behalf.
The FTC Act allows courts to order equitable relief from "any person . . . [who]
violates any rule . . . respecting unfair or deceptive acts or practices." 15 U.S.C. §
57b(a)(1). Under the statute's plain language, a person can be individually liable for
personally violating the FTC Act, much like in § 1983 cases when an official can be
individually liable if he was "personally involved" in a violation. See Boyd v. Knox,
47 F.3d 966, 968 (8th Cir. 1995). The record is clear that Shawn personally
participated in violating MITOR. During the pandemic, she told employees to deny
refund requests, to stop cancelling backorders, and to take pre-orders despite the
company's lack of product. She was, in other words, "personally involved" in
American Screening's misconduct. See id. The district court did not err in imposing
individual liability on Shawn.
The second loose end is American Screening's contention that the district court
should have considered a supplemental statement of facts that it filed in response to
the FTC's motion for summary judgment. The district court disregarded the statement
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on the ground that it didn't comply with Local Rule 4.01(E), which governs summary-
judgment procedure, and because the facts contained in it were irrelevant.
We agree that the facts contained in American Screening's supplemental
statement are irrelevant, and so any error in disregarding them was harmless.
American Screening says that the facts are relevant because they describe "the virtual
impossibility of technical compliance with MITOR and the reasons American
Screening was unable to abide by its usual shipping policies under the extraordinary
times" that the pandemic presented. For example, American Screening mentions that
it faced challenges because of difficulties with a third-party warehouse, government
directives, and an illness that Ron had suffered. But as a sister circuit recently
explained, MITOR "has built into its structure an accommodation for unforeseen
disruptions" like the ones companies experienced during the pandemic. See QYK
Brands, 2024 WL1526741, at *2. MITOR contemplates that sellers will not always
be able to ship products when expected, and in that circumstance, it directs sellers to
contact the buyer and obtain consent for the delay or offer to cancel the order for a
refund. See id.; see also 16 C.F.R. § 435.2(b)(1). What MITOR does not allow sellers
to do is what American Screening did here, regardless of the reasons why it shipped
items late. We therefore do not believe that the facts contained in the supplemental
statement would have moved the needle had the court not disregarded them.
Affirmed.
STRAS, Circuit Judge, concurring in part and dissenting in part.
Statutes matter, even in equity. The one here required the district court to make
specific findings before ordering full refunds and banning the company from selling
personal protective equipment again. I would vacate and remand.
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I.
First, the refunds. The Federal Trade Commission requested $15 million to
reimburse customers for orders that did not ship within 48 hours. The district court
thought that the refunds were “necessary” because the defendants “induced the sale
of [personal protective equipment] with misleading statements.” In its view, they had
to bear any “risk of uncertainty regarding the exact amount of damages.”
The statute requires more. Far from creating a default rule in favor of broad
relief unless the wrongdoer establishes otherwise, the statute calls upon the district
court to “find[]” that any monetary “relief” it orders is “necessary to redress injury
to consumers.” 15 U.S.C. § 57b(b) (emphasis added); see id. (ruling out “exemplary
or punitive damages”); see also Webster’s Third New International Dictionary 1511
(2002) (defining “necessary” as “that cannot be done without: that must be done or
had: absolutely required”). Regardless of whether the district court chooses a “refund
of money . . . [,] payment of damages,” or some other form of relief, it must tailor the
award and make “find[ings]” to support it. 15 U.S.C. § 57b(b); cf. FTC v. Verity Int’l,
Ltd., 443 F.3d 48, 69 (2d Cir. 2006) (requiring the award to “reasonably
approximate[]” consumer harm); FTC v. Trudeau, 579 F.3d 754, 771 (7th Cir. 2009)
(giving district courts leeway to choose a metric for “consumer losses” if they “make
sufficient factual findings to substantiate [the] award amount” (emphasis added)).
