530 F.2d 515 (3rd Cir. 1976), 75--1282, A. O. Smith Corp. v. F. T. C.

Docket Nº:FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1282.
Citation:530 F.2d 515
Party Name:A. O. SMITH CORPORATION et al. v.
Case Date:February 11, 1976
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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530 F.2d 515 (3rd Cir. 1976)



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1282.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1283.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1284.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1285.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1286.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1287.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1288.



FEDERAL TRADE COMMISSION et al., Appellants in No. 75--1289.

Nos. 75--1282 to 75--1289.

United States Court of Appeals, Third Circuit

February 11, 1976

Argued Oct. 17, 1975.

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W. Laird Stabler, Jr., U.S. Atty., Wilmington, Del., for appellants and Comptroller of the United States.

Robert J. Lewis, Gen. Counsel, Gerald Harwood, Asst. Gen. Counsel, James P. Timony, William A. Cerillo, Warren S. Grimes, Bruce G. Freedman, Mary L. Azcuenaga, Gerald P. Norton, Washington, D.C., for appellants, Federal Trade Commission.

Gilbert J. Helwig, Edward T. Tait, Lee A. Rau, John M. Wood, Reed, Smith, Shaw & McClay, Washington, D.C., Richard F. Corroon, Potter, Anderson & Corroon, Wilmington, Del., for appellee, A. O. Smith Corp., and others.

Robert L. Stern, Chicago, Ill., Frank P. Cihlar, Charles W. Petty, Jr., James R. Henderson, Mayer, Brown & Platt, Washington, D.C., for appellees, Inland Steel Co., Northwest Industries, Inc. and Oscar Mayer & Co. Inc.

Philip A. Lacovara, Gerald Goldman, Hughes, Hubbard & Reed, Washington, D.C., for appellee, Merck & Co., Inc.

John F. McClatchey, Leslie W. Jacobs, Thompson, Hine & Flory, Cleveland, Ohio, for appellees, Hobart Corp., The Goodyear Tire & Rubber Co.

Paul P. Welsh, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., David W. St. Clair, Charles H. McAuliffe, Englewood Cliffs, N.J., for appellee, Thomas J. Lipton, Inc.

Before ALDISERT, KALODNER and ADAMS, Circuit Judges.


ALDISERT, Circuit Judge.

We are to decide whether the district court had jurisdiction to entertain preenforcement suits for declaratory and injunctive relief against the Federal Trade Commission 1 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 tht 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

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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 preenforcement 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.


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), petition for cert. filed, 44 U.S.L.W. 3417 (U.S. Jan. 9, 1976) (No. 75--974), the primary holding of which was that the district court had

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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, 47 S.Ct. 553, 71 L.Ed. 978 (1927), as modified by the...

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