AO Smith v. FTC

Decision Date30 April 1976
Docket NumberCiv. A. No. 75-15,75-45 to 75-50,76-36,75-415,76-17 to 76-26,76-39,76-56 and 76-60.,75-56,75-412
Citation417 F. Supp. 1068
CourtU.S. District Court — District of Delaware
PartiesA. O. SMITH et al., Plaintiffs, v. FEDERAL TRADE COMMISSION et al., Defendants.




Richard F. Corroon, of Potter, Anderson & Corroon, Wilmington, Del., Edward T. Tait, Lee A. Rau, John M. Wood, Stuart M. Gerson, and Thomas H. Reilly, of Reed, Smith, Shaw & McClay, Washington, D.C., for plaintiffs and intervenor plaintiffs A. O. Smith Corp., et al. and Bemis Co., Inc., et al. in No. 75-15, and for American Air Filter Co., Inc., et al. and Bemis Co., Inc., et al. in No. 75-412.

William Simon, David C. Murchison, Harold F. Baker, J. Wallace Adair, John DeQ. Briggs, and Stuart H. Harris, of Howrey & Simon, Washington, D.C., for intervenor plaintiffs American Cyanamid Co., et al. in No. 75-412.

Donald J. Mulvihill, and Gerald J. Brown, of Cahill, Gordon & Reindel, Washington, D.C., for intervenor plaintiffs The Great Atlantic & Pacific Tea Co., Inc., in No. 75-15 and for Hoover Ball and Bearing Co. in No. 75-412.

Michael K. Wyatt, of Steptoe & Johnson, Washington, D.C., for intervenor plaintiff Atlantic Richfield Co. in No. 75-412.

Paul P. Welsh, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiffs and intervenor plaintiffs Air Products & Chemicals, Inc., Allen-Bradley Co., Atlantic Richfield Co., Cargil, Inc., The Goodyear Tire & Rubber Co., C.I.T. Financial Corp., CPC International Inc., Hart Schaffner & Marx, Hobart Corp., Inland Steel Co., Thomas J. Lipton, Inc., Northwest Industries, Inc., Oscar Mayer & Co., Inc., Ross Industries, Inc., Square D Co., Sunstrand Corp., United States Gypsum Co., and Van Dorn Co.

Basil J. Mezines, of Stein, Mitchell & Mezines, Washington, D.C., for plaintiff C.I.T. Financial Corp.

Philip A. Lacovara, and Gerald Goldman, of Hughes, Hubbard & Reed, Washington, D.C., for plaintiffs Allen-Bradley Co. and Merck & Co., Inc.

Frank P. Cihlar, and James R. Henderson, of Mayer, Brown & Platt, Washington, D.C., for plaintiffs CPC International Inc., Cargill, Inc., Hart Schaffner & Marx, Inland Steel Co., Northwest Industries, Inc., Oscar Mayer & Co., Inc., Ross Industries, Inc. and Sunstrand Corp.

James F. Rill, and Kathleen E. McDermott, of Collier, Shannon, Rill & Edwards, Washington, D.C., for intervenor plaintiff Carpenter Technology Corp. in No. 75-412.

John F. McClatchey, and Leslie W. Jacobs, of Thompson, Hine & Flory, Cleveland, Ohio, for plaintiffs The Goodyear Tire & Rubber Company, Hobart Corporation, and Van Dorn Company.

John F. Graybeal, and Robert C. Houser, Jr., of Foley, Lardner, Hollabaugh & Jacobs, Washington, D.C., for plaintiff Square D Co.

James F. Bromley, of Macleay, Lynch, Bernhard & Gregg, Washington, D.C., for plaintiff United States Gypsum Co.

Edmund N. Carpenter, II, of Richards, Layton & Finger, Wilmington, Del., for plaintiffs and intervenor plaintiffs American Cyanamid Company, et al., The Great Atlantic & Pacific Tea Co., Inc., Carpenter Technology Corp., and Hoover Ball and Bearing Co.

Robert J. Lewis, Gen. Counsel, Gerald P. Norton, Deputy Gen. Counsel, Gerald Harwood, Asst. Gen. Counsel, James P. Timony, and William A. Cerillo, Dept. of Justice, Washington, D.C., for defendant Federal Trade Commission.

W. Laird Stabler, Jr., U.S. Atty., Dept. of Justice, Wilmington, Del., Rex E. Lee, Asst. Atty. Gen., Jack E. Thornton, Jr., and Harland F. Leathers, Dept. of Justice, Washington, D.C., for Gen. Accounting Office.


MURRAY M. SCHWARTZ, District Judge.

