627 F.2d 1151 (D.C. Cir. 1979), 79-1117, Association of Nat. Advertisers, Inc. v. F.T.C.

Docket Nº:79-1117.
Citation:627 F.2d 1151
Party Name:1980-1 Trade Cases ASSOCIATION OF NATIONAL ADVERTISERS, INC., et al. v. FEDERAL TRADE COMMISSION, et al., Appellants.
Case Date:December 27, 1979
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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627 F.2d 1151 (D.C. Cir. 1979)

1980-1 Trade Cases




No. 79-1117.

United States Court of Appeals, District of Columbia Circuit

December 27, 1979

Argued May 1, 1979.

Certiorari Denied June 16, 1980. See 100 S.Ct. 3011.

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the District of Columbia (D.C.Civil No. 78-1421).

Gerald P. Norton, Deputy Gen. Counsel, and David M. Fitzgerald, Atty., Federal Trade Commission, Washington, D.C., were on the brief, for appellants.

Frederick P. Furth, San Francisco, Cal., with whom Samuel H. Seymour, Washington, D.C., was on the brief, for appellee Kellogg Co.

Gilbert H. Weil, New York City, counsel for appellee Association of Nat. Advertisers, Inc., with whom William W. Rogal, Washington, D.C., counsel for appellee American Advertising Federation, and Walter L. Stratton, New York City, counsel for appellee American Association of Advertising Agencies, Inc., were on the brief, argued on behalf of appellees Association of National Advertisers, Inc., et al.

Mark L. Evans, Gen. Counsel, I.C.C., Jerome Nelson, Associate Gen. Counsel, I.C.C., Andrew Krulwich, Gen. Counsel, Consumer Product Safety Commission, and Robert R. Bruce, Gen. Counsel, Federal Communications Commission, Washington, D.C., were on the brief for amici curiae Independent Regulatory Agencies, urging that the judgment of the District Court on appeal herein be reversed in light of the alleged chilling effect that decision can have upon agency rulemaking proceedings.

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Daniel J. Popeo and Joel D. Joseph, Washington, D.C., were on the brief for amicus curiae Washington Legal Foundation, urging affirmance.

Neil H. Koslowe, Sp. Litigation Counsel, Dept. of Justice, Washington, D. C., with whom Barbara Allen Babcock, Asst. Atty. Gen., Earl J. Silbert, U. S. Atty., Robert E. Kopp, Atty., Dept. of Justice, Michael N. Sohn, Gen. Counsel.

David B. Lytle, Washington, D.C., was on the brief for amicus curiae Air Transport Association of America, urging that this court reject the recommendations proffered by the several Independent Regulatory Agencies as amici curiae herein.

Hope B. Eastman, Charles Morgan, Jr., and Paul F. Colarulli, Washington, D.C., were on the brief for amicus curiae Grocery Manufacturers of America, Inc., urging affirmance.

Christopher S. Bond, Kansas City, Mo., and Charles A. Blackmar, Jefferson City, Mo., were on the brief for amicus curiae Great Plains Legal Foundation, urging affirmance.

Morton Hollander, Atty., Dept. of Justice, and Ann S. DuRoss, Asst. U. S. Atty., Washington, D. C., also entered appearances for appellants.

Earl C. Dudley, Jr., Washington, D. C., also entered an appearance for appellee Kellogg Co.

Joel J. McGrath, Jr., Washington, D. C., also entered an appearance for appellee American Ass'n of Advertising Agencies.

Before TAMM, LEVENTHAL, [*] and MacKINNON, Circuit Judges.

Opinion for the court filed by Circuit Judge TAMM.

Concurring opinion filed by Circuit Judge LEVENTHAL.

Opinion dissenting in part and concurring in part filed by Circuit Judge MacKINNON.

TAMM, Circuit Judge:

Plaintiffs, appellees here, brought an action in the United States District Court for the District of Columbia to prohibit Michael Pertschuk, Chairman of the Federal Trade Commission (Commission), from participating in a pending rulemaking proceeding concerning children's advertising. The district court, citing this court's decision in Cinderella Career & Finishing Schools, Inc. v. FTC, 138 U.S.App.D.C. 152, 425 F.2d 583 (D.C.Cir.1970), found that Chairman Pertschuk had prejudged issues involved in the rulemaking and ordered him disqualified. We hold that the Cinderella standard is not applicable to the Commission's rulemaking proceeding. An agency member may be disqualified from such a proceeding only when there is a clear and convincing showing that he has an unalterably closed mind on matters critical to the disposition of the rulemaking. Because we find that the appellees have failed to demonstrate the requisite prejudgment, the order of the district court is reversed.


