F. T. C. v. Gibson Products of San Antonio, Inc.

• Decision Date: 17 March 1978
• Docket Number: No. 76-1818,76-1818
• Parties: 1978-1 Trade Cases 61,925, 1978-1 Trade Cases 62,068 FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. GIBSON PRODUCTS OF SAN ANTONIO, INC., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 900

569 F.2d 900

1978-1 Trade Cases 61,925, 1978-1 Trade Cases 62,068

FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. GIBSON PRODUCTS OF SAN ANTONIO, INC., et al., Defendants-Appellants.

No. 76-1818.

United States Court of Appeals Fifth Circuit.

March 17, 1978.

Rehearing Denied May 22, 1978.

Bardwell D. Odum, Robert E. Rader, Jr., Dallas, Tex., for defendants-appellants.

John T. Fischbach, F T C, Gerald Harwood, Asst. Gen. Counsel, Mark W. Haase, Robert J. Lewis, Gen. Counsel, Gerald P. Norton, Deputy Gen. Counsel, F T C, Washington, D. C., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before BROWN, Chief Judge, GODBOLD, Circuit Judge, and MEHRTENS ^*, District Judge.

JOHN R. BROWN, Chief Judge:

Five Gibson Products corporations ¹ appeal the District Court's order enforcing Federal Trade Commission (FTC) subpoenas duces tecum. Despite cries of irrelevance, statutory abuse, and violations of the Commission's rules, we find the subpoenas relevant, within the bounds of the FTC Act, and free of any administrative rule defect. We affirm.

The Subpoena Arena

The Gibson corporations are part of a chain of over 500 retail department stores located predominantly in Texas, Oklahoma, Kansas, Colorado, and Arkansas. Under the name of "Gibson Discount Centers," these five stores operate in San Antonio, Garland, Richardson, and Plano, Texas and in Shreveport, Louisiana.

In 1975, the FTC issued a complaint against H. R. Gibson, Sr., the founder of the chain, and eleven other individual and corporate respondents. ² H. R. Gibson, Sr., individually and doing business as Gibson Products Company and The Gibson Trade Shows, et al., No. 9016 (F.T.C., filed Aug. 25, 1975). The five local retailers in this case were not named as respondents. ³ The FTC aimed the complaint primarily at practices resulting from trade shows for wholesale distributors. Representatives from Gibson retailers would come to these shows to examine merchandise and to arrange for purchases. The Commission charges that H. R. Gibson, Sr., and others induced discriminatory allowances from suppliers to participate in these shows in violation of § 5 of the FTC Act, 15 U.S.C.A. § 45. If wholesale suppliers refused to pay, moreover, the Gibson retailers allegedly boycotted the nonparticipating sellers.

After the complaint was filed, FTC Counsel applied to an administrative law judge (ALJ) for the subpoenas duces tecum at issue in this case. In general, the complaint counsel seeks to discover whether the respondents control the retail outlets. Specifically, the subpoenas request that a representative of each local store produce for inspection (i) minutes of shareholder meetings, (ii) minutes of board of directors meetings, (iii) names and addresses of shareholders since the date of incorporation to present, and (iv) records on the transfer of shares since the date of incorporation to present.

The ALJ ordered compliance, but he modified the subpoenas to require documents from only 1970 to 1975. After the five corporations refused to obey, the FTC sought enforcement in federal District Court. 15 U.S.C.A. § 49. Following a hearing, the trial court upheld the entire request.

Mootness

The threshold question is whether this case is moot. Following the District Court's, as well as this Court's, denial of a stay pending appeal, a representative of Gibson provided the documents or summaries of the information as requested. Although Gibson has now substantially complied with these subpoenas and the FTC has indicated it will not pursue further proceedings, ⁴ we believe the controversy is still alive. If this case were decided in Gibson's favor, relief would be available by an order requiring the FTC to return the subpoenaed documents and to forbid use of the material in the adjudicatory hearing. See Atlantic Richfield v. FTC, 5 Cir., 1977, 546 F.2d 646, 650; FTC v. Browning, 1970, 140 U.S.App.D.C. 292, 296, 435 F.2d 96, 97 n. 1. ⁵

Gibson also argues that the trial court erred in refusing to grant a stay pending appeal. This question, however, is made moot by our decision on the merits of the subpoenas. Cf. DeSimone v. Linford, 5 Cir., 1974, 494 F.2d 1186 (appeal from denial of preliminary injunction pending administrative appeal was moot after completion of administrative appeal).