The most obvious problem is that the district court never accounted for the
value of the personal protective equipment that American Screening’s customers
received. At least a third of the company’s revenue came from orders shipped within
30 days. Given that the pandemic lasted years, it is hardly clear that what was in
those orders would have been worthless after a few weeks. Yet to justify full refunds
for all orders that took more than 48 hours to ship, the district court must have
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reached exactly that conclusion. It just never said so. See Verity Int’l, 443 F.3d at 69
(requiring the district court to “explain[] its basis” for the award).
In contractual terms, the district court did more than just make customers
“whole.” BLB Aviation S.C., LLC v. Jet Linx Aviation, LLC, 808 F.3d 389, 394 (8th
Cir. 2015) (quoting Ed Miller & Sons, Inc. v. Earl, 502 N.W.2d 444, 450 (Neb.
1993)). It cobbled together two contractual remedies: “rescission of the fraudulent
transaction” and compensatory damages. 27 Williston on Contracts § 69:47; see
Bartenwerfer v. Buckley, 598 U.S. 69, 82 (2023). That is, customers received the best
of both worlds: they could keep the personal protective equipment they received and
get a full refund. See Feeney v. AT & E, Inc., 472 F.3d 560, 564 (8th Cir. 2006)
(“[T]he party seeking rescission” can get their money back, but “must return to the
other party the . . . consideration received.”). One does not have to be an expert on
contract law to know they ended up better off than when they started. It was, in other
words, a windfall, which did more than “necessary to redress [their] injur[ies].”2 15
U.S.C. § 57b(b); see BLB, 808 F.3d at 394 (requiring “a reasonably accurate measure
of [contract] damages [that] do[es] not result in a windfall” (quoting Ed Miller &
Sons, 502 N.W.2d at 451)).
To support its full-refund remedy, the district court relied on one of our prior
decisions, FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312, 1315–16 (8th Cir.
1991), rather than make the necessary findings. In Rare Coin, we affirmed a full-
refund equitable award, but only because the coins the company sold had lost all their
value. See id. at 1316. Here, by contrast, the personal protective equipment almost
2To be sure, the district court reduced the windfall by requiring customers to
request a refund and the Federal Trade Commission to return what remained to
American Screening. But at best this procedure reduced the number of customers
who collected a windfall, not the amount of the windfall each received. See 15 U.S.C.
§ 57b(b).
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certainly continued to have some value to the customers who purchased it, even if it
came late. And, in any event, the Supreme Court has since concluded that the statute
we applied in Rare Coin does not authorize refunds. See AMG Cap. Mgmt., LLC v.
FTC, 593 U.S. 67, 78 (2021).
AMG should have been a flashing warning sign. The statute we once thought
authorized a full refund does not. But rather than examining the issue anew, the court
just imports the Rare Coin framework. And it does so even though this statute, unlike
the previous one, requires the remedy to be “necessary to redress [customer]
injur[ies].” Compare 15 U.S.C. § 57b(b) (emphasis added), with 15 U.S.C. § 53(b)
(stating that, “in proper cases the Commission may seek, and after proper proof, the
court may issue, a permanent injunction”). Just like a near-total refund did not
qualify as a “permanent injunction” in AMG, 593 U.S. at 75 (quoting 15 U.S.C.
§ 53(b)), neither is giving customers a windfall “necessary to redress [their] injuries,”
15 U.S.C. § 57b(b). Even if, as the Federal Trade Commission argues, it is hard to
measure the exact harm they suffered. But see Verity Int’l, 443 F.3d at 69 (discussing
the agency’s “investigatory power . . . to estimate [damages] with some degree of
precision”).
II.
There are similar problems with the injunction permanently banning the
defendants from selling personal protective equipment. This time, all the district
court said was that there was a “cognizable danger of recurrent violation” because the
defendants had acted “egregious[ly]” and the pandemic was “ongoing.”
Once again, however, the relevant statute requires more. When “any person,
partnership, or corporation is violating, or is about to violate,” the law, the Federal
Trade Commission can “bring suit in a district court . . . to enjoin any such act or
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practice.” 15 U.S.C. § 53(b)(1) (emphasis added). For permanent injunctions like the
one here, a proviso applies: “Provided further, [t]hat in proper cases the [agency] may
seek, and after proper proof, the court may issue, a permanent injunction.” Id.
