Goodman v. Federal Trade Commission, 15124.

• Decision Date: 17 April 1957
• Docket Number: No. 15124.,15124.
• Citation: 244 F.2d 584
• Parties: Abel Allan GOODMAN, an individual trading as Weavers Guild, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

244 F.2d 584 (1957)

Abel Allan GOODMAN, an individual trading as Weavers Guild, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 15124.

United States Court of Appeals Ninth Circuit.

April 17, 1957.

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Wolver & Wolver, Eugene L. Wolver, Los Angeles, Cal., for petitioner.

Earl W. Kintner, Gen. Counsel, Robert B. Dawkins, Asst. Gen. Counsel, Emerson K. Elkins, Washington, D. C., for respondent.

Before LEMMON and CHAMBERS, Circuit Judges, and YANKWICH, District Judge.

YANKWICH, District Judge.

The Federal Trade Commission, the respondent herein, to be referred to as "the Commission", after an investigation of the practices of Abel Allan Goodman, an individual trading as "Weavers' Guild", to be referred to as "the petitioner", filed a complaint on December 22, 1953, charging him with violation of § 5(a) (1) and § 5(a) (6) of the Federal Trade Commission Act.¹

I.

The Proceedings Under Review.

In substance, the complaint charged that by the use of the words "Weavers' Guild" the petitioner had represented himself that his business was an organization or guild of weavers organized to protect the interests of its members, and that, for the purpose of obtaining salesmen in connection with the sales and distribution of his home study course of instruction in a method of repairing damage to cloth, he had caused to be published in interstate commerce advertisements, and false, misleading and deceptive statements as to the prospective earnings of such salesmen and the assistance which would be given to them. And for the purpose of inducing the salesmen to sell the course of instruction he had made false, deceptive and misleading claims and representations concerning the course and the benefits which would accrue to those purchasing it.

These representations will be treated with greater specificity as we discuss the findings made by the Commission and the attack made on them by the petitioner.

The petitioner filed his answer on January 11, 1954, in which he admitted that he formerly sold and distributed in interstate commerce the course mentioned, but claimed that he no longer did so, but was, at the time,

"only engaged in the liquidation and winding up of the business."

He also denied that certain of the representations were made either by him or in his behalf and claimed that others were true.

A Hearing Examiner was designated and hearings were held in Los Angeles, San Francisco and New Orleans. Twenty-two witnesses were presented for the Commission, nine for the petitioner. The Examiner filed his Initial Decision on September 23, 1955. On appeal, the Commission, on March 14, 1956, denied petitioner's appeal and granted, in part, the appeal in support of the complaint. The order issued by the Commission differed in one respect, to be adverted to later, from that recommended by the Examiner. In substance, the Order required the petitioner, in conjunction with the sales and distribution of the course of instruction of reweaving in commerce to cease and desist from:

1. Representing, directly or by implication:

(a) That the typical earnings of persons selling petitioner's course of instruction are greater than they actually are;

(b) That the petitioner will furnish sales leads or other selling assistance to those selling his course of instruction unless he actually does furnish such leads and assistance;

(c) That sales kits and other advertising material are furnished to sales agents, unless it is clearly disclosed that such articles are furnished only after the agents have made deposits or payment therefor;

(d) That the petitioner's course of instruction constitutes a complete course in reweaving unless and until such is in fact true;

(e) That reweaving is easily learned, or quickly learned, by taking the petitioner's course, unless such representation be specifically restricted to the overweaving or patch type of reweaving;

(f) That the petitioner will arrange for personal instructions for those purchasing his course;

(g) That the potential earnings of persons completing the petitioner's course and engaging in the reweaving business are greater than they are in fact;

(h) That the needles supplied with the course are worth any amount in excess of the amount ordinarily charged for such needles by the petitioner;

(i) That the petitioner will refund payments made on contracts unless he in fact makes such refunds upon demand by the purchasers;

(j) That the petitioner's courses of instruction have been approved for training by the Bureau of Education of the State of California or the United States Veterans Administration.

