F. T. C. v. Feldman

• Decision Date: 24 February 1976
• Docket Number: No. 75-1583,75-1583
• Citation: 532 F.2d 1092
• Parties: 1976-1 Trade Cases 60,742 FEDERAL TRADE COMMISSION, Petitioner-Appellee, v. Jerry E. FELDMAN, President, and Checker Taxi Company, Inc., Respondents-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1092

532 F.2d 1092

1976-1 Trade Cases 60,742

FEDERAL TRADE COMMISSION, Petitioner-Appellee, v. Jerry E. FELDMAN, President, and Checker Taxi Company, Inc. Respondents-Appellants.

No. 75-1583.

United States Court of Appeals Seventh Circuit.

Argued Oct. 21, 1975.

Decided Feb. 24, 1976.

Lee A. Freeman, Chicago, Ill., for respondents-appellants.

Samuel K. Skinner, U. S. Atty., Chicago, Ill., Barry R. Rubin, Atty., Federal Trade Commission, Washington, D. C., for petitioner-appellee.

Before FAIRCHILD, Chief Judge, HASTINGS, Senior Circuit Judge, and PELL, Circuit Judge.

FAIRCHILD, Chief Judge.

This is an appeal from a district court order requiring appellants Jerry L. Feldman, President, Checker Taxi Company, Inc. and Checker Taxi Company, Inc., (hereafter referred to jointly as "Checker"), to comply with subpoenas duces tecum issued in connection with an investigation presently being conducted by the Federal Trade Commission. ¹

Section 6(a) of the Federal Trade Commission Act (15 U.S.C. § 46(a) ) authorizes the Commission "to investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce, . . . and its relation to other persons, partnerships, and corporations." Section 9 (15 U.S.C. § 49) empowers the Commission "to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation." The nature of the present investigation is, as stated in the resolution of the Commission, directing use of compulsory process, dated January 3, 1973:

To determine whether or not the activities and practices by Checker Motors Corporation, Checker Taxi Cab Company, Inc., Yellow Cab Company, Inc. (Chicago), in connection with the regulation, ownership and operation of taxi services, in commerce, are conducted in an unfair manner for the purpose or with the effect of restraining or foreclosing competition, in violation of Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45).

15 U.S.C. § 45(a)(1) declares unlawful "unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce." ²

The Commission issued subpoenas duces tecum seeking documents dealing with the business operations of Checker, its subsidiaries and affiliates. Checker filed a motion to quash the subpoenas and to close the investigation. By order and opinion issued January 31, 1974, the Commission denied the motion. A petition for enforcement of the subpoenas was subsequently filed in the district court. On April 30, 1975, the court issued a final order granting enforcement, although reserving jurisdiction to alleviate vexation and hindrance. Checker appealed.

I

Appellants assert that the district court erred in failing to apply the doctrines of res judicata and collateral estoppel. They rely on the judgment and decisions reached in an action brought by the United States in the 1940's against Yellow Cab Company and others to restrain alleged violations of §§ 1 and 2 of the Sherman Act. They contend that these decisions establish, since appellants have presented affidavits showing that relevant practices have not changed, that the present FTC investigation and any complaint proceeding which could result are foredoomed to futility.

In the Yellow Cab Co. action, the district court first dismissed the complaint, United States v. Yellow Cab Co., 69 F.Supp. 170 (N.D.Ill.1946). The decision was reversed (in part), 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947). After trial on remand, judgment was entered for defendants, 80 F.Supp. 936 (N.D.Ill.1948). The judgment was affirmed, 338 U.S. 338, 70 S.Ct. 177, 94 L.Ed. 150 (1949). The appellants here are either identical to or successors in interest of defendants in Yellow Cab Co.

A similar subpoena, directed to others, but part of the same investigation, was considered in F.T.C. v. Markin, 391 F.Supp. 865 (W.D.Mich.1974). Pointing out that the Sherman Act claims in the earlier litigation and claims which the FTC might pursue arise under different statutes, and referring to limiting language in the Supreme Court Yellow Cab Co. decisions, the district court in Michigan rejected the res judicata claim.

