author: JANE B. STRANCH, Circuit Judge.

text:
    ECM BIOFILMS, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
    No. 15-4339
    United States Court of Appeals, Sixth Circuit.
    Argued: July 28, 2016
    Decided and Filed: March 16, 2017

      ARGUED: Jonathan W. Emord, EMORD & ASSOCIATES, P.C., Clifton, Virginia, for Petitioner. Theodore Metzler, FEDERAL TRADE COMMISSION, Washington, D.C., for Respondent. ON BRIEF: Jonathan W. Emord, Peter A. Arhangelsky, EMORD & ASSOCIATES, P.C., Clifton, Virginia, for Petitioner. Theodore Metzler, FEDERAL TRADE COMMISSION, Washington, D.C., for Respondent. Steven J. Grossman, GROSS-MAN, TUCKER ET AL, Manchester, New Hampshire, for Amicus Curiae.
    Before: WHITE and STRANCH, Circuit Judges; MICHELSON, District Judge.

       The Honorable Laurie J. Michelson, United Slates District Judge for the Eastern District of Michigan, sitting by designation.

   OPINION

JANE B. STRANCH, Circuit Judge.

ECM BioFilms, Inc. manufactures an additive that it claims accelerates the rate at which plastic biodegrades. In October 2013, the Federal Trade Commission (FTC) filed an administrative complaint against ECM, which alleged that several of ECM’s biodegradability claims were deceptive. The full Commission ultimately found that three of ECM’s claims were false and misleading under § 5 of the FTC Act (15 U.S.C. § 45). ECM appeals the Commission’s decision with regard to only one of the claims, arguing that it was unsupported by substantial evidence. ECM also contends that the Commission violated its rights under the First Amendment, the Administrative Procedures Act (APA), and the Due Process Clause of the Fifth Amendment. We disagree and DENY the petition for review.

I. BACKGROUND

More than half of all plastic waste ends up in landfills, where it can take thousands of years to biodegrade. In recent years, some environmentally-conscious consumers have turned away from traditional plastics in favor of products that biodegrade at a more rapid rate. In response to this trend, manufacturers of plastic products have begun to look for ways to increase the biodegradability of their products. ECM BioFilms sells an additive that it claims will accelerate the biodegradation of plastics manufactured with the additive (which we will refer to as “ECM plastic”).

A. ECM’s biodegradability claims

ECM’s claims regarding the biodegradability of ECM plastic have changed over the years. Before 2009, ECM did not market a specific time frame for biodegradation, but did represent that ECM plastic would biodegrade “in timeframes that would be similar to things like wood or pieces of sticks.” Responding to industry demands for specific time frames, in 2009 or 2010 ECM began advertising that ECM plastic would “fully biodegrade” in a “landfill” within nine months to five years. ECM placed this representation on its marketing materials and website. The administrative law judge (ALJ) overseeing this case concluded this claim was false and unsubstantiated. As the ALJ observed, “All of the experts in this case agreed that ECM Plastics do not fully biodegrade in 9 months to 5 years in a landfill.” The Commission also concluded that “the clear eon-sensus among both parties’ experts” was that “ECM lacks substantiation for its express and implied claims that ECM Plastics fully biodegrade in landfills within 5 years.” ECM no longer contends otherwise.

ECM also provided plastic manufacturers with material to market their products as biodegradable, including a logo marked “ECM Biodegradable” against a tree design. Millions of plastic products were manufactured with this representation or similar representations, including “plastic dinnerware, straws, and ‘clam shell’ carryout containers, restaurant and grocery bags, trash bags, and shampoo and conditioner bottles.” Some of ECM’s plastic-manufacturer customers also advertised that their plastics would biodegrade in nine months to five years in a landfill.

In 2012, the FTC revised its “Green Guides,” which are intended to “help marketers avoid making environmental marketing claims thát are unfair or deceptive under Section 5 of the FTC Act.” 16 C.F.R. § 260.1(a). The previous version of the Guides, issued in 1996, advised that an unqualified claim that a product is biodegradable “should be substantiated by competent and reliable scientific evidence that the entire product or package will completely break down and return to nature ... within a reasonably short period of time after customary disposal.” Guides for the Use of Environmental Marketing Claims, 61 Fed. Reg. 53311, 53318 (Oct. 11, 1996) (emphasis added). The 2012 Guides advised that “[i]t is deceptive to make an unqualified degradable claim for items entering the solid waste stream if the items do not completely decompose within one year after customary disposal.” (16 C.F.R. § 260.8(c) (emphasis added). Additionally, with regard to items customarily disposed of in landfills, the 2012 Guides advised that any unqualified biodegradable claim would be deceptive “because these locations do not present conditions in which complete decomposition will occur within one year.” Id.

After the FTC issued the 2012 Guides, ECM revised its marketing materials and logo. ECM placed an asterisk next to the word “biodegradable” and clarified that “[pjlastic products manufactured with [the ECM additive] will biodegrade in any biologically-active environment (including most landfills) in some period greater than a year.” However, ECM continued to make the “nine months to five years” claim on its website until late 2013, and in direct communications with customers until January 2014.

B. Scientific tests of ECM plastic

Scientists disagree on the precise definition of the term “biodegradable.” Most commonly, scientists define biodegradable material as material that can be broken down by biological agents, such as bacteria or fungi. Biodegradability is a property of a material, similar to color, weight, or density. A material’s rate of biodegradation depends on the environment in which biod-egradation occurs. Because biodegradation occurs at different rates in different environments, in evaluating the biodegradability of a material, scientists focus on its “intrinsic biodegradability.” That is, they do not estimate the time for complete biodegradation, but instead evaluate the material’s rate of biodegradation in various environments, as well as how this rate compares with other biodegradable materials.

The most practical and widely-used scientific method for measuring the intrinsic biodegradability of a material is gas evolution testing. Of the available gas evolution tests, the D5511 protocol provides the best approximation of plastic biodegradation in landfill conditions. Landfills are predominantly anaerobic environments, and the D5511 method measures “the degree and rate of anaerobic biodegradation of plastic materials.” The D5511 protocol provides, however, that claims of performance are to be limited to the numerical result obtained in the test and are “not be used for unqualified ‘biodegradable’ claims.” It also provides that results are not to be extrapo-' lated past the actual duration of the test.

A number of different laboratories performed D5511 biodegradation tests on plastics manufactured with ECM’s additive. ECM points to nineteen laboratory tests that, it claims, demonstrate that ECM plastic biodegrades at a faster rate than traditional plastic. In one test, for instance, ECM plastic biodegraded 49.28% over 900 days, whereas traditional plastic biodegraded just 0.1152% over the same time. The FTC, in turn, points to thirteen tests that, it alleges, indicate that ECM’s additive does not accelerate biodegradation.

C. Consumer understanding of biodegradability claims

Both ECM and the FTC rely on consumer surveys to establish consumer understanding of biodegradability claims. The FTC’s survey was conducted by Dr. Shane Frederick, a professor of marketing at Yale University’s School of Management. Using an online survey tool available through Google Consumer Surveys, Dr. Frederick asked respondents one of 60 different questions, collecting nearly 29,-000 responses. Dr. Frederick found that, at a minimum, adding a “biodegradable” label to a plastic bottle increased the percentage of respondents who believed the bottle would fully decompose within five years from 13% to between 44% and 49%. Similarly adding a “biodegradable” label to a plastic “Tupperware” container increased the percentage of respondents who believed the container would fully decompose within five years from 16% to 44%; and adding a “biodegradable” label caused an additional 20% of respondents to believe that a plastic bag would fully decompose within five years (increasing the percentage from 21% to 41%). This data led the Commission to conclude that adding the biodegradable label leads a “significant minority of reasonable consumers to believe that the plastic product will biodegrade within five years.”

ECM’s survey was conducted by Dr. David Stewart, a professor of marketing and business law at Loyola Marymount University. Dr. Stewart surveyed 400 respondents by landline telephone asking five questions, some of which contained one or more sub-questions. In one question, respondents were asked, “If something is biodegradable, how long do you think it would take for it to decompose or decay?” Of the respondents who provided an answer to this question with a number and unit of time, 64% said that it would decompose within five years. By Dr. Stewart’s own calculations, these respondents represented 23% of the survey’s 400 respondents.

D. Procedural history

In October 2013, the FTC filed an administrative complaint alleging that ECM’s biodegradability representations were false and misleading, and thus violated § 5 of the FTC Act. The complaint asserted that ECM’s express representation that ECM plastic would completely biodegrade within nine months to five years was unsupported by scientific evidence. It also alleged that “[cjonsumers likely interpret unqualified degradable claims to mean that the entire product or package, will completely decompose into elements found in nature within a reasonably short period of time after customary disposal.” Because ECM plastic does not fully biodegrade within a reasonably short time, the complaint alleged, this implied claim was misleading.

An ALJ held a three-week trial in August 2014. The ALJ concluded that ECM’s express claim that ECM plastic would completely biodegrade in a landfill within nine months to five years was false and unsubstantiated. He also determined, however, that the FTC had failed to prove that ECM’s remaining biodegradability claims were misleading because the FTC failed to prove ECM had made an “implied one year claim.” The AL J’s decision was based, in part, on perceived methodological problems with Dr. Frederick’s survey.

