Federal Trade Commission v. Amazon.com, Inc.

Filing 309

ORDER Granting 292 Amazon's Motion to Stay Regarding 287 Order Determining Monetary Relief, filed by Defendant Amazon.com Inc.; by U.S. District Judge John C Coughenour.(RM)

THE HONORABLE JOHN C. COUGHENOUR

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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FEDERAL TRADE COMMISSION,

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Plaintiff,
v.

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CASE NO. C14-1038-JCC
ORDER GRANTING AMAZON’S
MOTION TO STAY MONETARY
RELIEF

AMAZON.COM INC,

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Defendant.

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This matter comes before the Court on Defendant Amazon’s motion to stay monetary

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relief pending appeal (Dkt. No. 292). Having thoroughly considered the parties’ briefing and the

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relevant record, the Court finds oral argument unnecessary and hereby GRANTS the motion for

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the reasons explained herein.

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I.

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BACKGROUND
On April 26, 2016, the Court granted partial summary judgment for the Federal Trade

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Commission (FTC) and found Defendant Amazon liable for violations of Section 5 of the FTC

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Act. (Dkt. Nos. 224, 225, and 274-36.) On October 4, 2016, the Court held oral argument on the

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question of the proper amount and scope of monetary damages. (Dkt. No. 279.) On November

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10, 2016, the Court ordered a notice-and-claims procedure as the appropriate monetary relief.

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(Dkt. No. 287.)

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On January 6, 2017, the FTC filed a notice of appeal, challenging the Court’s order
ORDER GRANTING AMAZON’S MOTION TO
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granting Amazon’s motion for partial summary judgment and dismissing the FTC’s claim for

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injunctive relief. (Dkt. No. 289.) Amazon then cross-appealed on the Section 5 liability issue.

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(Dkt. No. 291.) Amazon now moves this Court for a stay of the monetary relief pending appeal.

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(Dkt. No. 292.) The FTC argues that Amazon is not entitled to a stay. (Dkt. No. 294.) The FTC

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argues, in the alternative, if a stay is granted, only disbursement of refunds should be stayed or

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the Court should amend its order granting monetary relief to award a specific lump sum amount.

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(Id. at 8–11.)

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II.

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DISCUSSION
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Standard of Review

When evaluating a motion for stay pending appeal, the Court evaluates similar factors

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that are employed in deciding whether to grant a preliminary injunction. Lopez v. Heckler, 713

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F.2d 1432, 1435 (9th Cir. 1983). The Court considers “(1) whether the stay applicant has made a

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strong showing that he is likely to succeed on the merits; (2) whether the applicant will be

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irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the

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other parties interested in the proceeding; and (4) where the public interest lies.” Nken v. Holder,

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556 U.S. 418, 434 (2009) (internal quotation marks omitted). The first two factors are the most

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important in the Court’s analysis. Id. at 434.

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B.

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First, Amazon must prove a likelihood of success on the merits or that “serious legal

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questions are raised” in its appeal. Abassi v. INS, 143 F.3d 513, 514 (9th Cir. 1998); see also

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Leiva-Perez v. Holder, 640 F.3d 962, 967–968 (9th Cir. 2011) (“What is clear . . . is that to

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justify a stay, petitioners need not demonstrate that it is more likely than not that they will win on

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the merits.”). Amazon presents four different arguments to prove that there are serious legal

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questions raised in its appeal: (1) the unfairness standard used by this Court is incomplete;

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(2) Amazon’s refund policy makes harm avoidable and constitutes a countervailing benefit;

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(3) Amazon lacked fair notice that unauthorized charges violate the law; and (4) a previous FTC

Likelihood of Success

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Commissioner dissented from the FTC’s issuance of an administrative complaint targeting

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Apple’s in-app purchasing practices. (Dkt. No. 292 at 6–10.) The Court rejected these arguments

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in the summary judgment order and maintains its disagreement with Amazon’s arguments, most

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specifically Amazon’s argument that the Ninth Circuit has not considered the Section 5

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unfairness standard. See, e.g., FTC v. Neovi, Inc., 604 F.3d 110, 1153 (9th Cir. 2010) (following

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the three-part statutory test for whether a practice is “unfair” under the FTC Act without

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embellishment). However, the Court concludes that there is a small amount of room for debate

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on the issues presented in Amazon’s appeal. Therefore, this factor tips in Amazon’s favor.

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C.

Irreparable Harm

Amazon must also prove that it will suffer irreparable harm if the Court denies this

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motion to stay. Irreparable harm exists when there are no adequate remedies at law. Latta v.

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Otter, 771 F.3d 496, 500 (9th Cir. 2014). Amazon argues that if the Ninth Circuit reverses this

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Court’s decision, “Amazon will be unable to recoup the refunds provided to customers who

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submitted claims.” (Dkt. No. 292 at 5.) This assertion is uncontested by the FTC.

