U.S. v. Louisiana-Pacific Corp., LOUISIANA-PACIFIC
| Decision Date | 24 June 1992 |
| Docket Number | LOUISIANA-PACIFIC,No. 90-35733,90-35733 |
| Citation | 967 F.2d 1372 |
| Parties | 1992-1 Trade Cases P 69,880 UNITED STATES of America, Plaintiff-Appellee, v.CORPORATION, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Clifford N. Carlsen, Jr., Miller, Nash, Wiener, Hager & Carlsen, Portland, Or., for defendant-appellant.
Thomas M. Bondy, U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellee.
Appeal from the United States District Court for the District of Oregon.
Before: TANG, O'SCANNLAIN, and RYMER, Circuit Judges.
Louisiana-Pacific Corporation ("LP" or "Company") appeals the decision of the district court imposing four million dollars in civil penalties for LP's delay in divesting certain assets pursuant to a consent order. LP also appeals the district court's decision sustaining the Federal Trade Commission's ("FTC" or "Commission") refusal to amend the consent order directing divestiture. We affirm.
In February 1978, LP acquired Fibreboard Corporation. Among Fibreboard's assets was a plant in Rocklin, California, that manufactured medium density fiberboard. After the FTC expressed concerns about the merger's potentially anticompetitive effect, LP and FTC agreed on a consent order requiring divestiture of the Rocklin plant within two years of the date the order became final. The order contained no provision concerning the price to which LP was entitled in selling the plant. On March 28, 1979, the consent order became final. LP therefore had until March 28, 1981, to divest the Rocklin plant.
In February 1980, about halfway through the two-year divestiture period, LP filed with the FTC a petition to reopen the consent order pursuant to section 5(b) of the Federal Trade Commission Act, 15 U.S.C. § 45(b). The Commission denied the petition in June 1980. In February 1981, LP requested an extension of eighteen months within which to divest the Rocklin plant. The FTC denied that request on March 27, 1981. The following day, the two-year divestiture period expired without LP selling the Rocklin plant. In June 1981, LP filed with the FTC a second petition requesting that the consent order be reopened. The Commission denied this petition a month later.
In September 1981, the United States on behalf of the FTC brought the present action for civil penalties pursuant to 15 U.S.C. § 45(l ) and for appointment of a trustee to oversee the divestiture of the Rocklin plant. Section 45(l ) provides for a $10,000 civil penalty for the offense of violating a final order of the FTC. According to the statute, "each day of continuance of [failure to obey or neglect to obey a final order of the Commission] shall be deemed a separate offense." The district court approved a sale of the plant on December 13, 1983, thus concluding the period in which civil penalties accrued. By this time, the total possible amount of penalties exceeded nine million dollars (i.e., roughly two and a half years multiplied by $10,000 per day).
In response to the government's complaint seeking civil penalties, LP filed a counterclaim alleging that the FTC violated the reopening statute and the Administrative Procedure Act ("APA"). LP sought dismissal of the action and an order compelling the FTC to reopen the consent order. In the first round of decisions below, the district court granted the government's summary judgment motion on LP's APA counterclaim and assessed civil penalties amounting to four million dollars against LP. The Company appealed.
We reversed summary judgment on LP's counterclaim, and vacated the civil penalties, holding:
The legislative history of the [Federal Trade Commission] Act shows an intent to curtail the FTC's discretion. If the FTC is allowed to reject a petition to reopen, other than one that is meritless on its face, without making findings and without offering a clear statement of its 754 F.2d 1445, 1449 (9th Cir.1985) (quoting 5 U.S.C. § 706(2)(A)). We instructed the district court "to enter an order compelling the FTC to enter specific findings with regard to [LP's] petitions." Id. at 1450.
reasons for rejecting the petition, the intent of Congress would be defeated. Accordingly, we find that a summary rejection of a petition to reopen is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."