I. Introduction

Presently before the Court is a series of motions in a complex administrative law case1 involving pre-enforcement challenges to two Federal Trade Commission ("FTC" or "Commission") programs, the Line of Business Program ("LB Program") and Corporate Pattern Reports ("CPR"). At issue are plaintiffs'2 motions for a preliminary injunction and summary judgment,3 the Commission's cross-motion for summary judgment,4 its motion to dismiss, stay or transfer and plaintiffs' motion to stay consideration of the Commission's motion to dismiss, stay or transfer. For reasons developed below the Court holds that plaintiffs are not entitled to preliminary injunctive relief and grants the FTC motion to transfer the instant actions. As a result, the issues posed by the cross-motions for summary judgment, all of which sought declaratory or permanent injunctive relief, are not treated on the merits in this opinion. Prior to discussing the issues which are reached, it is appropriate to develop the factual background surrounding the two contested programs.

II. The LB Program

The general facts regarding the LB Program have been extensively developed in three prior opinions insofar as the FTC's orders to file Form LB for fiscal year 1973 were concerned. See A. O. Smith v. Federal Trade Commission ("A. O. Smith I"), 396 F.Supp. 1108 (D.Del.1975); A. O. Smith v. Federal Trade Commission ("A. O. Smith II"), 396 F.Supp. 1125 (D.Del.1975); A. O. Smith v. Federal Trade Commission, 530 F.2d 515 (3d Cir. 1976). It is sufficient therefore to indicate that the LB Program was primarily designed to increase the accuracy and availability of data on industrial performance within specific lines of commercial activity.5 The program, which was developed over a four year period commencing in 1970, sought to overcome the fact that standard forms of corporate financial reporting had become increasingly less meaningful as a result of what can best be described as conglomeratization, by requiring large diversified corporations to provide, inter alia. sales and cost data with respect to specific lines of product activity.6 On March 26, 1974, the Commission approved 1973 Form LB and submitted it along with supporting statements to the Comptroller General for approval pursuant to the Federal Reports Act, 44 U.S.C. § 3512.7 Following the Comptroller General's approval of a somewhat limited version of the form,8 the Commission adopted a Resolution Requiring Annual Line of Business Reports from Corporations on August 2, 1974. This resolution, which subsequently appeared in the Federal Register, 39 Fed. Reg. 30377 (1974), led to Orders to File Form LB being served upon some 345 of the nation's largest commercial entities. Of those served, some 225 filed the required form for 19739 while the bulk of remaining recipients of the Orders chose to challenge the FTC's action in the courts.10 On April 20, 1976, the Commission directed that its 1973 LB enforcement orders be withdrawn against all companies which had not complied. As a consequence, all summary judgment motions and requests for relief to the extent directed to the 1973 LB Orders have been rendered moot. However, the controversy over the '74 LB Orders and LB Program itself remains very much alive.

The factual context surrounding the 1974 Line of Business Form is somewhat different than its predecessor. On April 16, 1975, the Commission published a notice in the Federal Register announcing the availability for public inspection and comment of a proposed 1974 Line of Business Form. 40 Fed.Reg. 17081 (1975). The notice further indicated that the Commission invited written comments on the proposed form and that it intended to hold an open hearing for the purpose of receiving oral comments on the proposed form on May 20, 1975. 40 Fed.Reg. 17081, 17348. In addition, copies of the proposed 1974 Form LB and related materials were mailed at that time to all companies which had been previously served with an order to file Form LB for fiscal year 1973.11 At the May 20, 1975, hearing on 1974 Form LB some twenty witnesses presented oral statements to the Commission including representatives of many of the plaintiffs in the instant cases.12 On July 1, 1975, the Commission approved the final version of 1974 Form LB and transmitted it, along with a supporting statement, to the General Accounting Office for review pursuant to the Federal Reports Act, 44 U.S.C. § 3512.13 On August 18, 1975, the General Accounting Office approved14 1974 Form LB for use by the Commission following its own solicitation of written comments. See 40 Fed.Reg. 28677. Immediately thereafter on August 20, 1975, the Commission authorized by resolution15 the issuance of orders to file 1974 Form LB to some 453 companies. These orders, which were served subsequent to the August 20th resolution, required that the completed forms be returned within 150 days of receipt.

Between August 25, 1975, and December 19, 1975, 178 recipients of the 1974 Form, including all the plaintiffs in the instant action, filed motions to quash. The motions were denied on December 19, 1975,16 the Commission stating its reason for so doing in a 19 page statement. The Commission at that time also withdrew the 1974 LB orders with respect to nine corporations and indicated that as to the remaining movants, the Commission would refrain from issuing notices of default or otherwise attempting to recover civil penalties from any noncomplying company unless the Commission had already instituted a proceeding seeking to enforce its 1974 LB order against such company pursuant to section 9 of the FTC Act, 15 U.S.C. § 49.17 To date some 276 companies have already filed 1974 Form LB or plan to do so shortly, while approximately 145 other companies have chosen to challenge the orders in pre-enforcement review proceedings. Of this latter group, roughly 25 percent requested pre-enforcement relief in this district while the remainder have instituted civil actions in the Southern District of New York.18

III. Corporate Patterns Survey

Commencing in mid August, 1975, the Commission served on each of the plaintiffs in this action an order requiring them to complete certain special reports ("CPR Reports") as part of its corporate pattern survey. It is these reports which have...

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