The parties then filed cross appeals to the Commission. In October 2015, the Commission affirmed the ALJ’s decision with regard to ECM’s express claim that ECM plastic would fully biodegrade within five years. The Commission reversed on the other biodegradability claims, finding that ECM had made implied claims that ECM plastic would fully biodegrade within a reasonably short period of time, i.e., within five years. Commissioner Maureen K. Ohlhausen partially dissented from the Commission’s order.

The Commission’s order prohibits ECM from making biodegradability claims “unless such representation is true, not misleading, and, at the time it is made, respondent possesses and relies upon competent and reliable scientific evidence that substantiates the representation,” and

I.A.i. the entire item will completely decompose into elements found in nature within five (5) years after customary disposal; or
ii. the representation is clearly and prominently and in close proximity qualified by:
a. Either (1) the time to complete decomposition into elements found in nature; or (2) the rate and extent of decomposition into elements found in nature, provided that such qualification must disclose that the stated rate and extent of decomposition does not mean that the product or package will continue to decompose; and
b. If the product will not decompose in a customary disposal facility or by a customary method of disposal, both (1) the type of non-customary disposal facility or method and (2) the availability of such disposal facility or method to consumers where the product or package is marketed or sold.

(App. at 4-5, 403-04)

The Commission’s order specifies the “competent and reliable scientific evidence” needed to substantiate a biodegradability claim, setting different standards for unqualified claims (that is, claims that simply use the term “biodegradable”), and qualified claims (claims that cabin the meaning of the word, such as by referring to the rate of degradation and the circumstances of disposal). To make an unqualified biodegradability claim, “any scientific technical protocol (or combination of protocols) substantiating such claims must assure complete decomposition and simulate the physical conditions found in landfills, where most trash is disposed.” (Id. at 8) Results from the D5511 protocol, the order explains, “are not competent and reliable scientific evidence supporting unqualified claims, or claims of outcomes beyond the parameters and results of the actual test performed.” (Id.) (emphasis added) To make a qualified biodegradability claim,

any scientific technical protocol (or combination of protocols) substantiating such claims must both:
i. assure the entire product will (1) completely decompose into elements found in nature in any stated timeframe ...; or (2) decompose into elements found in nature at the rate and to the extent stated in the representation; and
ii. simulate the physical conditions found in the type of disposal facility or method stated in the representation or, if not qualified by disposal facility or method, the conditions found in landfills, where most trash is disposed.

(Id.) The order does not bar ECM from using results of D5511 tests to substantiate a qualified biodegradability claim.

Lastly, because “ECM’s violations were serious, repeated, and deliberate,” the Commission’s order also includes “fencing-in relief to prevent the company from engaging in deceptive practices that are ‘like and related’ to the violating practice ‘as a prophylactic and preventative measure.’” (App. at 404 (quoting FTC v. Mandel, 359 U.S. 385, 393, 79 S.Ct. 818, 3 L.Ed.2d 893 (1959)) Specifically, the order prohibits ECM from claiming that any product “offers any environmental benefit, unless the representation is true, not misleading, and, at the time it is made, respondent possesses and relies upon competent and reliable evidence, which when appropriate must be competent and reliable scientific evidence, that substantiates the representation.” (App. at 5, 403-04)

II. ANALYSIS

On appeal, ECM contends that the Commission’s order was not supported by substantial evidence — and, therefore, that the Commission should not have found ECM liable for violating § 5 of the FTC Act— and that the Commission’s order violated the First Amendment, the APA, and the Due Process Clause of the Fifth Amendment. We address each of ECM’s challenges in turn.

A. Section 5 of the FTC Act

We begin by reviewing the Commission’s holding that ECM’s marketing materials violated § 5 of the FTC Act. In conducting this review, “[t]he findings of the Commission as to the facts, if supported by evidence, shall be conclusive.” 15 U.S.C. § 45(c). This standard is “essentially identical” to the “ ‘substantial evidence’ standard for review of agency factfinding.” F.T.C. v. Ind. Fed’n of Dentists, 476 U.S. 447, 454, 106 S.Ct. 2009, 90 L.Ed.2d 445 (1986). “Substantial evidence is evidence that a reasonable mind might accept as adequate to support a conclusion,” ProMedica Health Sys., Inc. v. F.T.C., 749 F.3d 559, 564 (6th Cir. 2014) (internal quotation marks and citation omitted), which “requires more than a mere scintilla but less than a preponderance,” Miller v. Comm’r of Soc. Sec., 811 F.3d 825, 833 (6th Cir. 2016) (internal quotation marks omitted).

Section 5 of the FTC Act prohibits the use of deceptive advertising in commerce and empowers and directs the Commission to prevent such advertising. See 15 U.S.C. § 45(a). The Commission determines whether an advertisement is deceptive by engaging “in a three-step inquiry, considering: (i) what claims are conveyed in the ad, (ii) whether those claims are false, misleading, or unsubstantiated, and (iii) whether the claims are material to prospective consumers.” POM Wonderful, LLC v. F.T.C., 777 F.3d 478, 490 (D.C. Cir. 2015), cert. denied, — U.S. -, 136 S.Ct. 1839, 194 L.Ed.2d 839 (2016). Because the FTC “deals continually” with deception cases, “the Commission is often in a better position than are courts to determine when a practice is ‘deceptive.’ ” F.T.C. v. Colgate-Palmolive Co., 380 U.S. 374, 385, 85 S.Ct. 1035, 13 L.Ed.2d 904 (1965); see also Buchanan v. Northland Grp., Inc., 776 F.3d 393, 398 (6th Cir. 2015) (quoting Colgate-Palmolive for this proposition). Accordingly, “the Commission’s judgment is to be given great weight by reviewing courts,” and “[t]his admonition is especially true with respect to allegedly deceptive advertising since the finding of a § 5 violation in this field rests so heavily on inference and pragmatic judgment.” Colgate-Palmolive, 380 U.S. at 385, 85 S.Ct. 1035.

ECM appeals the Commission’s findings with respect to only one of its claims: its representation that ECM plastic is “biodegradable” without reference to any time frame — that is, its “unqualified biodegradability claim.” The Commission rejected ECM’s argument that the term “biodegradable” conveys only that a product is “intrinsically” biodegradable, and concluded that the preponderance of the evidence showed that ECM’s unqualified biodegradability claim implied that ECM plastics “will completely break down in landfills within a reasonably short period of time, i.e., within five years.”

ECM does not dispute that this implied claim, if made, was false. Nor does it dispute that this implied claim would be material to its customers. Accordingly, we limit our analysis to whether substantial evidence supports the Commission’s finding that ECM’s unqualified biodegradability claim did, in fact, convey the implied claim that ECM plastic completely biodegrades within five years. See POM Wonderful, 777 F.3d at 491; see also Removatron Int’l Corp. v. F.T.C., 884 F.2d 1489, 1496 (1st Cir. 1989) (“The Commission’s findings with respect to what representations are made in advertisements are factual.”).

The Commission “will deem an advertisement to convey a claim if consumers acting reasonably under the circumstances would interpret the advertisement to contain that message.” POM Wonderful, 777 F.3d at 490 (citation omitted). In making this determination, the Commission “examines the overall net impression of an ad,” and may rely on both its own viewing of the ad and extrinsic evidence. See Kraft, Inc. v. F.T.C., 970 F.2d 311, 314, 318 (7th Cir. 1992). “An interpretation may be reasonable even though it is not shared by a majority of consumers in the relevant class, or by particularly sophisticated consumers.” FTC Policy Statement on Deception, 103 F.T.C. 174, 177 n.20 (1984). The Commission’ thus “considers .whether at least a significant minority of reasonable consumers would likely interpret the ad to assert the claim.” POM Wonderful, 777 F.3d at 490 (internal quotation marks omitted); see also Fanning v. F.T.C., 821 F.3d 164, 171 (1st Cir. 2016) (“Liability may be imposed if at least a significant minority of reasonable consumers [would be] likely to take away the misleading claim.”) (internal quotation marks omitted). We have previously expressed unwillingness “to overturn the deception findings of the Commission” where an ad misleads “15% (or 10%) of the buying public.” Firestone Tire & Rubber Co. v. F. T. C., 481 F.2d 246, 249 (6th Cir. 1978); see also In re Telebrands Corp., 140 F.T.C. 278, 291 (2005) (range of 10.5% to 17.3% “was sufficient to conclude that the challenged claims were communicated”), aff'd, 457 F.3d 354 (4th Cir. 2006).

Here, the Commission relied on two consumer surveys — a valid form of extrinsic evidence. Telebrands Corp., 140 F.T.C. at 291. It relied on Dr. Frederick’s survey, which found that, at a minimum, adding a “biodegradable” label caused an additional 31% to 36% of respondents to believe that a plastic water bottle would fully decompose within five years; an additional 28% to believe that a plastic “Tupperware” container would fully decompose within five years; and an additional 20% to believe that a plastic bag would fully decompose within five years. The Commission also relied on the survey of ECM’s own expert, Dr. Stewart, which found that 23% of respondents expected something biodegradable to fully decompose within five years. Thus, both consumer surveys would appear to support the Commission’s finding that ECM’s unqualified biodegradability claim conveyed the implied claim to a significant minority of consumers.

