FTC v. United States Pipe and Foundry Company

• Decision Date: 03 October 1969
• Docket Number: Civ. A. No. 1500-69.
• Citation: 304 F. Supp. 1254
• Parties: FEDERAL TRADE COMMISSION, Washington, D. C., Petitioner, v. UNITED STATES PIPE AND FOUNDRY COMPANY, a corporation, Birmingham, Alabama, Respondent.
• Court: U.S. District Court — District of Columbia

304 F. Supp. 1254

FEDERAL TRADE COMMISSION, Washington, D. C., Petitioner, v. UNITED STATES PIPE AND FOUNDRY COMPANY, a corporation, Birmingham, Alabama, Respondent.

Civ. A. No. 1500-69.

United States District Court D. Columbia.

October 3, 1969.

COPYRIGHT MATERIAL OMITTED

Jerold D. Cummins, Federal Trade Commission, Washington, D. C., for plaintiff.

Alan S. Ward, Washington, D. C., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

PRATT, District Judge.

This matter having come before the Court on the petition of the Federal Trade Commission for an order requiring the respondent United States Pipe and Foundry Company to produce documents in accordance with a subpoena duces tecum issued by a hearing examiner in the course of an adjudicative matter before the Commission, and the Court having considered the petition, its attachments, and the memoranda in support and in opposition filed herein, and having heard oral argument in open court, it hereby finds the facts and states the conclusions of law as follows:

Findings of Fact

1. The Commission is presently conducting an inquiry upon a complaint issued by it on January 17, 1968, against the Koppers Company, Incorporated (Koppers) charging it with methods of competition and acts and practices violative of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, in connection with the production of resorcinol (an industrial chemical), including acts by Koppers to foreclose entry into the resorcinol market by the United States Pipe and Foundry Company (U. S. Pipe). According to the complaint, Koppers' actions have had the effect of causing the failure of U. S. Pipe to establish itself as an alternate producer and viable competitor in that market. Koppers filed an answer denying the charges.

2. During prehearing discovery proceedings upon the complaint and answer, a duly appointed hearing examiner of the Commission on November 20, 1968 issued and caused to be served upon U. S. Pipe's subpoena duces tecum returnable within the jurisdiction of this Court.¹

3. As later modified by the hearing examiner, the subpoena calls for production of records and documents covering the period April 1, 1965 to March 12, 1968 (except for items 5 and 6 for which the time period is January 1, 1962 to March 12, 1968), and pertaining to U. S. Pipe's production of resorcinol, including documents showing prices, sales, production costs, profit or loss, and documents comparing these figures with past estimates or forecasts.² In requesting this subpoena Koppers pointed out to the Commission and its examiner that counsel supporting the complaint had given notice that they intended to call U. S. Pipe officials as witnesses at the hearings. Koppers argued that it needed the data in the subpoena for purposes of cross-examination and to defend against the charge in the complaint that it had prevented U. S. Pipe's entry into the resorcinol market, contending that any difficulties U. S. Pipe had were due to its own high production costs and not to anything which Koppers had done.

4. Also sought in the subpoena are underlying documents prepared in connection with certain pre-April 1965 market entry "study" or "studies" which U. S. Pipe had returned under the previous subpoena. Koppers had contended that the return on that subpoena was incomplete, as there was only one basic "study" and that study was couched in generalized language and referred to other underlying documents and data not returned by U. S. Pipe. Although the hearing examiner declined to rule that U. S. Pipe was in default under the first subpoena, he did agree that Koppers was entitled to get such underlying material under the second subpoena.

5. In opinions dated July 2, 1968 and November 1, 1968, the Commission upheld Koppers' right to both subpoenas. In the latter opinion, dealing with Koppers' request for the second subpoena, the Commission ruled:

"While we venture no opinion as to the kind or quality of evidence that would constitute a prima facie showing under this section, it would be patently improper to accept into evidence testimony of officers of U. S. Pipe, or documents from its files, in support of paragraph seven while at the same time honoring U. S. Pipe's assertion of a privilege against disclosing documents that might contradict such a showing. Moreover, without inquiry into contemporaneous business records, it would be difficult or impossible to establish whether U. S. Pipe's resorcinol venture was commercially viable and thus that it would have succeeded in the commercial resorcinol market had the alleged acts and practices of the respondent not taken place."

