Floersheim v. Weinburger

• Decision Date: 29 February 1972
• Docket Number: Civ. A. No. 2048-70.
• Parties: Sydney N. FLOERSHEIM, an individual trading and doing business as Floersheim Sales Company, Plaintiff, v. Caspar N. WEINBURGER, et al., Defendants.
• Court: U.S. District Court — District of Columbia

346 F. Supp. 950

Sydney N. FLOERSHEIM, an individual trading and doing business as Floersheim Sales Company, Plaintiff, v. Caspar N. WEINBURGER, et al., Defendants.

Civ. A. No. 2048-70.

United States District Court, District of Columbia.

February 29, 1972.

Marion Edwyn Harrison, Washington, D. C., for plaintiff.

Harold A. Titus, Jr., U. S. Atty., United States District Court, Washington, D. C., for defendants.

MEMORANDUM OPINION

PARKER, District Judge.

Plaintiff Sydney N. Floersheim, doing business as Floersheim Sales Company and National Research Company, seeks a declaratory judgment that certain forms revised in alleged compliance with an order of the Federal Trade Commission (FTC or Commission) are not unfair or deceptive in violation of the Federal Trade Commission Act,¹ 15 U.S.C. § 41, et seq. and, therefore, not subject to suppression by the Commission. These forms are sold by the plaintiff to third parties who in turn use them in the collection of delinquent debts and to obtain information about delinquent debtors. The plaintiff also seeks a similar determination as to certain forms intended to be used in plaintiff's own proposed debt collection business. He further seeks a preliminary stay of the penalty provisions of 15 U.S.C. § 45(l) during the pendency of this litigation. The defendants are the individual commissioners of the FTC and the United States of America (Government).

Defendants have moved to dismiss the complaint for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted, or, in the alternative for summary judgment. Opposition has been filed by the plaintiff to the motion to dismiss together with a cross-motion for summary judgment.

For the reasons set forth the Court concludes that the defendants' motion to dismiss should be denied as to the revised forms and granted as to the proposed forms; that the plaintiff's motion for a stay of penalties pendente lite should be denied; that the defendants' motion for summary judgment should be granted with regard to the revised forms for the plaintiff's existing business; and that the plaintiff's cross-motion for summary judgment should be denied.

Plaintiff's business, conceded to be virtually nationwide,

"is that of selling to creditors and to debt collection agencies certain forms— cards and envelopes—for the use of the purchaser in either (1) attempting to trace allegedly delinquent debtors (commonly called `skip-tracer' forms) or (2) attempting to induce allegedly delinquent debtors to pay their debts . . . ."²

On February 5, 1968, the Commission issued an Opinion and a Cease and Desist Order against Floersheim in Docket No. 8721. Floersheim was found to have used and sold forms demanding the payments of debts as well as forms to secure information concerning delinquent debtors, that were deceptive and misleading in appearance "creating the impression that they came from the Government or some other official source or third-party, rather than from the creditor." Envelopes used and sent to debtors were found to simulate those used for official purposes by the United States Government. Skip-tracer forms were found to be deceptive because of their general appearance and similarity to Government checks. The features of other forms used by Floersheim, all set out in the opinion, were regarded as concealing their true nature and were misleading and deceptive.

On review the United States Court of Appeals upheld the Commission's findings, concluding that there was substantial evidence to support the findings that the materials were deceptive. Floersheim's contentions that the Cease and Desist Order was unreasonable, arbitrary, and capricious, amounting to a denial of due process and extending beyond what was reasonably necessary to prevent the deceptions, were rejected. The Court held that the sanctions were justified in view of the past and immediate activities of Floersheim. Judgment was entered affirming the action of the Commission and Floersheim was required to obey and comply with the Cease and Desist Order. Floersheim v. Federal Trade Commission, 411 F.2d 874, 876-878 (9th Cir. 1969), cert. denied 396 U.S. 1002, 90 S.Ct. 551, 24 L.Ed.2d 494 (1970).

