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A. O. Smith Corp. v. Federal Trade Commission

filed: February 11, 1976.

A. O. SMITH CORPORATION, AMERICAN HOME PRODUCTS CORPORATION, EATON CORPORATION, JIM WALTER CORPORATION, REYNOLDS METALS COMPANY, W. R. GRACE & CO., WHEELING-PITTSBURGH STEEL CORP.
v.
FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1282, INLAND STEEL COMPANY V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1283, NORTHWEST INDUSTRIES, INC. V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1284, OSCAR MAYER & CO. INC. V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1285, MERCK & CO., INC. V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1286, HOBART CORPORATION V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1287, THE GOODYEAR TIRE & RUBBER COMPANY V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1288, THOMAS J. LIPTON, INC. V. FEDERAL TRADE COMMISSION, HON. LEWIS A. ENGMAN, CHAIRMAN, HON. PAUL RAND DIXON, COMMISSIONER, HON. MAYO J. THOMPSON, COMMISSIONER, HON. M. ELIZABETH HANFORD, COMMISSIONER, HON. STEPHEN A. NYE, COMMISSIONER, AND HON. ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES FEDERAL TRADE COMMISSION AND HON. LEWIS A. ENGMAN, CHAIRMAN; HON. PAUL RAND DIXON, COMMISSIONER; HON. MAYO J. THOMPSON, COMMISSIONER; HON. M. ELIZABETH HANFORD, COMMISSIONER; AND HON. STEPHEN A. NYE, COMMISSIONER, APPELLANTS IN NO. 75-1289



Appeal from the United States District Court for the District of Delaware. D.C.Civil Nos. 75-15, 75-45, 75-46, 75-47, 75-48, 75-49, 75-50, 75-56.

Aldisert, Kalodner and Adams, Circuit Judges. Adams, Circuit Judge, concurring.

Author: Aldisert

ALDISERT, Circuit Judge.

We are to decide whether the district court had jurisdiction to entertain pre-enforcement suits for declaratory and injunctive relief against the Federal Trade Commission*fn1 and, if so, whether the court erred in refusing to dismiss the complaint or in granting a preliminary injunction. After hearing, the district court preliminary enjoined the Commission from giving notice of default to appellees for failure to file Annual Line of Business Reports and from enforcing civil penalties for appellees' failure to file the reports. A. O. Smith Corp. v. FTC, 396 F. Supp. 1108 (D.Del. 1975) (" A. O. Smith I "); A. O. Smith Corp. v. FTC, 396 F. Supp. 1125 (D.Del. 1975) (" A. O. Smith II "). This appeal followed. We conclude that the district court had jurisdiction, but that it erred in granting preliminary injunctive relief.

Prompted by what it considered the inadequacies of existing corporate financial reporting, the Bureau of Economics recommended in 1970 that the Commission exercise its authority to require meaningful public reporting of financial information on a divisional basis as an extension of the existing Quarterly Financial Reports program. In March of 1974, the Commission submitted its proposed Line of Business (LB) Reports Form to the Comptroller General pursuant to 44 U.S.C. § 3512. The forms require, inter alia, detailed sales and cost data broken down into line of business categories as defined by the Commission. Finding specifically that the "information sought in the FTC LB proposal is not presently available from another source within the Federal government," the Acting Comptroller General approved the LB form, with certain provisions not here relevant, on May 13, 1974.

On August 2, 1974, the FTC adopted a resolution putting the program into effect. This resolution, which later appeared in the Federal Register, stated in part that "continuing and current financial data and statistics from corporations within the various industries and lines of commerce of the United States" were "necessary for the proper functioning of the government". 39 Fed.Reg. 30377 (1974). Pursuant to the resolution, the Commission ordered 345 of the nation's largest companies to complete and file LB reports. The orders required that reports be filed within 150 days of receipt of the orders which were served during August 1974. The orders concluded: "You are advised that penalties may be imposed under applicable provisions of Federal law for failure to file this report or for the filing of a false report." App. at 328. About 250 of the companies filed timely motions to quash the LB orders; these motions were denied. Renewed and amended motions to quash followed. On January 7, 1975, the FTC denied all motions to quash. Ibid. at 99-106.

