AMREP Corp. v. F.T.C., 84-1434

Decision Date25 July 1985
Docket NumberNo. 84-1434,84-1434
Citation768 F.2d 1171
Parties1985-2 Trade Cases 66,713 AMREP CORPORATION, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
CourtU.S. Court of Appeals — Tenth Circuit

Michael C. Schoeman, Schoeman, Marsh, Updike & Welt, and I. Michael Bayda, Jacobs, Persinger & Parker, New York City (Rothgerber, Appel & Powers, Denver, Colo., with them on the brief), for petitioner.

Frederick E. Dooley, Jr., F.T.C., Washington, D.C. (John H. Carley, Gen. Counsel, Ernest J. Isenstadt, Asst. Gen. Counsel, and George E. Schulman, F.T.C., Washington, D.C., with him on the brief), for respondent.

Before McKAY and DOYLE, Circuit Judges, and BROWN, District Judge *.

WILLIAM E. DOYLE, Circuit Judge.

Petitioner AMREP Corporation (Amrep) seeks review of a cease and desist order entered against it by the respondent Federal Trade Commission (FTC or Commission) on February 8, 1984. This court has jurisdiction in this case pursuant to 15 U.S.C. Sec. 45(c). We affirm the FTC's order in all respects.

The Basic Facts

Amrep is an Oklahoma corporation with its principal place of business in New York City. It was first incorporated as American Realty & Petroleum Corporation in 1955. 1 Prior to August, 1961 Amrep was engaged exclusively in operating oil and gas properties in Oklahoma. In August, 1961, however, the company entered the business of acquiring large tracts of unimproved land. It subdivided the land into lots and sold them in the subdivisions to the general public. Amrep's principal business today continues to be selling lots to the public in its subdivisions.

On March 11, 1975, the FTC issued a formal complaint charging that Amrep used unfair and deceptive sales practices in connection with sales of vacant lots in its subdivisions. The complaint centered on the sales practices used in connection with four Amrep subdivisions: Rio Rancho Estates, near Albuquerque, New Mexico; El Dorado at Santa Fe, New Mexico; Silver Springs Shores near Ocala, Florida, and Oakmont Shores, in Missouri. The Commission's complaint was that Amrep had falsely represented to potential buyers that its lots were a safe investment sure to yield short-term profits. It further alleged that Amrep had made false representations concerning the growth rates of the areas in which its subdivisions were located, and that it had falsely represented that land in its subdivisions was steadily increasing in value. It was also alleged that Amrep had made false representations about physical and legal constraints on the growth of Albuquerque that made an investment in land at Rio Rancho Estates appear more attractive to consumers than it actually was. The complaint also alleged that Amrep used unfair high-pressure sales tactics in marketing its lots, and that its prepared form contracts for the purchase of land contained unfair and illegal provisions.

Hearings before an Administrative Law Judge on the complaint began in June 1976. They were stayed by order of the United States District Court for the Southern District of New York as of July 30, 1976. This action was taken in order to complete a criminal proceeding against Amrep and its officers in that court. See United States v. Amrep Corp., 405 F.Supp. 1053 (S.D.N.Y.1976), aff'd without opinion, 535 F.2d 1240 (2d Cir.1976). The hearings resumed on May 2, 1977, following the completion of the criminal trial conducted by the government. That trial resulted in convictions of Amrep and six leaders on March 10, 1977. 2 They continued intermittently until May 17, 1978. The hearing record was closed on May 31, 1978.

Discussion of the Evidence

The exhibits and testimony introduced during those hearings revealed that during the time period covered by the FTC's complaint (1961-1975), Amrep had marketed its lots primarily through company-sponsored dinner parties. These parties were held all over the nation, usually far from the Amrep subdivision that was being promoted at the party. Their format did not vary. Prospective buyers (usually husband and wife) were invited to the parties and were seated at small tables (usually two couples together with an Amrep salesman). After the prospective buyers had been served a free dinner and substantial amounts of alcoholic beverages, an Amrep speaker would introduce promotional films on the particular Amrep subdivision that was the subject of the dinner party. These promotional films were produced by Amrep's central office and were described by the Administrative Law Judge as masterpieces of illusion. For example, the Amrep film on El Dorado at Santa Fe made the New Mexico desert bloom through liberal use of green spray paint on the grass shown in the film.

