Take the Fifth

Designated for publication

• Intuit, Inc. v. Federal Trade Commission, 24-60040, petition for review of FTC order
  • Jones, J. (Jones, Barksdale, Ho) (no oral argument), Ho, J., concurring; separation of powers, administrative law
  • Granting petition for review and vacating FTC cease-and-desist order as to Intuit’s advertisements for TurboTax.
  • Intuit sells TurboTax, including a “Free Edition” available only to taxpayers with “simple tax returns”—a category that excludes the majority of American filers. Intuit advertised TurboTax Free Edition widely, typically including disclosures that the free product was limited, but the FTC issued an administrative complaint in 2022 alleging the ads deceived consumers into believing all TurboTax products were free. The FTC initially filed suit in the Northern District of California but, after a preliminary injunction was denied, abandoned that case and pursued a cease-and-desist order through internal administrative adjudication. An ALJ found the ads were likely to mislead a significant minority of consumers, and three Commissioners affirmed. The resulting cease-and-desist order was sweeping: it prohibited Intuit for twenty years from advertising any goods or services as free unless extensive requirements were satisfied, extending well beyond tax-preparation products. The main issue on appeal on Intuit’s petition for review was whether FTC’s in-house adjudication of a deceptive advertising claim under Section 5 of the FTC Act violated the constitutional separation of powers under Article III, given the Supreme Court’s decision in SEC v. Jarkesy, 603 U.S. 109 (2024), which held that claims implicating “private rights” must be tried before Article III courts rather than administrative tribunals.
  • The court traced the public-rights/private-rights distinction from Murray’s Lessee through Atlas Roofing, Granfinanciera, and Jarkesy, noting that claims that are “in their nature” traditional actions at common law or equity involve private rights requiring Article III adjudication. Section 5 deceptive advertising claims share a “common core” with the traditional torts of deceit and fraud: both require a material representation likely to mislead. The court noted that FTC’s own complaint used classic terms of art—”deceptive,” “baits,” “fraud”—and that courts recognized the FTC Act’s roots in common law almost immediately after its 1914 passage, quoting the Seventh Circuit: “The same principles and tests that have been applied under the common law … are expected by Congress to control.”
  • The court rejected FTC’s attempt to liken its deception standard to the “detailed building code” workplace-safety regulations upheld in Atlas Roofing, emphasizing that “a blanket prohibition on ‘unfair or deceptive acts or practices’ does not remotely ‘resemble a detailed building code.'” It further found that technical differences between Section 5 and common-law fraud (e.g., no requirement to prove damages or fraudulent intent) do not negate the private-rights nature of the claims, just as similar differences between SEC securities fraud and common-law fraud did not in Jarkesy. The court also observed that the FTC has had authority since the 1970s to bring these claims directly in federal court, undermining any argument that they are exclusively administrative in nature.
  • On the FTC’s purposive argument that stripping its adjudicative authority would “dismantle” a 110-year-old scheme, the court responded that “it is ‘unclear how practice could transmute a private right into a public one,’ and ‘practical considerations alone can[not] justify extending the scope of the public rights exception.'” The court stressed that its holding is limited to deceptive advertising claims and does not decide FTC’s authority to adjudicate other categories of “unfair methods of competition” or “unfair or deceptive acts or practices.”
  • Judge Ho concurred, writing separately to underscore broader separation-of-powers concerns. He observed that “[o]ur Constitution establishes three branches of government, not four,” and called the FTC’s combination of executive, legislative, and judicial power “a potent brew” that the Founders would have viewed as “the very definition of tyranny.” In a colorful aside, he compared the multi-headed agency to a creature from Harry Potter: “just as the three-headed beast that terrorized Harry Potter and his friends could be put to sleep simply by playing music, … all we need to do to restrain the FTC is to restore the Constitution.”
  • Judge Ho emphasized that the public-rights exception to Article III “has no textual basis in the Constitution” and “must therefore derive instead from background legal principles,” warning that “[w]ithout such close attention to the basis for each asserted application of the doctrine, the exception would swallow the rule.” He concluded that the FTC’s action “falls far short of the rigorous historical standard required by Supreme Court precedent” and joined the court’s opinion in full.