2. Using the word "Guild" in his trade name or otherwise;

3. Representing, directly or by implication, that his business is anything other than a private business enterprise selling a correspondence course of instruction in reweaving, unless such representation is true.

II.

The Scope of Review.

This is a petition to review the order. Under the Federal Trade Commission Act, the findings of the Commission as to facts, if supported by evidence, are conclusive.²

In an Opinion just filed,³ we had occasion to treat fully the scope of review under this statutory mandate and the impact of the Administrative Procedures Act⁴ on it. The conclusion there stated was that the function of this Court is merely to make a comprehensive review of the record before the Commission and to determine if the findings are supported by substantial evidence on such record considered as a whole.⁵

In exercising the right of review, we are aware that the growing complexity of our economy has induced the Congress to place upon specialized agencies the power to regulate certain phases of it and to control the abuses in them. For this reason, the Supreme Court has stated, both as a policy and as a warning:

"Courts are slow to interfere with their conclusions when reconcilable with statutory directions."⁶

III.

The Status of the Salesmen.

The petitioner's primary contention is that the salesmen who sold the course were independent contractors, for whose actions he was not responsible. The brunt of the argument is based on the claim that because the petitioner carried the salesmen on his books as independent contractors, his agreements with them so stated, and he had no control over their work and the manner of performing it, the connection between him and his salesmen conformed to the classical characteristics which courts have attached to that relationship.

The criteria of direction and control, which govern in determining whether or not such relationship exists, are well recognized in law. However, even the general criteria are not applied with rigid consistency. And in the authorities⁷ there are references to cases in which salesmen have been held to be agents of the principal notwithstanding assertions of a different relationship. However, when interpreting a statute the aim of which is to regulate interstate commerce and to control and outroot some evil practices in it, the courts are not concerned with the refinements of common-law definitions, when they endeavor to ascertain the power of any agency to which the Congress has entrusted the regulation of the business activity or the enforcement of standards it has established.

Illustrative is a case which arose under the National Labor Relations Act⁸ involving the definition of the word "employee" as used in that Act. There was before the Supreme Court the important question whether newsboys who, by ordinary criteria — because they purchase the newspapers at a definite price and resell them, and, in many other respects — would be considered independent contractors, were within the Act.⁹ Ruling in the affirmative, the Court rejected the contention that common-law concepts should be read into statutes of this character, saying:

"It will not do, for deciding this question as one of uniform national application, to import wholesale the traditional common-law conceptions or some distilled essence of their local variations as exclusively controlling limitations upon the scope of the statute\'s effectiveness. To do this would be merely to select some of the local, hairline variations for nation-wide application and thus to reject others for coverage under the Act."¹⁰

The courts adopted a similar attitude under the Fair Labor Standards Act¹¹ when it was urged that homeworkers working on a piece basis, not under the direct control of the employer, were not employees, but independent contractors.¹²

The gloss of these cases is that, in dealing with a regulatory statute aimed to achieve a greater societal control through specialized agencies, the courts should disregard common-law definitions. Rather, should they envisage the legislation as a whole, the evils it sought to eradicate or the control which it aimed to achieve and interpret the words used with these objectives in view. As said by the Court of Appeals for the Sixth Circuit:

"We are dealing, however, with a specific statute which, * * * is of a class of regulatory statutes de signed to implement a public social, or economic policy through remedies not only unknown to the common law but often in derogation of it. * * * If the Act presently considered, expressly or by necessary implication, brings within the scope of its remedial and regulatory provisions, workers in the status here involved, we are not concerned with the question whether a master-servant relationship exists under otherwise applicable rules of the common law."¹³

The statute under which the present proceeding was instituted declares unlawful,

"Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce."¹⁴

And the Commission is empowered to prevent persons

"from using unfair methods of competition in commerce and deceptive acts or practices in commerce."¹⁵

The courts in interpreting the particular statute have...