Fifth Circuit Holds U.S. FTC’s In-House Adjudication of Deceptive Advertising Claim Unconstitutional Under Jarkesy

 On March 20, 2026, the U.S. Court of Appeals for the Fifth Circuit granted Intuit’s petition for review and vacated a cease-and-desist order from the U.S. Federal Trade Commission (FTC or Commission) related to Intuit’s marketing of TurboTax because “[f]ollowing the Supreme Court’s decision in SEC v. Jarkesy ... the adjudication of a deceptive advertising claim before an administrative law judge [ALJ] violated the constitutional separation of powers.”¹

The opinion provides a powerful new argument for any entity that finds itself on the FTC’s radar — but it does much more than that. The Fifth Circuit interpreted Jarkesy to narrowly circumscribe the public-rights exception to Article III adjudication given its lack of grounding in the Constitution’s text in two key ways. First, Article III courts must adjudicate claims even broadly analogous to a claim susceptible of jurisdiction at law or equity. Second, Article III adjudication is necessary even if the relief requested would have sounded in equity (i.e., injunctive relief) rather than in law (i.e., money damages). Any attempt to force an individual or entity to litigate claims in an agency’s in-house administrative forum should be closely scrutinized in light of this decision.

Background

Intuit sells and markets TurboTax, “a popular line of online and desktop tax-preparation products.”² TurboTax provides a “free” edition for individuals with simple tax returns.³ In 2022, the FTC issued an administrative complaint against Intuit alleging that TurboTax advertisements violated Section 5 of the FTC Act because the agency claimed that they “deceived consumers into believing that all TurboTax products are free.”⁴ “Deceptive advertising claims brought under Section 5 require proof that a material representation ‘was likely to mislead customers acting reasonably under the circumstances.’”⁵ But “Section 5 deceptive advertising claims do not require FTC to produce evidence of damage and fraudulent intent.”⁶

The FTC initially sought injunctive relief in the U.S. District Court for the Northern District of California but “changed course” when the injunction was denied and elected to proceed by internal agency adjudication.⁷ After a trial, an FTC ALJ concluded that Intuit’s advertising was “unfair or deceptive” and issued a sweeping cease-and-desist order covering all of Intuit’s products and marketing for a period of 20 years. Intuit appealed to the Commission, which upheld the ALJ’s decision. Intuit publicly stated that it would “immediately” appeal the decision, stating that “when the matter ultimately returns to a neutral body we will prevail.”⁸ Intuit asserted that it “has always been clear, fair, and transparent with its customers.”⁹ Intuit filed its petition for review under 15 U.S.C § 45(c) directly in the U.S. Court of Appeals, challenging the FTC’s actions on constitutional, legal, and substantive grounds. 

The Fifth Circuit

The Intuit decision begins and ends with the “threshold argument that FTC unlawfully adjudicated ‘private rights’ before an ALJ rather than an Article III court.”¹⁰ The Constitution vests the “judicial power of the United States” in Article III courts, which includes “all Cases, in Law and Equity,” and “Congress may not ‘confer the Government’s “judicial power” on entities outside Article III.’”¹¹ “Whether a given claim falls within that scope turns on a longstanding distinction between ‘public rights’ and ‘private rights.’”¹² Relying on the Supreme Court’s admonishment in Jarkesy that courts must pay “close attention to the basis for each asserted application of the” public-rights exception, the decision takes pains to identify why the asserted deceptive advertising claims under the FTC Act (1) borrow sufficiently from the common law to require Article III adjudication despite (2) seeking relief grounded in equity.¹³

Public and Private Rights

The question before the Fifth Circuit was whether a deceptive advertising claim under the FTC Act implicated Intuit’s “private rights.” To answer that question, the Fifth Circuit applied the four factors identified by the Supreme Court in Jarkesy.

First, the Fifth Circuit held that claims for deceptive advertising under the FTC Act target the “‘same basic conduct as common law fraud’” claims.¹⁴ Relying on 18th-century English cases and the Restatement (First) of Torts, the decision concludes that courts in law and equity “accounted for tortious deceit in the commercial context of deceptive advertising.”¹⁵ Despite the technical and important differences between deceit, fraud, and deceptive advertising under the FTC Act, the Fifth Circuit concluded that the claims “share a common core” focused on “a material representation that was false.”¹⁶ Because there was an “equivalent level of overlap between SEC securities fraud claims and common law fraud” in Jarkesy, that common core was sufficient to find that a claim for deceptive advertising implicates a private right.¹⁷

Second, the Fifth Circuit noted that the deceptive advertising claims use “‘the same terms of art’ as common law fraud.”¹⁸ The decision notes that “[s]triking similarities exist between the FTC’s administrative complaint and the Commission’s opinion, on the one hand, and classic terms of art associated with fraud and deceit.”¹⁹ Agency complaints are often replete with legalese and other terms that mimic traditional litigation. Now, this feature meant to provide a patina of due process may ultimately undermine an agency’s attempt to distinguish Intuit and Jarkesy. 