ECM argues that the Commission’s finding was not supported by substantial evidence for two reasons. ECM first argues that Dr. Frederick’s survey is unreliable. However, the Commission convincingly rebutted each of ECM’s criticisms, in detail and with extensive citation to the record. Evaluation of consumer survey evidence is within the Commission’s expertise, and we accord its judgment “great weight.” See Colgate-Palmolive, 380 U.S. at 385, 85 S.Ct. 1035. Thus, Dr. Frederick’s survey constitutes substantial evidence in support of the Commission’s finding. Furthermore, ECM does not contest Dr. Stewart’s survey results, which also support the Commission’s finding. Throughout its brief, ECM extols Dr. Stewart’s expertise and survey methodology. Because Dr. Stewart’s survey constitutes substantial evidence on its own, the alleged deficiencies in Dr. Frederick’s survey are immaterial.

ECM also argues that these consumers, even if a significant minority, were not “acting reasonably under the circumstances.” POM Wonderful, 777 F.3d at 490. ECM contends that these consumers are not acting reasonably because “nothing biodegrades within five years” and their understanding of biodegradability is unscientific. But the scientific validity of a consumer’s belief is not the standard for reasonableness. Rather, “[i]n considering charges of false and deceptive advertising, the public’s impression is the only true measure of deceptiveness.” F.T.C. v. Brown & Williamson Tobacco Corp., 778 F.2d 35, 39-40 (D.C. Cir. 1985); see id. at 41 (noting that in Zauderer v. Office of Disciplinary Counsel of Sup. Ct. of Ohio, 471 U.S. 626, 652, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985), the Supreme Court implied that “in situations involving ‘technical ... terms,’ it may become reasonable to assume that members of the public may be ‘unaware of the ... meanings of such terms’ and that ‘substantial numbers’ might be misled”); see also In re Thompson Med. Co., Inc., 104 F.T.C. 648, 839 & n.33 (1984) (concluding that scientific understandings are not the measure of reasonableness because “scientific and popular understandings are known to vary on occasion” and “average consumers” might not understand the representation “as would a scientist”), aff'd, 791 F.2d 189 (D.C. Cir. 1986). Moreover, ECM itself represented to plastic manufacturers that ECM plastic would biodegrade within five years. Certain of these plastic manufacturers found the claim reasonable enough to include on their products. If these sophisticated consumers accepted ECM’s claims, it stands to reason that it was reasonable for an average consumer to do the same.

We thus conclude that the Commission’s finding that ECM violated § 5 of the FTC Act was supported by substantial evidence.

B. APA challenges

The APA “requires us to uphold agency action unless it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’ ” Nat’l Truck Equip. Ass’n v. Nat’l Highway Traffic Safety Admin., 711 F.3d 662, 667 (6th Cir. 2013) (quoting 5 U.S.C. § 706(2)(A)). An agency decision is arbitrary and capricious if

the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Id. (quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). In conducting this analysis, “our role is limited to reviewing the administrative record to determine whether there exists a rational connection between the facts found and the choice made.” Nat’l Truck Equip. Ass’n, 711 F.3d at 667 (internal quotation marks omitted). We “appl[y] a harmless-error rule to APA cases, such that a mistake that has no bearing on the ultimate decision or causes no prejudice shall not be the basis for reversing an agency’s determination.” Sierra Club v. Slater, 120 F.3d 623, 637 (6th Cir. 1997); see also Rabbers v. Comm’r Soc. Sec. Admin., 582 F.3d 647, 654-55 (6th Cir. 2009).

ECM raises several APA challenges. First, ECM argues that the Commission ignored dispositive scientific evidence and erroneously concluded that thirteen tests undermined ECM’s biodegradability claims. But the Commission did not rely on this finding to hold that the unqualified biodegradability claim was misleading; it relied on the finding that ECM plastic cannot fully biodegrade in a landfill within five years, which is undisputed. Accordingly, even if ECM is correct, the Commission’s error was harmless.

Second, ECM argues that the Commission erroneously failed to explain significant departures from the ALJ’s factual findings, including the credibility findings regarding the experts and the ALJ’s related conclusions regarding the survey evidence. However, “under both the Administrative Procedure Act and [the FTC’s] regulations, the Commission may exercise, on appeal from an initial decision by an administrative law judge, all powers which it would possess if it made the initial decision itself.” Chrysler Corp. v. F.T.C., 561 F.2d 357, 362 (D.C. Cir. 1977); see 16 C.F.R. § 3.54(a). The Commission explained its departure from the ALJ’s findings regarding the survey results, and thus the record does not support the conclusion that the Commission’s decision “fail[s] to reflect attentive consideration to the [ALJ’s] decision.” Morall v. Drug Enf't Admin., 412 F.3d 165, 177 (D.C. Cir. 2005). True, “[w]hen the Commissiop overrules the ALJ and substitutes its own findings, we should carefully scrutinize the Commission’s determinations of fact.” In re Detroit Auto Dealers Ass’n, Inc., 955 F.2d 457, 469 (6th Cir. 1992). But that does not change the standard of review. Our task remains “to determine whether the Commission’s findings are supported by substantial evidence,” and we uphold those findings if they are. Id. For the reasons given in our discussion of ECM’s Section 5 challenge, we are satisfied that there is substantial evidence to support the Commission’s decision to partially reverse the ALJ’s decision.

Third, ECM contends that the Commission misapplied the factors from In re Pfizer Inc., 81 F.T.C. 23 (1972). The Pfizer factors are used to examine the substantiation needed for a claim. See POM Wonderful, 777 F.3d at 490-91. But the parties agreed at trial that the appropriate level of substantiation was “competent and reliable scientific evidence” — the standard the Commission applied on appeal. ECM has thus waived this argument. And, in any event, any error was harmless. It is now undisputed that no evidence supported the claim that ECM plastic would fully biodegrade within five years, so ECM would be liable under any level of required substantiation.

Fourth, ECM makes a passing reference to the Commission’s fencing-in relief, arguing that it was unnecessary because “there was no evidence of any actual purchase by an end-use consumer” of plastic manufactured with the ECM additive. But the record showed that the reason plastic manufacturers want to produce biodegradable plastic is to satisfy end-use consumer demand, which stems from environmental concerns. For instance, a representative from one plastic manufacturer testified that plastic manufacturers “were looking for a product they could mark as degradable to say that they were being, you know, environmentally sensitive.” Another testified that “[p]eople ... don’t want to pollute the environment and this [biodegradable plastic] is what they choose to buy.” Accordingly, there was a rational connection between the facts in the record and the fencing-in relief.

Finally, ECM argues that the Commission’s order should not be enforced because it impinges on the Environmental Protection Agency’s (the EPA) authority to manage solid waste disposal. See 5 U.S.C. § 706(2)(C) (“The reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be ... in excess of statutory jurisdiction, authority, or limitations.... ”). ECM alleges that the Commission’s order will coerce the plastics industry to abandon products that biodegrade in more than five years; the plastics industry will either produce more traditional plastics or develop plastic that biodegrades within five years; rapidly biodegrading plastic produces more methane gas, which is worse for the environment; and the EPA is engaged in an effort to collect methane gas at landfills, which would be frustrated by rapidly-biodegrading plastics. By shifting market incentives, ECM concludes, the Commission will set national waste policies and thus invade the EPA’s jurisdiction.

This far-fetched scenario is unworthy of serious consideration. No evidence in the record supports ECM’s speculation about the possible effects of the Commission’s order. More importantly, Congress “empowered and directed” the Commission to prevent deceptive acts and practices in the marketplace, FTC Act § 5, 15 U.S.C. § 45(a), and gave “the Commission an influential role in interpreting § 5 and in applying it to the facts of particular cases,” Colgate-Palmolive, 380 U.S. at 385, 85 S.Ct. 1035. Exercising such authority will invariably have marketplace effects. That does not render the initial Commission action — which was unquestionably within its statutory authority — unlawful.

C. First Amendment

We now turn to ECM’s First Amendment challenge to the Commission’s order. ECM contends that the Commission’s order is an unconstitutional restriction on biodegradability claims, specifically ECM’s right to disseminate truthful scientific information. It also argues, in the alternative, that its proposed disclaimer would have cured any deception and that the Commission’s required disclaimers are unduly burdensome.

1. Standard of review for the Commission’s factual findings

Before reaching the merits of ECM’s First Amendment challenge, we must first decide the appropriate standard of review for the Commission’s factual findings. ECM argues that in the First Amendment context, we must review the Commission’s factual findings de novo, pointing to Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 104 S.Ct. 1949, 80 L.Ed.2d 502 (1984), and Peel v. Attorney Registration & Disciplinary Commission of Illinois, 496 U.S. 91, 110 S.Ct. 2281, 110 L.Ed.2d 83 (1990). ECM is fighting an uphill battle: Both the D.C. and Seventh Circuits considered the same argument and rejected ECM’s reading of Bose and Peel, see, e.g., POM Wonderful, 777 F.3d at 499 (citing Novartis Corp. v. FTC, 223 F.3d 783, 787 n.4 (D.C. Cir. 2000)); Kraft, Inc. v. F.T.C., 970 F.2d 311, 317 (7th Cir. 1992), and no circuit has adopted ECM’s reading.