Unpublished decisions

• United States v. Solis, 25-50394, appeal from W.D. Tex.
  • per curiam (King, Haynes, Ho) (no oral argument), criminal, sentence reduction
  • Affirming denial of motion for sentence reduction.
  • Because Solis had a criminal history score subtotal of seven, a two-point reduction would not have changed his criminal history category (Category IV) or his guidelines range, making him ineligible for relief under Part A of Amendment 821. The court further held that Solis abandoned his Part B arguments by failing to brief them, that challenges to his underlying conviction and sentence are not cognizable in a § 3582(c)(2) proceeding, and that he had no constitutional right to appointed counsel in such a proceeding. All outstanding motions were denied.

• United States v. Barraza, 24-50858, appeal from W.D. Tex.
  • per curiam (Elrod, Higginbotham, Graves) (no oral argument), criminal, mental competence, guilty plea
  • Affirming district court’s competency findings and denial of motion to withdraw guilty plea.
  • The Fifth Circuit found that neither of the district court’s competency findings at both the April 2022 plea hearing and the August 2024 final competency hearing were clearly arbitrary or unwarranted. The court also found that the district court properly applied the Carr factors to the defendant’s motion to withdraw his guilty plea and did not abuse its discretion. Because Barraza’s plea was knowing and voluntary, his appellate waiver was enforceable, and the court dismissed all remaining challenges to his conviction and sentence (concurrent life sentences on the murder and drug-importation counts, a concurrent 20-year term for money laundering, and a consecutive 10-year term for a firearms offense).

• Crawford v. Perkins, et al., 24-20521, c/w 25-20038, appeal from S.D. Tex.
  • per curiam (Jones, Duncan, Douglas) (oral argument withdrawn), § 1983, appellate jurisdiction
  • The notices of appeal were filed years beyond the 30-day deadline of Federal Rule of Appellate Procedure 4(a), and the appeals were too vague and disjointed to identify any timely, reviewable order. The court noted that even affording the most liberal construction to the notices, “there remain no orders or judgments that one could reasonably construe as covered by Appellant’s notice of appeal.”

• Beltran v. Lockheed Martin Corporation, 25-10808, appeal from N.D. Tex.
  • per curiam (Elrod, Higginbotham, Graves) (oral argument), Title VII, whistleblower
  • Affirming summary judgment for defendant employer on plaintiff’s Title VII retaliation and discrimination claims and whistleblower retaliation claim under the National Defense Authorization Act.
  • The main issues on appeal were whether Lockheed Martin retaliated against quality inspector Nestor Beltran in violation of the National Defense Authorization Act’s (NDAA) whistleblower provision, 41 U.S.C. § 4712, after he emailed his department director with concerns about supervisors undermining quality-inspection efforts and policy changes. The court applied the burden-shifting framework used in NDAA whistleblower cases: once a plaintiff establishes a prima facie case, the employer may avoid liability by showing, by clear and convincing evidence, that it would have taken the same action absent the protected activity. The court evaluated Lockheed’s affirmative defense using the three Carr v. Social Security Administration factors: (1) the strength of the employer’s evidence supporting the personnel action, (2) the existence and strength of any retaliatory motive, and (3) evidence the employer takes similar actions against non-whistleblower employees.
  • Assuming without deciding that Beltran made a prima facie case, the court found all three Carr factors favored Lockheed: Beltran had been suspended twice in four months for refusing direct orders, had a lengthy disciplinary record including harassment and dishonesty, and other employees in the same role completed the tasks Beltran refused. No evidence showed that the senior manager who convened the Disciplinary Review Committee harbored a retaliatory motive; he testified he assumed Beltran’s complaints were made in good faith. And Lockheed demonstrated it had disciplined and dismissed other non-whistleblower employees for identical misconduct.