673 F.2d 1008 (9th Cir. 1981), 79-7647, Ford Motor Co. v. F. T. C.

Docket Nº:79-7647, 79-7654.
Citation:673 F.2d 1008
Party Name:FORD MOTOR COMPANY, Ford Motor Credit Co. and Francis Ford, Inc., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
Case Date:August 24, 1981
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 1008

673 F.2d 1008 (9th Cir. 1981)

FORD MOTOR COMPANY, Ford Motor Credit Co. and Francis Ford,

Inc., Petitioners,



Nos. 79-7647, 79-7654.

United States Court of Appeals, Ninth Circuit

August 24, 1981

Argued and Submitted May 5, 1981.

Rehearing and Rehearing En Banc Denied April 5, 1982.

Michael J. Esler, Esler & Schneider, Portland, Or., for petitioners.

Ernest J. Isenstadt, F.T.C., Washington, D.C., for respondent.

Petition for Review of the Order of the Federal Trade Commission.

Before GOODWIN, KENNEDY and ALARCON, Circuit Judges.

GOODWIN, Circuit Judge.

Francis Ford, Inc. petitions this court to review an F.T.C. order finding it in violation of § 5 of the F.T.C. Act, 15 U.S.C. § 45 (unfair trade practices). We have reviewed the petition, and set aside the order.

Francis Ford, Inc. is an Oregon automobile dealership. Its practice in repossessing cars has been to credit the debtor for the wholesale value of the car, charge him for indirect expenses (i. e., overhead and lost profits) as well as direct expenses (i. e., refurbishing) associated with repossession and resale, and sell the repossessed vehicle at retail keeping the "surplus." In doing so, Francis Ford claims it is doing what is commonly done throughout its industry.

The F.T.C. does not approve of the described practice. Nor does it approve of a number of other credit practices now commonly in use in a wide variety of industries. See its investigations of the credit business, and its recent attempted rulemaking. In re Proposed Trade Regulation Rule: Credit Practices, 40 Fed.Reg. 16,347 (1975).

Page 1009

In order to attack Francis Ford's practice, the F.T.C. began in 1976 an adjudicatory action against Ford Motor Co., Ford Credit Co., and Francis Ford, Inc. The commission alleged that the respondents had violated § 5 of the F.T.C. Act by failing to give defaulting customers more than wholesale value for their repossessed cars, and by improperly charging them with indirect expenses such as overhead and lost profits. Parallel proceedings were commenced against Chrysler Corp. and General Motors, their finance subsidiaries, and two dealers. The National Association of Car Dealers sought to intervene to protect the interests of its members but was not allowed to do so. Eventually, all the respondents except Francis Ford settled with the F.T.C.

Shortly after the consent decrees were entered, the administrative law judge held that Francis Ford's credit practices had violated § 5 of the F.T.C. Act, but that the commission had failed to establish that Francis Ford's acts were substantially injurious to its customers. Both Francis Ford and complaint counsel for the F.T.C. appealed to the full commission. The commission deleted the portion of the order favorable to Francis Ford, and affirmed the administrative law judge's decision. The order directed Francis Ford to cease its present credit practices, and to adopt the F.T.C.'s view of proper credit practices under ORS 79.5040 (U.C.C. § 9-504).

The narrow issue presented here is whether the F.T.C. should have proceeded by rulemaking in this case rather than by adjudication. The Supreme Court has said that an administrative agency, such as the F.T.C., "is not precluded from announcing new principles in the adjudicative proceeding and that the choice between rulemaking and adjudication lies in the first instance within the (agency's) discretion." NLRB v. Bell Aerospace Co., 416 U.S. 267, 294, 94 S.Ct. 1757, 1771, 40 L.Ed.2d 134 (1974). See also, Securities Comm'n v. Chenery Corp., 332 U.S. 194, 202-203, 67 S.Ct. 1575, 1580-81, 91 L.Ed. 1995 (1947). But like all grants of discretion, "there may be situations where the (agency's) reliance on adjudication would amount to an abuse of discretion ...." Bell Aerospace Co., 416 U.S. at 294, 94 S.Ct. at 1771. The problem is one of drawing the line. On that score the Supreme Court has avoided black-letter rules. See id. at 294, 94 S.Ct. at 1772 ("(i)t is doubtful whether any generalized standard could be framed which would have more than marginal utility....") Lower courts have been left, therefore, with the task of dealing with the problem on a case-by-case basis.

The Ninth Circuit recently made such an attempt in Patel v. Immigration & Naturalization Serv., 638 F.2d 1199 (9th Cir. 1980). In Patel, the Immigration and Naturalization Service, by an administrative adjudication, added a requirement to a regulation governing permanent immigration to this country. The court...

To continue reading