AO SMITH CORPORATION v. FTC, Civ. A. No. 75-15
| Decision Date | 18 March 1975 |
| Docket Number | Civ. A. No. 75-15,75-45 to 75-50 and 75-56. |
| Citation | 396 F. Supp. 1125 |
| Court | U.S. District Court — District of Delaware |
| Parties | A. O. SMITH CORPORATION et al., Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants. INLAND STEEL COMPANY, Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. NORTHWEST INDUSTRIES, INC., Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. OSCAR MAYER & CO., INC., Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. MERCK & CO., INC., Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. HOBART CORPORATION, Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. The GOODYEAR TIRE & RUBBER COMPANY, Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. THOMAS J. LIPTON, INC., Plaintiff, v. FEDERAL TRADE COMMISSION et al., Defendants. |
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Richard F. Corroon, Charles F. Crompton, Jr., Potter, Anderson & Corroon, Wilmington, Del., Gilbert J. Helwig, Edward T. Tait, Lee A. Rau, John M. Wood, Reed, Smith, Shaw & McClay, Washington, D. C., for plaintiffs A. O. Smith, and others.
Paul P. Welsh, Robert F. Stewart, Jr., Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for all plaintiffs except A. O. Smith Corporation, and others; Frank P. Cihlar, Charles W. Petty, Mayer, Brown & Platt, Washington, D. C., of counsel, for plaintiffs Inland Steel Co., Northwest Industries, Inc. and Oscar Mayer & Co., Inc.; Philip A. Lacovara, Howell Begle, Hughes, Hubbard & Reed, Washington, D. C., of counsel, for plaintiff Merck & Co., Inc.; John F. McClatchey, Leslie W. Jacobs, Thompson, Hine & Flory, Cleveland, Ohio, of counsel, for plaintiffs Hobart Corp. and The Goodyear Tire & Rubber Co.; David W. St. Clair, Charles H. McAuliffe, Englewood Cliffs, N. J., of counsel, for plaintiff Thomas J. Lipton, Inc.
Ralph Keil, U. S. Atty., Wilmington, Del., Calvin J. Collier, Gerald Harwood, James P. Timony, William A. Cerillo, Warren S. Grimes, Bruce E. Freedman, Federal Trade Commission, Washington, D. C., for defendant Federal Trade Commission.
Ralph Keil, U. S. Atty., Wilmington, Del., for defendant General Accounting Office.
On February 19, 1975 this Court issued its opinion in A. O. Smith Corporation, et al. v. Federal Trade Commission, et al., Civil Action No. 75-15, wherein it denied defendants' motion to dismiss for lack of jurisdiction and granted plaintiffs' motion for preliminary injunction. That case involves a suit by seven corporations seeking declaratory and injunctive relief against the Federal Trade Commission ("Commission" or "FTC"), its chairman and each commissioner separately, and the Comptroller General of the United States. The suit challenges the validity of an order promulgated by the Commission requiring the plaintiffs there, along with 338 other large corporations, to file annual line-of-business reports ("LB Reports").
Thereafter, an additional seven separate but nearly identical actions were filed by seven other corporations.1
This opinion treats two motions arising from the preliminary injunction previously issued in A. O. Smith Corporation, et al. v. Federal Trade Commission, et al.2 ("Smith" or "A. O. Smith"), plaintiffs'3 motions for preliminary injunction in seven unconsolidated civil actions all seeking relief identical to that granted in A. O. Smith, and the motion of defendant, Federal Trade Commission, to dismiss, or in the alternative, to transfer the seven actions to the Southern District of New York.
The varied motions4 will be considered separately.
Defendants have filed motions to dismiss the seven separate but nearly identical actions brought by seven additional corporations against the same defendants as in the A. O. Smith case.
These seven plaintiffs are among the 345 corporations subject to the Commission's Line-of-Business order. Most of the background facts pertinent to these actions are identical to those cited in the A. O. Smith opinion D.C., 396 F.Supp. 1108 at pp. 1111-1112. In addition, nearly all of the record in that proceeding has been introduced into the record of each of these cases. There are, however, some differences in the facts incident to these plaintiffs which, according to the FTC, require a different outcome than that reached in the A. O. Smith opinion.
