Federal Trade Commission v. Scientific Living

• Citation: 150 F. Supp. 495
• Decision Date: 09 April 1957
• Docket Number: Civ. A. No. 5614.
• Parties: FEDERAL TRADE COMMISSION, Petitioner, v. SCIENTIFIC LIVING, Inc., a corporation, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

150 F. Supp. 495

FEDERAL TRADE COMMISSION, Petitioner, v. SCIENTIFIC LIVING, Inc., a corporation, Defendant.

Civ. A. No. 5614.

United States District Court M. D. Pennsylvania.

April 9, 1957.

COPYRIGHT MATERIAL OMITTED

Joseph J. Gercke, Washington, D. C., J. Julius Levy, U. S. Atty., Scranton, Pa., for petitioner.

Raymond Bialkowski, Scranton, Pa., Horace J. Donnelly, Jr., Washington, D. C., for defendant.

JOHN W. MURPHY, Chief Judge.

This is an application by the Federal Trade Commission, an administrative agency of the United States, pursuant to § 9 of the Federal Trade Commission Act of 1914, 15 U.S.C.A. §§ 41-46 and 47-58, see Id. § 49, for an order requiring Scientific Living, Inc., a Pennsylvania corporation, having its office and principal place of business in this district, to comply with a subpoena duces tecum of the Commission duly authorized and served on the corporation in the course of an investigation, § 6(a), Id. § 46(a), instituted to ascertain whether or not the corporation was complying with a cease and desist order of the Commission made at the conclusion of a formal hearing under § 5(b) of the Act, Id. § 45(b) and rules and regulations adopted by virtue of authority granted by § 6(g), Id. § 46(g).

The corporation, its officers and counsel having repeatedly refused to answer pertinent questions or to provide access to relevant specified corporate documents for inspection and copying, the Commission issued and served upon the corporation a subpoena duces tecum directing it to appear at a fixed time and place in this district to testify and produce documentary evidence specified therein, before a duly designated representative of the Commission.¹

A motion by defendant to quash the subpoena was denied by the Commission and defendant ordered to comply at a later hour on the return date. Defendant did not comply on the date in question or at any time thereafter.

Defendant contends the motion to quash stayed the subpoena; that the Commission did not deny it until after the return day and that the order to appear later that day was of no binding effect, and, at all events, that the time fixed for the later appearance was unreasonable. There is nothing in the record to support defendant's contention. The evidence appears to be to the contrary. Defendant made no issue of the matter before the Commission or offered to appear at a more convenient time. On the contrary, it denied the Commission's right, authority or power to proceed. Defendant should have made reasonable efforts before the Commission to fix a more reasonable time. Cf. United States v. Morton Salt Co., 1950, 338 U.S. 632, at page 653, 70 S.Ct. 357, 94 L.Ed. 401. Administrative remedies must be exhausted. Goodyear Tire & Rubber Co., Inc., v. F. T. C., D.C.D.C.1950, 88 F.Supp. 789, 790, and cases cited; Perkins v. Endicott Johnson Corp., 2 Cir., 1942, 128 F.2d 208, at page 213, affirmed 1943, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424; Hagen v. Porter, 9 Cir., 1946, 156 F.2d 362, at page 366; Miles Laboratories, Inc., v. F. T. C., 1944, 78 U.S.App.D.C. 326, 140 F.2d 683, at page 685.

Defendant moves to dismiss the application and to quash the order to show cause why an order to comply should not issue.

Jurisdiction arises once the circumstances fit into the provisions of § 9 and service is made upon the defendant within this district. A summary proceeding —making application through an authorized agent as provided by § 9, Pars. 1, 2 and 3—is the approved method. Oklahoma Press Pub. Co. v. Walling, 1946, 327 U.S. 186, at page 200, 66 S.Ct. 494, 90 L.Ed. 614, 166 A.L.R. 531; United States v. Morton Salt Co., supra, 338 U.S. 632, at pages 635, 640, 642, 70 S.Ct. 357; Cudahy Packing Co. v. Fleming, 8 Cir., 1941, 122 F.2d 1005, 1007; Fleming v. Easton Pub. Co., D.C.E.D. Pa.1941, 38 F.Supp. 677, 679. The Federal Rules of Civil Procedure, 28 U.S. C.A., are not applicable. Porter v. Mueller, 3 Cir., 1946, 156 F.2d 278, 279; Goodyear Tire and Rubber Co. v. N. L. R. B., 6 Cir., 1941, 122 F.2d 450, at page 451, 136 A.L.R. 883; Perkins v. Endicott Johnson Corp., supra, 128 F.2d at page 227; In re Wolrich, D.C.S.D.N.Y.1949, 84 F.Supp. 481-482; see and cf. Comment, Advisory Committee Rules 45 and 81, and see N. L. R. B. v. Kingston Trap Rock Co., 3 Cir., 1955, 222 F.2d 299, at page 302. There was no need to tender witness fees and mileage upon service of the subpoena. See and cf. 28 U.S.C.A. § 1825, § 1821; United States v. Durling, D.C.Ill.1869, 25 Fed.Cas. page 944, No. 15,010; Norris v. Hassler, C.C.N.J.1885, 23 F. 581.²