After the conclusion of the films, the speaker gave a brief talk on the particular subdivision in question. The speakers' presentations had been prepared in writing by Amrep's central office in New York. The emphasis was made that Amrep land was a great short-term investment and a sure-fire hedge against inflation. Following the speaker's completed presentation, prospective buyers were pressured into signing land purchase agreements that very night by the salesmen sitting at their tables. These salesmen's tactics had been also dictated by the New York office. The salesmen were told to create artificial excitement by calling out "holds" on particular pieces of property. This was so as to create an artificial impression of increasing property values by stressing that Amrep had dictated increases in the list prices of lots in the subdivision, and to create artificial pressure to purchase land by filling out Amrep-prepared form contracts with required personal data before prospective buyers had indicated their willingness to buy land. These high-pressure tactics led many individuals to buy Amrep land sight unseen.

The individuals who made these sight unseen land purchases were not firmly bound to carry through with them at this time. They had the right to cancel their purchases if they visited the Amrep subdivision where they had purchased land within six months and were not satisfied with their purchases. If they were merely dissatisfied with the particular lot they had purchased, they also had the right to exchange it for another lot of comparable value within the subdivision. To facilitate purchasers' inspections of their lots, Amrep provided chartered trips to its subdivisions. These trips were not conducive to dispassionate inspections of the purchasers' new properties. Indeed these visits were almost as carefully scripted as were Amrep's dinner parties. The purchasers (now known as "homesite owners") were again plied with substantial quantities of alcoholic beverages. During their stay at the subdivision, they were taken on tours of the region's most noteworthy attractions. These views did not include the Amrep subdivision. Purchasers' inspections of their lots were usually limited to a couple of hours on the last day of the trips. If the buyers showed any inclination to cancel their purchases, Amrep's salesmen were instructed to make overly optimistic representations to the buyers about the pace of development in the subdivision and about Amrep's plans for the subdivision's future. The salesmen also stressed the "exchange privilege" and pointed out more desirable lots in other parts of the subdivision. They did not, however, point out that more desirable lots of equal value were often smaller than the lots that the buyers had purchased, or that buyers were required to pay cash "boot" to obtain more desirable lots of a size equal to their original lots. Amrep's tours and exchange privileges were effective in that they served to prevent most buyers from cancelling their land purchase contracts.

Amrep-drafted contracts were, according to evidence introduced at the hearings, rather onerous, in that the contract purchasers did not get possession of their land until they had completed their payments (usually five to eight years) and if they defaulted on any payment, even the very last one, Amrep had the contractual right to terminate the purchaser's interest in the land and keep all payments that had been made as "liquidated damages."

Based on the facts which are described above, the Administrative Law Judge (ALJ) issued a decision on July 18, 1979. It held that Amrep had engaged in unfair and deceptive conduct in connection with its sales of lots in its subdivisions. It also held that the "liquidated damages" clause in its form contracts was an illegal forfeiture clause. The ALJ also issued a proposed cease and desist order. This directed Amrep to stop making certain representations about its land, to make affirmative disclosures to past lot purchasers by means of a letter that was to be sent to them, and to stop enforcing the illegal forfeiture clause in its form contracts. The full Commission affirmed the ALJ's decision in large part in an opinion issued November 2, 1983 and released February 8, 1984. The Commission also modified the proposed cease and desist order. This was in order to make its provisions consistent with requirements imposed by other federal statutes.

