7th Circuit Should Get Chance Now to Rule on FTC’s Litigation Powers, Says Walmart

Walmart said the FTC doesn’t, and can’t, deny the questions the retailer highlighted in its motion to certify for interlocutory appeal the district court’s denial of Walmart’s motion to dismiss the agency’s enforcement action “strike at the heart of the FTC’s legal authority and the proper interpretation of key provisions of the FTC Act.” Walmart filed its reply Thursday (docket 1:22-cv-03372) in U.S. District Court for Northern Illinois in Chicago in support of its bid to challenge the constitutionality of the FTC’s litigation powers before the 7th U.S. Circuit Court of Appeals.

The case involves telemarketers who conned consumers into sending money using Walmart’s services. The FTC alleges Walmart knew it was processing fraudulent money transfers and failed to do enough to protect consumers. The court’s March 27 order denying Walmart’s motion to dismiss “raises fundamental questions about the FTC’s legal authority and the proper interpretation of key provisions of the FTC Act,” said Walmart’s April 12 motion for the 7th Circuit challenge. The FTC’s May 10 opposition called Walmart’s interlocutory appeal bid an “unwarranted” delay tactic (see 2305090001).

The questions raised in Walmart’s motion for 7th Circuit interlocutory review “will inevitably dictate the viability and scope of this consequential lawsuit going forward,” said Walmart’s reply. As long as any of those questions “satisfies the criteria for certification” under Title 28's Section 1292(b), Walmart’s motion should be granted and the court’s order should be certified for interlocutory appeal, it said.

The FTC rests its opposition “on a distorted interpretation of the well-settled standard for certification,” said Walmart’s reply. Contrary to the FTC’s assertions, Walmart doesn’t need to show that the 7th Circuit is likely to overturn the court’s ruling on appeal,” it said. It rather must show that the order “involves one or more controlling legal questions” whose resolution is “contestable” and will “materially advance the termination of this case,” it said, citing the 7th Circuit’s 2002 decision in Boim v. Quranic Literacy Institute. Section 1292(b) “imposes a mandatory duty to certify when these statutory criteria are satisfied -- as they are here,” it said.

Defending the constitutional validity of the FTC’s litigation powers, the agency asserts the March 27 ruling was “compelled by precedent,” said Walmart’s reply. “But the FTC identifies no decision even suggesting, let alone holding, that the remedy for an unconstitutional grant of executive powers to a preexisting independent agency is to invalidate the agency’s otherwise-valid removal protections,” it said.

Nor does the FTC “persuasively distinguish the Supreme Court decisions that instead support the remedy of invalidating the new litigation powers,” said Walmart’s reply. The agency also provides “no explanation whatsoever for how lower courts can deem the removal protections invalid when that would effectively overrule the Supreme Court’s binding decision upholding those protections,” it said, citing the 1935 SCOTUS ruling in Humphrey’s Executor v. U.S. “This case-dispositive issue is, at the very least, sufficiently contestable” that the 7th Circuit “should have the opportunity to resolve it now,” it said.