In A. O. Smith, no Commission enforcement proceeding, per 15 U.S.C. § 49, as amended, had been applied for prior to the time suit was filed in this Court. As to the seven new plaintiffs the following facts apply. On February 11, 1975, a district judge of the Southern District of New York signed a show cause order directed to Thomas J. Lipton, Inc. ("Lipton"), among others, concerning compliance with the Commission's order. By its own terms this show cause order was to be served upon Lipton by February 21, 1975.5 This order, docketed on February 21, 1975,6 was not served upon Lipton by February 21 and had not been served by February 26, 1975.7 Lipton filed suit in this district on February 24, 1975.
Six of the seven actions herein involved (Civil Action Nos. 75-45 to 75-50) were filed with this Court on February 14, 1975. On February 20, 1975, Judge Weinfeld issued another order to show cause, at the request of the Commission, to 95 additional companies then due to file reports. By its terms service was to be made by March 4, 1975. This latter order was directed to the other six plaintiffs in these actions. It was filed with the Docket Clerk of the Southern District of New York Court on March 7, 1975.8 Service had not been perfected as to any of these six plaintiffs by February 26, 1975.
On February 26, 1975 this Court issued a temporary restraining order preventing the Commission from taking any further action toward enforcement of its order, including any service of show cause orders, with respect to the seven plaintiffs involved in these actions. A hearing was held on March 13 on plaintiffs' motion for preliminary injunction. The timing of the issuance of this opinion is controlled by the expiration of the Temporary Restraining Order on March 18, 1975, the parties having been unable to agree to an extension. As a result, the Court has had no opportunity to review a forthcoming transcript of the March 13 hearing.
Following the order in which the issues were treated in the A. O. Smith opinion, the first challenge posed by the defendants to the conclusions reached therein goes to the absence of hardship to these plaintiffs, hence, the lack of ripeness, as that concept is discussed in the Abbott Labs trilogy.9
First, defendants need not worry that this Court finds hardship here based upon grounds which it could not accept in A. O. Smith. Specifically, the risk that data obtained through the LB Program will mislead the public and thereby redound to the detriment of complying corporations is a factor too speculative to be considered here.10
Defendants in their brief next examine the hardship of noncompliance and reassert that as to any enforcement proceeding brought by the Commission all claims and defenses asserted in this preenforcement action could be asserted in an enforcement action. Assuming the truth of this argument and ignoring the possible unavailability of discovery so as to effectively prevent the assertion of defenses (see infra p. 1134), the Court deems it irrelevant to a discussion of hardship for purposes of establishing ripeness. Similarly irrelevant is the fact that, upon receiving a notice of default, plaintiffs could seek a stay of the accrual of penalties.
In measuring ripeness, the Supreme Court in the Abbott Labs trilogy said that for pre-enforcement jurisdiction purposes, a Court must evaluate the hardship of compliance and the hardship of non-compliance. If either is minimal at the time of adjudication, the matter will be held not ripe.11
The hardship of non-compliance is the risk of criminal and civil sanctions, not the chance that no sanctions will be invoked, that controls. For this reason, the issue of plaintiff's ability to fully assert all his defenses in an enforcement proceeding or the likelihood that plaintiff would prevail on the merits are unimportant considerations in determining ripeness. Thus, defendants' reference to cases such as Reisman v. Caplin12 and Federal Trade Commission v. Claire Furnace Co.13 completely misconstrues the important distinction between testing hardship for purposes of ripeness and testing the adequacy of some other remedy for purposes of exercising vel non a court's discretionary equitable jurisdiction.14
Defendants next promote the argument that plaintiff's burden of compliance will be the same and no greater if and when an enforcement proceeding determines they must submit the LB Report, as it would be if compliance were engaged in voluntarily at this time. The answers to this argument are twofold: (1) In determining ripeness for pre-enforcement purposes, the operative considerations are cost of compliance vis-a-vis cost of non-compliance at the time of the ripeness determination. Comparing costs of compliance in terms of pre-and post-enforcement time frames is irrelevant; (2) if defendants' argument were accepted, pre-enforcement relief would nearly always be denied, and the Court would be forced to conclude that the Abbott Laboratories case was wrongly decided.
Some of these plaintiffs have apparently made progress toward completion of a rough first draft of an LB Report to the Commission.15 However, this Court finds that the burdens of compliance yet remaining as to each plaintiff is sufficiently heavy to satisfy ripeness requirements.
All prior discussion in this section assumes the propriety of applying the tests set forth in the Abbott Labs trilogy, a position which defendants supported in A. O. Smith.16 Defendants in this action, however, urge this Court to...
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