6. After issuance of the subpoena on November 20, 1968, U. S. Pipe moved to quash the subpoena on several grounds. The hearing examiner denied the motion but ruled that descriptions of secret processes could be omitted by U. S. Pipe in making return on the subpoena. He also entered an order which provided that "the contents of the documents shall not be disclosed to anyone except counsel of record of the parties pending decision of a motion which may be made by United States Pipe and Foundry Company for a protective order within ten days after production of such documents."³

7. U.S. Pipe appealed to the Commission from the hearing examiner's denial of the motion to quash, raising numerous objections, including objections to the propriety of a second subpoena, its scope, the relevance of the documents called for, and the adequacy of any protective order that could be entered by the examiner. After full briefing by both parties, the Commission issued an opinion, dated January 15, 1969, in which it found no impropriety in the examiner's rulings.

8. Subsequent to the ruling of the Commission, the hearing examiner issued an order scheduling the return date on the subpoena, setting it for January 31, 1969.

9. On January 31, 1969, respondent U. S. Pipe, appeared but refused to produce records and documents in accordance with the subpoena.

10. On June 4, 1969, the Federal Trade Commission, with the authorization of the Attorney General of the United States, filed a petition in this Court for an order requiring respondent U. S. Pipe to produce documentary evidence in compliance with the Commission's subpoena. On June 5, 1969, Judge Howard F. Corcoran of this Court ordered respondent to appear and show cause why the Court should not grant the petition.

11. Prior to such appearance, respondent filed a motion to quash this Court's show cause order because of lack of personal jurisdiction over respondent. Hearings on that motion were held before Judge Corcoran on July 14, 1969, at the conclusion of which Judge Corcoran denied the motion to quash.

12. The date upon which respondent was to appear and show cause why the Commission's petition should not be granted was extended by subsequent amendments until September 11, 1969, when the matter came on for hearing.

Conclusions of Law

1. Jurisdiction of this cause and of respondent, and power to issue the order hereafter prayed for, are conferred upon this Court by Section 9 of the Federal Trade Commission Act, 15 U.S.C. § 49, which provides that any District Court of the United States "within the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued to any corporation or other person, issue an order requiring such corporation or other person to appear before the commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question; * * *." The inquiry, in the course of which petitioner's subpoena was issued and served, is being conducted by petitioner within the jurisdiction of this Court.

2. The subpoena should be enforced by this Court if the agency's proceeding is within its statutory authority, and if the documents demanded by the subpoena are reasonably relevant to the proceeding and are described with sufficient particularity. Oklahoma Press Pub. Co. v. Walling 327 U.S. 186, 208-209, 66 S.Ct. 494, 90 L.Ed. 614 (1946); Civil Aeronautics Board v. Hermann, 353 U.S. 322, 77 S.Ct. 804, 1 L.Ed.2d 852 (1957); Adams v. Federal Trade Commission, 296 F.2d 861, 866 (8th Cir. 1961), cert. denied, 369 U.S. 864, 82 S.Ct. 1029, 8 L.Ed.2d 83 (1962). Under the standards enumerated in the above cases, our determination is limited to the question whether the petitioner abused its discretion in issuing the subpoena.

3. The inquiry by the Commission into alleged unfair acts and practices of the Koppers Company, during which inquiry the subpoena was issued, is clearly within the statutory authority of the Commission. Section 5 of the Federal Trade Commission Act, 15 U.S. C. § 45.

4. In an adjudicative matter before the Commission, Koppers as the party named in the Commission's complaint has the right to prehearing discovery processes, including subpoenas duces tecum, on a showing of general relevance and reasonable scope of the evidence sought. 5 U.S.C. § 555(d) (Supp. III, 1965-67); Commission's Rules of Practice, Section 3.42, 16 C.F. R. 3.42 (1969).

5. The documents called for are reasonably relevant to the proceeding. Both the hearing examiner and the Commission have considered carefully the relevancy of the documents in question. In the Matter of Koppers Co., Inc., Docket No. 8755 (Jan. 15, 1969). The subpoena now at issue was in fact prompted by respondent's response to the first subpoena and the Commission in upholding the instant subpoena specifically noted the care with which the hearing examiner observed the Commission precedents in analyzing this subpoena. This court is reluctant to substitute its judgment for the well informed judgments of the examiner and the Commission.

Respondent argues that since the Commission's complaint alleges that Koppers, by unlawful methods of competition, attempted to maintain a monopoly by preventing respondent from entering the resorcinol market, the subpoenaed...