Atlantic Richfield Co. v. F.T.C., 75-2802

Citation546 F.2d 646
Decision Date04 February 1977
Docket NumberNo. 75-2802,75-2802
Parties1977-1 Trade Cases 61,269 ATLANTIC RICHFIELD COMPANY, Plaintiff-Appellant, v. FEDERAL TRADE COMMISSION, et al., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Michael R. Waller, Houston, Tex., Henry B. Weaver, Robert E. Jordan, III, Robert M. Goolrick, Steven H. Brose, Washington, D.C., Donald A. Bright, Edward E. Vaill, Los Angeles, Cal., James R. Coffee, Dallas, Tex., for plaintiff-appellant.

Robert E. Duncan, Robert J. Lewis, Gerald Harwood, W. Baldwin Ogden, Washington, D.C., for F.T.C.

Robert M. Craft, Houston, Tex., for Continental Oil.

Cloy D. Monzingo, Jack L. Brandon, Houston, Tex., for Getty Oil.

Russel H. Smith, Tulsa, Okl., for Cities Service.

Appeal from the United States District Court for the Southern District of Texas.

Before THORNBERRY, COLEMAN and MORGAN, Circuit Judges.

THORNBERRY, Circuit Judge:

Atlantic Richfield Company filed suit in federal district court seeking declaratory and injunctive relief against the enforcement of investigatory subpoenas duces tecum issued by the Federal Trade Commission to Atlantic and three other oil-company members of a joint venture engaged in offshore oil production. The district court denied Atlantic all relief. Atlantic Richfield Company v. F.T.C., 398 F.Supp. 1 (S.D.Tex.1975). For somewhat different reasons than adduced by the court below, we find that its decision was correct.

As part of a general investigation into the energy industry, the FTC issued the challenged subpoenas seeking the production of certain documents from the participants in the joint venture known as CAGC and comprised of Continental Oil Company, Atlantic, Getty Oil Company, and Cities Service Company. All four companies sought to quash the subpoenas before the Commission on the grounds that they were overly broad and irrelevant to the investigation and that the Commission's procedural rules for considering motions to quash were improper. Atlantic urged the additional ground that the documents sought might improperly be used in an FTC antitrust adjudicative proceeding already pending against Atlantic and seven other large oil companies accused of monopolizing the crude-oil refining business. In the Matter of Exxon Corporation, et al., FTC Docket No. 8934. None of the other members of CAGC were respondents in the adjudicative proceeding. The Commission denied all motions to quash.

Thereupon Atlantic filed this action, naming the FTC and the other CAGC members as defendants, seeking a declaration that the investigative subpoenas served upon Atlantic and its joint venturers were invalid and unenforceable. Atlantic also asked the court to enjoin the FTC from enforcing the subpoenas and the oil-company defendants from voluntarily complying with them. Alternatively, Atlantic sought a declaration and injunction prohibiting the FTC adjudicative staff in the Exxon proceeding from having access to any documents or information produced in compliance with the investigatory subpoenas.

The substantive basis of Atlantic's challenge to the subpoenas was that any disclosure of the subpoenaed material to the FTC complaint staff in the Exxon proceeding would infringe upon Atlantic's procedural rights to a fair hearing in the pending adjudicative action in violation of the due process clause of the Constitution, the Administrative Procedure Act, and the FTC's Rules of Practice and Procedure. 1

Because the oil-company defendants had agreed with Atlantic that they would not voluntarily produce any subpoenaed materials, the district court dismissed them for lack of sufficient adverseness and a justiciable controversy between them and Atlantic. Acknowledging the limited propriety of pre-enforcement judicial review of agency action, the court looked to the standards established in Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); Toilet Goods Association v. Gardner, 387 U.S. 158, 87 S.Ct. 1520, 18 L.Ed.2d 697 (1967); and Gardner v. Toilet Goods Association, 387 U.S. 167, 87 S.Ct. 1526, 18 L.Ed.2d 704 (1967), and concluded, "out of an abundance of caution, that a limited portion of the instant case is arguably ripe for consideration at this time" and that "there is arguably a hardship on plaintiff if plaintiff ultimately refuses to comply with the subpoena request." 398 F.Supp. at 14 (emphasis added). The court then considered the limited, "arguably ripe" question of whether an agency violates the due process and regulatory procedural rights of an adjudicative respondent by issuing to it, or to any entity with information about its operations, a subpoena duces tecum for information pertinent to the already pending adjudicative proceeding. On the merits of this narrow issue the district court found that Atlantic was entitled to neither injunctive nor declaratory relief. 2

