Federal Trade Commission v. Ken Roberts Co., 00-5266
| Citation | 276 F.3d 583 |
| Decision Date | 28 December 2001 |
| Docket Number | No. 00-5266,00-5266 |
| Parties | (D.C. Cir. 2001) Federal Trade Commission, Appellee v. Ken Roberts Company, et al., Appellants |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Appeal from the United States District Court for the District of Columbia (No. 00ms00204)
Neil A. Goteiner argued the cause for appellants. With him on the briefs was Richard E. Nathan.
Lawrence DeMille-Wagman, Attorney, Federal Trade Commission, argued the cause for appellee. With him on the brief was John F. Daly, Assistant General Counsel.
John G. Gaine was on the brief for amicus curiae Managed Funds Association.
Before: Edwards, Rogers, and Tatel, Circuit Judges.
Opinion for the court filed by Circuit Judge Edwards.
The appellants Ken Roberts Company ("KRC"), Ken Roberts Institute, Inc. ("KRI"), United States Chart Company ("Chart"), and Ted Warren Corporation ("Warren") (collectively "Ken Roberts") sell instructional materials that purport to teach would-be investors how to make money investing in the commodities and securities markets. In an effort to determine whether Ken Roberts had engaged in deceptive advertising or selling of goods or services in violation of sections 5 and 12 of the Federal Trade Commission Act, 15 U.S.C. 45, 52, the Federal Trade Commission ("FTC") issued civil investigative demands ("CIDs") requiring Ken Roberts to produce documents and to respond to interrogatories relating to the companies' business practices. The appellants answered some of the interrogatories, but declined to respond to most of what had been requested. Ken Roberts then filed a Petition to Quash with the FTC. The appellants claimed that, because the regulation of their advertising practices was subject to the exclusive jurisdiction of the Commodities Futures Trading Commission ("CFTC") or the Securities and Exchange Commission ("SEC"), the FTC lacked authority to investigate. The FTC denied the petition and then filed its own petition in District Court seeking an order to enforce the CIDs. On May 26, 2000, the District Court granted the FTC's petition and ordered Ken Roberts to comply with the CIDs. The appellants now seek review of that judgment.
Ken Roberts contends that, pursuant to the express terms of the Commodity Exchange Act ("CEA"), the CFTC has exclusive jurisdiction to regulate the disputed business practices of Ken Roberts Company and United States Chart Company. Ken Roberts claims further that, because Ken Roberts Institute and Ted Warren Corporation are subject to pervasive regulation by the SEC under the Investment Advisors Act ("IAA"), the FTC's authority to investigate these companies has been impliedly preempted. Therefore, according to Ken Roberts, because the FTC is without authority to regulate the cited advertising and promotional practices of Ken Roberts, the CIDs cannot be sustained. We disagree.
With rare exceptions (none of which applies here), a subpoena enforcement action is not the proper forum in which to litigate disagreements over an agency's authority to pursue an investigation. Unless it is patently clear that an agency lacks the jurisdiction that it seeks to assert, an investigative subpoena will be enforced. Whatever the ultimate merit of Ken Roberts' preemption arguments and we believe they have little appellants cannot overcome the long-standing doctrine that precludes courts from entertaining challenges to the jurisdiction of administrative agencies during subpoenaenforcement proceedings. Because under no reasonable reading of the CEA or the IAA does either of those statutes manifestly strip the FTC of its broad power over deceptive advertising, we affirm the District Court's decision that appellants must comply with the FTC's compulsory process.
KRC and Chart market courses in commodities trading and are therefore subject to the jurisdiction of the CFTC. KRI and Warren offer instruction in securities trading, which places them within the regulatory ambit of the SEC. These companies rely heavily on Internet advertising: their websites feature grandiose claims about potential earnings by investors and testimonials from persons who have allegedly benefitted from Ken Roberts' instructional materials.
Since 1994, the CFTC has carefully monitored the activities of KRC to determine whether the company had violated various sections of the CEA, particularly the statute's antifraud provisions, 7 U.S.C. 6o (1999). In at least four separate investigations, the Commission sought to determine whether KRC's advertising claims, both in print and, more recently, on-line, can be substantiated. To this end the CFTC repeatedly used its subpoena power to compel KRC to turn over business records and detailed documentation supporting the promotional claims that it has made. The company always has responded to CFTC subpoenas, and never has been sanctioned or forced to admit any wrongdoing. While one investigation did lead to a consent decree, pursuant to which KRC and Chart registered with the CFTC as commodity trading advisers ("CTAs"), see 7 U.S.C. 1a(5), the Commission has never taken enforcement action against KRC.
