The opinion of the court was delivered by: SHAPIRO
These cases concern a Federal Trade Commission ("FTC") investigation of disclosure policies and procedures of consumer finance companies regarding the sale of credit insurance in connection with consumer loan transactions. The FTC's general investigatory powers, see 15 U.S.C. § 46(a), include the issuance of civil investigative demands ("CID") to compel production of documents, interrogatory answers and testimony for the purpose of ascertaining whether a person is engaged in unfair or deceptive acts or practices. See 15 U.S.C. s 57b-1. Forty-three CID's were issued nationwide in this particular investigation. Twenty-two recipients have complied.
Manufacturers Hanover Consumer Services ("Hanover"), Credico Financial, Inc. ("Credico"), General Finance Corporation ("General"), Domestic Finance Corporation ("Domestic"), Barclaysamerican Corporation ("Barclays") and Postal Finance Company ("Postal") are among the twenty-one recipients that have resisted the CID's at the administrative or judicial level. Hanover, Credico, General, Domestic, Barclays and Postal contend that their participation in the sale of credit insurance in connection with consumer loan transactions constitutes "the business of insurance" as that phrase is used in the McCarran-Ferguson Act and Federal Trade Commission Act limitations on FTC jurisdiction.
Three actions are before this court. The FTC has petitioned for enforcement of CIDs issued to these companies. FTC v. Manufacturers Hanover Consumer Services, Inc., Misc. No. 81-363 (E.D.Pa., filed December 4, 1981). We will refer to this petition as the "enforcement action." Hanover and Domestic each have brought actions seeking equitable relief from the FTC investigation. Manufacturers Hanover Consumer Services, Inc. v. FTC, No. 81-4418 (E.D.Pa., filed October 28, 1981); Domestic Finance Corp. v. FTC, No. 82-656 (E.D.Pa., filed December 7, 1981).
These actions will be referred to as the "extra-enforcement actions." The enforcement and extra-enforcement actions were consolidated.
In addition, three respondents to the enforcement petition, General, Barclays and Postal sought declaratory and injunctive relief from the FTC's investigation in a separate extra-enforcement suit filed in the Northern District of Illinois. General Finance Corp. v. FTC, No. 81-C-6564 (N.D.Ill., filed Nov. 23, 1981).
This extra-enforcement action has since been dismissed. Id. (filed June 23, 1982).
The FTC's enforcement petition and respondent Credico's motion for declaratory judgment in the enforcement action are under advisement. This opinion deals not with the merits of that petition but with the anomalous procedural posture of this case in which we find the same parties contesting in extra-enforcement actions, brought here and in the Northern District of Illinois, the same issues as those raised in the enforcement action filed in this District. Before the court in the extra-enforcement actions of Hanover and Domestic are the FTC's motions to dismiss or in the alternative motions for summary judgment, and plaintiffs' cross-motions for summary judgment. For the reasons discussed below, we decline to exercise jurisdiction over the actions brought by Hanover and Domestic and these extra-enforcement actions will be dismissed.
A CID is analogous to an investigative subpoena. See FTC v. International Diamond Corp., No. 81-29 (N.D.Cal., filed January 4, 1982). Resort to a court by recipients of investigative subpoenas before an action for enforcement has commenced is disfavored. Reisman v. Caplin, 375 U.S. 440, 84 S. Ct. 508, 11 L. Ed. 2d 459 (1964); Wearly v. FTC, 616 F.2d 662 (3d Cir.), cert. denied, 449 U.S. 822, 101 S. Ct. 81, 66 L. Ed. 2d 25 (1980). The teachings of Wearly apply to extra-enforcement review rather than merely to pre-enforcement review, for "the significant question is not when the instant action was filed or acted upon vis-a-vis the enforcement proceeding, but whether declaratory relief should be made available outside the channels normally provided for the challenge of agency action." Exxon Corp. v. FTC, 588 F.2d 895, 901 (3d Cir. 1978).
