AuthorBerger, Collin


Imagine a national bank's practices violated a federal banking regulation and thereby cost some people their savings. Criminal charges or civil penalties may be appropriate but might not make defrauded victims whole. If the victims see a lawsuit as not worth the effort or they struggle to attract appropriate representation, then no private legal action would undo the bank's harm. Enter the Office of the Comptroller of the Currency ("OCC"). If the illegal actions enriched the bank or "involved a reckless disregard for the law," the OCC could issue a cease-and-desist order requiring the bank to pay restitution to victims. (1) If the bank were to violate that order, the OCC could seek enforcement through a federal court. (2)

Now imagine that the OCC's cease-and-desist order was only an injunction or a penalty owed to the government and did not include restitution. This could occur if the OCC's authorizing statute did not permit "restitution" or if the OCC did not invest the resources to find proof of enrichment or reckless disregard. (3) If the OCC believed the bank was threatening to violate its injunction or penalty order, then it could still seek enforcement through a federal court. There, under most circuits' current standards and potentially beyond statutes' authorization, (4) the OCC might seek and the court could grant restitution that was not in the original OCC order.

Now imagine resetting the scenario and adding another twist: the victims sue the bank, and the OCC separately argues before a federal court that the bank should pay restitution as part of its order's enforcement. Although the OCC's role marshals public resources to advocate for victims' interests, only the private collective action has established court procedures to ensure different victims are adequately represented and restitution is distributed appropriately. (5) Courts would not force the wrongdoer to pay full restitution in two lawsuits, so to the extent the OCC suit adjudicates, liquidates, and distributes victim restitution, that suit cannot only expand on statutes' explicit remedies but also sidestep the court's victim-protecting procedures.

Much of these hypothetical OCC actions hinge on statutes, which vary across agencies and their areas of enforcement. However, one cross-agency step that courts have scrutinized recently is federal courts' ability to allow and grant an agency's request for victim compensation when statutes do not explicitly allow it. This ability to "strip wrongdoers of their ill-gotten... net profits" appears in cases and statutes as "restitution," "accounting," or "dis-gorgement" depending on the era, and it is based on equitable principles that aim to assist victims without becoming punitive. (6) Not all instances of restitution or disgorgement are within courts' equitable power, though. A pair of Supreme Court cases recently differentiated between, on the one hand, disgorgements that were penalties and therefore did not benefit from courts' equitable powers and, on the other hand, disgorgements that were implicit in a statute that granted "equitable relief." (7) While the former type of disgorgement is primarily punitive, in the public interest, and often does not benefit victims, (8) the latter is usually given to victims. (9) In the Supreme Court's 2020 term, AMG Capital Management, LLC v. FTC examined a circuit split over scenarios like the hypothetical OCC lawsuit in which an agency seeks disgorgement as an equitable extension of a statute's language. (10) As this Note describes, (11) the Supreme Court's 2020 ruling in Liu v. SEC and other decisions suggest the Court will rein in situations like the OCC hypothetical but uphold precedents that recognized courts' broad equitable remedies.

Even after AMG Capital Management clarifies what courts can do when they hear agency cases, the frameworks around how and when agencies can seek redress for victims will remain thin even as agencies disburse billions to victims annually. The Securities and Exchange Commission ("SEC") alone ordered $3.6 billion of disgorgements in fiscal year 2020, (12) and calendar year 2019 saw the Federal Trade Commission (FTC) disburse $136 million of consumer "redress" and record $1.2 billion of "new redress, disgorgement[,] and civil contempt awards." (13) Even though the 2017 Kokesh v. SEC case found that SEC disgorgements are penalties rather than equitable relief, (14) the SEC subsequently concentrated on "investigations which hold the most promise for returning funds to investors." (15) The basis for classifying SEC disgorgements as penalties under Kokesh may therefore be weaker now or in the future. Agencies as diverse as the United States Postal Service (USPS) and the Food and Drug Administration (FDA) all have processes for benefitting victims of wrongdoing, and these processes' procedures vary. (16) Despite this range, cases examining what agencies can do in federal courts focus on equity in the federal courts, not on the standing of administrative agencies. By defining this aspect of agencies' purview through federal courts' limitations, courts have linked judicial power to agencies' executive power and given limited direction to agencies. Such direction could address procedural shortcomings or improve statutes' effectiveness at compensating victims.

