Casey v. F.T.C.

• Decision Date: 12 June 1978
• Docket Number: Nos. 77-2697,77-3155,s. 77-2697
• Citation: 578 F.2d 793
• Parties: 98 L.R.R.M. (BNA) 3093, 1978-1 Trade Cases 62,131 Sid CASEY et al., Plaintiffs-Appellants, v. FEDERAL TRADE COMMISSION, Defendant-Appellee. FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. Sid CASEY et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 793

578 F.2d 793

98 L.R.R.M. (BNA) 3093, 1978-1 Trade Cases 62,131

Sid CASEY et al., Plaintiffs-Appellants, v. FEDERAL TRADE COMMISSION, Defendant-Appellee.

FEDERAL TRADE COMMISSION, Plaintiff-Appellee, v. Sid CASEY et al., Defendants-Appellants.

Nos. 77-2697, 77-3155.

United States Court of Appeals Ninth Circuit.

June 12, 1978.

Rehearing Denied July 19, 1978.

Hugh Hafer (argued), of Hafer, Cassidy & Price, Seattle, Wash., for plaintiffs-appellants.

Mark Haase, Gen. Trade Commission, (argued), Washington, D. C., for defendant-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before WRIGHT and CHOY, Circuit Judges, and WEIGEL, District Judge. ^*

EUGENE A. WRIGHT, Circuit Judge:

These consolidated cases present the issue whether the federal courts should intervene to prevent the Federal Trade Commission (FTC) from investigating appellants, union locals and their principal officers (Unions), to determine if Safeway Stores and the Unions engaged in unfair methods of competition. The Unions contend that judicial intervention is warranted because the FTC has no jurisdiction to investigate collective bargaining activities of bona fide labor unions.

In No. 77-2697 (Casey I ), the Unions sought to enjoin the FTC investigation. The district court denied equitable relief. In No. 77-3155 (Casey II ), the FTC petitioned the district court for enforcement of subpoenas after union officers refused to testify at FTC hearings. The court ordered the subpoenas enforced, but this court stayed enforcement pending appeal. We conclude that judicial intervention would be improper and we vacate the stay order and affirm.

BACKGROUND:

The FTC issued a resolution on October 13, 1976, directing the use of compulsory process to investigate whether Safeway Stores and other participants in labor-management negotiations affecting the grocery industry in the Pacific Northwest engaged in unfair methods of competition in violation of § 5 of the Federal Trade Commission Act (Act) (15 U.S.C. §§ 41-58). ¹

In February 1977 the FTC served subpoenas duces tecum on the Unions directing them to produce records at a hearing in Seattle. The Unions submitted the records but did not verify their authenticity as required.

After the FTC denied a motion to quash the subpoenas, the Unions filed their complaint in Casey I, seeking to enjoin the investigation on the ground that the FTC has no jurisdiction to investigate bona fide labor unions. The Unions also asked the court for a declaratory judgment that § 10 of the Act is unconstitutional. The FTC moved to dismiss and the Unions moved for a preliminary injunction and for summary judgment.

The district court granted the FTC's motion to dismiss. It refused to enjoin the investigation, finding that the Unions had not shown that they would suffer irreparable injury if the subpoenas were not quashed. It also found that the FTC was not plainly operating outside the scope of its jurisdiction.

On May 6, 1977, the FTC served subpoenas ad testificandum on officers of the Unions. The first union officer to appear refused to testify on the ground that the FTC was acting outside its authority. He persisted in his refusal to testify despite the Hearing Examiner's warning that § 10 provides penalties and imprisonment for wrongful refusal to testify in response to a subpoena. The other subpoenaed union officers filed affidavits advising the FCT that they also would refuse to testify.

In Casey II, the FTC petitioned the district court under § 9 of the Act ² for an order requiring the union officers to testify. The district court issued an order enforcing the subpoenas, finding that the information sought by the FTC was not plainly incompetent or irrelevant to any lawful purpose of the FTC.

CASEY I

The Unions appeal from the district court's refusal to enjoin the FTC from investigating or proceeding against them. Appellate jurisdiction is properly founded on 28 U.S.C. § 1292(a)(1) (1970).

A. Mootness.

As a preliminary matter, we must determine whether Casey I is moot. The FTC contends that, because the Unions had completed submission of documents when they filed suit, there no longer exists a case or controversy.

The Unions did not, however, submit affidavits verifying the authenticity of the documents, as required by the subpoenas. The FTC has neither waived the verification requirement nor stipulated that the Unions have satisfactorily complied with the subpoenas duces tecum. That the documents were not verified suggest that there still exists a controversy. ³

Moreover, the Unions did not merely request relief from the subpoenas duces tecum. They asked the court for an order permanently enjoining the FTC from investigating or proceeding against them. The possibility that we may yet afford the Unions relief by preventing further disclosure or by requiring the FTC to return records wrongfully subpoenaed vests the appeal with controversy sufficient to render the case justiciable. See Atlantic Richfield Co. v. FTC, 546 F.2d 646, 650 (5th Cir. 1977); FTC v. Browning, 140 U.S.App.D.C. 292, 293, 435 F.2d 96, 97 n.1 (1970).

