AO Smith Corporation v. FTC

• Decision Date: 19 February 1975
• Docket Number: Civ. A. No. 75-15.
• Citation: 396 F. Supp. 1108
• Parties: A. O. SMITH CORPORATION et al., Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.
• Court: U.S. District Court — District of Delaware

396 F. Supp. 1108

A. O. SMITH CORPORATION et al., Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.

Civ. A. No. 75-15.

United States District Court, D. Delaware.

February 19, 1975.

COPYRIGHT MATERIAL OMITTED

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.

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.

OPINION

MURRAY M. SCHWARTZ, District Judge.

This case arises from a complaint filed by A. O. Smith Corporation ("Smith") and six other corporations seeking a declaratory judgment and preliminary and permanent injunctive relief against the Federal Trade Commission ("Commission" or "FTC"), its chairman and each commissioner separately, and the Comptroller General of the United States. This suit is, in effect, a request for pre-enforcement judicial review of an order by the Commission requiring the plaintiffs, along with 338 other large corporations engaged in manufacturing in the United States, to file with the Commission annual line-of-business reports ("LB Reports").¹ The grounds for relief asserted in the complaint are, inter alia, lack of statutory authority to issue the order, failure to follow the rule-making procedure prescribed by the Administrative Procedure Act ("APA"), undue burden required to prepare the report, and various constitutional grounds.

Defendants responded by filing a motion to dismiss for lack of jurisdiction.² Defendants' motion was joined for hearing with plaintiffs' motion for preliminary injunction. This opinion contains the Court's decision on defendants' motion and constitutes its findings of fact and conclusions of law as to plaintiffs' motion for preliminary injunction.

I. BACKGROUND

Pleadings, affidavits, and briefs establish the following undisputed facts.

During the period from August 1973 to August 1974 the Federal Trade Commission was evolving a plan which eventually became the current Line-of-Business Program ("LB Program"). On August 3, 1973 an early proposal for annual line-of-business reports was submitted to the Office of Management and Budget ("OMB") for approval as then required under the Federal Reports Act, 44 U.S.C.A. § 3501 et. seq. (1969).³ Some oral comments apparently were received by OMB on the proposal, but no statement of approval was forthcoming from OMB, as then required by law, 44 U.S.C.A. § 3509(2) (1969), before Congress amended the Federal Reports Act on November 16, 1973 by enactment of Section 409 of the Trans-Alaska Pipeline Authorization Act, P.L. 93-153, 44 U.S. C.A. §§ 3502, 3512 (1975 Supp.).

In March 1974 the Commission forwarded for approval a revised LB Report form to the Comptroller General of the United States, who assumed certain responsibilities previously held by OMB. During April and May of 1974 the Comptroller General received oral and written comments on the program. On May 13, 1974 the Acting Comptroller General formally approved with certain "provisions" the LB Report form which had been submitted to that office for review.

Meanwhile, the Business Roundtable ("Roundtable"), an unincorporated association of which most plaintiffs are members, through its attorneys, requested the Commission to hold hearings on its various proposed annual LB Reports by letters dated November 13, 1973, January 29, 1974 and March 21, 1974. The last letter also mentioned the necessity of the Commission complying with the APA. By letter dated April 4, 1974 the Commission denied these requests.

In May 1974 the Roundtable made a letter request that the Commission "fully comply" with the requirements of Section 409 of P.L. 93-153 by engaging in "meaningful exchange between the Commission and business representatives to `advance the ease and accuracy of line-of-business reporting'" as expressed in a provision of the Acting Comptroller General's letter to the Commission and by exploring coordinating or consolidating the Commission's line-of-business data needs with data collected by other Federal agencies. The same letter again drew attention to the necessity for compliance with the APA. The Commission denied all requests and asserted the APA was inapplicable by letter dated June 11, 1974.

On June 14, 1974 a meeting was held between top financial executives from several domestic corporations assembled by the Roundtable and the Commission's Bureau of Economics staff. Views were exchanged but apparently not to the satisfaction of the Roundtable, which next requested by letter dated the same day that proposals raised by corporate representatives at the meeting be presented directly to the Commission at a special meeting. This last letter was never acknowledged, nor was such a meeting ever held.

