Carter Products, Inc. v. FTC
| Citation | 268 F.2d 461 |
| Decision Date | 16 June 1959 |
| Docket Number | No. 15373.,15373. |
| Parties | CARTER PRODUCTS, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
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William L. Hanaway, Stoddard B. Colby, New York City, Herman Phleger, Alvin J. Rockwell, Brobeck, Phleger & Harrison, San Francisco, Cal., Breed, Abbott & Morgan, New York City, for appellant.
Earl W. Kintner, Gen. Counsel, James E. Corkey, Asst. Gen. Counsel, John W. Carter, Jr., Fletcher G. Cohn, Attys., Federal Trade Comm., Washington, D. C., for appellee.
Before HEALY, BONE and HAMLEY, Circuit Judges.
The instant case, which has a long history, is before us on a petition by Carter for review of and to set aside a Cease and Desist Order (hereafter "Order") of the Federal Trade Commission (hereafter "Commission") which Order was entered in 1956 at the conclusion of about 149 hearings held before a Hearing Examiner of the Commission. These hearings were held on a complaint of the Commission which charged petitioner Carter Products, Incorporated (hereafter "Carter") with engaging in unfair and deceptive acts and practices in violation of the Federal Trade Commission Act (hereafter the "Act") 15 U.S.C.A. § 41 et seq. The instant litigation was instituted by the Commission's complaint bearing date of May 28, 1943. In the earlier stages of the proceeding, the Commission dismissed its complaint (without prejudice) as to a co-defendant and the case is now before us with Carter alone seeking a review of the Order.
This litigation was previously before this court and the much narrower issues then presented were disposed of by our opinion and judgment reported in 201 F. 2d 446, Carter Products, Inc. v. Federal Trade Commission. On certiorari, the Supreme Court vacated this judgment and remanded the cause to this court with directions. 346 U.S. 327, 74 S.Ct. 2, 98 L.Ed. 4. This court thereupon entered judgment as directed by the mandate of the Supreme Court.
Pursuant to our judgment remanding the cause to the Commission for further hearings, these "further hearings" were held before the Hearing Examiner for the Commission who had presided over the first and original set of hearings. At these supplemental hearings conducted in accordance with our said remand order, Doctors Case and Bollman, two of the three expert Commission witnesses whose original cross-examination by Carter this court held had been improperly curtailed and restricted, were tendered to Carter for further cross-examination. Because of the intervening death of Dr. Lockwood (one of these three Commission witnesses in the first hearing) this witness could not be tendered for cross-examination and all of the testimony and all of the exhibits based upon, or connected with, the testimony of Dr. Lockwood in the first set of hearings were stricken by the Hearing Examiner. For this reason the Lockwood part of the record in the original hearings was not before the Commission for its consideration when it made and entered its formal Decision along with an entirely new set of Findings of Fact and the new Cease and Desist Order which is before us on this review.1
Because of the great length of the records now before us (which embrace both the original and the supplemental hearings here mentioned)2 an important aspect of this controversy should be noted. In the mandate of the Supreme Court on its remand, this court was ordered and directed "to reinstate its prior judgment and order after amending it so that it specifically authorizes the Federal Trade Commission to open this proceeding for further evidence and a new order consistent with the Court of Appeals opinion herein." (Emphasis supplied.)
In the "prior judgment and order" of this court, thus referred to, we set aside the order of the Commission, and specifically indicated therein our reasons for this action. We held that Carter had been denied a fair hearing because the Hearing Examiner had unduly and prejudicially restricted Carter's right to cross-examine the three above mentioned expert witnesses who had appeared in support of the allegations of the Commission's complaint; that the error of the examiner was his failure to permit a "broad latitude" in the cross-examination of these three witnesses.3 So that no doubt might remain concerning the exact reason for our action, we there carefully identified the particular rulings of the Hearing Examiner which we assailed and which we concluded had caused Carter to be denied a fair hearing.4
It is also our firm conclusion that if the new order of the Commission so authorized in our order of remand was to be truly "consistent with" our opinion (as directed by the Supreme Court) this new order would have to be bottomed on the evidence and testimony received in the original hearings (except where appropriately stricken as in the case of Dr. Lockwood) plus the "further evidence" adduced in the renewed and additional cross-examination of two of the Commission's above noted expert witnesses in the supplemental hearings which followed the remand. If it be the view of Carter that our order of remand required a proceeding de novo, or was properly to be construed (in light of the direction from the Supreme Court) as an invitation or suggestion that the proceedings might (also) be opened for the purpose of receiving additional testimony from witnesses other than the two expert witnesses we have mentioned (Case and Bollman) we must disagree with Carter since our conclusion is to the contrary.
After Case and Bollman were further cross-examined at length in the following supplemental hearings above referred to, and on October 4, 1956, the Commission made and entered an entirely new and second set of Findings of Fact, a Conclusion of Law, its formal Decision (see footnote 1) and the Cease and Desist Order5 which is here involved. A formal Opinion of the Commission was also filed on October 4, 1956. For reference to date and place of publication of an official copy of the here noted Commission's Cease and Desist Order, see last paragraph of footnote 5.
Applicable provisions of the Act with which we are here concerned are:
Pursuant to the order authorizing the Commission to open the proceedings for the further evidence mentioned and for entry of a new order consistent with the opinion of this court, the Commission did, by order, reopen the proceeding and refer it to the Hearing Examiner "for such further proceedings as may be necessary to correct the errors in the original hearings as specified by the Court of Appeals." The examiner was directed to file "a report upon the additional evidence and state the changes, if any, he wishes to make in his original recommended decision as a result of such additional evidence."
After an order of the examiner was later made closing the record and denying Carter's motion and offers of certain proof, Carter (on April 18, 1955) filed a motion to disqualify the Hearing Examiner from taking any further action in this proceeding, and for an order wholly terminating these proceedings because of bias of the examiner. Subsequently, the examiner filed his supplemental report and his recommendation. Later on, and in an opinion carefully analyzing the issues tendered by the said motion, the Commission denied Carter's motion to disqualify the examiner and to terminate the proceedings.
We are of the opinion that the question whether the Hearing Examiner should have been disqualified (for the reason urged by Carter) and in addition the hearings terminated, presented issues the disposition of which rested in the sound discretion of the Commission. From the record as a whole we cannot conclude as a matter of law that the Commission abused its discretion when it denied Carter's said motion for the relief here mentioned.
As the Commission emphasizes in its brief, the issues in this case were adjudicated by the Commission under a procedure in which the examiner files only a "recommended decision," i. e., a "report upon the evidence" as provided by a rule of the Commission in effect when the proceedings were instituted. Therefore, the examiner in the instant matter did not make an "initial decision," as is required under the present procedure. It should be noted that in this proceeding the Commission made its own formal findings as to the facts, its own conclusion and issued its own order to cease and desist. While the Commission's "rule" here referred to required the trial examiner to make a "report" upon the evidence to the Commission, this controlling rule also provided that such a report was advisory only and not binding upon the Commission.
For many years Carter has engaged in the sale and distribution in interstate commerce of its laxative pills sold under the trade-mark or trade name of "Carter's Little Liver Pills." These pills are admittedly sold as a laxative and admittedly contain only two active drugs — aloes and podophyllum. On this review the Commission takes the position that the evidence adduced in support of the allegations of the complaint clearly establishes that these two drugs are recognized as "irritative laxatives"; that this evidence shows that Carter repeatedly made, and is making, false representations in its general advertising in commerce that use of its medicinal preparation will stimulate the production and flow of liver bile thereby rapidly improving the health of users; that Carter also falsely claims in this widely disseminated advertising that use of its pills...
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