In Friday's decision in Intuit, Inc. v. Federal Trade Commission, the Fifth Circuit considered a question with wide-ranging implications: May enforcement actions brought by the Federal Trade Commission (FTC) against companies that allegedly engage in deceptive advertising as prohibited by Section 5 of the FTC Act be adjudicated in administrative proceedings, or must they instead be heard by a federal court endowed with full Article III powers? The Court's determination that such proceedings must be brought before an Article III court extends recent Supreme Court precedent and signals an entrenchment of a regime that is skeptical of administrative agencies' adjudicative authority. 

In concluding deceptive advertising claims must be heard by Article III courts, the Fifth Circuit rejected the contention that such claims could be adjudicated by an administrative agency under the public rights exception. That exception did not apply, according to the Court, because deceptive advertising claims echoed traditional common law claims like deceit and fraud. Section 5 of the FTC Act, in other words, did not create a new duty supporting an entirely distinct cause of action, but instead merely incorporated duties that could be enforced by private parties under common law causes of action before the FTC Act was ever created. 

The Court also expressed skepticism more generally about the scope of the public rights exception. In this vein, the Court noted that a claim does not involve a public right merely because the government is a party or because prosecuting the claims would vindicate the public interest. Instead, any claim that “relate[s] to” traditional common law causes of action requires adjudication by an Article III court, regardless of the parties involved or the interests to be vindicated. 

Key Takeaways:

• Companies or individuals subject to investigation or prosecution by federal agencies — from the FTC to the SEC to the IRS — should consider the trade-offs of proceeding before an administrative tribunal or in federal court. Given the differing costs and benefits of adjudication by an administrative agency or a full Article III federal court, there is no one-size-fits-all approach in determining the best forum for adjudicating administrative claims.
• Traditional principles like consent and waiver still apply. If parties want their claim heard by an Article III court, they should object to administrative adjudication promptly.
• The opinion highlights the growing trend away from administrative adjudication. Expect future opinions that increasingly cabin the authority of federal agencies to adjudicate claims, especially when significant penalties will potentially accompany that adjudication.