Community Blood Bank of Kansas City Area, Inc. v. FTC

• Citation: 405 F.2d 1011
• Decision Date: 10 January 1969
• Docket Number: No. 18645.,18645.
• Parties: COMMUNITY BLOOD BANK OF the KANSAS CITY AREA, INC., a Corporation, et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

405 F.2d 1011 (1969)

COMMUNITY BLOOD BANK OF the KANSAS CITY AREA, INC., a Corporation, et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

No. 18645.

United States Court of Appeals Eighth Circuit.

January 10, 1969.

COPYRIGHT MATERIAL OMITTED

Lucian Lane, of Tucker, Murphy, Wilson, Lane & Kelly, Kansas City, Mo., for Community Blood Bank, etc.

Dick H. Woods, of Stinson, Mag, Thomson, McEvers & Fizzell, Kansas City, Mo., for Kansas City Area Hospital Assn. and petitioners other than Community Blood Bank.

Miles J. Brown, Atty., Federal Trade Commission, Washington, D. C., for respondent, James McI. Henderson, Gen. Counsel, and J. B. Truly, Asst. Gen. Counsel, F.T.C., on the brief.

Armstrong, Teasdale, Kramer & Vaughan, St. Louis, Mo., and Lewis, Roca, Beauchamp & Linton, Phoenix, Ariz., on brief of amicus curiae, Community Blood Bank Council.

Evans & Dixon, St. Louis, Mo., and Peart, Hassard, Smith & Bonnington, San Francisco, Cal., on brief of amicus curiae, American Assn. of Blood Banks.

Before MATTHES, MEHAFFY and HEANEY, Circuit Judges.

MATTHES, Circuit Judge.

This case is before us on a petition to review and set aside a final decision and order of the Federal Trade Commission entered on September 28, 1966,¹ directing petitioners to cease and desist from unfair methods of competition and unfair acts and practices alleged to be in violation of § 5(a) of the Federal Trade Commission Act (15 U.S.C. § 45(a)).² Jurisdiction is conferred upon this Court by § 5(c) of the Act.

The petitioners to which the order is directed are divided generally into three groups: (1) Community Blood Bank of the Kansas City Area, Inc., (Community), a Missouri not-for-profit corporation³ and its officers, directors and agents; (2) Kansas City Area Hospital Association (AHA), a Missouri nonprofit corporation, and its officers, directors and agents and certain member hospitals. AHA is composed of hospital administrators and most of the Kansas City area hospitals, and serves its dues-paying members by collecting information and providing a forum for discussion of hospital problems and their solutions; (3) Individual pathologists affiliated with various hospitals located in the Kansas City area.

The Commission's complaint, filed on July 5, 1962, charged that petitioners entered into and carried out an agreement, understanding, combination or planned course of action to hinder the development of two commercial blood banks, Midwest Blood Bank and Plasma Center, Inc. (Midwest) and World Blood Bank (World). Petitioners were charged with carrying out the alleged planned course of action by: (1) not accepting or permitting the use of blood from Midwest or World in Kansas City area hospitals; (2) advising customers and prospective customers of Midwest and World that blood obtained from those firms would not be accepted in exchange for blood obtained from the hospitals or from Community; (3) advising the district blood clearing house⁴ and the American Association of Blood Banks⁵ that the hospitals in the Kansas City area would not accept blood from the two commercial banks. The complaint further charged such acts and practices injured the public, unreasonably restricted and restrained interstate commerce and competition in the exchange, sale and distribution of whole blood⁶ and violated the intent of § 5 of the Act.

In their answer petitioners challenged the jurisdiction of the Commission and specifically denied all charges contained in the complaint.

A lengthy and exhaustive hearing before an examiner was concluded on September 24, 1963. The examiner, in his decision filed on June 8, 1964, found that petitioners were motivated by their feeling that commercial trafficking in blood was immoral and not in the public interest and that the "preponderance of creditable evidence establishes the existence of a scheme or plan knowingly entered into by petitioners each of whom knew it would, if entered into by others, restrain the trade of Midwest."

The examiner recommended that petitioners be ordered to cease and desist from engaging in the acts and practices complained of. Petitioners appealed to the Commission, which subsequently upheld the examiner's findings and ordered petitioners to refrain from the proscribed conduct. Two of the five Commissioners dissented.

At issue here are a number of questions, first and foremost of which is whether the Commission was clothed with jurisdiction over the petitioners.⁷

We approach the jurisdictional issue mindful of certain general legal principles.

