Anheuser-Busch, Incorporated v. FEDERAL TRADE COM'N

• Decision Date: 06 January 1966
• Docket Number: No. 18096.,18096.
• Parties: ANHEUSER-BUSCH, INCORPORATED, a corporation, and Paul C. Guignon, Divisional Vice-President, Anheuser-Busch, Incorporated, Appellants, v. FEDERAL TRADE COMMISSION, Paul Rand Dixon, Chairman, Philip Elman, A. Everette MacIntyre, John R. Reilly, and Mary Gardiner Jones, Commissioners, J. W. Bollinger, Alan C. Schneeberger, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

359 F.2d 487 (1966)

ANHEUSER-BUSCH, INCORPORATED, a corporation, and Paul C. Guignon, Divisional Vice-President, Anheuser-Busch, Incorporated, Appellants, v. FEDERAL TRADE COMMISSION, Paul Rand Dixon, Chairman, Philip Elman, A. Everette MacIntyre, John R. Reilly, and Mary Gardiner Jones, Commissioners, J. W. Bollinger, Alan C. Schneeberger, Appellees.

No. 18096.

United States Court of Appeals Eighth Circuit.

January 6, 1966.

Harold F. Baker, of Howrey, Simon, Baker & Murchison, Washington, D. C., Victor P. Kohl, Jr., Dwight D. Ingamells, St. Louis, Mo., for appellants.

Harvey L. Zuckman, Attorney, Department of Justice, Washington, D. C., John W. Douglas, Asst. Atty. Gen., Dept. of Justice, Alan S. Rosenthal, Attorney, Dept. of Justice, Washington, D. C., and Richard D. FitzGibbon, Jr., U. S. Atty., St. Louis, Mo., for appellees.

Before VOGEL, Chief Judge, and BLACKMUN and GIBSON, Circuit Judges.

BLACKMUN, Circuit Judge.

Anheuser-Busch, Incorporated, and Paul C. Guignon, its divisional vice-president, seek declaratory and injunctive relief against the Federal Trade Commission, its members, and two of its attorney-employees. The district court dismissed the complaint. Anheuser-Busch, Inc. v. FTC, 242 F.Supp. 122 (E.D.Mo. 1965). The plaintiffs appeal.

Anheuser-Busch manufactures yeast. It and other yeast producers are under investigation by the Commission. The inquiry is directed, among other things, to possible violations of § 2(a), (d) and (e) of the Clayton Act, as amended, 15 U.S.C. § 13(a), (d) and (e), and of § 5(a) (1) of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45(a) (1).

The Commission propounded to Anheuser-Busch a questionnaire with almost 100 questions and demands for access. The company, according to the Commission's brief, "complied generally with this request". It refused, however, to answer a question which called for data as to yeast production costs and profits for 1958 through 1963. The Commission then served Mr. Guignon with its subpoena requiring him to appear at a hearing to be conducted before a commission attorney, to bring with him specified company books and documents relating to the requested cost and profit data, and to testify. Guignon thereupon filed with the Commission a motion to quash the subpoena and for an order allowing Anheuser-Busch to file, in camera, an affidavit concerning the nature of its cost data and the adverse effect disclosure would have upon the company. This motion was denied by the Commission.

The present action was then instituted. The plaintiffs base their case on the grounds that (a) the Commission's rules for investigatory hearings (particularly the former Rule 1.40 of the Commission's Procedures and Rules of Practice, now Rule 1.36(b), 16 C.F.R. § 1.36(b)) deny Guignon the right to full representation by counsel permitted by § 6(a) of the Administrative Procedure Act, 5 U.S.C. § 1005(a); (b) compliance with the demand for cost information would seriously imperil Anheuser-Busch's competitive position because the data constitutes trade secrets; (c) cost has no relevancy with respect to any phase of the investigation; (d) if Guignon refuses to testify or produce the demanded documents, he and Anheuser-Busch will be subject to criminal prosecution under § 10 of the Federal Trade Commission Act, 15 U.S.C. § 50,¹ and under the Commission's rules (former Rule 1.39, now Rule 1.40, 16 C.F.R. § 1.40); and (e) Anheuser-Busch's reputation with its customers would be damaged. As indicated above, both declaratory and injunctive relief were requested.

The Commission filed a motion to dismiss or, in the alternative, for summary judgment. The district court's judgment of dismissal was for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted. The court, however, stayed further administrative proceedings pending final determination of this appeal.

We hold that this case is controlled by Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964); that the plaintiffs have an adequate remedy at law; and that the complaint was subject to dismissal for want of equity.

The petitioners in Reisman were attorneys for taxpayers who were under investigation by the Internal Revenue Service. The Commissioner of Internal Revenue, pursuant to § 7602 of the Internal Revenue Code of 1954, had issued summonses to accountants, whom the attorneys had employed, directing the production of working papers in the accountants' possession. Asserting that such enforced production would be an unlawful appropriation of a work product and an unreasonable seizure requiring self-incrimination and the deprival of the effective assistance of counsel, the petitioner-attorneys sought, just as in the case now before us, both declaratory and injunctive relief.

The Supreme Court noted, p. 444, 84 S. Ct. p. 511:

"The case reaches us at a stage when the only affirmative action taken by the Commissioner is the issuance of the summonses for the accountants to appear before a hearing officer, i. e., a special agent of the Internal Revenue Service, to testify and produce records."

The Court held that a witness or any interested party may attack the summons before the hearing officer. It noted that if the officer rejects the challenge to the summons, and the witness still refuses to testify or produce, the examiner has no power to enforce compliance or to impose sanctions, and that if the Secretary wishes to enforce the summons he must then proceed under § 7402(b) of the 1954 Code. That section grants the district courts jurisdiction to compel attendance, testimony or production. The Court said, p. 446, 84 S.Ct. p. 512:

"Any enforcement action under this section would be an adversary proceeding affording a judicial determination of the challenges to the summons and giving complete protection to the witness. In such a proceeding only a refusal to comply with an order of the district judge subjects the witness to contempt proceedings."

It recognized that a person who "neglects to appear or produce" may be prosecuted under § 7210 of the Code and subjected to fine and imprisonment but held that that statute does not apply "where the witness appears and interposes good faith challenges to the summons" and that it prescribes punishment only where the witness neglects either to appear or produce. Section 7604(b) was similarly construed "to cover only a default or contumacious refusal to honor a summons before a hearing officer". The Court said, p. 449, 84 S.Ct. p. 513:

"Furthermore, we hold that in any of these procedures before either the district judge or United States Commissioner, the witness may challenge the summons on any appropriate ground. * * * It follows that with a stay order a witness would suffer no injury while testing the summons."

See United States v. Powell, 379 U.S. 48, 51-52, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964), and FCC v. Schreiber, 381 U.S. 279, 296, 85 S.Ct. 1459, 14 L.Ed.2d 383 (1965).

Here, as in Reisman, the petitioners sought both declaratory and injunctive relief. Here, as there, no claim is made that the subpoena statute, 15 U.S.C. § 49, suffers any constitutional infirmity on its face. Certainly here, as there, the witness (Mr. Guignon) and the corporate plaintiff (Anheuser-Busch) may attack the summons before the hearing officer. Here again, as under the Internal Revenue Code, the...