F.T.C. v. Brigadier Industries Corp.

• Decision Date: 19 December 1979
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1110

613 F.2d 1110

198 U.S.App.D.C. 377, 1980-1 Trade Cases 63,082

FEDERAL TRADE COMMISSION v BRIGADIER INDUSTRIES CORP., et al., Appellants.

FEDERAL TRADE COMMISSION v BRIGADIER INDUSTRIES CORP., Chief Industries, Inc., et al.,

Appellants.

Nos. 78-1875, 78-1878.

United States Court of Appeals District of Columbia Circuit.

Argued 6 Sept. 1979.

Decided 19 Dec. 1979.

Miles W. Kirkpatrick, Washington, D. C., for appellant Brigadier Industries Corp., et al.

James A. Brodsky, Washington, D. C., for appellant Chief Industries, Inc.

Clarence R. Laing, Jr., Atty., F. T. C., Washington, D. C., a member of the bar of the Supreme Court of New York, pro hac vice, with whom Michael M. Sohn, Gen. Counsel, Gerald P. Norton, Deputy Gen. Counsel, and Jerold D. Cummins, Deputy Asst. Gen. Counsel, F. T. C., Washington, D. C., were on the brief, for F. T. C Katherine A. Meyer, Washington, D. C., with whom Harvey Schweitzer, Washington, D. C., was on the brief for appellee Center for Auto Safety.

Kennard R. Weaver, Elkhart, Ind., entered an appearance for appellant, Shult Homes Corp.

Before MacKINNON and WILKEY, Circuit Judges, and GORDON, ^* Senior United States District Judge for the Western District of Kentucky.

Opinion for the Court filed by WILKEY, Circuit Judge.

WILKEY, Circuit Judge:

This is an appeal from an order of the district court enforcing ten subpoenas duces tecum served on appellants by the Federal Trade Commission (Commission) during the course of a rulemaking proceeding. Drawing on its newly granted authority under the Magnuson-Moss Warranty Federal Trade Commission Improvement Act (Magnuson-Moss Act), ¹ the Commission initiated proceedings for the promulgation of a trade regulation rule governing sales and warranty services of the mobile home industry on 29 May 1975. ² Toward the close of the public hearings held in connection with the proceeding, appellee-intervenor Center for Auto Safety (Center) filed a motion with the presiding officer to compel the production of service records from mobile home manufacturers who testified at the hearings. Section 1.13(d)(6) of the Commission's Rules of Practice empowers officials presiding over Magnuson-Moss rulemaking to issue subpoenas duces tecum on behalf of "interested persons" provided certain requirements are met. ³ After determining that the Center's request satisfied the criteria set forth in section 1.13(d)(6), the presiding officer granted the motion on 2 March 1978. ⁴

Ten of the fourteen manufacturers who were served with subpoenas refused to comply, and the Commission subsequently instituted enforcement proceedings in the United States District Court for the District of Columbia. Appellants argued there that the Commission lacked statutory authority to promulgate section 1.13(d)(6), which delegated to presiding officers in the agency's rulemaking the power to issue subpoenas on behalf of third parties. In addition, appellants complained that even assuming this authority, the presiding officer administered the subpoenas in bad faith, in part because the official denied allegedly similar requests that appellants filed for production of dealer and consumer correspondence records. In an opinion rendered from the bench, Judge Hart held that the Commission had the legal authority to issue the subpoenas in question, those subpoenas were not unduly burdensome, and the denial of appellants' motion to compel production was not an issue properly before the court. ⁵ We affirm.

I. BACKGROUND

In January 1975 Congress enacted the Magnuson-Moss Warranty Federal Trade Commission Improvement Act. ⁶ Section 202 of that Act amends the Federal Trade Commission Act to add a new section 18. ⁷ Under this section, the Commission is authorized to promulgate rules that specifically define unfair or deceptive acts or practices (trade regulation rules) within the meaning of section 5 of the Federal Trade Commission Act. ⁸ To exercise this power, the Commission must follow certain procedures detailed in section 18, which are designed to afford persons potentially affected by the rules greater opportunity to participate in the agency's rulemaking.