We find it unnecessary to consider the merits of Atlantic's due process and other procedural claims and hold that denial of all injunctive and declaratory relief is proper because Atlantic has an adequate remedy at law and will suffer no undue hardship from our withholding judicial consideration at this juncture in the FTC's proceedings. For our holding we rely primarily on the cases of Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964), and the Abbott Laboratories trilogy, supra.

In Reisman, the Internal Revenue Service had issued an administrative summons to the accounting firm of Peat, Marwick, Mitchell & Co. seeking production of the financial records of taxpayers Martin and Allyn Bromley. The taxpayers' attorneys, who had supplied the records to the accounting firm, filed suit for declaratory and injunctive relief against IRS and the accountants, opposing production of the documents on the grounds that they constituted the attorneys' work product and that their production would amount to an illegal seizure or forcing the Bromleys to incriminate themselves. The Supreme Court held that the attorneys' complaint should be dismissed for want of equity because they had an adequate remedy at law through challenges to the summons in any proceeding instituted for its enforcement.

The Court noted that an IRS summons is not self-executing; the Service has no power to compel compliance or to impose sanctions for noncompliance. To enforce its summons the IRS must proceed under section 7402(b) of the Internal Revenue Code and seek enforcement from a district court. Because the summoned party and other interested parties through intervention could raise any constitutional or other objections to the summons in the enforcement proceeding, the Court found pre-enforcement injunctive or declaratory relief unwarranted, explaining in detail the adequacy of the legal remedy:

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 a district judge subjects the witness to contempt proceedings.

Furthermore, we hold that in any of these procedures before either the district judge or the United States Commissioner, the witness may challenge the summons on any appropriate ground. This would include . . . the defenses that the material is sought for the improper purpose of obtaining evidence for use in a criminal prosecution. . . . In addition, third parties might intervene to protect their interests, or in the event the taxpayer is not a party to the summons before the hearing officers, he, too, may intervene.

Nor would there be a difference should the witness indicate as had Peat, Marwick, Mitchell & Co. that he would voluntarily turn the papers over to the Commissioner. If this be true, either the taxpayer or any affected party might restrain compliance, as the Commissioner suggests, until compliance is ordered by a court of competent jurisdiction. This relief was not sought here. Had it been, the Commissioner would have had to proceed for compliance, in which event the petitioners or the Bromleys might have intervened and asserted their claims.

Finding that the remedy specified by Congress works no injustice and suffers no constitutional invalidity, we remit the parties to the comprehensive procedure of the Code, which provides full opportunity for judicial review before any coercive sanctions may be imposed.

375 U.S. at 446, 449-50, 84 S.Ct. at 512, 513-14.

The similarity of the facts and relief sought in Reisman and in the instant case as well as the similarity between IRS and FTC subpoena and enforcement procedures convinces us that the holding and reasoning of Reisman control our conclusion here that pre-enforcement relief from the subpoenas issued to Atlantic and the other CAGC members is inappropriate. The legal remedies outlined in Reisman seem entirely adequate to protect Atlantic from the anticipated harm. Like the IRS summons considered in Reisman, FTC subpoenas are not self-executing and may only be enforced by a district court. 3 Atlantic may raise all its due process and regulatory procedural objections in any enforcement proceeding brought against it. Additionally, it may intervene and raise objections as a party "affected by a disclosure," Reisman, 375 U.S. at 445, 84 S.Ct. 508, in subpoena enforcement proceedings against the other CAGC participants. Because its joint venturers had agreed with Atlantic not to comply voluntarily with the subpoenas, Atlantic did not need to seek judicial restraint of their compliance pending enforcement; and Atlantic thus suffered no hardship from the district court's dismissal of the oil-company defendants for lack of adverseness.

We thus conclude that Atlantic had an adequate remedy at law through FTC enforcement actions and suffered no undue hardship in being remitted to that remedy by the district court's...

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