Third, the Fifth Circuit found that FTC Act deceptive advertising claims operate pursuant to “‘similar legal principles’”²⁰ to common law fraud based in “traditional wrongs that had been previously identified by the judiciary.”²¹

Fourth, the court confronted whether the requested remedy was one “that was traditionally available in courts of law.”²² Here, the answer would clearly be no — if the rubric articulated in Jarkesy extended only to claims available at law (rather than equity). But as the decision notes, “[m]ost cases concerning the private/public rights distinction involve claims that might have traditionally sounded at common law rather than equity. Because Article III expressly confers exclusive jurisdiction on federal courts over cases that sound in law and equity, any distinction would only become relevant if Intuit claimed a right to a jury trial under the Seventh Amendment.”²³ As such, far from complicating the court’s analysis, “the similarities between cease-and-desist orders and equitable remedies” only highlights that the FTC’s requested relief is analogous to “traditional remedies” available from the judiciary.²⁴

In so holding, the court rejected FTC’s argument that the myriad distinctions between common law fraud and deceit and a claim under the FTC Act — including the requirement of proving damages, fraudulent intent, and privity of contract — was sufficient to “disprove that private rights are at stake.”²⁵ “Mere obstacles to relief [created by the higher burdens imposed by the common law claims] do not compel the conclusion that there was no actionable wrong” and, as such, “eliminating obstacles to relief does not make an actionable wrong no longer ‘traditional’ in its nature.”²⁶ What was important was not the technical elements, the burden of proof, or even the ability to bring a claim but whether the nature of the alleged wrong was susceptible of disposition by the judiciary without reference to the agency’s enforcement action. Or, put another way, the court decided that “Section 5 of the FTC Act did not create a new duty for merchants to refrain from deceptive advertising” but created a new and perhaps “more effective tool” than the common law.²⁷ Providing the public (or the government) with a more effective tool for dealing with an old problem does not render the claim public and does not allow the agency to bring the claim into its own in-house forum.

After applying the four factors from Jarkesy, the decision dismissed FTC’s various additional attempts to distinguish its enforcement action against Intuit from the SEC’s claims in Jarkesy. For example, FTC contended the claims involved public rights because it was seeking equitable remedies on behalf of the public — but that was precisely the sort of circular, self-justifying argument the Supreme Court rejected in Jarkesy. FTC also tried to analogize its deceptive advertising claim to the building code at issue in Atlas Roofing — the “high-water mark” of public-rights jurisprudence, but to no avail. In addition to noting that Atlas Roofing is of dubious precedential value, the decision notes that “a blanket prohibits on ‘unfair or deceptive acts or practices’ does not remotely ‘resemble[] a detailed building code like the workplace safety standards promulgated under the OSH Act.”²⁸ Finally, FTC’s reliance on Thomas v. Union Carbide and CFTC v. Schor also missed the mark as both cases relied on consent or waiver, neither of which existed with respect to Intuit. 

The Relief

Despite the broad sweep of its reasoning, the court carefully circumscribed its holding. The court expressly did not “decide the same question for any other ‘unfair methods of competition’ or other ‘unfair or deceptive acts or practices’” under the FTC Act.²⁹ As such, the FTC’s authority to institute in-house administrative adjudications for other alleged violations of the FTC Act remain ostensibly viable — though subject to serious constitutional challenge. The court also declined to instruct the FTC to dismiss its claims, holding that dismissal was premature. While FTC would have to proceed in federal court — and face a higher burden of proof and stricter requirements to explain the necessity of its sweeping requested relief — the court refused to prejudge such issues prior to remand.  

Judge Ho’s Concurrence

Judge James Ho joined the court’s decision in full but wrote separately to call into question various additional aspects of the FTC’s structure — and the entire edifice of the public/private rights distinction. According to Judge Ho, if “the Constitution separates power to preserve liberty, then the Federal Trade Commission Act of 1914 combines power to undermine liberty.”³⁰ The FTC’s “combined power” presents multiple constitutional issues, including (1) the vesting of legislative power in an executive agency, (2) unconstitutional protections from removal, and (3) the vesting of the judicial power in executive tribunals. In addition, Judge Ho argued that while “the so-called ‘public rights exception’ to Article III finds firm support in Supreme Court precedent,” it “has no textual basis in the Constitution.”³¹ As such, “any attempt to invoke that exception had better be supported by a ‘serious and unbroken historical pedigree.’”³²

Key Takeaways

Despite cabining its opinion to deceptive advertising claims and granting only limited relief, the Fifth Circuit’s decision in Intuit provides a roadmap for challenging an even broader swath of attempted in-house administrative adjudications than Jarkesy. The decision broadly interprets Jarkesy to hold that any administrative claim — whether sounding in law or in equity — that shares a “common core” with claims cognizable by the judiciary implicates a private right and requires Article III adjudication. Agency enforcement of broadly written organic statutes or implementing regulations provides ample opportunities for individuals and entities to locate broad overlap with earlier common law claims — and forces an agency to plead and prove its case in federal court.