Grolier Inc. v. F.T.C., No. 78-2159

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore WALLACE and ANDERSON; WALLACE
Citation615 F.2d 1215
Parties, 1980-1 Trade Cases 63,153 GROLIER INCORPORATED, a corporation and American Peoples Press, etc., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
Docket NumberNo. 78-2159
Decision Date24 January 1980

Page 1215

615 F.2d 1215
53 A.L.R.Fed. 711, 1980-1 Trade Cases 63,153
GROLIER INCORPORATED, a corporation and American Peoples
Press, etc., et al., Petitioners,
v.
FEDERAL TRADE COMMISSION, Respondent.
No. 78-2159.
United States Court of Appeals,
Ninth Circuit.
Jan. 24, 1980.
As Amended on Denial of Rehearing April 17, 1980.

Page 1216

Frederick P. Furth, Furth, Fahrner & Wong, San Francisco, Cal., argued, for petitioners; Thomas R. Fahrner, San Francisco, Cal., on brief.

Jerold D. Cummins, F.T.C., Washington, D. C., argued, for respondent; Michael N. Sohn, Washington, D. C., on brief.

Petition to Review a Decision of the Federal Trade Commission.

Before WALLACE and ANDERSON, Circuit Judges, and SOLOMON, * District Judge.

OPINION

WALLACE, Circuit Judge:

On March 13, 1978, the Federal Trade Commission (FTC) entered a final cease and desist order against Grolier, Incorporated and 14 of its wholly-owned subsidiaries (Grolier) designed to correct Grolier's adjudged violations of 15 U.S.C. § 45. By this

Page 1217

appeal, pursuant to 15 U.S.C. § 45, Grolier seeks to have that order set aside because of alleged procedural and substantive errors. We set aside the order and remand this case to the FTC for further consideration.
I

Grolier is engaged in the door-to-door and mail order sale of encyclopedias and related reference publications. On March 9, 1972, the FTC issued an administrative complaint charging Grolier with unfair methods of competition and unfair or deceptive acts or practices in connection with its sales activities, pricing representations, promotion techniques, recruitment practices, debt collection, and mail order operations. The case was initially assigned to an Administrative Law Judge (ALJ), who, after presiding at hearings throughout 1973 and 1974, retired from federal service before rendering a decision. A second ALJ was then assigned to complete the case, but he promptly recused himself. In February 1975, Theodore P. von Brand, the third ALJ assigned to the case, began hearings and decided to recall many of the witnesses who had previously testified in the proceedings. In January 1976, four months before completion of the hearings, ALJ von Brand informed the parties that he had served as an attorney-advisor to former FTC Commissioner A. Everett MacIntyre from 1963 through January 1971, during which period Grolier was intermittently investigated and charged by the FTC. Records available to Grolier indicated that Commissioner MacIntyre attended at least one meeting between it and representatives of the FTC.

Upon learning of ALJ von Brand's advisory responsibilities during the eight-year period, Grolier requested that the judge disqualify himself from further participation in the proceedings. The judge denied the request, stating that he did not recall working on matters involving Grolier while serving as legal advisor to the Commissioner. Grolier then filed with the FTC a formal motion for disqualification and removal of ALJ von Brand, at the same time requesting the FTC to permit discovery of specified FTC records which would have tended to show the nature and extent of the judge's contact with the Grolier case. The FTC denied both the motion for disqualification and the requested discovery.

After hearing a substantial part of the case de novo, ALJ von Brand concluded the hearings in May 1976 and issued his decision and recommended cease and desist order in October 1976. On appeal, the FTC adopted in large part the decision and order of ALJ von Brand and reaffirmed denial of the disqualification motion and request for discovery.

II

Grolier argued before the FTC, and now argues before us, that failure to disqualify ALJ von Brand from the case violated both section 554(d) of the Administrative Procedure Act (APA), 5 U.S.C. § 554(d), and the Due Process guarantee of the Fifth Amendment. Grolier also claims that the FTC erred in denying the requested discovery. Upon considering the 554(d) claim and the denial of discovery, we remand the case to the FTC for further consideration. Consequently, we do not here reach Grolier's claims of due process violation and of error in the cease and desist order.