The CID statute allows the FTC to petition the district court for the enforcement of a CID. 15 U.S.C. § 57b-1(e). The court has jurisdiction to hear and determine the matter and to enter such orders as may be required. 15 U.S.C. § 57b-1(h). Any final order so entered is subject to appeal. Id.; 28 U.S.C. § 1291. Disobedience of any final order "shall" be punished as a contempt of the court. 15 U.S.C. § 57b-1(h). Thus, Congress has provided to Hanover and Domestic a remedy, defense to this enforcement proceeding, and their extra-enforcement actions appear premature. In General Motors v. Volpe, 457 F.2d 922 (3d Cir. 1972), in which General Motors sought extra-enforcement judicial review of a National Highway Safety Board order mandating the correction of defects, the Court held that the district court had properly refused to exercise jurisdiction because there was an adequate opportunity to defend the pending enforcement action. So here the FTC's investigation can and is being challenged in the enforcement proceeding pending before this court.
The exception to the rule disfavoring extra-enforcement review is based on two considerations: (1) whether the issue raised was fit for judicial resolution, because no further factual development was necessary or the agency action was final; and (2) whether plaintiffs faced the dilemma of refusing to comply in the face of serious civil or criminal penalties or complying at substantial costs. Wearly, supra at 666. Whether or not the issuance of a CID is a "final" agency action, and we doubt it, see, FTC v. Standard Oil Co., 449 U.S. 232, 101 S. Ct. 488, 66 L. Ed. 2d 416 (1980), we think it clear that in light of statutory provisions for enforcement hearings, appeals and, if appropriate, stays pending appeal, Hanover and Domestic face neither immediate civil or criminal penalties nor immediate, substantial costs of compliance. They face no dilemma warranting relief prior to enforcement proceedings.
Hanover and Domestic will not be unduly prejudiced if this challenge is confined to the pending enforcement proceeding. See, General Motors, supra at 923. The FTC has rightly conceded that we may reach respondent's jurisdictional defense notwithstanding the rule that, to avoid delay in investigations, issues of statutory jurisdiction are ordinarily not to be resolved in subpoena enforcement actions. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 66 S. Ct. 494, 90 L. Ed. 614 (1946); ICC v. Gould, 629 F.2d 847 (3d Cir. 1980), cert. denied, 449 U.S. 1077, 101 S. Ct. 856, 66 L. Ed. 2d 800 (1981). Subpoenas have been enforced so long as the FTC's jurisdiction is "clouded but not plainly spurious." FTC v. Swanson, 560 F.2d 1, 2 (1st Cir. 1977); see also, FTC v. Texaco, 180 U.S. App. D.C. 390, 555 F.2d 862 (D.C.Cir.) (en banc ), cert. denied, 431 U.S. 974, 97 S. Ct. 2939, 53 L. Ed. 2d 1072 (1977).
However, the provisions of the McCarran-Ferguson and FTC Acts cited by respondents raise a colorable jurisdictional defense to an FTC investigation. In FTC v. Miller, 549 F.2d 452 (7th Cir. 1977), the Court held that a jurisdictional defense based on a pre-existing FTC Act investigatory exemption, that for common carriers, could be raised at a subpoena enforcement proceeding. Accord, FTC v. Winters National Bank & Trust Co., 601 F.2d 395, 401-2 n.14 (6th Cir. 1979). Miller was cited in the legislative history of the FTC Act Section 46(h) investigatory exemption, pertaining to "the business of insurance," for the following proposition:
The amendment contemplates that, in determining what lies within the "business of insurance,' the FTI (sic) will adhere to the judicial precedents. However, the Committee also recognizes that reasonable differences of opinion may exist with regard to whether certain peripheral activities of insurance companies or agents are the "business of insurance.' The amendment is thus intended to permit judicial review on jurisdictional questions as now permitted under the court decisions construing the existing exemptions from section 6. See e.g., FTC v. Miller, 549 F.2d 452 (7th Cir. 1977).
S.Rep.No. 96-500, 96th Cong., 1st Sess. 15 (1970). The Miller exception is applicable here.
Miller listed three factors compelling deviation from the settled rule: (1) the agency had clearly violated a right secured by statute; (2) the issue was strictly legal, not involving factual determination or agency expertise; and (3) the issue could not be raised ...