F.T.C. v. Owens-Corning Fiberglas Corp.
| Decision Date | 04 August 1988 |
| Docket Number | No. 87-3334,OWENS-CORNING,87-3334 |
| Citation | 853 F.2d 458 |
| Parties | 1988-2 Trade Cases 68,168, 12 Fed.R.Serv.3d 83 FEDERAL TRADE COMMISSION, Plaintiff, U.S. Roofing Corporation, Intervenor-Appellant, v.FIBERGLAS CORP., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Thomas L. Boyer, Charles J. Gerlach, Kemp, Klein, Endelman & Beer, Birmingham, Mich., John J. Siciliano, Fuller & Henry, Ohio, Edward L. Hoffman (argued), Toledo, Ohio, for intervenor-appellant.
James T. Halverson, Shearman & Sterling, New York City, Robert T. Joseph (argued) Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Ill., Thomas W. Palmer, Marshall & Melhorn, Toledo, Ohio, for defendant-appellee.
Before: LIVELY, MERRITT, and BOGGS, Circuit Judges.
This case presents intriguing questions concerning federal court jurisdiction. Intervenor-appellant U.S. Roofing Corporation (USR) appeals the district court decision reversing the Federal Trade Commission's (FTC) finding of fact that USR was qualified to purchase certain roofing divisions of defendant-appellee Owens-Corning Fiberglas Corporation (Owens-Corning). The Federal Trade Commission elected not to appeal the district court decision to this court. We dismiss USR's appeal for lack of appellate jurisdiction.
Owens-Corning, a major manufacturer of roofing products, negotiated a settlement to a proposed FTC challenge in 1980 of its acquisition of the Lloyd Fry Roofing Company (Fry), one of the nation's largest privately owned roofing manufacturers. In April 1977, Owens-Corning acquired four plants from Fry. They were located at Compton, California; Portland, Oregon; San Leandro, California; and Woods Cross, Utah. In settlement of that proposed challenge, Owens-Corning and the FTC agreed on certain criteria for an "eligible purchaser" of these plants in a consent order (first consent order). On April 8, 1981, that order was entered by the FTC as a final order. After two years of attempting to sell the plants, Owens-Corning moved to reopen the consent order on the ground that significant changes had occurred in the roofing industry. In 1984 the FTC denied the request.
Thereafter, FTC brought an action for civil penalties against Owens-Corning in district court pursuant to 15 U.S.C Sec. 45(l ). 1 Negotiation between the FTC staff and Owens-Corning resulted in a second consent order. The FTC then filed both a Complaint and this second consent order in the district court. The second consent order became the court's Final Judgment pursuant to 15 U.S.C. Sec. 45(l ).
In that order, Owens-Corning and the FTC agreed that the district court would appoint an independent trustee, nominated by the FTC and approved by Owens-Corning, who would have nine months to find a "qualified purchaser" or "qualified acquirer." The FTC would initially determine whether a proposed acquirer met the qualifying criteria in the final judgment, 2 but that determination would be subject to a de novo factual review in the district court. 3 Upon the failure of the Trustee to find a "qualified purchaser" within the nine month period, the divestiture obligation of Owens-Corning would terminate.
Unable to find a qualified purchaser within the nine month period, the Trustee sought an extension of thirty days, the maximum permitted by the Final Judgment, to try to sell the Compton and Portland plants. The court granted the extension on June 14, 1985.
On June 28 the Trustee entered into a purchase agreement with USR for the sale of all four plants at a price of $1,200,000. The Trustee failed to consult Owens-Corning in making the deal with USR. Owens-Corning argued that this price represented a mere 22% of the plants' appraised real estate value of approximately $5.5 million. The purchase agreement recited, in apparent recognition that the Trustee had not requested an extension for the San Leandro and Woods Cross plants, that if USR were not permitted to purchase those plants, USR could purchase the remaining two plants for $800,000.
Owens-Corning filed a motion in district court challenging the validity of the "purchase agreement" on several grounds. Owens-Corning argued that the purchase agreement lacked mutuality; that the Trustee acted beyond his authority by agreeing to unauthorized conditions; and that the granting of an extension was an abuse of discretion. In response to this motion, the FTC requested the right to review these issues first, which the district court granted.