Amrep now asks this court to set aside the FTC's decision and order. Its attacks on the FTC's action fall into four categories: (1) attacks on the Commission's regulatory jurisdiction over land sales; (2) alleged procedural irregularities in the Commission's deliberations in this case; (3) alleged deficiencies in the evidence supporting the FTC's decision; and (4) attacks on the scope of the FTC's remedial order. These four categories will be addressed separately below.

The Commission's Regulatory Jurisdiction

Amrep contends that because Congress passed the Interstate Land Sales Full Disclosure Act (ILSFDA), 15 U.S.C. Sec. 1701, et seq., in 1968, the FTC no longer has jurisdiction to regulate interstate land sales. Its argument is based on the principle of statutory construction that when two statutes arguably apply to the...

To continue reading

Request your trial
18 cases
  • Mission Group Kansas, Inc. v. Riley
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • June 1, 1998
    ......Resolution Trust Corp., 511 U.S. 531, 537, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (quoting ... and " 'adjudications that create binding precedents' " (quoting Amrep Corp. v. FTC, 768 F.2d 1171, 1178 (10th Cir.1985))). . 6 The regulations ......
  • Southern Ute Indian Tribe v. Amoco Production Co., 94-1579
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • July 16, 1997
    ...... well as the language and design of the statute as a whole." K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S.Ct. 1811, 1818, 100 L.Ed.2d ... or through adjudications that create binding precedents." Amrep Corp. v. FTC, 768 F.2d 1171, 1178 (10th Cir.1985). 23 . ......
  • Franklin v. U.S., 92-6056
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • May 5, 1993
    ...... Key v. Liquid Energy Corp., 906 F.2d 500, 505 (10th Cir.1990); Johnson v. Mid-South Sports, Inc., ... construction that repeals by implication are not favored.' " AMREP Corp. v. . Page 1502 . FTC, 768 F.2d 1171, 1176 (10th Cir.1985) ......
  • Consumer Protection Div. v. Luskin's, Inc.
    • United States
    • Court of Special Appeals of Maryland
    • September 1, 1997
    ...... used by federal courts when reviewing the Federal Trade Commission's (FTC) application of law to fact. Luskin's provides two reasons for its ... Corp. v. FTC, 695 F.2d 681, 687 (3d Cir.1982) (alteration in original) (quoting ... See, e.g., AMREP Corp. v. FTC, 768 F.2d 1171, 1179 (10th Cir.1985) (citing FTC v. ......
  • Request a trial to view additional results
1 firm's commentaries
  • The FTC's 1980 Definition Of Unfair Trade Practice Applies To FDUTPA Actions
    • United States
    • Mondaq United States
    • June 30, 2015
    ...S & H Standard) 3 See Southwest Sunsites, Inc. v. Federal Trade Commission, 785 F.2d 1431, 1435 (9th Cir. 1986); Amrep Corp. v. FTC, 768 F.2d 1171, 1178 (10th Cir. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sough......
2 books & journal articles
  • The unexplored territory of unfairness in Florida's Deceptive and Unfair Trade Practices Act.
    • United States
    • Florida Bar Journal Vol. 73 No. 5, May 1999
    • May 1, 1999
    ...[30] In Horizon Corporation, 97 F.T.C. 464, 848 (1981), and Amrep Corporation, 102 F.T.C. 1362,1668 (1983), aff'd, Amrep Corp. v. FTC, 768 F.2d 1171 (10th Cir. 1985), the FTC held unfair, in applying the three-part test, land sale contract forfeiture clauses allowing the sellers to retain, ......
  • Credit repair organizations after regulation: wolves in nonprofits' clothing?
    • United States
    • Florida Bar Journal Vol. 77 No. 7, July - July 2003
    • July 1, 2003
    ...Administrative and decisional precedent shows a recession from the standard of"tendency or capacity" to mislead. See Amrep Corp. v. FTC, 768 F. 2d 1171, 1179 (10th Cir. 1985); United Companies Lending Corp. v. Sargeant, 20 F. Supp.2d 192 (D. Mass. 1998). See also FTC v. Sperry & Hutchin......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT