354 F.Supp. 521 (S.D.N.Y. 1973), 70 Civ. 1589, United States v. J. B. Williams Co., Inc.

Docket Nº:70 Civ. 1589.
Citation:354 F.Supp. 521
Party Name:UNITED STATES of America, Plaintiff, v. J. B. WILLIAMS COMPANY, INC. and Parkson Advertising Agency, Inc., Defendants.
Case Date:January 22, 1973
Court:United States District Courts, 2nd Circuit

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354 F.Supp. 521 (S.D.N.Y. 1973)

UNITED STATES of America, Plaintiff,


J. B. WILLIAMS COMPANY, INC. and Parkson Advertising Agency, Inc., Defendants.

No. 70 Civ. 1589.

United States District Court, D. New York

Jan. 22, 1973

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Whitney North Seymour, Jr., U. S. Atty., by Patricia M. Hynes, Asst. U. S. Atty., New York City, Janet D. Saxon, Bureau of Consumer Protection, F. T. C., Washington, D. C., for plaintiff.

Hughes, Hubbard & Reed, by Powell Pierpoint, New York City, Covington & Burling, by James H. McGlothlin, John Vanderstar, Washington, D. C., Henry E. Schultz, New York City, for defendants.

MOTLEY, District Judge.

Opinion on Motion for Summary Judgment

This action was instituted against defendants to recover civil penalties for alleged violations of a Federal Trade Commission (FTC) cease and desist order. Federal Trade Commission Act (F.T.C. Act), Section 5( l), 15 U.S.C. § 45( l).

The order, which was enforced by the Court of Appeals for the Sixth Circuit with modifications, see J. B. Williams Company v. Federal Trade Commission, 381 F.2d 884 (6th Cir. 1967), reads in pertinent part as follows:

IT IS ORDERED that respondents, The J. B. Williams Company, Inc., a corporation, and Parkson Advertising Agency, Inc., a corporation, ... directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of the preparation designated Geritol Liquid or the preparation designated Geritol Tablets, or any other preparation of substantially similar composition or possessing substantially similar properties, under whatever name or names sold, do forthwith cease and desist from:

1. Disseminating or causing to be disseminated by means of the United States mails or by any means in commerce, as "commerce" is defined in the Federal Trade Commission Act, any advertisement

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(b) which represents directly or by implication that the preparation is a generally effective remedy for tiredness, loss of strength, run-down feeling, nervousness or irritability;

(c) which represents directly or by implication that the preparation is an effective remedy for tiredness, loss of strength, run-down feeling, nervousness or irritability in more than a small minority of persons experiencing such symptoms;

(d) which represents directly or by implication that the use of such preparation will be beneficial in the treatment or relief of tiredness, loss of strength, run-down feeling, nervousness or irritability, unless such advertisement expressly limits the claim of effectiveness of the preparation to those persons whose symptoms are due to an existing deficiency of one or more of the vitamins contained in the preparation, or to an existing deficiency of iron or to iron deficiency anemia, and further, unless the advertisement also discloses clearly and conspicuously that: (1) in the great majority of persons who experience such symptoms, these symptoms are not caused by a deficiency of one or more of the vitamins contained in the preparation or by iron deficiency or iron deficiency anemia; and (2) for such persons the preparation will be of no benefit;

(e) which represents directly or by implication that tiredness, loss of strength, run-down feeling, nervousness or irritability are generally reliable indications of iron deficiency or iron deficiency anemia;

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In Matter of J. B. Williams Company, Inc., Federal Trade Commission Docket No. 8547, November 24, 1967. (Modified order to cease and desist.)

This order became final by operation of law on December 24, 1967, 15 U.S.C.§ 45(i), and has remained in effect since that date. The validity of the order is not subject to question in this action. See Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 54, 68 S.Ct. 822, 92 L.Ed. 1196 (1948); Piuma v. United States, 126 F.2d 601, 603 (9th Cir.), cert. denied, 317 U.S. 637, 63 S.Ct. 28, 87 L.Ed. 513 (1942); United States v. H. M. Prince Textiles, Inc., 262 F.Supp. 383, 388 (S.D.N.Y.1966); United States v. Vitasafe Corporation, 212 F.Supp. 397, 398 (S.D.N.Y.1962); cf. Parke, Austin & Lipscombe, Inc. v. Federal Trade Commission, 142 F.2d 437, 442 (2d Cir.), cert. denied, 323 U.S. 753, 65 S.Ct. 86, 89 L.Ed. 603 (1944).