§ 53(b).
The statute does not directly say what a “proper case[]” and “proper proof” are,
but reading the statute in its entirety unlocks the meaning of both. “[P]roper proof”
is a reference back to the requirement that the Federal Trade Commission establish
that the “person, partnership, or corporation” against whom it seeks a permanent
injunction is “violating” or “about to violate” the law. Id. § 53(b)(1). A “proper
case” is one in which the court has found, based on that evidence, that a violation is
ongoing or “about to” happen and a permanent injunction “would be in the interest
of the public.” Id.; see United States v. Morrow, 266 U.S. 531, 535 (1925)
(explaining that a proviso “refers . . . to the provision to which it is attached”); cf.
Starbucks Corp. v. McKinney, — S. Ct. —, 2024 WL 2964141, at *4–5 (2024)
(noting that, although the phrase “just and proper” requires a district court to employ
“the normal equitable rules” for injunctive relief, Congress can “increase the burden
for obtaining an injunction”). The statute’s focus, after all, “is prospective, not
retrospective,” meaning that past misconduct alone is not enough.3 AMG Cap. Mgmt.,
593 U.S. at 76; see United States v. Or. State Med. Soc’y, 343 U.S. 326, 333 (1952)
(“The sole function of an action for injunction is to forestall future violations. . . . [I]t
adds nothing that the calendar of years gone by might have been filled with
transgressions.” (emphasis added)).
Yet that is all we have here. By the time the Federal Trade Commission
requested a permanent injunction, there was no evidence that American Screening
3Nor would it be enough under ordinary equitable principles. See United States
v. W.T. Grant Co., 345 U.S. 629, 633 (1953) (requiring “some cognizable danger of
recurrent violation”).
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was still violating the statute or on the verge of doing so again. Nor was there
evidence that the extraordinary circumstances surrounding the early days of the
pandemic, which placed unprecedented strains on the country’s supply chains, would
recur. Plus, as the district court itself pointed out, American Screening had already
“altered some of [its illegal] practices” by implementing a policy notifying customers
of delayed shipments and offering them an option to cancel. Given these changed
circumstances, the district court never explained why there was still a “cognizable
danger of recurrent violation.” See FTC v. Shire ViroPharma, Inc., 917 F.3d 147, 160
(3d Cir. 2019); W.T. Grant, 345 U.S. at 635 (“The failure to point to circumstances
compelling further relief against the [defendants] speaks for itself.”).
The court tries to supply what is missing by connecting “the egregiousness of
American Screening’s conduct” with a predisposition toward “tak[ing] advantage of
another national emergency calling for [personal protective equipment].” Ante at 10.
The problem with that line of reasoning is that the statute requires a finding that a
defendant “is about to violate” the law. 15 U.S.C. § 53(b)(1) (emphasis added);
Webster’s Third New International Dictionary, supra, at 5 (defining “about” as “near
or not far from in time”). Unless the next emergency was “near,” there was no reason
to grant a permanent injunction, even if the district court had reason to believe that
American Screening would exploit it. See Minn. Ass’n of Health Care Facilities, Inc.
v. Minn. Dep’t of Pub. Welfare, 602 F.2d 150, 154 (8th Cir. 1979) (“[T]he speculative
nature of the threatened harm support[s] the denial of injunctive relief.”).
Besides, the relevant statutes supply a remedy in this scenario. In addition to
providing for immediate monetary relief, see 15 U.S.C. § 57b(b), they allow the
Federal Trade Commission to return to court for a temporary restraining order or a
preliminary injunction upon discovery that a previous offender “is about to violate”
the law again, see id. § 53(b). It is still a mystery, at least to me, why these statutorily
authorized routes would not have done the job. See Califano v. Yamasaki, 442 U.S.
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682, 702 (1979) (explaining “that injunctive relief should be no more burdensome to
the defendant than necessary to provide complete relief to the plaintiffs”).
III.
Accordingly, I would vacate the remedies imposed by the district court and
remand for further proceedings.
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