A. Section 554(d)

Most federal administrative agencies combine within one organization a number of responsibilities that our system of government normally seeks to separate. They formulate policy as does the legislature, administer policy as does the executive, and adjudicate controversies as does the judiciary. They investigate infractions of statutes or regulations, prosecute those against whom their investigation has established a prima facie case, and judge the case they themselves have presented. W. Gellhorn & C. Byse, Administrative Law, Cases and Comments 1035 (1974). Nowhere is this combination of functions more apparent than in the FTC.

(T)he Federal Trade Commission receives a charge, ordinarily filed by a consumer

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or a competitor, that a business concern is engaging in an unfair trade practice. The charge is investigated by the Commission's personnel. If the Commission's investigator digs up enough evidence to show the charge to be substantial, a complaint issues in the Commission's name. An attorney employed by the Commission presents evidence (or "prosecutes") in support of the complaint at a hearing before an administrative law judge named by the Commission. The Commission's designated judge considers whether the Commission's attorney has proved the soundness of the Commission's case against the respondent. And in the end the Commission, aided by its staff, decides whether or not the respondent has committed the unfair trade practice of which the Commission had complained.

Id. at 1034-35.

In an effort to minimize any unfairness caused by this consolidation of responsibilities, the APA mandates an internal separation of the investigatory-prosecutorial functions from adjudicative responsibilities. The relevant portion of APA § 554(d) states:

An employee or agent engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision, recommended decision, or agency review pursuant to section 557 of this title . . ..

5 U.S.C. § 554(d). 1 To violate section 554(d), then, an agency employee must, in the same or a factually related case, (1) engage in "investigative or prosecuting functions," 2 and (2) "participate or advise in the decision." Neither Grolier nor the FTC contests the fact that ALJ von Brand's actions meet the latter of these two requirements. The point of their disagreement, and the issue which we must resolve, is whether ALJ von Brand meets the first requirement, i. e., whether his employment as an attorney-advisor to Commissioner MacIntyre constituted "investigative or prosecuting functions" in this or a factually related case.

Grolier contends that attorney-advisors come within the meaning of "investigative or prosecuting functions" because they are chargeable with knowledge of all matters that come before the FTC during their employment.

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Grolier urges that Congress intended to prevent adjudication by persons previously exposed to ex parte information like that developed by the FTC in its investigative and prosecutive activities. In other words, because ALJ von Brand is presumed to have knowledge of every FTC investigation conducted during his eight-year tenure as an attorney-advisor, Grolier would disqualify him from participating in the adjudication of any case investigated during that period, even those with which he had no contact.

The FTC's argument is equally extreme. It contends that because Congress was principally concerned with preventing adjudication by those who have developed, through investigative or prosecutorial zeal, a "will to win" that is incompatible with objective adjudication, section 554(d) applies only to those employed in the actual investigative and prosecutive branches of the FTC. Since attorney-advisors are employed in neither of those branches, the FTC contends that ALJ von Brand is not disqualified by section 554(d). Under such analysis, even an attorney-advisor who involves himself in a case to the point of losing all objectivity could later, without violating the APA, render judgment in that case simply because he was never employed in certain branches of the FTC organization. Neither Grolier's nor the FTC's position is convincing. To determine the scope of section 554(d), we must examine the legislative history of the APA.

In 1939 President Roosevelt "directed the Attorney General to name 'a committee of eminent lawyers, jurists, scholars, and administrators to review the entire administrative process in the various departments of the executive Government and to recommend improvements, including the suggestion of any needed legislation.' " Wong Yang Sung v. McGrath, 339 U.S. 33, 38-39, 70 S.Ct. 445, 449, 94 L.Ed. 616, modified, 339 U.S. 908, 70 S.Ct. 564, 94 L.Ed. 1336 (1950). The report of this committee became the blueprint for the APA and is "still a primary source of information about the federal administrative process." K. Davis, Administrative Law and Government 13 (2d ed. 1975); e. g., Wong Yang Sung v. McGrath, supra, 339 U.S. at 44, 70 S.Ct. 445. In responding to the much criticized union of the investigative, prosecutive and adjudicative...

