395 F.Supp. 1367 (E.D.Pa. 1975), Civ. A. 73-2221, Tasty Baking Co. v. Cost of Living Council

Docket NºCiv. A. 73-2221
Citation395 F.Supp. 1367
Party NameTasty Baking Co. v. Cost of Living Council
Case DateMay 30, 1975
CourtUnited States District Courts, 3th Circuit, Eastern District of Pennsylvania

Page 1367

395 F.Supp. 1367 (E.D.Pa. 1975)

TASTY BAKING COMPANY

v.

COST OF LIVING COUNCIL et al.

Civ. A. No. 73-2221.

United States District Court, E.D. Pennsylvania.

May 30, 1975

Page 1368

Robert A. Altman, Washington, D.C., S. Gordon Elkins, Philadelphia, Pa., for plaintiff.

Winston E. Miller, Economic Stabilization Section, Civ. Div., Dept. of Justice, Washington, D.C., for defendants.

OPINION

FOGEL, District Judge.

In this action filed by Tasty Baking Company, (the Company), to set aside and enjoin enforcement of Decisions and Orders of the Cost of Living Council, (the Council), issued pursuant to Phase II of the Economic Stabilization Program, we are asked to adjudicate the cross-motions for summary judgment filed by the parties. Plaintiff's motion challenges the action of the Council, because of the alleged failure of that agency to comply with the controlling sections of the Economic Stabilization Act of 1970, as amended, and with certain provisions of the Administrative Procedure Act. Defendants' motion seeks affirmance of the decision reached by the Council and approval of the regularity of its proceedings. We have concluded that summary judgment should be entered in favor of the Council.

Page 1369

The procedural history of this litigation may be summarized as follows: Tasty Baking Company, a diversified corporation engaged in the sale of small cakes and pies, cookies, toys, and graphic arts materials, filed an application dated October 23, 1972, with the Office of Exceptions Review of the Price Commission, in which that company sought permission to adjust its base period profit margin from 6.64 per cent to 7.63 per cent, in order to reflect the effect of divestitures by the Company of its Potato Chip-Pretzel Division and Silver Nitrate Division. 1 On February 5, 1973, the Council issued a Decision and Order which permitted the Company to restate its base period profit margin, 'effective with the start of the Company's 1973 fiscal year.' 2 On February 22, 1973, the Company filed a 'Request for Reconsideration--Exception' with the Exceptions Review Office of the Price Monitoring Division of the Council, seeking modification of the Decision and Order of February 5, 1973, in order to enable it to restate the profit margin for the 1972 fiscal year. 3 A second Decision and Order of the Council was issued on April 2, 1973, which acknowledged that the Company had 'made a prima facie showing as required by 6 CFR 305.36(a)(3) that the Cost of Living Council's initial action was erroneous in fact or in law;' that order allowed a pro tanto restatement of the base period profit margin to reflect the effect upon the company of the divestiture of the Potato Chip and Pretzel Division, retroactive to the commencement of its 1972 fiscal year. The Decision and Order of the Council did not permit similar adjustment for divestiture of the Silver Nitrate Division; the refusal to do so was based upon the finding of the Council that 'divestiture of this division was not completed until fiscal year 1972.' 4

Thereafter, on June 22, 1973, the Company received a Notice of Probable Violation, dated June 19, 1973, from the Office of Price Monitoring of the Council setting forth that a determination had been made as to a probable violation the Council concluded that a profit margin violation had in fact occurred, and of 6 CFR §§ 300.12 and 300.13; this action was based upon the thesis that the Company had apparently exceeded the base period profit margin which had been restated in accordance with the Decision and Order of April 2, 1973, for the fiscal year 1972. 5 The Company responded in writing to the Notice of Probable Violation; 6 a meeting was subsequently held with representatives of the Council on July 2, 1973. 7

After a review of the written and oral presentation submitted by the Company, in its Order of August 2, 1973, mandated price reductions to bring the Company

Page 1370

into compliance with the Economic Stabilization Program. 8

The Company thereafter filed a Request for Recission and asked for a stay of the August 2, 1973 Order; 9 a stay was subsequently granted by the Council. 10 On September 28, 1973, the Council denied the Request for Recission, and substantially reaffirmed its August 2, 1973 Order. 11

Thereafter, the instant action was filed in this Court on October 3, 1973, pursuant to the jurisdictional grant contained in § 211 of the Economic Stabilization Act of 1970, as amended, 12 U.S.C. § 1904 n.; 12 the Company seeks declaratory and injunctive relief to set aside, annul, declare unlawful, and enjoin enforcement of the Orders of the Council of September 28, 1973 and August 2, 1973.

After this suit was filed, counsel for the parties entered into an agreement whereby the Company's theretofore unsuccessful request for 'exceptions' relief was reopened for administrative review, and the Company was permitted to submit additional materials for the Council's consideration in connection with that action. 13 On February 11, 1974, the Council issued an extensive Decision and Order which reaffirmed its prior Decision and Order of April 2, 1973. 14 Another round of letters between the Company and the Council followed, 15 and minor amendments to the February 11, 1974 Decision and Order were issued on April 10, 1974. 16

There can be no doubt, based upon the procedural and substantive history of this matter, that the Company has fully exhausted its administrative remedies. 17

Hence, we are satisfied that the controversy is one which is ripe for judicial review.