In the instant case, the district court said:

(A) decision by this Court on the res judicata effects of the two Yellow Cab cases would seem to be premature in light of the potential differences in facts and law between those two cases and the alleged scope of the current FTC investigation. Similarly, a decision on the 'in commerce' issue would be premature. In its first Yellow Cab decision, the Supreme Court expressly stated that it did not intend to establish any absolute rule that local taxi service was 'beyond the reach of federal power.' 332 U.S. at 232, 67 S.Ct. 1560.

We agree with the district court.

In U. S. v. Yellow Cab, supra, 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947), the Court reviewed the district court's dismissal of a complaint claiming three types of violation of Sections 1 and 2 of the Sherman Antitrust Act. As to two charges, conspiracy to eliminate competition in the business of transporting passengers between different Chicago railroad stations, and conspiracy to restrain and monopolize the sale of taxicabs by control of the principal companies operating them in several cities, the Supreme Court reversed, holding that the complaint stated a cause of action under the Sherman Act. The third allegation charged Yellow Cab with conspiracy to restrain trade in the transportation of interstate travelers by taxicab between Chicago railroad stations and intra-city destinations such as homes, offices and hotels. The Court decided that this type of transportation "is too unrelated to interstate commerce to constitute a part thereof within the meaning of the Sherman Act." 332 U.S. at 230, 67 S.Ct. at 1567.

The Court said:

. . . These taxicabs, in transporting passengers and their luggage to and from Chicago railroad stations, admittedly cross no state lines; by ordinance, their service is confined to transportation 'between any two points within the corporate limits of the City.' None of them serves only railroad passengers, all of them being required to serve 'every person' within the limits of Chicago. They have no contractual or other arrangements with the interstate railroads. Nor are their fares paid or collected as part of the railroad fares. In short, their relationship to interstate transit is only casual and incidental. 332 U.S. at 230-31, 67 S.Ct. at 1567.

The Court went on to hold that "a restraint on or monopoly of that general local service, without more, is not proscribed by the Sherman Act," and that as to local service of that type, the complaint failed to state a cause of action under the Sherman Act.

On the basis of a showing by affidavit that the relevant character of their activity has not changed, appellants argue that the Commission is barred from relitigating whether practices in the operation of taxis, including advertising for drivers, constitute a restraint of competition in or affecting commerce. They would, in effect, require that in order to obtain enforcement, the FTC must at this preliminary stage, postulate factual changes in the operation of appellants' business or changes of law or relevant differences between the Sherman Act and the FTC Act sufficient to demonstrate that an FTC proceeding could be brought in 1975 which could escape the res judicata defense.

Appellants take this position despite the fact that the Supreme Court, in Yellow Cab Co., was very careful to limit its determination to the specific facts presented. The Court said:

We do not mean to establish any absolute rule that local taxicab service to and from railroad stations is completely beyond the reach of federal power or even beyond the scope of the Sherman Act . . . (W)e are not to be understood in this case as deciding that all conspiracies among local cab drivers are so unrelated to interstate commerce as to fall outside the federal ken. . . . 332 U.S. at 232-33, 67 S.Ct. at 1568.

We deem it the more appropriate and orderly procedure for the Commission to proceed with the investigation within its discretion. If it ultimately issues a complaint, appellants will then have an opportunity, depending on the issues raised by the complaint, or the proof thereunder, to assert the defense of res judicata or collateral estoppel, if they see fit.

In U. S. v. Yellow Cab Co., supra, 338 U.S. 338, 70 S.Ct. 177, 94 L.Ed. 150 (1949), aff'g 80 F.Supp. 936 (N.D.Ill.1948), the district court had determined at trial that the evidence was insufficient to support the claim that Yellow Cab conspired to restrain trade in the sale of taxicabs. The Supreme Court affirmed on the basis that the trial court's findings were not clearly erroneous, pointing out that many of the significant findings resolved issues with respect to intent in certain transactions.

Appellants point in particular to a finding by the district court in Yellow Cab Co. that the companies' decision to buy CCM "purpose built" cabs was a reasonable and natural business judgment which "should not, on the evidence, be disturbed by the Court." Appellants, having shown by affidavit that there is presently only one source of purpose built taxi vehicles, contend that the findings of lawful motivation of purchases made in the 1940's legally precludes the Commission's investigation in the 1970's of the motivation of more recent purchases. They contend that this has been made so clear that the court should stop the Commission's activity at the beginning of the investigation stage. This argument is even less persuasive than the earlier one.

It is well settled that the courts should not interrupt the administrative process except under very limited and exceptional circumstances. Se...