On August 2, 1974 the Commission issued a "Resolution Requiring Annual Line of Business Reports from Corporations," which appeared on August 22 in the Federal Register. By this act the Commission resolved to adopt the LB Program requiring annual LB Reports to include detailed information as to each corporation's affiliations and a breakdown of costs, profits, assets, and other expenditures according to line-of-business categories established by the Commission. Also on August 2, 1974 the Commission issued an identical "Order to File Special Report" ("Order") to 345 of the nation's largest manufacturing companies, requiring them to complete and file annual LB Reports. The initial report limited the data required as to each firm's fiscal year ending between July 1, 1973 and June 30, 1974. Subsequent reports were to include all the data indicated as required by the form itself although at oral argument the FTC indicated the LB Report form might be modified in the future. This Order and the accompanying form were served upon the instant plaintiffs on varying dates between August 13, 1974 and August 23, 1974. Filing with the Commission was required within 150 days of receipt of the Order or within 150 days of the end of the fiscal year, whichever was later. The Order ended with this warning: "You are advised that penalties may be imposed under applicable provisions of Federal law for failure to file this report or for the filing of a false report."

Pursuant to the Commission's Procedures and Rules of Practice, each plaintiff seasonably moved to quash the aforementioned orders in August and September 1974. On September 24, 1974 the Commission denied the motions of four of the plaintiffs, subject to a limited right to renew such motions "solely on the issues of undue burden and lack of confidentiality." In its denial the Commission stated neither the original motion to quash nor filing of a renewal motion would toll the 150 day period directed by the Commission. This right to renew or amend was also made available to those whose original motions had not yet been acted upon by the Commission. Five of the seven plaintiffs did timely renew or amend their motions to quash, the last having been filed on October 29, 1974. The Commission not having disposed of plaintiffs' outstanding motions by December 27, 1974, and the 150 day period having nearly drawn to a close, counsel for plaintiffs wrote to the Commission pointing out its inaction was effectively becoming a denial on the merits in a manner violative of due process. On the same date, the Commission denied the three remaining plaintiffs' motions to quash; on January 7, 1975 the Commission denied all renewed or amended motions filed by plaintiffs.

Because the Commission's staff required considerable time to respond to all of these motions, the Director of the Commission's Bureau of Economics granted a thirty day extension of time to file the LB Report to all plaintiffs. The new deadline for filing was February 10, 1975 as to one plaintiff, February 17 as to five plaintiffs, and February 19 as to one plaintiff. Argument was had on plaintiffs' and defendants' motions on February 5, 1975. By letter to the Court dated February 7, 1975 the Commission advised that no injunctive enforcement action would be sought against any plaintiff until after February 19, 1975, and no notice of default would be served upon any plaintiff until this Court had issued its opinion on the pending motions.⁴ Disposition of the motions requires a discussion of jurisdiction, ripeness, and the merits. With regard to the latter, all expressions are in the procedural context of an application for preliminary injunction.

II. JURISDICTION

But for the ripeness question raised by the seeking of pre-enforcement review of Federal agency action, this Court has non-discretionary jurisdiction to entertain plaintiffs' complaint. Because this case arises under the Federal Trade Commission Act, September 26, 1914, 38 Stat. 717, as amended, 15 U.S. C.A. § 41 et seq., and the requisite amount appears to be in controversy as to each plaintiff, this Court has Federal Question jurisdiction under 28 U.S.C.A. § 1331.⁵ Alternatively, jurisdiction under 28 U.S.C.A. § 1337⁶ is obvious because the Federal Trade Commission Act falls clearly within the ambit of that statute. Because jurisdiction is so easily found, other bases of jurisdiction urged by plaintiffs as conferring jurisdiction will not be considered.

Because plaintiffs urge this Court to review action of a federal agency, reference must be made to the APA to ascertain whether it contains any provision which would deprive the Court of jurisdiction. Plaintiffs urge they are aggrieved by final agency action and are entitled to judicial review thereof under Section 10 of the Administrative Procedure Act, 5 U.S.C.A. §§ 702, 704. In support, t...