Pursuant to our mandate, the district court remanded the case to the FTC. The Commission responded with a lengthy statement of its reasons for denying LP's petitions to reopen. The district court held, however, that the FTC's response was not sufficient, stating that if a petition for reopening made a "satisfactory showing" then the Ninth Circuit decision required the FTC to reopen the order to consider whether it should be modified, altered, or set aside. 654 F.Supp. 962, 965 (D.Or.1987). Because LP stated the changed conditions with particularity, the district court remanded the case again for the FTC to reopen the case and to consider modification. 1 Id. We dismissed the United States' appeal from this second remand order. 846 F.2d 43 (9th Cir.1988).
On the second remand, the Commission disagreed with the district court's decision, but purportedly accepted it. Accordingly, the Commission instituted an adjudicative proceeding, received the parties' briefs, and heard oral argument. In a twenty-eight page opinion, the Commission denied the request to modify. The FTC concluded an evidentiary hearing was unnecessary because the Commission accepted as true all of LP's factual allegations.
The district court found that the FTC's opinion denying modification was manifestly not "arbitrary and capricious," that no rule of procedure applicable to the FTC required an evidentiary hearing on reopening, and that acceptance of LP's allegations as true did not necessitate modification. The district court granted summary judgment to the government on LP's APA counterclaim.
The district court also reconsidered its original decision imposing four million dollars in penalties. In doing so, the district court followed our previous instruction to "consider the conduct of [LP] and the FTC as reflected in the existing record [and to] consider any other relevant evidence or arguments." 754 F.2d at 1450 (footnote omitted). The district court determined that the FTC acted in good faith when it committed the error identified in our 1985 decision (i.e., summarily denying a non-frivolous petition to reopen). Thus, the court below held that the FTC's conduct--which had not been considered previously--did not merit a change in the penalties as originally assessed. Cf. 754 F.2d at 1450 n. 6 (). The court also found that LP was not prejudiced by the FTC's deficient responses to the petitions to reopen, in part because "LP's failure to make a good-faith effort to sell the plant, not the pendency of motions to reopen, caused the vast majority of the delay" in divesting the Rocklin plant. In light of these additional considerations, the district court found no reason not to abide by its earlier penalty determination and reimposed penalties in the amount of four million dollars.
LP has timely appealed from this latest set of decisions. 2
LP challenges three aspects of the FTC's failure to reopen. LP first contends that as a matter of statutory construction, if an order is reopened, and if the allegations of the petition to reopen are taken as true, then the Commission is required to alter, modify, or set aside the order. Second, LP argues that the FTC abused its discretion in failing to take evidence. Third, LP asserts that, if the facts alleged in its petitions to reopen are taken as true, then it was arbitrary and capricious for the Commission not to modify the consent order.
We review de novo the district court's grant of summary judgment in favor of the government on LP's counterclaim under the APA. See Sierra Pac. Indus. v. Lyng, 866 F.2d 1099, 1105 (9th Cir.1989). Statutory construction is also reviewed de novo. United States v. Louisiana-Pacific Corp., 754 F.2d 1445, 1447 (9th Cir.1985). While great deference must be given to the interpretation rendered by the agency charged with a statute's administration, we must "reject administrative constructions of a statute that are inconsistent with the statutory mandate or that frustrate the policy that Congress sought to implement." Id.
Regarding the FTC's compliance with the APA:
The APA provides that final agency action shall be held unlawful and set aside if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," or if it was taken "without observance of procedure required by law."
Review under the "arbitrary and capricious" standard is narrow, and a court may not substitute its judgment for that of the agency. Nonetheless, the agency must articulate a satisfactory explanation for its action, including a "rational connection between the facts found and the choice made." In reviewing that explanation, a court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment."
Sierra Pacific, 866 F.2d at 1105 (citations omitted).
LP contends that the statute providing for reopening of FTC orders requires that, if the allegations in a petition for reopening are sufficient to require reopening, and if the FTC takes the facts alleged to be true, then the FTC must alter, modify, or set aside the order in the manner requested. 3 We disagree.
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