We decline to apply de novo review for the reasons identified by the D.C. and Seventh Circuits. First, the Supreme Court provided no indication that it intended Bose or Peel to overrule the substantial-evidence standard for the Commission’s factual findings. See Ind. Fed’n of Dentists, 416 U.S. at 454, 106 S.Ct. 2009; United States v. O’Brien, 560 U.S. 218, 224, 130 S.Ct. 2169, 176 L.Ed.2d 979 (2010) (“If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions.”) (citation omitted). To the contrary: as both the Seventh Circuit and the D.C. Circuit observed, Bose was a libel case, and the Bose Court “itself suggests that commercial speech might not warrant the higher standard of review established for libel cases.” Kraft, 970 F.2d at 317 (citing Bose, 466 U.S. at 504 n.22, 104 S.Ct. 1949); see also Brown & Williamson Tobacco Corp., 778 F.2d at 41 n.3 (same). Moreover, Bose and Peel “involved review of court decisions, and courts generally lack the Commission’s expertise in the field of deceptive advertising.” Kraft, 970 F.2d at 317. Thus, while there was little reason to defer to the factual findings of the lower courts in Bose and Peel, “Commission findings are well-suited to deferential review because they may require resolution of ‘exceedingly complex and technical factual issues.’ ” Id. (quoting Zauderer, 471 U.S. at 645, 105 S.Ct. 2265). Given that this complexity is present in “virtually any field of commerce,” Zauderer, 471 U.S. at 645, 105 S.Ct. 2265, ECM’s argument that the Commission lacks expertise in biodegradation science is not persuasive. Finally, unlike the “prophylactic regulation” in Peel that “completely prohibited] an entire category of potentially misleading commercial speech,” here “the issue is whether an individualized FTC cease and desist order, prohibiting a particular set of deceptive ads, passes constitutional muster.” Kraft, 970 F.2d at 317. Like the Seventh Circuit, “[w]e find the restriction at issue in Peel and the one here sufficiently distinct to justify differing levels of appellate review.” Id. at 317-18.

We thus review “the Commission’s factual finding of a deceptive claim under the ordinary (and deferential) substantial-evidence standard.” POM Wonderful, 777 F.3d at 499. That is to say, the same standard under which we reviewed the Commission’s finding that ECM violated § 5 of the FTC Act.

2. Restrictions on biodegradability claims

We review prohibitions on commercial speech under the four-part test set forth in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980), and disclaimer requirements under Zauderer. See Int’l Dairy Foods Ass’n v. Boggs, 622 F.3d 628, 635-36, 640-42 (6th Cir. 2010).

The Commission’s order prohibits ECM from representing that ECM plastic is biodegradable “unless such representation is true, not misleading, and, at the time it is made, respondent possesses and relies upon competent and reliable scientific evidence that substantiates the representation,” and

I.A.i. the entire item will completely decompose into elements found in nature within five (5) years after customary disposal; or
ii. the representation is clearly and prominently and in close proximity qualified by:
a. Either (1) the time to complete decomposition into elements found in nature; or (2) the rate and extent of decomposition into elements found in nature,, provided that such qualification must disclose that the stated rate and extent of decomposition does not mean that the product or package will continue to decompose; and
b. If the product will not decompose in a customary disposal facility or-by a customary method of disposal, both (1) the type of non-customary disposal facility or method and (2) the availability of such disposal facility or method to consumers where the product or package is marketed or sold.

(App. at 4-5, 403-04) Thus, the Commission’s order imposes two levels of restriction based on the results of “competent and reliable” scientific testing. First, if ECM possesses scientific evidence that ECM plastic will completely decompose within five years, then it may use the word “biodegradable” in its advertisements without any restriction whatsoever. Second, if -ECM does not possess scientific evidence that ECM plastic will completely decompose within five years, but does possess scientific evidence that ECM plastic will decompose at some other rate, then it may use the word “biodegradable” only if it also includes certain disclaimers.

'ECM contends that the first level of restriction — which permits ECM to represent that ECM plastic is biodegradable without disclaimers if ECM possesses scientific evidence that ECM plastic will completely decompose within five years — actually amounts to a prohibition because “nothing biodegrades within five years in a landfill.” As ECM points out, the record shows that all of the experts in this case thought that most, if not all, waste will not biodegrade in a landfill within five years, and no expert thought that ECM plastic could achieve that rate of biodegradation. One expert, for instance, estimated that ECM plastic would take 30-100 years to biodegrade in a landfill. Thus, ECM contends, the Commission’s order effectively prohibits ECM from making “unqualified biodegradability claims” — that is, prohibits ECM from using the word “biodegradable” in its advertisements without disclaimers.

We agree with ECM’s description of the expert testimony, but disagree with ECM’s characterization of the ensuing restriction. Because ECM has not provided — and in all likelihood cannot provide— scientific evidence that ECM plastic will completely decompose within five years after customary disposal (i.e. in a landfill), the Commission’s order effectively requires that any use of the word “biodegradable” be accompanied with disclaimers. This restriction is not a prohibition on speech; it does not ban ECM from using the word “biodegradable” (or any other word) in its advertisements. Nor are the disclaimer requirements so onerous that they effectively preclude ECM from making qualified biodegradability claims. The Commission’s order permits ECM to use results from gas evolution testing — including the D5511 protocol- — to substantiate qualified biodegradability claims. ECM may need to specify the disposal conditions simulated by the test; and, if the tests are not run until complete decomposition, ECM may need to specify the rate and extent of decomposition supported by the test. But such requirements do not effect a prohibition.

It is true that the Commission’s order prohibits ECM from speaking in a certain manner: it prohibits ECM from representing that ECM plastic is biodegradable without explanatory disclaimers. But disclaimer requirements always restrict speech in this way. Adopting ECM’s characterization of the Commission’s restrictions would render any disclaimer requirement a prohibition on speech. We decline to collapse the distinction the Supreme Court has made between these two types of restrictions. See Zauderer, 471 U.S. at 651, 105 S.Ct. 2265 (“[I]n virtually all our commercial speech decisions to date, we have emphasized that because disclosure requirements trench much more narrowly on an advertiser’s interests than do flat prohibitions on speech, ‘warning[s] or disclaimer[s] might be appropriately required ... in order to dissipate the possibility of consumer confusion or deception.’ ”) (citation omitted).

The Commission’s disclaimer requirements are evaluated under the more lenient standard set forth in Zauderer. See Int'l Dairy Foods, 622 F.3d at 640-42. Disclaimer requirements must be “reasonably related to the [Commission’s] interest in preventing deception of consumers” and cannot be “unjustified or unduly burdensome.” Zauderer, 471 U.S. at 651, 105 S.Ct. 2265. We have already concluded that substantial evidence supports the Commission’s finding that ECM’s unqualified biodegradability claim was misleading. In conducting this analysis, then, we are mindful that the FTC Act grants the Commission “wide discretion in determining the type of order that is necessary to cope with the' unfair practices found.” Colgate-Palmolive, 380 U.S. at 392, 85 S.Ct. 1035. Having violated the FTC Act, ECM “must expect some fencing in,” and the Commission may “frame its order broadly enough to prevent respondents from engaging in similarly illegal practices in future advertisements.” Id. at 395, 85 S.Ct. 1035.

The Commission’s order permits ECM to represent that ECM plastic is biodegradable if accompanied by certain disclaimers. ECM’s unqualified biodegradability claim was misleading because it implied a rate of complete biodegradation not “substantiated by competent and reliable scientific evidence.” The Commission’s disclaimer requirements are reasonably related to preventing this deception. They require ECM to disclose the rate and extent of biodegradation that is actually supported by its scientific testing. And, if tests show that ECM plastic will not biodegrade in a landfill (or other customary disposal method) — as some evidence in the record indicated — ECM must disclose that information as well.

ECM argues that the deception also would be cured by the disclaimer it proposed: “There is no scientific test that establishes the rate within which this product will achieve complete biodegradation.” Because this disclaimer is less restrictive, ECM contends, the Commission’s required disclaimers are unduly burdensome.

We disagree for two reasons. First, as the Commission observed, ECM’s proposed disclaimer “offers only a vague allusion to variations in conditions and/or the imprecision of available substantiation techniques,” and “addresses neither the rate nor extent of biodegradation that consumers perceive in ECM’s representations.” It is thus inadequate to neutralize the deception. Second, the Commission was not required to adopt the least restrictive disclaimer. See Zauderer, 471 U.S. at 651 n.14, 105 S.Ct. 2265 (rejecting the argument that courts “should subject disclosure requirements to a strict ‘least restrictive means’ analysis under which they must be struck down if there aré other means by which the State’s purposes may be served”). Because the Commission’s disclaimers are reasonably related to preventing the deception, they are constitutional under Zauderer — even if a less-restrictive disclaimer is up to the task.

Finally, ECM objects to the order’s disclaimer requirement related to extrapolating test results beyond the duration of the test. This restriction, however, is reasonably related to the directives of ECM’s testing protocol (D5511), which expressly instructs that “results shall not be extrapolated past the actual duration of the test.” It is therefore constitutional under Zau-derer.

D. Due Process

ECM argues that the Commission’s order violated its due process rights. ECM contends that in its Green Guides, 16 C.F.R. § 260.8(c), and during the proceedings before the ALJ, the FTC defined “reasonably short period of time” for the purposes of the implied claim to mean “complete biodegradation within one year after customary disposal.” Thus, ECM did not know that the Commission interpreted a reasonably short period of time to mean five years, and “lacked fair notice and an opportunity to develop facts to support its defense on that point.”

“The purpose of the administrative complaint is to give the responding party notice of the charges against him.” L. G. Balfour Co. v. F. T. C., 442 F.2d 1, 19 (7th Cir. 1971) (citation omitted). A complaint is adequate in this regard if 'the responding party is “reasonably apprised of the issues in controversy, and any such notice is adequate in the absence of a showing that a party was misled.” Id. (citations omitted). Additionally, an issue need not be raised in the administrative complaint if the responding party receives fair notice and a full opportunity to litigate the issue. See N.L.R.B. v. Mackay Radio & Tel. Co., 304 U.S. 333, 349-50, 58 S.Ct. 904, 82 L.Ed. 1381 (1938) (rejecting the argument that the agency’s “findings do not follow the pleadings” because.“[w]hile the respondent was entitled to know the basis of the complaint against it, and to explain its conduct, in an. effort to meet that complaint,” the record showed that it “understood the issue and was afforded full opportunity” to litigate the issue; Yellow Freight Sys., Inc. v. Martin, 954 F.2d 353, 358 (6th Cir. 1992) (concluding that an agency may base its decision on an issue “not raised in pleadings” if the responding party “knew what conduct was in issue and had an opportunity to present [its] defense”); see also Nat’l Realty & Const. Co. v. Occupational Safety & Health Review Comm’n, 489 F.2d 1257, 1264 (D.C. Cir. 1973) (“So long as fair notice is afforded, an issue litigated at an administrative hearing may be decided by the hearing agency even though the formal pleadings did not squarely raise the issue.”).

The complaint here provided ECM with adequate notice to prepare a defense. It alleged that ECM’s various biodegradability claims were false and misleading, and it identified specific marketing materials containing these claims. It also informed ECM of the main issues in dispute: the scientific validity of the claims; the rate of biodegra-dation of ECM plastics after customary disposal; and whether consumers “interpret unqualified degradable claims to mean that the entire product or package will completely decompose into elements found in nature within a reasonably short period of time after customary disposal.” Although the complaint does not define “reasonably short period of time” as a specific time period, that level of detail was unnecessary to “reasonably apprise” ECM of the issues in controversy. See L. G. Balfour Co., 442 F.2d at 19.

Moreover, ECM did, in fact, have ample notice of complaint counsel’s intent to use “within five years” as a benchmark for “reasonably short period of time.” Before, during, and after trial, complaint counsel defined “reasonably short period of time” as “a period close to one year, or at least within 5 years.” We have previously held such elaboration over the course of the proceedings sufficient to provide notice. See J. B. Williams Co. v. F. T. C., 381 F.2d 884, 888 (6th Cir. 1967) (holding that petitioner had sufficient notice of an issue even though the '“specific issue was not charged in the complaint, and Government counsel stated early in the proceeding that this issue was not present”); see also L. G. Balfour Co., 442 F.2d at 19 (concluding that petitioner had adequate notice because “[a]s the Commission case against petitioners unfolded, there was a reasonable opportunity to know the claims of the opposing party and to meet them” (internal quotation marks omitted)). ECM’s due process claim is thus without merit.

The D.C. Circuit’s “fair notice” doctrine, relied upon by ECM, is not to the contrary. This doctrine restricts the penalties agencies may impose when their regulatory interpretations have not been announced with sufficient clarity. See Gen. Elec. Co. v. U.S.E.P.A., 53 F.3d 1324, 1329 (D.C. Cir. 1995); see also Gates & Fox Co. v. Occupational Safety & Health Review Comm’n, 790 F.2d 154, 156-57 (D.C. Cir. 1986). However, this heightened notice standard only applies when agencies seek to impose “sufficiently grave” or “drastic” sanctions. See United States v. Chrysler Corp., 158 F.3d 1350, 1355 (D.C. Cir. 1998) (citation omitted); Gen. Elec. Co., 53 F.3d at 1329. Examples of grave or drastic sanctions include denying the renewal of an operating license, Trinity Broad. of Fla., Inc. v. F.C.C., 211 F.3d 618, 628-32 (D.C. Cir. 2000), compelling a product recall, Chrysler Corp., 158 F.3d at 1354-55, and imposing a $25,000 fine, Gen. Elec. Co., 53 F.3d at 1329-30. Here, by contrast, the Commission merely ordered ECM to cease making certain representations that violate its interpretation of the FTC Act. This is not a “grave” or “drastic” sanction. See id. at 1328 (“Had [the] EPA merely required GE to comply with its interpretation, this case would be over.”). And, in any event, ECM received adequate notice of the charges.

III. CONCLUSION

For the foregoing reasons, we DENY' the petition for review.

      . Complaint counsel offered two other consumers surveys that were rejected by the Commission and are not at issue on appeal.

      . When the tool used by Dr. Fredericks is employed, "an internet user encounters a 'pop-up' survey question when attempting to access desired content on a website; the user is blocked from access to the desired content unless he or she answers the survey question or pays for access to the desired content without answering.”

      . A portion of respondents did not respond with a number and unit of time. Dr. Frederick's original survey did not “code” these responses, thus excluding them from his analysis, and ECM argued that this omission biased his results. In its review of these arguments, the Commission observed that "[ojmitting the uncoded responses would only affect the results if the respondents whose answers were not coded as a group held different views on biodegradation times than the remainder of the population; however, there is no reason to believe that is the case here.” Nevertheless, the Commission recalculated Dr. Frederick's results by counting every uncertain, ambiguous, or unclear response as “stating an expectation that biodegradation will take more than five years.” The Commission found that "even if all of the responses excluded by Dr. Frederick's coding rule were included in the denominator with no adjustment to the numerator ... the results still support Dr. Frederick's findings.” We rely on the more conservative, recalculated survey results.

      . This is a conservative figure. The Commission calculated 119 responses of five years or less, which would constitute 30% of the 400 survey respondents. "To be conservative,” the Commission noted that it relied “only on the smaller figure cited in the text and validated by Dr. Stewart.” Additionally, Dr. Frederick reviewed the "verbatim responses from Dr. Stewart's survey,” and found 138 responses of five years or less, which would constitute 35% of the 400 survey respondents.

      . ECM does not expressly contest the Commission's order under § 5. Instead, it argues that the Commission violated the APA. Most of ECM's APA arguments, however, amount to assertions that the Commission lacked adequate evidence to support its findings under § 5. Those arguments are addressed here. ECM's remaining APA arguments are addressed in a later section.

        . The Commission held ECM liable for two other representations, neither of which is raised on appeal. First, ECM claimed that plastics manufactured with its additive would biodegrade in a landfill within nine months to five years. The ALJ ruled that this claim was false and unsubstantiated, and ECM did not appeal that ruling to the Commission, though it did argue that this claim was not material. The Commission rejected this argument, holding that the claim was material. ECM has not appealed the Commission’s finding.
      Second, ECM claimed that plastics manufactured with its additive would biodegrade in “most landfills” in "some period greater than a year.” The Commission ruled that this claim was facially deceptive because the claim’s reference to one year had an "anchoring effect” conveying the message that the time for biod-egradation would be reasonably short. — perhaps longer than a year, but not a lot longer. The Commission supported this facial analysis with findings from the consumer surveys of Dr. Stewart and Dr. Frederick. Dr. Stewart found that 24% of respondents inferred that the plastic would biodegrade in one year. Dr. Frederick found that 54% of respondents who provided a time period inferred that the plastic would biodegrade in less than five years and, of this subset of respondents, 23% clustered around one year. ECM has not appealed the Commission’s finding with respect to this claim either.

      . As discussed in footnote 4, ECM characterized its substantial evidence arguments as APA challenges. These arguments are better addressed through the framework of the FTC Act.

      . Because the D.C. Circuit’s "fair notice” doctrine would not change the outcome in this case, we decline to decide whether it should be adopted in this circuit.


source: Caselaw Access Project

author: MERRITT, Circuit Judge.

license: Public Domain

text:
    IN RE: Susan G. BROWN, Debtor. Susan G. Brown, Appellant, v. Douglas Ellmann, Appellee.
    No. 16-1967
    United States Court of Appeals, Sixth Circuit.
    Decided and Filed: March 20, 2017
    Rehearing En Banc Denied April 20, 2017

      United States Bankruptcy Court for the Eastern District of Michigan at Detroit. No. 14-48421 — Marci B. Mclvor, Judge.
    ON BRIEF: Gary Boren, Westland, Michigan, for Appellant. Douglas S. Ell-mann, ELLMANN & ELLMANN, P.C., Ann Arbor, Michigan, for Appellee. Tara A. Twomey, NATIONAL CONSUMER BANKRUPTCY RIGHTS CENTER, San Jose, California, for Amicus Curiae.
    Before: MERRITT, KETHLEDGE, and WHITE, Circuit Judges.
   OPINION

MERRITT, Circuit Judge.

This appeal centers upon a bankruptcy court order denying Chapter 7 Debtor-Appellant, Susan G. Brown,'an exemption under 11 U.S.C. § 522 on the basis of the value of her state-law redemption rights in a piece of real property sold by Trustee-Appellee, Douglas Ellmann, on behalf of Brown’s bankruptcy estate. We AFFIRM the bankruptcy court’s denial of Brown’s proposed exemption because she lacked any equity in the property after the sale— that is, the property sold for substantially less than the value of the secured claims on the property.

I.

In 2014, Brown filed a voluntary petition for bankruptcy protection under Chapter 7 of the Bankruptcy Code. In an attachment to her original petition, Brown disclosed her ownership of a residence in Ypsilanti, Michigan. The home — valued at $170,000— was subject to $219,000 in secured mortgage claims held by two separate creditors. Brown’s initial petition stated her intent to surrender her residence to the bankruptcy estate and did not claim any exemptions for the value of her redemption rights under Michigan law. The bankruptcy court granted Brown a discharge in August of 2014.

After the filing of the bankruptcy petition, the Trustee sought the court’s permission to sell the Ypsilanti property for $160,000 and to distribute the proceeds of the sale among Brown’s creditors and the various professionals involved in selling the home. Brown objected to the Trustee’s request and sought to amend her initial disclosures to claim exemptions for the value of the redemption rights she enjoyed under Michigan law. See Mich. Comp. Laws § 600.3240. Specifically, she sought exemptions in the amount of $11,475 under § 522(d)(1) and $11,675 under § 522(d)(5). The bankruptcy court granted the Trustee permission to sell the property and denied Brown’s requested exemptions.

Brown appealed the bankruptcy court’s order to the district court. The district court affirmed, citing this court’s decision in Baldridge v. Ellmann (In re Baldridge), 553 Fed.Appx. 598 (6th Cir. 2014). This appeal followed.

II.

At the outset, the Trustee argues that this court lacks jurisdiction to hear Brown.’s appeal on two grounds. First, the Trustee argues that the case before us is moot on constitutional, statutory, and equitable grounds. Second, he argues that Brown lacks appellate standing because she lacks a pecuniary interest in the distribution of her assets among her creditors. We hold that the case is not moot and that Brown has standing to appeal the order of the bankruptcy court.

A. Mootness

The Bankruptcy Code declares a specific, statutory mootness rule that extends beyond the mootness analysis under Article Ill’s “case or controversy” requirement. Specifically, 11 U.S.C. § 363(m) provides:

The reversal or modification on appeal of an authorization ... of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.

Under § 363(m), appeals from a bankruptcy court’s decision to grant the trustee authority to sell certain property are moot if the appellant has failed to obtain a stay from the bankruptcy court’s order and the trustee has already conveyed the property to a bona fide purchaser for value. Official Comm. of Unsecured Creditors v. Anderson Senior Living Prop., LLC (In re Nashville Senior Living, LLC), 620 F.3d 584, 591 (6th Cir. 2010). This mootness rule applies “regardless of the merits of legal arguments raised against” the bankruptcy court’s order and functions to “encourage participation in bankruptcy asset sales and increase the value of the property of the estate by protecting good faith purchasers from modification by an appeals court of the bargain struck with the [trustee].” Id. (internal quotation marks and citations omitted).

A “majority of our sister circuits construe § 363(m) as creating a per se rule automatically mooting appeals for failure to obtain a stay of the sale at issue.” Parker v. Goodman (In re Parker), 499 F.3d 616, 621 (6th Cir. 2007). At least two other circuits require the party alleging mootness to prove an additional element: that the reviewing court is unable to “grant effective relief without impacting the validity of the sale.” Id.; see In re ICL Holding Co., 802 F.3d 547, 554 (3d Cir. 2015) (holding § 363(m) inapplicable despite failure to obtain a stay when funds remained in escrow for payment of administrative fees and unsecured claims); C.O.P. Coal Dev. Co. v. C.W. Mining Co. (In re C.W. Mining Co.), 641 F.3d 1235, 1239 (10th Cir. 2011) (same when state law provided for equitable relief in the form of a constructive trust on the proceeds of the conveyance at issue).

The panel in In re Nashville Senior Living noted that “[t]his court has not yet committed to following one or the other of these two approaches,” and refrained from deciding the issue because there was no way to fashion relief without materially altering the transaction in that case. In re Nashville Senior Living, 620 F.3d at 593 n.3. We decide that issue today. Because there is no question that Brown failed to obtain a stay of the sale of the Ypsilanti property and because we might well be able to issue relief that would not disturb the bargain struck with the good faith purchaser — whether by redistributing money still in escrow or by imposing a constructive trust on the proceeds of the sale — the answer to this question is central to the mootness analysis.

We adopt the approach of the Third and Tenth Circuits requiring parties alleging statutory mootness under § 363(m) to prove that the reviewing court is unable to grant effective relief without affecting the validity of the sale. This is the superior interpretation of § 363(m) as it accommodates the provision’s clear preference in favor of upholding the validity of bankruptcy sales without unduly restricting the appellant’s right to contest errors of law made by the bankruptcy court. Moreover, it is in line with the plain language of § 363(m), which prohibits reviewing courts from modifying or setting aside a sale of property purchased in good faith. The statute does not prevent a reviewing court from redistributing the proceeds from such a sale.

The Trustee bears the burden to prove that the ease is actually moot. See Riverview Trenton R.R. Co. v. DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940, 945-46 (6th Cir. 2007). Here, the Trustee’s briefing does not indicate whether any proceeds from the sale of the Ypsilanti property remain accessible to the Trustee— whether in escrow or otherwise. Nor does it address whether Michigan law provides for equitable relief in cases involving conveyances to good-faith purchasers. Indeed, assuming Michigan law permits the imposition of a constructive trust over the assets flowing from the sale of Brown’s residence, this court could order relief without disturbing the earlier conveyance. Accordingly, we hold that the Trustee has not carried his burden to demonstrate mootness under § 363(m).

Because this court is capable of issuing effective relief, we also hold that the Trustee has failed to prove that the case is moot under the narrower Article III standard. We do not address the Trustee’s argument in favor of applying the prudential doctrine of equitable mootness to cases involving Chapter 7 debtors because he unduly delayed raising that issue until a sur-reply to an already-untimely amicus brief, which left Brown without the opportunity to meaningfully respond.

B. Standing

The Trustee also claims that Brown lacks standing to pursue this appeal from the bankruptcy court’s order. The standard used to determine if a party has standing to appeal a claim in the bankruptcy context is narrower than the constitutional standard under Article III. Harker v. Troutman (In re Troutman Enters.), 286 F.3d 359, 364 (6th Cir. 2002). Under this narrower standard, a party may only appeal a bankruptcy court order if they have been “directly and adversely affected pecuniarily by the order.” Id. (internal quotation marks and citations omitted). The Trustee charges that Brown lacks standing under that standard because she has no claim to the proceeds of the sale of the Ypsilanti property since she held no residual equity in the property. That characterization, however, misconstrues Brown’s claim — she specifically appeals the bankruptcy court’s order denying her request for exemptions under § 522 on the basis of the value of her redemption rights under Michigan law. If the bankruptcy court had granted her request, she would have been entitled to the exempted portion of the proceeds of the sale of the Ypsilanti property. Since the effect of the bankruptcy court’s order was to deprive Brown of her purportedly exempted share of the proceeds from the sale of her residence, we hold that she has been “adversely affected pecuniarily” by the bankruptcy court’s order denying her request for exemptions and has standing to appeal. Id.

III.

The only issue remaining is whether the bankruptcy court erred in denying Brown’s request for exemptions under § 522 of the Bankruptcy Code on the basis of the value of the redemption rights guaranteed to her under Michigan law. We review the legal conclusions of the bankruptcy court de novo, giving “no special deference to the district court’s decision.” Caradon Doors & Windows, Inc. v. Eagle-Picher Indus., Inc. (In re Eagle-Picher Indus., Inc.), 447 F.3d 461, 463 (6th Cir. 2006). Because no equity remained in the Ypsilanti property after it was sold, we affirm the decision of the bankruptcy court.

A. Brown’s Redemption Rights Did Not Entitle Her to Exemption Under § 522

In a decision relied upon by the bankruptcy court below, this court has previously affirmed a bankruptcy court’s denial of an exemption under § 522 on the basis of redemption rights when the property was encumbered with security interests that eliminated any “residual equity” in the property. In re Baldridge, 553 Fed.Appx. at 599. The court reasoned that any exemption on the basis of the value of the debtor’s redemption rights must attach to some equity held by the debtor after satisfaction of the secured liens on the property. Id. Absent such equity, the debtor had no interest to which the claimed exemption could attach. Id.

While that unreported decision does not bind our decision in this case, the rule it announced is consistent with the decisions of other courts addressing similar facts. Simonson v. First Bank of Greater Pittston (In re Simonson), 758 F.2d 103, 105-06 (3d Cir. 1985); Drummond v. Urban (In re Urban), 375 B.R. 882, 885 n.7 (9th Cir. BAP 2007) (“Section 522(d) exempts the debtor’s interest in property — not the property itself. The value that can be exempted is the unencumbered portion. Consequently, the amount of exemption available to a debtor is the lesser of either the equity in the property or the maximum amount of the applicable exemption.”). It is also consistent with Congress’s intent when it enacted § 522. See In re Simonson, 758 F.2d at 106 (“We have found no indication in the legislative history of section 522 suggesting that Congress intended it to be a means of creating equity, which did not otherwise exist, in property for the benefit of a debtor.”).