Defendant urging failure to state a claim upon which relief can be granted challenges applicant's right to enforcement contending: (1) that the Commission had no authority to issue a subpoena in an investigation under § 6(a) and § 9, Pars. 1, 2, 3; a subpoena could only be used in connection with a formal hearing under § 5(b), and that § 1.35 of the Commission rules, 15 U.S.C.A. following section 45, providing for the issuance of a subpoena for such purposes is contrary to Arts. I and III of the United States Constitution; (2) that the subpoena was issued without notice or a showing of good cause; (3) did not show relevancy of the documents called for, and was nothing more than a "fishing expedition", citing F. T. C. v. American Tobacco Co., 1924, 264 U.S. 298, 44 S.Ct. 336, 68 L.Ed. 696, 32 A.L.R. 786, and therefore constituted an unreasonable search and seizure in violation of the Fourth Amendment to the Constitution of the United States; (4) was served upon a party not a witness, citing United States v. Minker, 1956, 350 U.S. 179, 76 S.Ct. 281, 100 L.Ed. 185; (5) violates the due process clause of the Fifth Amendment and the requirements of the Administrative Procedure Act of 1946, as amended, 5 U.S.C.A. § 1001 et seq., because it was not returnable before a member of the Commission or a qualified examiner as required by § 9, or before one who was "unbiased" and "independent"; finally, that the time fixed for the return day was unreasonable because the corporation and its principal officer were scheduled to appear before the court the following day for sentence in a criminal action.

Section 9 specifically provides that the Commission or its duly authorized agent shall have access to any documentary evidence of any corporation being investigated or proceeded against and that "* * * 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 * * *." (Itallics supplied.) Having such power the Commission could make rules under § 6(g), Id. § 46(g) regulating the procedure in connection therewith. See United States v. Morton Salt Co., supra, 338 U.S. at pages 647-651, 70 S.Ct. at pages 366-368. Without the subpoena the power of investigation would in effect be only that of inspection, exercised only upon consent. See Cudahy Packing Co., Ltd. v. Holland, 1942, 315 U.S. 357, at page 364, 62 S.Ct. 651, 86 L.Ed. 895. The intention of Congress is clear. The subpoena power is given in aid of investigations by the Commission. As such the subpoena is no more than a notice. Federal Power Comm. v. Metropolitan Edison Co., 1938, 304 U.S. 375, at page 386, 58 S.Ct. 963, 82 L.Ed. 1408; Myers v. Bethlehem Shipbuilding Corp., 303 U. S. 41, at page 49, 58 S.Ct. 459, 82 L.Ed. 638. See dissent Mr. Justice Douglas, Cudahy Packing Co., Ltd. v. Holland, supra, 315 U.S. at page 371, 62 S.Ct. at page 658. In case of disobedience the district court may be called upon to enforce the subpoena through its contempt powers. "No constitutional provision forbids Congress to do this. On the contrary, its authority would seem clearly to be comprehended in the `necessary and proper' clause, as incidental to both its general legislative and its investigative powers." Oklahoma Press Pub. Co. v. Walling, supra, 327 U.S. at page 214, and see Id. at pages 198, 199-201, 66 S. Ct. at page 508, and 66 S.Ct. at pages 499-500, and see United States v. Morton Salt Co., supra, 338 U.S. at pages 635, 640, 642-643, 70 S.Ct. at pages 360, 362, 363-364; F. T. C. v. Smith, 1929, D.C. S.D.N.Y., 34 F.2d 323.

"Despite some indications to the contrary in earlier cases, it is now well settled that, without violating constitutional provisions bearing upon separation and delegation of powers or due process, an administrative agency may be given and may exercise the power to require the attendance of witnesses in proceedings of a purely investigatory nature." Note 27 A.L.R.2d 1208, citing many cases.³ Porter v. Mueller, 3 Cir., 1946, 156 F.2d 278, at page 280, and see F. C. C. v. Pottsville Broadcasting Co., 1940, 309 U.S. 134, at pages 142-144, 60 S.Ct. 437, 84 L.Ed. 656.

There is no subpoena here such as that involved in F. T. C. v. American Tobacco Co., supra, 264 U.S. 298, 44 S.Ct. 336, 68 L.Ed. 696. The documentary evidence requested, see § 4, 15 U.S.C.A. § 44, related to the matter under investigation over a reasonable period within a field of inquiry covered by the Act. See N. L. R. B. v. Northern Trust Co., 7 Cir., 1945, 148 F.2d 24, at page 29; Cudahy Packing Co. v. Fleming, supra, 122 F.2d at page 1009; Perkins v. Endicott Johnson Corp., supra, 128 F.2d at page 211; Hagen v. Porter, supra, 156 F.2d at pages 364-365; United States v. Morton Salt Co., supra, 338 U.S. at pages 642, 649, 650, 70 S.Ct. at pages 363, 367; Oklahoma Press Pub. Co. v. Walling, supra, 327 U.S. 200-201, 209, 215-216, 66 S.Ct. 501, 505, 508-509.

Defendant was fully apprised and cognizant of the purpose, nature and scope of the investigation, of the demands made upon it and of the provisions of §§ 6, 9 and 10. While the Commission resolution asserts reason to believe the corporation may have violated the cease and desist order, and that it was in the public interest to investigate the manner and form of compliance, a showing of probable cause preliminary to...