Two related series of incidents give rise to the present litigation. The genesis of the first occurred when the plaintiff, pursuant to 16 C.F.R. § 3.61 (a), filed a Report of Compliance alleging in detail the manner and form of his compliance with the Commission's Final Order of February 5, 1968. The cards, forms and envelopes described in and enclosed with the Report of Compliance (the revised forms) were intended to be used in plaintiff's existing business.³ The FTC's Division of Compliance, Bureau of Deceptive Practices responded to the Report of Compliance with critical comments. Following an exchange of correspondence the FTC on April 10, 1970 formally rejected the Report of Compliance, based primarily on the objections noted by its Division of Compliance, and also for failure of the plaintiff to sign the report in accordance with the requirements of the Commission's regulations.⁴ A Commission letter of April 16, 1970 expressly warned that

". . . Any use of the materials rejected by the Commission or any other materials violative of the order may subject Mr. Floersheim to a suit for civil penalties."⁵

The second problem arises from the plaintiff's October 23, 1969 request,⁶ pursuant to 16 C.F.R. § 3.61(c), for an advisory opinion concerning whether certain forms (the proposed forms)⁷ intended to be used in the plaintiff's own proposed debt collection business would comply with the Order in Docket No. 8721. On March 9, 1970, following several contacts regarding this request, the Commission, through its Secretary, formally and with particularity advised plaintiff that the proposed forms failed to comply with the order in numerous respects. . . ."

Plaintiff then further modified these proposed forms and requested reconsideration of the FTC advisory comments. But, significantly, the revisions were merely descriptive; true copies of the samples were not supplied to the Commission. The Commission therefore declined to comment indicating it had "insufficient information on which to base any change in its views of the forms respondent Floersheim proposes to use as those views are stated in its letter dated April 10, 1970 . . . ."⁸

Because of the FTC's response, plaintiff has not embarked on the proposed business venture.

Plaintiff contends that the response to the Report of Compliance concerning the revised forms and the advisory opinion regarding the proposed forms, although both prior to any actual actions or enforcement proceedings, are final agency actions subject to and ripe for judicial review.

REPORT OF COMPLIANCE (THE REVISED FORMS)

The Court agrees with the plaintiff that the FTC's rejection of a Report of Compliance is, for purposes of judicial review, final agency action.

The issue of pre-enforcement judicial review was recently and extensively discussed by the United States Court of Appeals for the District of Columbia in National Automatic Laundry and Cleaning Council v. Shultz, 143 U.S.App. D.C. 274, 443 F.2d 689 (1971), Circuit Judge Leventhal writing for a unanimous bench. In that case a national trade association representing several thousand members of the coin-operated laundry and dry cleaning industry sought a judgment declaring invalid a ruling of the Administrator of the Wage and Hour Division of the Department of Labor. In response to a query from the trade association which set forth three typical fact situations prevailing in that industry the Administrator indicated his opinion that the Fair Labor Standards Amendments of 1966 made the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., as amended, applicable to coin-operated laundries.

In reversing the District Court's dismissal of the action for lack of jurisdiction, the Court of Appeals concluded that

". . . We find no threshold obstacle that requires dismissal of the action before us merely because it seeks judicial review of the `agency action' of interpretation prior to the institution of an agency action for enforcement." 443 F.2d at 704.

". . . The ultimate question is whether the problems generated by pre-enforcement review are of such a nature that, taken together, they outweigh the hardship and interest of plaintiff's members and establish that judicial review of the interpretative ruling should be deferred. To some extent a balancing is involved." 443 F.2d at 702.

The Court proceeded to examine the pertinent aspects of "ripeness" and "finality" with respect to the actual facts before it. It found that "with the authoritative interpretative ruling by the Administrator heading the Wage and Hour Division the agency's interpretative action has come to an end," 443 F.2d at 701; that "the authoritative interpretation of an executive official has the legal consequence, if it is reasonable and not inconsistent with ascertainable legislative intent, of commanding deference from a court that itself might have reached a different view if it had been free to consider the issue on a blank slate," 443 F.2d at 697; and that "the Administrator's interpretation, . . ., has the characteristic not only of securing `expected compliance' . . ., but of possibly stimulating double damage suits by employees who need not fear that they would be at odds with the Government officials involved." 443 F.2d at 697.⁹ Proceeding from those findings the Court concluded that "the sound course is to accept the ruling of a board or commission, or the head of an agency, as presumptively final," 443 F.2d at 701; and that pre-enforcement judicial review of the Administrator's ruling was appropriate.

Judge Leventhal cautioned that "The general presumption of judicial reviewability, and the modern rulings implementing that approach, are not to be understood as projecting a

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