In 1999, the FTC, in conjunction with the CFTC and the SEC, announced a coordinated investigation of deceptive day trading promotions. In early September 1999, the FTC formally authorized the use of compulsory process to determine whether various on-line merchants were engaged in deceptive marketing practices. With an investigative agenda aimed at high-risk/high-yield investment activity and suspicious Internet advertising, the Commission soon focused on Ken Roberts. On September 30, 1999, the FTC issued CIDs requesting a wide variety of information through written interrogatories and documents relating to Ken Roberts' business practices. The CIDs were designed to reveal whether the companies had mislead the public in promoting their instructional courses. To this end, the Commission demanded a full accounting of the companies' sales volume, as well as evidence underlying the claims made in their testimonials and other advertising materials.
Appellants resisted complying fully with the CIDs, believing them to be duplicative of the subpoenas that had already been issued by the CFTC and beyond the FTC's power to issue. Thus, Ken Roberts responded only to some of the interrogatories and produced none of the requested documents. They then filed an administrative petition with the FTC to quash the CIDs. In that proceeding, Ken Roberts argued, as they do here, that the CEA and the IAA deprive the Commission of its jurisdiction to regulate and therefore to investigate deceptive advertising practices of, respectively, CTAs and investment advisers. The FTC rejected this petition, holding that the subpoenas were issued as part of a lawful investigation, one fully authorized by the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 41 et seq. (1997), and not foreclosed by any rival regulatory statute. See In re Petition of The Ken Roberts Co. et al. to Quash Civil Investigative Demands, File No. 9923259 (Feb. 25, 2000), reprinted in Joint Appendix ("J.A.") 72. When Ken Roberts persisted in refusing to comply with the CIDs, the FTC petitioned the District Court to compel enforcement pursuant to 15 U.S.C. 57b-1(e). In a brief order, the District Court granted the agency's petition to enforce. See FTC v. Ken Roberts Co., Order, Misc. No. 00-204 (May 26, 2000), reprinted in J.A. 248. Ken Roberts now appeals.
Appellants ask this court to hold that the jurisdictionconferring provisions of the CEA and the IAA preempt the former expressly, the latter implicitly the jurisdiction that the FTC would otherwise possess over appellants' allegedly deceptive marketing of their investor-training courses. Though the nature of our analysis obliges us to investigate these questions, we need not answer them definitively, for we have concluded that Ken Roberts' challenge is premature.
The threshold issue in this case is whether the appellants may raise their challenge to the Commission's jurisdiction now, or instead whether they are obliged to await an actual enforcement action. In upholding the judgment of the District Court, we are governed by the long-standing doctrine that administrative agencies must be given wide latitude in asserting their power to investigate by subpoena. As the Second Circuit has noted:
[A]t the subpoena enforcement stage, courts need not determine whether the subpoenaed party is within the agency's jurisdiction or covered by the statute it administers; rather the coverage determination should wait until an enforcement action is brought against the subpoenaed party.
United States v. Construction Prods. Research, Inc., 73 F.3d 464, 470 (2d Cir. 1996).
The Supreme Court first articulated this doctrine in Endicott Johnson Corp. v. Perkins, 317 U.S. 501 (1943). Endicott established that, as a general proposition, agencies should remain free to determine, in the first instance, the scope of their own jurisdiction when issuing investigative subpoenas. The Court therefore held that the Secretary of Labor was entitled to enforce a subpoena for payroll records issued in an effort to determine whether Endicott Johnson had run afoul of the Walsh-Healey Public Contracts Act. The District Court had scheduled a trial to determine whether Endicott was covered by the Act, but the Supreme Court rejected this approach. Rather, the Court held that, because "[t]he evidence sought by the subpoena was not plainly incompetent or irrelevant to any lawful purpose of the Secretary in the discharge of her duties under the Act ... it was the duty of the District Court to order its production for the Secretary's consideration." Id. at 509 (emphasis added).
Following Endicott, courts of appeals have consistently deferred to agency...
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