In contrast to the relationship between agency lawsuits and courts' powers, the equitable doctrine of parens patriae permits states, tribes, and territories to sue on behalf of citizens, but only when there is a sovereign or quasisovereign interest at stake. (17) Applying at least some elements of this doctrine to federal agencies would give a foundation for agencies' victim-compensating actions that is independent from courts' powers and emphasizes victims' interests.

This Note adds to the literature about federal agency actions on victims' behalf by incorporating recent cases and comparing cases about courts' power to parens patriae cases. Part I describes these two lines of cases: the parens patriae cases that define what states can do in federal court, and the cases on courts' equitable powers in agency suits through Kokesh, Liu, and AMG Capital Management. Part II then considers potential practical issues with current agency processes, including a simple empirical analysis of the SEC's records and how they might reflect the agency's internal strategy and deadlines. Part III considers how a federal parens patriae framework distinct from states' parens patriae standing could orient agency suits to victims' benefit without contradicting existing law.


    Before proceeding, it is worth contextualizing agency lawsuits on citizens' behalf. A wronged individual suing a private party for money is a quintessential form of litigation. Such suits reach a federal court if, among other things, the plaintiff has standing, like if a federal statute identifies the defendant's action toward the plaintiff as an injury and then specifies a remedy. (18) If there are enough individual plaintiffs, a lawsuit against one defendant enters the realm of class action suits. Because of the added coordination challenges among individual participants and in awards' distribution, some literature has compared class action settlement funds to miniature private administrative agencies. (19) If the alleged wrongdoing harms the collective public interest as defined in statutes and regulations, prosecutors and regulators press criminal charges or impose monetary penalties that wrongdoers often pay into the public coffers. For example, many of the SEC's disgorgements fall here under Kokesh because of their emphasis on punishment and deterrence even though statutes do not define them as penalties. (20)

    There are other situations, though, in which a plaintiff brings a suit to rectify a wrong without suffering a particularized injury, yet the plaintiff still has standing and can access federal courts. One such variant is qui tam cases, through which private plaintiffs help enforce the public's laws (i.e., a private plaintiff seeks redress for the public's injury). In a sense, a statute that establishes private rights of action creates an enforcement mechanism, but the resulting cases hinge on the harm the plaintiff suffered and not the public's harm. Another variant that has evolved in recent decades is roughly the opposite of a qui tam case of private enforcement of public interests: the public in the form of a government entity uses the courts to extract compensation for the alleged wrongdoer's victims.

    Three distinct types of these public actions are worth noting with respect to federal courts. One has been described as "criminal class actions" where federal prosecutors settle criminal charges with corporate defendants in exchange for the defendants' creation of "victim restitution funds" that operate like private class action suits' funds. (21) While such cases' patterns can inform analysis of other federal actors' suits, these settlements are outside this Note's focus on civil case proceedings. A second version involves state attorneys general who "long have understood their role to include a compensatory function" and seek victim compensation through state and federal courts. (22) These cases operate under statutes' authorization or parens patriae. (23) Third, federal actors like administrative agencies may bring a civil suit against a party to undo results from infractions of federal law and to benefit victims. For example, SEC disgorgements like the one from Liu might be in this category as they benefit victims and might not be so large as to be penalties. This area defined by statutes and equitable principles is this Note's focus. Figure 1 maps this contextualization with this Note's focus in the lower right.

    1. Parens Patriae for State Actors

      As described below, federal courts have an ongoing debate concerning the extent of their...

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