The Company asserts four general grounds in support of its prayer for injunctive and declaratory relief in this Court; its contentions may be summarized as follows:

First: that the Council's failure to grant the request of the Company for an exception to adjust its base period profit margin for the fiscal year 1972 constituted arbitrary action by that agency, which also exceeded its authority in ruling as it did.

Second: that there is a lack of substantial evidence to support the Council's ruling.

Third: that the Council violated the provisions of 5 U.S.C. § 555(e) when it rendered its Decisions and Orders denying the Company's request for 'exceptions' relief, and thereafter issued the

Page 1371

orders that are the subject of this appeal.

Fourth: that the Council's determination is invalid because of the alleged fatal defect which permeates all of its pertinent regulations, a defect that is charged to stem from the Agency's failure to comply with the rule-making provisions of the Administrative Procedure Act, 5 U.S.C. § 553.

We will discuss these contentions, seriatim.

1. Was the action of the Council in denying the request of the Company for an exception to adjust its base period profit margin for fiscal 1972 arbitrary, or in excess of the authority of the agency, or both?

Section 211(d) and (e) of the Economic Stabilization Act of 1970, as amended by the Economic Stabilization Act Amendments of 1971, P.L. 92-210, 85 Stat. 743 (December 22, 1971), (the 'Amended Act'), contain the following provisions with respect to District Court review of orders of the Council:

(d) (1) Subject to paragraph (2), * * * no order (of any agency exercising authority under this title) shall be enjoined or set aside, in whole or in part, unless a final judgment determines that such order is in excess of the agency's authority or is based upon findings which are not supported by substantial evidence. (d)(2) A district court of the United States * * * may enjoin temporarily or permanently the application of a particular * * * order issued under this title to a person who is a party to litigation before it. * * * (e) (1) Except as provided in subsection (d) of this section, no interlocutory or permanent injunction restraining the enforcement, operation, or execution of * * * any * * * order issued (under this title), shall be granted by any district court of the United States or judge thereof. Any such court shall have jurisdiction to declare * * * (B) that an order of (an agency exercising authority under this title) is invalid upon a determination that the order is in excess of the agency's authority, or is based upon findings which are not supported by substantial evidence. * * * (emphasis supplied)

While the statutory criteria for review appear to be limited to orders which are either in excess of the authority of the agency, or based upon findings which are not supported by substantial evidence, the Temporary Emergency Court of Appeals has concluded that 'the power of the court to correct arbitrary action is implicit in Section 211(d)(1)', Associated General Contractors of America, Inc., Oklahoma Chapter-Builders' Division v. Laborers International Union of North America, supra, 476 F.2d at 1400-1401, n. 20. The standards which control in arriving at a determination with respect to the existence of substantial evidence to support Council action are discussed in Part 2, infra. At this point, our inquiry is directed to the charge that the Council acted either arbitrarily, or in excess of its authority, or was in fact guilty of both transgressions.

At the outset we will examine the statutory framework established by Congress which governs the grant or denial of exceptions and variations under the Economic Stabilization Program. 18 Section

Page 1372

203(b) of the Amended Act provides as follows, in pertinent part:

(b) In carrying out the authority vested in him by subsection (a), the President shall issue standards to serve as a guide for determining levels of wages, salaries, prices, rents, interest rates, corporate dividends, and similar transfers which are consistent with the purposes of this title and orderly economic...

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2 practice notes
  • 72 Cal.App.3d 629, Civ. 16034, Armistead v. California State Personnel Board
    • United States
    • California California Court of Appeals
    • August 10, 1977
    ...(Hotch v. United States (9 Cir. 1954) 212 F.2d 280, 282, 14 Alaska 594; Tasty Baking Company v. Cost of Living Council (D.C., 1975) 395 F.Supp. 1367, at p. 1389; cf. California Citizens Band Association v. United States (9 Cir., 1967) 375 F.2d 43.) The policy considerations for applying the......
  • 529 F.2d 1005 (Fed. Cir. 1975), 3-9, Tasty Baking Co. v. Cost of Living Council
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals for the Federal Circuit
    • December 22, 1975
    ...of the trial court that good cause appears for the regulations issued in November of 1971. Tasty Baking Co. v. Cost of Living Council, 395 F.Supp. 1367 at 1394 (E.D.Pa.1975). Unlike the trial court, however, we are not convinced that 'good cause' existed for the regulations promulgated in F......
2 cases
  • 72 Cal.App.3d 629, Civ. 16034, Armistead v. California State Personnel Board
    • United States
    • California California Court of Appeals
    • August 10, 1977
    ...(Hotch v. United States (9 Cir. 1954) 212 F.2d 280, 282, 14 Alaska 594; Tasty Baking Company v. Cost of Living Council (D.C., 1975) 395 F.Supp. 1367, at p. 1389; cf. California Citizens Band Association v. United States (9 Cir., 1967) 375 F.2d 43.) The policy considerations for applying the......
  • 529 F.2d 1005 (Fed. Cir. 1975), 3-9, Tasty Baking Co. v. Cost of Living Council
    • United States
    • Federal Cases United States Courts of Appeals United States Court of Appeals for the Federal Circuit
    • December 22, 1975
    ...of the trial court that good cause appears for the regulations issued in November of 1971. Tasty Baking Co. v. Cost of Living Council, 395 F.Supp. 1367 at 1394 (E.D.Pa.1975). Unlike the trial court, however, we are not convinced that 'good cause' existed for the regulations promulgated in F......