First, the Commission has only such jurisdiction as Congress has conferred upon it by the Federal Trade Commission Act. Federal Trade Commission v. Western Meat Co., 272 U.S. 554, 559, 47 S.Ct. 175, 71 L.Ed. 405 (1926); Federal Trade Commission v. Sinclair Refining Co., 261 U.S. 463, 475, 43 S.Ct. 450, 67 L.Ed. 746 (1922).

Second, if the jurisdiction of the Commission is challenged, it bears the burden of establishing its jurisdiction. Cf. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 86 L.Ed. 951 (1942); McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S. Ct. 780, 80 L.Ed. 1135 (1936); Hedberg v. State Farm Mut. Auto Ins. Co., 350 F.2d 924 (8th Cir. 1965).

Third, the general rule of statutory construction requires the courts to ascertain the intent of legislation from the language used. The legislative will must be ascertained from the statute if it is clear and plain and the whole act is internally cohesive. In 62 Cases, More or Less, Each Containing Six Jars of Jam v. United States, 340 U.S. 593, 596, 71 S.Ct. 515, 518, 95 L.Ed. 566 (1951), the Court was prompted to state:

"But our problem is to construe what Congress has written. After all, Congress expresses its purpose by words. It is for us to ascertain — neither to add nor to subtract, neither to delete nor to distort."

Fourth, the plain, obvious and rational meaning of a statute is to be preferred to "any curious, narrow, hidden sense that nothing but the exigency of a hard case and the ingenuity and study of an acute and powerful intellect would discover." Lynch v. Alworth-Stephens Co., 294 F. 190, 194 (8th Cir. 1923), aff'd. 267 U.S. 364, 45 S.Ct. 274, 69 L.Ed. 660 (1925).

Fifth, common words are to be taken in their ordinary significance in the absence of an indication of a contrary intent. Westerlund v. Black Bear Mining Co., 203 F. 599 (8th Cir. 1913).

The core of the jurisdictional dispute is whether the term "corporation" as defined in § 4 of the Act embraces any and all nonprofit corporations regardless of their objectives, motives and the results of their operations. This section, as originally enacted, defined "corporation" to mean "any company or association incorporated or unincorporated, which is organized to carry on business for profit and has shares of capital or capital stock, and any company or association, incorporated or unincorporated, without shares of capital or capital stock, except partnerships, which is organized to carry on business for its own profit or that of its members." (Emphasis added.) The Wheeler-Lea Act of 1938 amended § 4 to read as follows:

"`Corporation\' shall be deemed to include any company, trust, so-called Massachusetts trust, or association, incorporated or unincorporated, which is organized to carry on business for its own profit or that of its members, and has shares of capital or capital stock or certificates of interest, and any company, trust, so-called Massachusetts trust, or association, incorporated or unincorporated, without shares of capital or capital stock or certificates of interest, except partnerships, which is organized to carry on business for its own profit or that of its members." (Emphasis added.)⁸

Obviously, as recognized by the Commission, the troublesome phrase is "organized to carry on business for its own profit or that of its members." The Commission concluded that the word "profit" should be given one meaning as applied to corporations having shares of capital stock and another meaning as applied to those without shares. As to the former the Commission properly reasoned that they are so organized that profits may be distributed to their shareholders; the essence of their being is that their shareholders own an equity in the corporation and its income and are entitled not only to share in the profits but in the assets upon dissolution. "Thus," the Commission opined, "the phrase, `carry on business for profit,' when applied to such corporations, should receive its traditional and most generally accepted definition — that the corporation is engaged in some undertaking for the purpose of realizing gain which will ultimately be distributed to the shareholders or members."

As to corporations without capital stock the Commission rationalized that the language "carry on business for its own profit or that of its members" must have a different meaning from the traditional phrase "organized to carry on business for profit" which is applied to corporations having shares of capital.

The Commission reasoned that since a corporation not having capital stock does not distribute amounts realized to incorporators, officers, directors, or other persons the words "business" and "profit" must have a broader connotation than those usually ascribed to these words, stating: "The only logical meaning which the phrase `organized to carry on business for its own profit * * *' could have when applied to a corporation unable to distribute `profits' realized is that the corporation is organized to engage in some undertaking for which it will receive compensation in the form of fees, prices, or dues and is not prohibited by its charter from devoting any excess of income over expenditures or other benefit derived from doing business to its own use; i. e., for its own self-perpetuation or expansion." (Emphasis added.)

The interpretation of the Commission means, of course, that any corporation engaged in...