Seven corporations, the appellees at No. 75-1282, filed suit in the district court on January 22, 1975, seeking pre-enforcement declaratory and injunctive relief. They alleged, inter alia, lack of statutory authority to issue the LB orders, undue burden on the companies to comply with the orders, and failure of the Commission to promulgate the orders in accordance with the procedures for rule making prescribed by the Administrative Procedure Act. They also asserted various constitutional grounds. Six other companies, appellees at Nos. 75-1283/8, filed similar actions on February 14, 1975. Appellee at No. 75-1289 filed its action on February 24, 1975, seeking virtually the same relief. The Commission moved to dismiss the complaints; the companies moved for preliminary injunctions against enforcement of the LB orders. The district court denied the Commission's motion, and granted the corporations' motions, entering preliminary injunctions on February 19 (A. O. Smith I) and March 18, 1975 (A. O. Smith II). The Commission's appeals from both orders have been consolidated before us.

On appeal, the Commission advances alternative theories for reversal. First, it argues that the district court did not have jurisdiction to entertain this pre-enforcement suit, because the FTC Act provides for counter-enforcement procedures which afford a party challenging an FTC order with an adequate remedy. See 15 U.S.C. § 49. Next, the Commission contends that, if the district court had jurisdiction, it should have declined to exercise that jurisdiction, because the controversy was not yet ripe for judicial resolution. Finally, the Commission urges that the district court erred in preliminarily enjoining the Commission from giving notice of default and from enforcing penalties for failure to file. Here, the FTC particularly controverts the district court's conclusion that appellees established a probability of succeeding with the merits of their rule-making claims; the Commission contends that its LB orders were issued pursuant to Section 6 of the FTC Act, 15 U.S.C. § 46, and were not subject to the rule-making provisions of the Administrative Procedure Act, 5 U.S.C. § 553. The Commission also challenges the issuance of the preliminary injunction on the ground that appellees failed to prove they would be irreparably harmed absent the injunction.

We conclude that the district court had jurisdiction; that it properly exercised that jurisdiction because the controversy was ripe for judicial resolution; but that it erred in issuing the preliminary injunction because appellees failed to establish irreparable harm. Accordingly, we neither reach, nor express an opinion on, the question whether appellees demonstrated a probability of succeeding on the merits of their claim that the APA's rule-making provisions applied to the issuance of the LB orders.

I.

Appellants' initial argument is that the district court had no jurisdiction to entertain pre-enforcement complaints challenging the LB orders. At the outset, we note that the district court held that it had federal question jurisdiction under 28 U.S.C. § 1331, or, alternatively, jurisdiction under 28 U.S.C. § 1337. A. O. Smith I, supra, 396 F. Supp. at 1113; see Tr. Oral Arg. at 44-45. Appellants do not contest these rulings. In any event, we would agree with the district court. Thus, this case is distinguishable from West Penn Power Co. v. Train, 522 F.2d 302 (3d Cir. 1975), cert. denied, 426 U.S. 947, 96 S. Ct. 3165, 49 L. Ed. 2d 1183 (1976), the primary holding of which was that the district court had not erred in dismissing the complaint because there was no independent jurisdictional predicate. Compare ibid. at 308 n.26 & 309-10 (majority opinion) with ibid. at 321 n.42 (Adams, J., dissenting).

Instead, appellants' first contention proceeds from recognition that the LB orders were issued pursuant to Section 6(b) of the FTC Act, 15 U.S.C. § 46 (b), and, as such, were not self-enforcing. Rather, the legislative scheme calls for the Commission to enforce the LB orders by using the procedures set forth in Sections 9 and 10 of the Act, 15 U.S.C. §§ 49, 50. Under Section 9 the Commission may petition the court for an order in the nature of mandamus to compel the filing of a report; Section 10 provides for the issuance of notices of default, and for the accrual of civil penalties of $100 a day for each day of default after the thirtieth day following receipt of the notice. Accordingly, appellants argue that, until the FTC seeks to enforce its orders, the district courts are without jurisdiction to entertain actions for declaratory and injunctive relief.

In this argument, appellants rely on FTC v. Claire Furnace Co., 274 U.S. 160, 71 L. Ed. 978, 47 S. Ct. 553 (1927), as modified by the holding in St. Regis Paper Co. v. United States, 368 U.S. 208, 82 S. Ct. 289, 7 L. Ed. 2d 240 (1961). These cases, appellants contend, stand for the proposition that, unless a notice of default has issued, there can be no judicial review of an FTC order issued pursuant to Section 6(b) until the Commission moves for enforcement under Section 9. See, e.g., Genuine Parts Co. v. FTC, 445 F.2d 1382 (5th Cir. 1971).*fn2 Since the Commission had not moved effectively for enforcement of the LB orders against any of the instant appellees, see A. O. Smith I, supra, 396 F. Supp. at 1112; A. O. Smith II, supra, 396 F. Supp. at 1129, appellants urge that the district court had no jurisdiction to hear the cases.