Owens-Corning also sought a declaration that, under the Final Judgment, its divestiture obligations respecting the San Leandro and Woods Cross plants had expired when the Trustee failed to request an extension of time to sell these two plants. The FTC did not oppose this portion of the motion. USR filed a motion to intervene as of right under Fed.R.Civ.P. 24(a)(2) for the limited purpose of presenting its position on whether the extension of time applied to only two or four of the plants. The district court granted USR's motion for intervention, but ruled that Owens-Corning no longer was obligated to divest the San Leandro and Woods Cross plants. No stay of this order was sought.
At the hearing before the FTC, Owens-Corning submitted affidavits from several experts, demonstrating USR's inability to satisfy the criteria of a proposed acquirer in the Final Judgment. After a four month investigation, the FTC sent the Trustee a letter stating that, by a 2-1 vote, 4 the FTC would, under certain conditions, approve USR as a purchaser of the Compton and Portland plants. For example, the two-member majority conditioned its approval of the purchase agreement on USR's offering Owens-Corning a "buy-back" agreement, precluding USR or its shareholders from profiting from a quick liquidation of the plants.
Dissatisfied with the FTC's findings that USR possessed the financial capacity and intent to operate the plants as roofing corporations, Owens-Corning sought the de novo review provided in the court's Final Judgment. USR again moved to intervene, this time for permissive intervention as to all issues under Fed.R.Civ.P. 24(b)(2). The district court granted USR's motion for permissive intervention.
On February 3, 1987, interpreting and applying the terms of its own Final Judgment, the court in its de novo review reversed the FTC's factual findings, and held that USR did not meet the criteria set forth in the Final Judgment. Specifically, the court found that USR lacked the capacity to operate the plants as manufacturing facilities of asphalt roofing products; that the proposed divestiture would not further the remedial purposes of the FTC's second consent order; that USR lacked the requisite intent to operate the plants as manufacturing asphalt roofing products; and that the contract between the Trustee and USR was illusory and lacked mutuality, thus exceeding the Trustee's authority.
On April 6, 1987, only USR filed a notice of appeal from the district court's judgment. On May 7, 1987, in light of the FTC's decision not to appeal, Owens-Corning filed in this court a Motion to Dismiss Appeal for Lack of Jurisdiction.
This case presents two major issues:
(1) in the context of an agreement to settle an action to enforce an FTC consent decree in district court pursuant to 15 U.S.C. Sec. 45(l), which agreement becomes the Final Judgment of the district court, may the district court, in enforcing the terms of that Final Judgment, conduct a de novo review of FTC factfinding?
(2) assuming the district court could exercise such de novo review, does USR, as an intervenor under Fed.R.Civ.P. 24(b)(2) in 15 U.S.C. Sec. 45(l ) litigation, have any independent right to appeal the district court's factual determinations to this court, where the FTC has elected not to appeal from those determinations?
The FTC and Owens-Corning, as parties to the district court's Final Judgment, agreed and stipulated to the procedure for determining whether a proposed acquirer met standards relating to financial capacity and intent to operate the plants as asphalt roofing facilities. The language of the stipulated Final Judgment clearly states that the district court, upon Owens-Corning's petition, is to undertake an "independent de novo 5 determination" as to whether USR met the agreed on criteria in the final judgment. FTC's staff attorney stated, in the hearing before the district court, that "[t]his is a de novo review, and by that is meant that the Court is not bound by the Commission's findings of fact...."
USR argues, on the other hand, that despite the language providing for district court de novo review, the district court was nevertheless required to accord substantial deference to the FTC findings on the financial capacity and intent of USR. Federal Trade Commission v. Cement Institute, 333 U.S. 683, 726, 68 S.Ct. 793, 815, 92 L.Ed. 1010 (1948). Firestone Tire & Rubber Company v. Federal Trade Commission, 481 F.2d 246, 248-49 (6th Cir.1973), cert. denied, 414 U.S. 1112, 94 S.Ct. 841, 38 L.Ed.2d 739 (1974).
While we are mindful of previous rulings that federal courts generally do not have the discretion to set aside FTC findings of fact unless they are clearly erroneous, those rulings arose in direct challenges to agency action. The instant case involves enforcement of a stipulated final judgment entered by a district court pursuant to its enforcement authority under the Federal Trade Commission Act, 15 U.S.C. Sec. 45(l ). The Supreme Court has indicated that "there may be independent judicial fact-finding when issues that were not before the agency are raised in a proceeding to enforce nonadjudicatory agency action." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). 6 The Court has also stated that "... de novo review is appropriate only where there are inadequate factfinding procedures in an adjudicatory proceeding, or where...
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