In deciding whether to promulgate a trade regulation rule, the Commission first must publish a notice of proposed rulemaking stating the reasons for the proposed rule and permitting interested persons to submit their views. ⁹ The statute then directs the Commission to conduct informal hearings on the proposed rule during which interested persons may present their positions orally and through documentary submissions. If the Commission determines that disputed issues of material fact exist, interested persons may offer rebuttal submissions and conduct such cross-examination of witnesses as the Commission deems appropriate and necessary for a full and true disclosure of the material facts. ¹⁰

On 4 April 1975 the Commission solicited comments on proposed rules intended to implement its rulemaking authority under the Magnuson-Moss Act. ¹¹ These rules, including section 1.13, went into effect on 13 August 1975. ¹² Section 1.13(d)(6) of the Commission's Rules of Practice allows "interested persons" to petition presiding officers in rulemaking proceedings for the issuance of subpoenas. To obtain a subpoena duces tecum, the party must make a general showing of the reasonableness and relevancy of the scope of the request together with a showing that the information sought is unavailable by voluntary methods and is "appropriate and required for a full and true disclosure" of the issues set for consideration. ¹³ Appellants do not quarrel with the Commission's findings that the Center's request was in accord with these requirements. Instead, appellants contend that because the Magnuson-Moss Act itself makes no provision for the availability of compulsory process, the Commission was without authority to adopt section 1.13(d)(6) as part of its Rules of Practice governing Magnuson-Moss proceedings.

II. ANALYSIS

A. Statutory Authority to Adopt Section 1.13

The Commission's claimed authority to adopt section 1.13(d)(6) hinges in part on a construction of section 9 of the Federal Trade Commission Act. ¹⁴ Section 9 provides in pertinent part: "For the purposes of (the Act) . . . 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 Appellees advocate construction of the Act as an integrated whole, permitting the Commission to draw on the subpoena powers contained in section 9 to discharge it functions under section 18 of the Act. ¹⁶ Appellants contend on the other hand that the subpoena powers authorized in section 9 extend only to investigative subpoenas issued by the Commission's staff prior to the commencement of a rulemaking proceeding and not to subpoenas issued by a presiding officer during the agency's actual rulemaking proceeding. ¹⁷ Their assertion is based on the contention that both the language and the legislative history of the Magnuson-Moss Act preclude the availability of compulsory process in section 18 proceedings. We find appellants' arguments unpersuasive.

Appellants' first contention rests on a strained interpretation of section 202(a)(2) of the Magnuson-Moss Act. ¹⁸ Section 202(a)(2) provides that the "Commission shall have no authority under this Act, other than its authority under this section, to prescribe any rule with respect to unfair or deceptive acts or practices in or affecting commerce." ¹⁹ Appellants apparently read this section as prohibiting the Commission from adopting additional procedural rules governing the conduct of the agency's rulemaking a position we find to be totally without merit.

A plain reading of the section reveals that it restricts only the Commission's power to promulgate Substantive rules and does not affect or even address the Commission's power to adopt procedural requirements for rulemaking proceedings. ²⁰ In fact it is clear from another section of the statute that the Commission does indeed have the authority to prescribe procedural rules for its rulemaking proceedings. Section 202(c)(2) provides that the "Commission may prescribe such rules and make such rulings concerning proceedings in (the informal) hearings as may tend to avoid unnecessary costs or delay." ²¹

A more substantial challenge to the Commission's authority to delegate the subpoena powers in question is appellants' argument that Congress, by delineating the procedural requirements to be followed in Magnuson-Moss rulemaking and by not providing for compulsory process, intended to prevent third-party access to subpoenas in these proceedings. Although use of subpoenas is nowhere mentioned in the Magnuson-Moss Act or in the legislative history to the Act, Congress, as mentioned above, expressly granted the Commission the authority to adopt procedural rules in its informal hearings, if appropriate. Thus it is certain that Congress intended the Commission to have Some flexibility in conducting rulemaking. The issue before the court, then, is whether the Commission's adoption of section 1.13(d)(6) was within the latitude intended the Commission by Congress. We hold that it was.

In attempting to assess congressional intent, we are bound to render an interpretation consistent with the policies and purposes of the Act. "(T)he width of administrative authority must be measured in part by the purposes for which it was conferred." ²² One of Congress's chief concerns in devising section 202 of the Magnuson-Moss Act was to afford increased opportunity for public participation in rulemaking while still enabling the Commission to pursue its statutory directive efficiently and effectively. ²³ As the House Report explains: "Our mission was to develop a provision which would allow interested persons an opportunity to be heard in a meaningful and constructive way on proposed rules while...