Zale Corporation and Corrigan-Republic, Inc. v. FTC
Decision Date | 09 March 1973 |
Docket Number | No. 71-2633.,71-2633. |
Citation | 473 F.2d 1317 |
Parties | ZALE CORPORATION AND CORRIGAN-REPUBLIC, INC., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. |
Court | U.S. Court of Appeals — Fifth Circuit |
Sam G. Winstead, Jack Pew, Jr., Dallas, Tex., for petitioners.
Ronald M. Dietrich, Gen. Counsel, Harold D. Rhynedance, Jr., Asst. Gen. Counsel, Robert E. Duncan, Atty., F.T.C., Washington, D. C., for respondent.
Before GEWIN, COLEMAN and INGRAHAM, Circuit Judges.
The issues on this petition to review an order of the Federal Trade Commission, requiring the petitioners to cease and desist from violations of Regulation Z1 promulgated under the Truth in Lending Act,2 are (1) Whether the parent corporation shall be held accountable for its own and its subsidiary's violations of the Regulation; (2) whether an injunction against future violations of the Regulation is appropriate where the parent corporation has conceded the violation but asserts their non-recurring nature; and (3) whether the cease and desist order entered in this case was overly broad in its prohibition of violating sections of the Regulation assertedly not violated.
Petitioners are the Zale Corporation and its owned or controlled subsidiaries (the Zale Corporate Enterprise). Zale itself is a combination operating and holding company, and as a holding company controls a network of 1056 wholly owned subsidiaries, including the subsidiary, Corrigan-Republic, Inc. The Corporate Enterprise engages in a nationwide business of selling retail jewelry and other merchandise, generating a large volume of consumer credit transactions.3
The consumer credit transactions of the Zale Corporate Enterprise were the subject of FTC's inquiry. Specifically, the Commission attacked the Enterprise's uniform retail installment contract as used in the subject period, July 1, 1969 to December 31, 1969. Zale has conceded this form's violation of Regulation Z in thirteen particulars by failing to:
Zale, however, contends that the offending form has been remedied to comply with the Regulation. The Commission disagrees, finding still other violations such as the new form's notice provision. See 12 C.F.R. 226.6(a). Additionally, it should be noted that certain of the admitted violations involve incorrect amounts or rates in the actual transactions rather than in the use of terminology or disclosure sequence which is preprinted on those forms. Whether or not such practices have actually been abandoned can only be determined through subsequent enforcement procedures. Hence, while respecting the good corporate name of the Zale Enterprise, there is no valid assurance that if Zale were free of the Commission's restraint it would not continue its former course. Compare Sears, Roebuck & Co. v. FTC, 258 F. 307 (7th Cir., 1919), and Clinton Watch Co. v. FTC, 291 F.2d 838 (7th Cir., 1961). "Courts properly leave to the Commission's non-abusive discretion the question whether the public interest requires the protection of an order in cases where unlawful practices have been discontinued." Cotherman v. FTC, 417 F.2d 587, 594 (5th Cir., 1969). Zale's statement that it has amended its form and no longer will violate the Act was unpersuasive before the Commission and is insufficient to convince us that the Commission abused its discretion in entering a cease and desist order.
Zales next questions the scope of the Commission's order and the Commission's power to look to the parent Zales for all violations occurring in the daily use of the credit forms in the Enterprise — to Zales the latter vests review in the district court.
We conclude that the FTC appropriately entered its decree against the Zale Enterprise due to the presence in the record of the following factors:
1. The source of the majority of violations is the form prepared by the parent Zale and distributed by it to its subsidiary and division stores alike.
2. Accountability for the use of the form lies with the parent Zale.
3. The advertising done is in the Enterprise name vis-a-vis the names of specific stores.
4. The Enterprise organization denies recognition of the separate corporate infra structure employed.
The following facts supported by this record are borrowed from the government's brief:
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