Playing By The Rules

Gibson's principal attack on the subpoenas is that the FTC violated its own discovery rules. This Court, of course, will not aid in enforcing a subpoena if the Commission did not adhere to its rules governing the use of such discovery tools. When the FTC publishes rules, the FTC is bound by them. Pacific Molasses Co. v. FTC, 5 Cir., 1966, 356 F.2d 386, 389-90. ⁶

Gibson argues, in particular, that the complaint counsel did not adequately make the showing required under 16 C.F.R. § 3.33 and § 3.34 before the ALJ, or indeed, failed to make any showing at all. Unlike the Federal Rules of Civil Procedure, which provide for judicial intervention only when a party resists discovery, ⁷ the FTC Rules stipulate that a party seeking discovery must justify every deposition and subpoena before an ALJ. This requirement, in theory, allows the ALJ to control dilatory tactics by parties who would abuse the discovery process. ⁸ To justify these subpoenas, the FTC complaint counsel filed the following statement:

Complaint counsel seek basic corporate information from five Gibson's Discount Centers, not specifically named in the Complaint, but believed to be owned in whole or in part by named Gibson respondents. The information which could be provided in response to the subpoenas is relevant to considerations of direction and control by various individual respondents or various corporate respondents of Gibson's Discount Centers. Discovery on this point is necessary to meet the defenses asserted by counsel for the Gibson respondents. (Tr. 29, 30 and 34). The information requested is unavailable from any other source but it is relevant to demonstrate that respondents are now officers or shareholders of Gibson stores.

In both the case of the respondent witnesses and the family-owned stores, complaint counsel have attempted to obtain the information voluntarily in accordance with the Administrative Law Judge's direction of June 26, 1975. Respondents' attorneys Bardwell Odum and Robert E. Rader, Jr., met with Complaint counsel in June 1975. Copies of the proposed Specifications for . . . the five Gibson Discount Centers were presented to them. Complaint counsel were advised by letter . . . that none of the requested information would be provided voluntarily.

Gibson and the FTC complaint counsel disagree on whether both § 3.33 and § 3.34 apply to these subpoenas. The parties agree that these are adjudicative subpoenas issued after the filing of the complaint, and not investigative subpoenas. ⁹ But Gibson contends that since the subpoenas demand that a representative testify as well as produce documents, ¹⁰ the FTC must follow the adjudicative rule on depositions, § 3.33, ¹¹ along with the adjudicative rule on subpoenas duces tecum, § 3.34. ¹² The FTC complaint counsel, on the other hand, argues that only § 3.34 applies. Neither party has shown us what we think is a definitive Commission statement on what rule or rules are relevant. Our decision, fortunately, does not depend on determining which rules apply. ¹³ We hold that the complaint counsel complied with the requirements under either § 3.34 or § 3.33. ¹⁴

Subpoena Duces Tecum: § 3.34

Section 3.34(b) provides two requirements for a subpoena duces tecum. The party applying for the subpoena must show, first, the "general relevancy of the material" and, second, "the reasonableness of the scope of the subpoena." Although the two paragraphs of the FTC's application do not contain the latter phrase, the subpoenas request only four specific items from each corporation, and the FTC explained that the information was unavailable from any other source. Due to the limited nature of the subpoenas, the ALJ would be justified in concluding that the subpoenas were reasonable in scope. In addition, the complaint counsel obviously made a claim of relevance. Counsel explained in the application that the subpoenas were needed to determine the "direction and control" of the stores and to demonstrate that respondents in the complaint were "now officers or shareholders of the Gibson stores."

A more difficult question is whether this showing of relevance is sufficient. However, all that a reviewing court requires is that the material sought be "reasonably relevant." E. g., FTC v. Browning, 1970, 140 U.S.App.D.C. 292, 298, 435 F.2d 96, 102; Adams v. FTC, 8 Cir., 1961, 296 F.2d 861, 866, cert. denied, 1962, 369 U.S. 864, 82 S.Ct. 1029, 8 L.Ed.2d 83. Considering the FTC counsel's statement along with the complaint, see Moore Business Forms v. FTC, 1962, 113 U.S.App.D.C. 231, 232, 307 F.2d 188, 189; Adams v. FTC, 8 Cir., 1961, 296 F.2d 861, 867, cert. denied, 1962, 369 U.S. 864, 82 S.Ct. 1029, 8 L.Ed.2d 83, we believe this standard is met.

The gist of the complaint concerns the alleged special payments by wholesale distributors to H. R. Gibson, Sr., and others who ran the trade shows, along with the boycott of wholesalers who did not participate in the shows. Although we express no opinion on the merits of the complaint, unless H. R. Gibson could "direct and control" the purchasing of the retailers, it is unlikely that suppliers would make special payments to participate in the trade shows. Likewise, unless H. R. Gibson could "direct and control" local store buying, he could not prevent retailers from making purchases from suppliers who refused to participate in the shows. A list of shareholders and officers, as well as minutes of board meetings, from the local stores would help resolve who actually controls wholesale buying.

Furthermore, although the application states, in part, that the...