Brown argues that the Supreme Court’s recent decision in Law v. Siegel, — U.S. -, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014), counsels in favor of a departure from the decision in Baldridge. We disagree. In Law v. Siegel, the Supreme Court addressed a situation in which the bankruptcy court used its equitable powers under 11 U.S.C. § 105(a) to approve a trustee’s request to surcharge the debtor’s undisputed $75,000 homestead exemption as reimbursement for more than $500,000 in fees associated with an investigation of the debtor’s fraudulent conduct. Id. at 1193. In a decision reversing the bankruptcy court’s approval of the surcharge, the Court held that the bankruptcy court lacked authority to surcharge the debtor’s homestead exemption because the statute providing for that exemption expressly and unconditionally stated that exempt property was “not liable for payment of any administrative expense.” Id. at 1195; 11 U.S.C. § 522(k) (homestead exemption). In short, the holding of Law is that the bankruptcy court may not use its equitable powers to contravene the express requirements of the Bankruptcy Code. Id.

Brown contends that the bankruptcy court’s application of the “no equity-no exemption” rule here was invalid under Law because it was not drawn from the Bankruptcy Code and functioned to “defeat” the clear language of § 522(d). However, Law is not relevant to our analysis. Whereas Law addressed the extent of the bankruptcy court’s discretionary powers under § 105(a), this case addresses the bankruptcy court’s interpretation of a specific provision of the Bankruptcy Code. Brown is certainly convinced that the “clear language” of § 522(d) requires us to decide in her favor and that any contrary interpretation would “defeat” her rights under the Code. However, that proposition is far from obvious, especially in light of previous decisions of this court — and others — suggesting her purported rights do not actually exist. Law does not strip bankruptcy courts of their ability to interpret the Bankruptcy Code; it merely reinforces the common-sense notion that bankruptcy courts may not use their discretionary powers to reach results that are inconsistent with the clear meaning of the Bankruptcy Code. The parties disputed the applicability of § 522(d) in this case, and the bankruptcy court duly interpreted that provision. While the court’s interpretation was not the one Brown would have preferred, that does not mean the court lacked the power to interpret the statute in the first place. Accordingly, we find Brown’s reliance on Law unpersuasive.

Since Brown points to no authority contrary to our holding in Baldridge, we adhere to the rule articulated in that case: Section 522 will not support an exemption on the basis of state-law redemption rights in a piece of property if the proceeds from the sale of that property are “insufficient to satisfy the prior obligations owed to the secured creditors.” Baldridge, 553 Fed.Appx. at 599. It is undisputed that the $160,000 in proceeds from the sale of the Ypsilanti property were insufficient to satisfy the $219,000 in secured claims held by the two mortgage creditors. Consequently, we affirm the bankruptcy court’s denial of Brown’s request for exemptions under § 522 on the basis of her redemption rights under Michigan law because there was no “residual equity” in the Ypsilanti property to which Brown’s claimed exemptions could attach.

B. Amici’s Abandonment Argument Not Properly Before This Court

In a helpful brief submitted to this court, amici curiae question the propriety of the Trustee’s decision to administer Brown’s residence as part of the bankruptcy estate since it was fully encumbered by secured creditors. Specifically, amici suggest that decision was improper in light of this court’s decision in Hoehn v. McIntosh, 110 F.2d 199, 202 (6th Cir. 1940), and the abandonment procedures codified at 11 U.S.C. § 554. However, the issue of abandonment was not raised below and was not adequately briefed by the parties on appeal. Accordingly, we hold that it is not properly before this court. See Self-Ins. Inst. of Am., Inc. v. Snyder, 827 F.3d 549, 560 (6th Cir. 2016) (quoting Cellnet Commc’ns, Inc. v. FCC, 149 F.3d 429, 443 (6th Cir. 1998)) (“[W]hile an amicus may-offer assistance in resolving issues properly before a court, it may not raise additional issues or arguments not raised by the parties.” (internal quotation marks omitted)).

IV.

The bankruptcy court properly denied Brown’s claim for an exemption under § 522 on the basis of the value of her state-law redemption rights in the Ypsilanti property because there was no residual equity in the property upon which her claimed exemptions could attach. Accordingly, we AFFIRM the order of the bankruptcy court.

      . 11 U.S.C. § 522 provides in relevant part: "The following property may be exempted under subsection (b)(2) of this section: (1) The debtor's aggregate interest, not to exceed $23,675 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence.... (5) The debt- or’s aggregate interest in any property, not to exceed in value $1,250 plus up to $11,850 of any unused amount of the exemption provided under paragraph (1) of this subsection." 11 U.S.C. § 522(d) (footnotes omitted).


author: SUTTON, Circuit Judge.

text:
    Marcial LOPEZ, Petitioner, v. Jeff B. SESSIONS, Attorney General, Respondent.
    No. 16-3083
    United States Court of Appeals, Sixth Circuit.
    Argued: March 9, 2017
    Decided and Filed: March 21, 2017

      ARGUED: Scott E. Bratton, MARGARET WONG & ASSOCIATES, CO., LPA, Cleveland, Ohio, for Petitioner. Colin J. Tucker, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent. ON BRIEF: Margaret Wong, MARGARET WONG & ASSOCIATES, CO., LPA, Cleveland, Ohio, for Petitioner. Colin J. Tucker, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent.
    Before: CLAY, SUTTON, and GRIFFIN, Circuit Judges.
   OPINION

SUTTON, Circuit Judge.

Marcial Lopez, a native and citizen of Guatemala, contests a decision by the Board of Immigration Appeals that prohibits him from staying in this country. Under the immigration laws, it usually counts against the individual if he enters the country free from governmental detection or restraint — if, that is, he sneaks across the border. See, e.g., 8 U.S.C. § 1326(a). But under the “special rule cancellation” of removal provisions of the Nicaraguan Adjustment and Central American Relief Act, it favors the individual if he sneaks across the border without detection or restraint. In the words of the Act, he must show that he has “not been apprehended at the time of entry” since 1990.

The burden is on the applicant to make this showing. That’s easy enough when it comes to presenting evidence that no government official has physically stopped him when he tried to cross the border during that period of time. But another form of official restraint at the border is continued surveillance as the individual enters the country. What then? Must the individual submit evidence that he does not have and should not have — that government agents were not tracking his movement as he made his way into the country? The applicant cannot be asked to prove what he cannot obtain. Instead, once the applicant has met his burden by showing that no one physically stopped him at. the border during that period of time, the government is free to put on any surveillance evidence in the nature of an affirmative defense. That’s not what the Board of Immigration Appeals did here. It simply held that Lopez had failed to meet his burden of proof and incorrectly rejected his petition on that ground alone. For these reasons and others elaborated below, we grant the petition for review in part and deny it in part.

I.

Returning from a visit to his ailing father in Guatemala, Lopez crossed the Rio Grande around 11:30 p.m. on May 24, 2001, just west of Brownsville, Texas. About thirty-one minutes later, the border patrol arrested Lopez roughly a mile from the border at or near Brownsville. Lopez lied to the border patrol about his name and nationality. Thinking that Lopez was a citizen of Mexico, the border patrol let him voluntarily return to Mexico. Lopez later crossed back into the United States, this time evading any apprehension and (apparently) any surveillance.

The Department of Homeland Security tried to deport Lopez in 2008. Lopez applied for special rule cancellation of removal under the Nicaraguan Adjustment and Central American Relief Act, see 8 U.S.C. § 1229b(e)(3), and cancellation of removal, id. § 1229b(b)(l). Of relevance here, the Immigration Judge ruled that Lopez failed (1) “to prove that he has not been apprehended at the time of entry after December 19, 1990,” and (2) “to establish that his removal from the United States would result in exceptional and extremely unusual hardship to his qualifying relatives,” including Lopez’s American daughter. A.R. 96-98.

The Board of Immigration Appeals agreed on both fronts. Lopez appealed. 8 U.S.C. § 1252(b).

II.

There are a few ground rules for reviewing such applications. On the one hand, we may not review “any judgment regarding the granting of relief under section ... 1229b,” which covers cancellation of removal, and “any other decision or action of the Attorney General ... the authority for which is specified ... to be in the discretion of the Attorney General.” 8 U.S.C. § 1252(a)(2)(B). The Nicaraguan Adjustment and Central American Relief Act grants the Attorney General, acting through the Board and the Immigration Judges, discretion over special rule cancellation of removal determinations. Pub. L. No. 105-100, § 203(a)(1), 111 Stat. 2160, 2197-98 (1997); see Ruiz v. Gonzales, 455 F.3d 661, 662 (6th Cir. 2006) (per curiam). That means we “lack[] jurisdiction over claims that can be evaluated only by engaging in head-to-head comparisons between the facts of the petitioner’s case and those of precedential decisions,” or over arguments that “require[] a tallying of hardships” or “second-guessing the agency’s weighing of factors.” Ettienne v. Holder, 659 F.3d 513, 518 (6th Cir. 2011).