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The FTC counters, however, that even if Amazon could satisfy the irreparable injury

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factor, it is not entitled to a stay if it does not make a strong showing that it is likely to succeed

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on the merits. (Dkt. No. 294 at 7) (citing Nken, 556 U.S. at 427). However, this is an inaccurate

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statement of the law. The Supreme Court has said that a “strong showing” of likelihood of

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success, although important, is one factor to be considered and that a stay is not a matter of right,

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even if irreparable injury might otherwise result to the appellant. Id. at 426, 427. Therefore, a

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severe irreparable injury and small likelihood of success on the merits, when balanced with the

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other two factors, can still be the reasons to grant a motion to stay.

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The FTC also argues that the irreparable injury alleged is speculative because “there is

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simply no way to know how many refund claims Amazon will actually receive or what the dollar

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amount of those claims will be.” (Dkt. No. 294 at 7.) However, this argument is curious when the

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FTC previously, and adamantly, argued that the Court should award a lump sum monetary relief,
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instead of a notice-and-claims procedure, because the lump sum amount suggested by the FTC

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accurately reflected the injury caused by Amazon’s unfair in-app purchase practices. (See

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generally Dkt. Nos. 258, 269-1.) Moreover, the FTC seems at least to acknowledge that there is

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the potential for specific irreparable harm by offering an alternative stay option that stays only

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distributing the monetary relief. (See Dkt. No. 294 at 8–10.)

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The Court concludes that if Amazon is forced to implement the notice-and-claims

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procedure and this Court is reversed on appeal, Amazon would undoubtedly suffer specific

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irreparable harm. The refund money Amazon distributed, which the FTC estimated would be

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substantial in its previous briefings, would be unrecoverable. Moreover, even if the amount of

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refunds submitted is small, Amazon will still incur administrative costs for operating and

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managing the notice-and-claims platform while the appeal is pending. Therefore, the Court

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concludes that the irreparable harm that could be incurred is a strong reason to grant this motion

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to stay.

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D.

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Next, the Court assesses whether the balance of equities tips in Amazon’s favor and the

Balance of the Hardships and Public Interest

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stay is in the public interest. Nken, 556 U.S. at 434. These factors may be considered together.

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A.H.R. v. Wash. State Health Care Auth., 2016 WL 98513, at *17 (W.D. Wash. Jan. 7, 2016)

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(discussing the factors in the preliminary injunction context). Amazon argues that the balance

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tips in its favor because of the significant irreparable harm it would suffer in comparison to the

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delayed receipt of refunds Amazon consumers would suffer if a stay was granted. (Dkt. No. 292

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at 10.) Amazon also argues that a stay would promote judicial economy, which is in the public

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interest. (Id. at 11.) The FTC counters that the consumer harm is substantial because consumers’

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memories of which charges were incurred by children may fade and there is a strong public

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interest in stopping unfair trade practices. (Dkt. No. 294 at 8.)

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The Court concludes that because the harm to Amazon could be truly irreparable, the
balance tips sharply in Amazon’s favor. As Amazon notes, the harm of a fading customer
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memory is not as significant as the FTC claims because the Amazon refund claims portal will

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display the customer’s potentially eligible transactions. (Dkt. No. 297 at 8 n.4.) However, the

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harm Amazon could suffer if this Court is reversed is undeniably irreparable. Additionally, while

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the Court is cognizant of the public interest in stopping unfair trade practices, a temporary stay

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on the monetary relief does not mean that the public will never be reimbursed for Amazon’s

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unfair trade practices, just that it may occur after the Ninth Circuit has ruled on the appeal.

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Therefore, after considering all of the factors, and with specific emphasis on the
significant irreparable harm Amazon could suffer, the Court GRANTS Amazon’s motion to stay.

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E.

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The FTC’s Alternative Arguments

The FTC first argues that if the Court grants a stay, only the disbursement of refunds

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portion of the notice-and-claims procedure should be stayed. (Dkt. No. 294 at 8–10.) However,

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this request is not practical because it could lead to customer confusion. For example, if the

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Ninth Circuit reverses this Court, a customer would be invited to apply for a refund for which he

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or she was in fact not eligible. Therefore, this argument is impractical and rejected.

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Second, the FTC argues that the Court should sua sponte amend the monetary relief order

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and award a specific lump sum amount to be paid to the FTC. (Id.at 10–11.) The FTC claims that

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“[a]n order granting monetary relief in a specific amount, to be remitted to the FTC for consumer

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redress, would moot Amazon’s purported irreparable injury.” (Id. at 10.) While this may be the

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case, the Court declines to amend the monetary relief order because it still believes that the

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notice-and-claims procedure adopted is the more appropriate form of relief. The notice-and-

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claims procedure removes the inherent uncertainty of the lump sum monetary relief options

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suggested by the parties in past briefing. The FTC presents no new evidence to the contrary.

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Therefore, this alternative is also rejected.

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III.

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CONCLUSION
For the foregoing reasons, Amazon’s motion to stay the monetary relief (Dkt. No. 292) is

GRANTED.
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DATED this 23rd day of February 2017.

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John C. Coughenour
UNITED STATES DISTRICT JUDGE

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