On May 29, the U.S. District Court for the Northern District of California granted the FTC’s motion to dismiss a declaratory-judgment action filed by several California-based companies that provide student loan processing services, along with their CEO/primary shareholder (plaintiffs). In August 2017, having allegedly learned that the FTC “was in the final process of gathering information to file a lawsuit against one or more of [the] [p]laintiffs on the purported and factually unsupportable basis that the [c]ompanies made misrepresentations to consumers” and violated the TSR’s debt relief service provision, the plaintiffs filed for instant declaratory relief under the Declaratory Judgment Act, seeking a declaration that the Telemarketing Sales Rule’s (TSR) debt relief provisions did not apply to them or, alternatively, that they were in compliance with the provisions. In February 2018, the FTC filed an enforcement action against the plaintiffs alleging that their collection of fees in advance of providing services violated the FTC Act and the TSR, and seeking injunctive and equitable relief. The FTC also moved to dismiss the plaintiffs’ declaratory judgment for lack of subject-matter jurisdiction.
According to the order granting the FTC’s motion, the court agreed with the FTC that the Administrative Procedure Act (APA)—not the Declaratory Judgment Act—is the exclusive, proper vehicle to obtain judicial review of a federal agency’s action. The court then held that the plaintiffs failed to satisfy the two prerequisites for judicial review under the APA, that (i) the agency’s actions constitute as a “final” agency action, and (ii) there exists no other adequate remedy in court. Specifically, the court found that the plaintiffs failed to demonstrate that the FTC’s “investigation into the lawfulness of the [plaintiffs’] actions and initiation of enforcement proceedings” qualified as a “final” agency action subject, and that the plaintiffs’ alternative “adequate remedy” was to be had in the enforcement action brought against them by the FTC, where they would be able to present all of the same defenses and arguments they sought to advance in their declaratory judgment action.