On the other hand, we retain jurisdiction to review “constitutional claims or questions of law raised upon a petition for review,” 8 U.S.C. § 1252(a)(2)(D), and “non-discretionary decisions” dictated by agency precedent, Aburto-Rocha v. Mukasey, 535 F.3d 500, 503 (6th Cir. 2008). The burden is on Lopez to show by a preponderance of the evidence that he satisfies the eligibility requirements. 8 C.F.R. § 1240.64(a). Only after Lopez establishes his eligibility for cancellation of removal or special rule cancellation does the Attorney General have “discretion to grant or deny the application” as he deems appropriate. Sad v. INS, 246 F.3d 811, 819 (6th Cir. 2001).

To be eligible for special rule cancellation of removal and run-of-the-mine cancellation of removal, the applicant must show, respectively, that (1) he “was not apprehended after December 19, 1990, at the time of entry,” Pub. L. No. 105-100, § 203(a)(1), 111 Stat. 2160, 2197-98 (1997); see 8 C.F.R. § 240.61(a)(1), and (2) that his removal from the United States “would result in exceptional and extremely unusual hardship” to his qualifying relatives, 8 U.S.C. § 1299b(b)(1)(D). In this instance, the Board ruled that Lopez was ineligible for special rule cancellation because he was not free from official restraint at the time of his 2001 crossing and that he was ineligible for ordinary cancellation because his removal would not cause undue hardship to his family. The former ruling is a question of law, the latter an application of it. See De Leon v. Holder, 761 F.3d 336, 341 (4th Cir. 2014).

“Apprehended ... at the time of entry. ” The Nicaraguan Adjustment and Central American Relief Act grants the Attorney General authority over special rule cancellation of removal determinations. Pub. L. No. 105-100, § 203(a)(1), 111 Stat. 2160, 2197-98 (1997). Among other grants of power, the Attorney General, through decisions of the Board of Immigration Appeals, may cancel the removal of certain Guatemalans who have “not been apprehended at the time of entry after December 19, 1990.” 8 C.F.R. § 240.61(a)(1). The question at hand is whether law enforcement stopped Lopez “at the time of entry” in May 2001.

The Board has long defined “entry” into our country for immigration purposes to require (1) a crossing into the territorial limits of the United States; (2) inspection and admission by an immigration officer or actual and intentional evasion of inspection; and (3) freedom from official restraint. In re Pierre, 14 I. & N. Dec. 467, 468 (BIA 1973); see De Leon, 761 F.3d at 338. No one challenges that definition here. The key insight for our purposes comes from the last requirement — that one small step on American soil does not an “entry” make. A completed entry does not occur whenever the border patrol declines to play red rover with an alien in the middle of the Rio Grande. The individual must evade inspection and be free of official restraint.

What, then, is freedom from official restraint? It’s the alien’s liberty to go where he wishes and to mix with the general population. On the flip side, there are at least two ways in which, the government might restrain an individual. It could stop the individual physically at the border— the most obvious form of restraint. See Yang v. Maugans, 68 F.3d 1540, 1550 (3d Cir. 1995). Or it could monitor the individual as he crosses the border by conducting surveillance of him. See In re Pierre, 14 I. & N. Dec. at 469. The government may have good reasons for allowing an alien to cross the border, only to arrest him later in time and miles from the border. The government, for example, might wish to see if the alien leads them to a safe house or joins up with other individuals who have crossed the border illegally.

That law enforcement finds someone close in time to their entry and near the border thus does not by itself establish official restraint. Hence: An alien may complete entry if he drives out of sight for four-tenths of a mile after crossing the border. Cheng v. INS, 534 F.2d 1018, 1019 (2d Cir. 1976) (per curiam). An alien may complete entry if he drives out of sight of immigration officials while traveling in the country on a highway for two miles. Nyirenda v. INS, 279 F.3d 620, 625 (8th Cir. 2002). Or an alien may complete entry if he crawls fifty yards into the country undetected before being apprehended while climbing a wall. United States v. Martin-Plascencia, 532 F.2d 1316, 1317-18 (9th Cir. 1976).

To their credit, the immigration authorities appear to treat the concept of freedom from official restraint the same way across different statutes. They might prefer one meaning of official restraint in cases that arise under a provision in which “a finding that the alien entered free from official restraint rendered the alien deportable.” De Leon, 761 F.3d at 344; see, e.g., Cheng, 534 F.2d at 1019. And they might prefer another reading of freedom from official restraint in other settings. For example, it is a crime for someone whom the government previously deported to re-enter the country. 8 U.S.C. § 1326(a). But to “enter” the country under this criminal statute, as under entry for special rule cancellation purposes, the individual must be free from official restraint. See, e.g., United States v. Ramos-Godinez, 273 F.3d 820, 824-25 (9th Cir. 2001); United States v. Gonzalez-Torres, 309 F.3d 594, 598-99 (9th Cir. 2002). And there too surveillance counts as official restraint. See id. Thus, if the government “maintain[s] continuous observation” of a group of illegal immigrants from the time they cross the border until their apprehension, the aliens have not “entered” the country in violation of the law. Id. at 599. But if, absent some other form of restraint, an alien crosses the border and evades detection, “even for a brief period,” he has entered the United States. Ramos-Godinez, 273 F.3d at 824. And if border patrol agents “did not see” the alien “cross the border,” and if. neither side presents “evidence of the precise place where” the alien “had crossed,” then that suffices for the government to carry its burden to show that an alien arrested 100 yards from' the border “was free to migrate into the general population for some time, and was not under constant observation during that period.” United States v. Castellanos-Garcia, 270 F.3d 773, 775-76 (9th Cir. 2001). The government thus applies the same definition of entry across statutes. As well it should: In the absence of “a reasoned explanation for the change” in interpretation or a relevant distinction between the statutory provisions, the government has no warrant to use Chevron deference to take opposing positions about the same concept just because it helps, them in some eases to do one thing and helps them in other cases to do something else. Encino Motorcars, LLC v. Navarro, — U.S. -, 136 S.Ct. 2117, 2125, 195 L.Ed.2d 382 (2016).

In applying this official-restraint test here, the parties agree that surveillance was the only form of official restraint that the government could have used against Lopez before his arrest. Because only the government customarily possesses evidence of surveillance and because an alien cannot prove what he cannot see, we treat surveillance as an affirmative defense, one that allows the government to show official restraint with respect to an individual who crosses the border without being stopped. In this instance, the Board made no factual finding as to whether Lopez was, or was not, under surveillance from the time he crossed the border until the time the border agents found him. The Board sidestepped the question. It instead found that Lopez’s capture a mile from the border and thirty-one minutes after' his crossing did not suffice to prove that Lopez had evaded apprehension and was free from official restraint. That conclusion does not follow from the facts. No evidence shows that border agents surveilled Lopez when he crossed the border. And Lopez testified that he was looking for a hotel to check into, all consistent with the border patrol’s report that said Lopez was in “travel/seeking” when apprehended. A.R. 247. Unless and until the Board finds that Lopez was under surveillance when he crossed the border, that means Lopez was free from official restraint and had evaded inspection.

We accordingly vacate this part of the Board’s decision and remand the case to the Board to resolve this factual question or to resolve Lopez’s eligibility for special rule cancellation on some other ground.

“Exceptional and extremely unusual hardship. ” Lopez faces a significant obstacle in challenging the Board’s ruling that he had “not established] that his removal would cause exceptional and extremely unusual hardship to his United States citizen daughter,” a requirement for cancellation of removal. A.R. 8; see 8 U.S.C. § 1229b(b)(1). As noted, we “lackf ] jurisdiction over claims that can be evaluated only by engaging in head-to-head comparisons between the facts of the petitioner’s case and those of precedential decisions,” or over arguments that “require[ ] a tallying of hardships” or “second-guessing the agency’s weighing of factors.” Ettienne v. Holder, 659 F.3d 513, 518 (6th Cir. 2011).

That is just what Lopez asks us to do in this case. The Board considered how a move to Guatemala would affect Lopez’s daughter. It weighed the changes in the daughter’s educational, medical, social, and economic circumstances and applied the Board’s precedents to the facts at hand. After all that, it held that Lopez had “not show[n] that his qualifying relative would suffer hardships substantially beyond the ordinary hardships that children and other family members experience when an alien is removed from the United States.” A.R. 9. We do not have jurisdiction to second guess whether the daughter’s reduced access to quality doctors and schools amounts to an exceptional and extremely unusual hardship. The Board’s weighing of the “social and economic conditions in the country of removal” is beyond our jurisdiction, id. at 9, despite the “ample evidence of the violence” in Guatemala that Lopez entered into the record, Appellant’s Br. 14. And Lopez does not cite a single precedent indicating that the Board, misconstrued its own standards, ending our inquiry into the Board’s denial of his application for cancellation of removal. See Ettienne, 659 F.3d at 518.

III.

For these reasons, we grant the petition for review in part, reverse its special rule cancellation eligibility ruling, deny the petition in part, and remand to the Board for further consideration of Lopez’s eligibility for special rule cancellation.