B. Injunctive Relief.

The Unions seek injunctive relief on the ground that the FTC has no jurisdiction to investigate collective bargaining activities of bona fide unions. The FTC argues that judicial intervention is premature, as the Unions have failed to exhaust administrative remedies.

Although failure to exhaust administrative remedies typically precludes judicial relief, other factors occasionally outweigh the preference for a preliminary agency determination. California ex rel. Christensen v. FTC, 549 F.2d 1321, 1323 (9th Cir.), cert. denied, 434 U.S. 876, 98 S.Ct. 227, 54 L.Ed.2d 156 (1977).

We consider three such factors in determining whether to enjoin anticipated agency action: (1) the extent of injury from pursuing an administrative remedy; (2) the degree of doubt about agency jurisdiction; and (3) the involvement of agency expertise in the question of jurisdiction. Id. (citing Lone Star Cement Corp. v. FTC, 339 F.2d 505, 510 (9th Cir. 1974)). Applying the Lone Star Cement test convinces us that the district court properly refused to enjoin the FTC investigation. ⁴

1. Extent of Injury.

"Only a clear showing of irreparable injury from anticipated agency action will excuse the exhaustion of administrative remedies and permit judicial intervention in the agency process." Christensen, 549 F.2d at 1323. The Unions argue that the threat of criminal prosecution under section 10 of the Act constitutes irreparable injury. ⁵

The Unions' argument fails, however, because there is no risk of criminal prosecution where one in good faith challenges an agency subpoena by noncompliance. Atlantic Richfield Co. v. FTC, supra, 546 F.2d at 648-49; First National City Bank v. FTC, 538 F.2d 937, 938-39 (2d Cir. 1976); Anheuser-Busch, Inc. v. FTC, 359 F.2d 487, 490 (8th Cir. 1966); see Reisman v. Caplin, 375 U.S. 440, 447, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964).

2. FTC Jurisdiction.

The FTC offers three jurisdictional grounds: (1) FTC power to regulate persons; (2) its power to regulate corporations; and (3) its power to subpoena witnesses pursuant to its power to investigate corporations.

Sections 5 and 6 of the Act empower the FTC to investigate and regulate any "person, partnership, or corporation." The Act does not define " person." ⁶ However, in determining the meaning of any Act of Congress, unless the context indicates otherwise, ". . . the words 'person' and 'whoever' include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals; . . . ." 1 U.S.C. § 1 (1976). This definition is arguably broad enough to include labor unions.

Section 4 of the Act provides: " 'Corporation' shall be deemed to include any . . . association, incorporated or unincorporated, which is organized to carry on business for its own profit or that of its members. . . ." 15 U.S.C. § 44. It is also not inconceivable that a labor union would come within the Act's definition of corporation. Compare FTC v. National Commission on Egg Nutrition, 517 F.2d 485, 487-88 (7th Cir. 1975), with Community Blood Bank v. FTC, 405 F.2d 1011, 1015-20 (8th Cir. 1969). ⁷

Moreover, even if labor unions are exempt from FTC regulatory power, union officials may be subject to FTC subpoena power as witnesses. Section 9 of the Act provides in relevant part:

the Commission, or its duly authorized agents, shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any person, partnership, or corporation being investigated or proceeded against; and the Commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation . . .

15 U.S.C. § 49 (1976) (emphasis supplied).

The § 9 subpoena power has been held to extend "not only to those who are not targets of an investigation, but also to those who, because of an exemption . . ., can never be targets." FTC v. Rockefeller, 441 F.Supp. 234, 240 (S.D.N.Y.1977). Accord, FTC. v. Cockrell, 431 F.Supp. 561, 563-64 (D.D.C.1977). See also United States v. Marshall Durbin & Co., 363 F.2d 1, 5 (5th Cir. 1966); FTC v. Harrell, 313 F.2d 854, 856 (7th Cir. 1963); FTC v. Tuttle, 244 F.2d 605, 615 (2d Cir. 1957); Freeman v. Brown Bros. Harriman & Co., 250 F.Supp. 32, 34 (S.D.N.Y.), aff'd, 357 F.2d 741 (2d Cir. 1966).

3. Agency Expertise.

Admittedly, the issue of FTC's authority to investigate labor unions may be framed strictly in legal terms. The exhaustion of remedies doctrine, however, often applies to questions of law as well as to questions of fact. Christensen, 549 F.2d at 1324. We are mindful that "(c)ourts should accord deference to an agency's own construction of its authorizing statute when reviewing final...