The appellees' response is that the Claire Furnace-St. Regis formula no longer controls. They point out that Claire Furnace antedated the Declaratory Judgment Act by some seven years and the Administrative Procedure Act by some 19 years. See Abbott Laboratories v. Gardner, 387 U.S. 136, 142 and nn. 4-6, 18 L. Ed. 2d 681, 87 S. Ct. 1507 (1967). Most important, contend appellees, the paramount principles today in deciding whether federal courts have jurisdiction to review administrative actions derive from the Supreme Court's 1967 Abbotts Laboratories trilogy,*fn3 recently reaffirmed in Dunlop v. Bachowski, 421 U.S. 560, 44 L. Ed. 2d 377, 95 S. Ct. 1851 (1975). The district court agreed with appellees. So do we.*fn4 Accordingly, we turn to an analysis of the legal precepts Justice Harlan articulated in Abbott Laboratories and their application to the facts at hand.

The fundamental jural lesson flowing from Abbott Laboratories is this: a person aggrieved by final agency action may come to federal court for judicial review "so long as [ a ] no statute precludes such relief or [ b ] the action is not one committed by law to agency discretion." 387 U.S. at 140. Appellants do not claim applicability of either exception; nor do we find one obtained. As the Supreme Court said in Abbott Laboratories, and reiterated last term in Dunlop v. Bachowski,*fn5 "only upon a showing of 'clear and convincing evidence' of a contrary legislative intent should the courts restrict access to judicial review." Ibid. 387 U.S. at 141, repeated in Dunlop v. Bachowski, supra, 421 U.S. at 567; see, e.g., Pollard v. Romney, 512 F.2d 295, 298 (3d Cir. 1975).*fn6 We have examined the FTC Act and find no clear and convincing evidence of a congressional intent to bar judicial review of final FTC orders under Section 6(b). For this reason, appellants' reliance on Getty Oil Co. (Eastern Operations), Inc. v. Ruckelshaus, 467 F.2d 349 (3d Cir. 1972), cert. denied, 409 U.S. 1125, 35 L. Ed. 2d 256, 93 S. Ct. 937 (1973), is misplaced. There, we held that Section 307 of the Clean Air Act demonstrated a clear congressional intent to limit judicial review of the Environmental Protection Administrator's actions to the courts of appeals. Accordingly, we concluded that the district court was without jurisdiction to entertain a suit seeking to enjoin enforcement of an EPA compliance order: Getty had sought judicial review in the wrong court. See ibid. at 356, 357-58 n.14.

II.

A second teaching of Abbott Laboratories is that, where the party aggrieved seeks injunctive and declaratory relief as here, since those remedies are discretionary, the court should hesitate to apply them unless (a) the issues are fit for judicial resolution and (b) withholding judicial consideration would result in hardship to the parties. Abbott Laboratories, supra, 387 U.S. at 149. As Judge McGowan recently observed, this law of "ripeness", once a tangled web of special rules and distinctions, is since Abbott Laboratories "very much a matter of practical common sense." Continental Air Lines, Inc. v. CAB, 173 U.S. App. D.C. 1, 522 F.2d 107, 124 (1975).

A.

In assessing the fitness of the challenge to FDA actions for judicial decision, Justice Harlan looked to two factors: (1) the nature of the issues, which he denominated "purely legal", Abbott Laboratories, supra, 387 U.S. at 149, and (2) the finality of the agency actions. These guidelines are consonant with the underlying rationale for the ripeness doctrine -- "to prevent the courts . . . from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized . . . ." Ibid. at 148. See also Weinberger v. Salfi, 422 U.S. 749, 765, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975).

Here, the ultimate issues raised by appellees' challenges to the LB orders are purely legal: whether the promulgation of the LB resolution exceeded the Commission's authority or was in the nature of an administrative rule so as to require prior compliance with rule-making procedures specified in the APA. Further factual development would not sharpen the issues; nor does ...


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