The alleged violations of the order consist of the dissemination by defendants of eleven different television advertisements on a total of 100 separate occasions. The United States seeks the maximum penalty of $5000 for each violation, as prescribed by Section 5( l), of the F.T.C. Act, 15 U.S.C. § 45( l), or a total of $500,000 in penalties against each defendant.

Before initiation of the instant suit by the United States, the facts which gave rise to it were properly certified by the FTC to the Attorney General of the United States, as required by Section 16 of the Act, 15 U.S.C. § 56. 1

The United States now moves for summary judgment. For the reasons set forth below, the motion is granted.

I. Propriety of the Motion for Summary Judgment

A. Defendants Do Not Have the Right to Trial by Jury.

At the outset, the court must consider defendants' claim that summary judgment would be improper in this action because "the Sixth Amendment requires a jury trial in this case." Defendants' Memorandum 32. To support this argument defendants cite the Supreme Court decision in Bloom v. Illinois, 391 U.S. 194, 88 S.Ct. 1477, 20 L.Ed.2d 522 (1968), which held that serious criminal contempts must be tried to a jury. Defendants argue that the instant action, seeking penalties of $1,000,000, is "inherently criminal in nature" and "so similar to a criminal contempt proceeding, [that] defendants must be extended exactly the same right to a jury trial as they would have enjoyed had the Commission sought to impose the identical fines in a criminal contempt proceeding." Defendants' Memorandum 32, 34-35.

Plaintiff simply responds in its reply brief that "this action, as well as all prior civil penalty actions involving violations of Federal Trade Commission orders to cease and desist, is clearly civil in nature." Reply Memorandum 14. Plaintiff also points out that no court has ever held that a civil penalty action involving violations of a FTC order was criminal rather than civil in nature.

The court does not believe that defendants' contention can be dismissed so easily. However, the court reads two lines of Supreme Court cases as clearly establishing that the Sixth Amendment right to jury trial does not apply to suits brought by the United States pursuant to Section 5( l).

The first line of cases culminating in Kennedy v. Mendoza-Martinez, 372 U.S. 144, 83 S.Ct. 554, 9 L.Ed.2d 644 (1963), considers the question of whether a sanction imposed by a particular legislative enactment is penal or regulatory in character. The Court in Kennedy set forth the relevant criteria for answering this question in a specific case. Absent conclusive evidence of congressional intent as to the penal nature of a statute, the Court noted, in dictum, that "[various]

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factors must be considered in relation to the statute on its face."

Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishment-retribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned are all relevant to the inquiry .... Kennedy, supra, 372 U.S. at 168-169, 83 S.Ct. at 567.

On their face the statutory provisions under which this action has been brought, Sections 5( l), 12 and 16 of the F.T.C. Act, 15 U.S.C. §§ 45, 52 and 56, are regulatory in character. There is no doubt that, taken together, one of their objects is to control false or misleading advertising of drugs in order to shield the typical consumer against deception and misinformation resulting from dissemination of such advertising and to give him an opportunity to make an intelligent choice about drug products. See, e. g., J. B. Williams, supra, 381 F.2d at 890; Federal Trade Commission v. Sterling Drug, Inc., 317 F.2d 669, 674 (2d Cir. 1963). In this way, too, the provisions promote the basic policy of the F.T.C. Act of curtailing unfair competition. See, e. g., Federal Trade Commission v. Texaco, 393 U.S. 223, 225-226, 89 S.Ct. 429, 21 L.Ed.2d 394 (1968). In the regulatory scheme, the civil penalty provision of Section 5( l) serves the distinct function of compelling compliance with FTC cease and desist orders which have been issued to protect the consuming public and the business community in the manner just described. See United States v. St. Regis Paper Company, 355 F.2d 688, 692-695 (2d Cir. 1966). 2

Section 5( l) itself specifically provides that the fines imposed are a "civil penalty" to be recovered in a "civil action". While this characterization by Congress does not conclusively establish that the statutory provision is non-criminal in nature, see United States v. Constantine, 296 U.S. 287, 294, 56 S.Ct. 223, 80 L.Ed. 233 (1935), cf. Kennedy, supra, 372 U.S. at 163-184, 83 S.Ct. 554, it does furnish very strong evidence that Congress did not intend the provision to be punitive. Indeed, when Congress wished to make the dissemination of certain types of false advertising a criminal offense, it did exactly that. See 15 U.S.C. §...

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