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18 practice notes
  • Portland Audubon Soc. v. Endangered Species Committee, No. 92-70436
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • April 1, 1993
    ...should be allowed where documents related to improper ex parte communications); see also Grolier, Inc. v. Federal Trade Comm'n, 615 F.2d 1215 (9th Cir.1980) (where ALJ had worked as staff attorney for FTC Commissioner during relevant time period, discovery regarding alleged improper contact......
  • Ewing v. Commissioner of Internal Revenue, Docket No. 1940-01 (U.S.T.C. 1/28/2004), Docket No. 1940-01.
    • United States
    • United States Tax Court
    • January 28, 2004
    ...Dept. of Labor v. Greenwich Collieries, 512 U.S. 267, 278 (1994); Darby v. Cisneros, 509 U.S. 137, 147-148 (1993); Grolier, Inc. v. FTC, 615 F.2d 1215, 1220 (9th Cir. 1980); Marathon Oil Co. v. EPA, 564 F.2d 1253, 1260 n.25 (9th Cir. 1977); see also Carter/Mondale Presidential Comm., Inc. v......
  • Ewing v. Comm'r of Internal Revenue , No. 1940–01.
    • United States
    • United States Tax Court
    • January 28, 2004
    ...2251, 129 L.Ed.2d 221 (1994); Darby v.. Cisneros, 509 U.S. 137, 147–148, 113 S.Ct. 2539, 125 L.Ed.2d 113 (1993); Grolier, Inc. v. FTC, 615 F.2d 1215, 1220 (9th Cir.1980); Marathon Oil Co. v. EPA, 564 F.2d 1253, 1260 n. 25 (9th Cir.1977); see also Carter/Mondale Presidential Comm., Inc. v. F......
  • State v. Living Essentials, LLC, No. 76463-2-I
    • United States
    • Court of Appeals of Washington
    • March 18, 2019
    ...it is likely to make on the general populace." Grolier, Inc., 91 F.T.C. 315, 430 (1978), order set aside and remanded on other grounds, 615 F.2d 1215 (9th Cir. 1980), modified, 98 F.T.C. 882 (1981), reissued, 99 F.T.C. 379 (1982). ¶ 65 In reviewing ads, the court "will often be able to dete......
  • Request a trial to view additional results
18 cases
  • Portland Audubon Soc. v. Endangered Species Committee, No. 92-70436
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • April 1, 1993
    ...should be allowed where documents related to improper ex parte communications); see also Grolier, Inc. v. Federal Trade Comm'n, 615 F.2d 1215 (9th Cir.1980) (where ALJ had worked as staff attorney for FTC Commissioner during relevant time period, discovery regarding alleged improper contact......
  • Ewing v. Commissioner of Internal Revenue, Docket No. 1940-01 (U.S.T.C. 1/28/2004), Docket No. 1940-01.
    • United States
    • United States Tax Court
    • January 28, 2004
    ...Dept. of Labor v. Greenwich Collieries, 512 U.S. 267, 278 (1994); Darby v. Cisneros, 509 U.S. 137, 147-148 (1993); Grolier, Inc. v. FTC, 615 F.2d 1215, 1220 (9th Cir. 1980); Marathon Oil Co. v. EPA, 564 F.2d 1253, 1260 n.25 (9th Cir. 1977); see also Carter/Mondale Presidential Comm., Inc. v......
  • Ewing v. Comm'r of Internal Revenue , No. 1940–01.
    • United States
    • United States Tax Court
    • January 28, 2004
    ...2251, 129 L.Ed.2d 221 (1994); Darby v.. Cisneros, 509 U.S. 137, 147–148, 113 S.Ct. 2539, 125 L.Ed.2d 113 (1993); Grolier, Inc. v. FTC, 615 F.2d 1215, 1220 (9th Cir.1980); Marathon Oil Co. v. EPA, 564 F.2d 1253, 1260 n. 25 (9th Cir.1977); see also Carter/Mondale Presidential Comm., Inc. v. F......
  • State v. Living Essentials, LLC, No. 76463-2-I
    • United States
    • Court of Appeals of Washington
    • March 18, 2019
    ...it is likely to make on the general populace." Grolier, Inc., 91 F.T.C. 315, 430 (1978), order set aside and remanded on other grounds, 615 F.2d 1215 (9th Cir. 1980), modified, 98 F.T.C. 882 (1981), reissued, 99 F.T.C. 379 (1982). ¶ 65 In reviewing ads, the court "will often be able to dete......
  • Request a trial to view additional results

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