On April 27, 1978, the Commission issued a Notice of Proposed Rulemaking that suggested restrictions regarding television advertising directed toward children. 1 The decision to commence rulemaking under section 18 of the Federal Trade Commission (FTC) Act 2 was accompanied by a statement

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setting forth "with particularity the reason for the proposed rule." 3 The Commission explained that it had decided to propose a rule limiting children's advertising after consideration of a staff report that discussed

facts which suggest that the televised advertising of any product directed to young children who are too young to understand the selling purpose of, or otherwise comprehend or evaluate, commercials may be unfair and deceptive within the meaning of Section 5 of the Federal Trade Commission Act, requiring appropriate remedy. The Report also discloses facts which suggest that the current televised advertising of sugared products directed to older children may be unfair and deceptive, again requiring appropriate remedy.

43 Fed.Reg. 17,967, 17,969 (1978) (footnotes omitted). 4 The Commission invited interested persons to comment upon any issue raised by the staff proposal. 5

On May 8, 1978, the Association of National Advertisers, Inc. (ANA), the American Association of Advertising Agencies (AAAA), the American Advertising Federation (AAF), and the Toy Manufacturers of America, Inc. (TMA) petitioned Chairman Pertschuk to recuse himself from participation in the children's advertising inquiry. The petition charged that Pertschuk had made public statements concerning regulation of children's advertising that demonstrated prejudgment of specific factual issues sufficient to preclude his ability to serve as an impartial arbiter. See Appendix (A.) at 11, 15. The charges were based on a speech Pertschuk delivered to the Action for Children's Television (ACT) Research Conference in November 1977, on several newspaper and magazine articles quoting Chairman Pertschuk's views on children's television, on the transcript of a televised interview, and on a press release issued by the Commission during the summer of 1977. 6

On July 13, 1978, Chairman Pertschuk declined to recuse himself from the proceeding. Pertschuk stated his belief that the disqualification standard appropriate for administrative adjudications did not apply to administrative rulemaking, id. at 57-58, and that, even if adjudicative criteria were relevant, his remarks did not warrant disqualification because they did not concern the petitioners in particular; rather, they addressed the "issue of advertising to children and the policy questions raised by it," id. at 64 (emphasis in original). Five days later, the Commission, without Pertschuk participating, also determined that Pertschuk need not be disqualified. Id. at 65.

In August 1978, ANA, AAAA, AAF, and TMA petitioned the district court to declare that Chairman Pertschuk should be disqualified from participating in the children's television proceeding. ANA, AAAA, AAF, and TMA also sought preliminary and permanent injunctions barring Pertschuk's participation and an order requiring the remaining Commissioners to reconsider all matters previously decided in the inquiry. The plaintiffs introduced copies of three letters, sent by Chairman Pertschuk on the day after he delivered the ACT speech, as additional evidence of his alleged prejudgment. The letters accompanied a copy of the speech.

On September 8, 1978, the Kellogg Company (Kellogg), a food manufacturer that

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advertises on television programs regularly viewed by children, moved to intervene as a plaintiff. The district court granted the motion on October 4, 1978. Two days later, Kellogg introduced as evidence in support of the motion for a preliminary injunction a copy of a letter sent by Chairman Pertschuk on November 17, 1977, to Donald Kennedy, Commissioner of the Food and Drug Administration.

On November 3, 1978, the district court ruled on cross-motions for summary judgment. The court, relying on Cinderella, found that Chairman Pertschuk "has prejudged and has given the appearance of having prejudged issues of fact involved in a fair determination of the Children's Advertising rulemaking proceeding." Accordingly, the court granted the plaintiffs' motion for summary judgment and ordered Pertschuk enjoined from further participation. Id. at 110. This appeal followed. 7


Before we consider the merits of the district court's decision, we pause at a procedural way station. The Commission asserts that the district court erred in considering the disqualification issue before the rulemaking proceeding had ended. As a general matter, of course, the exhaustion doctrine provides that challenges to agency action should not be heard until relevant administrative proceedings have been concluded. McKart v. United States, 395 U.S. 185, 194-95, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969). This permits an administrative agency to develop a factual record, to apply its expertise to that record, and to avoid piecemeal appeals. Id. at 193-94, 89 S.Ct. 1657.

Application of the exhaustion doctrine, however, is not inflexible. In rare circumstances, this court has considered extraordinary prejudgment claims prior to final agency action. See Amos Treat & Co. v. SEC, 113 U.S.App.D.C. 100, 306 F.2d 260 (D.C.Cir.1962). See also Fitzgerald v. Hampton, 152 U.S.App.D.C. 1, 14, 467 F.2d 755, 768 (D.C.Cir.1972); Sterling...

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