Holloway v. Bristol-Myers Corporation

Decision Date26 July 1973
Docket NumberNo. 71-1479.,71-1479.
Citation485 F.2d 986
PartiesGladys G. HOLLOWAY et al., Appellants, v. BRISTOL-MYERS CORPORATION.
CourtU.S. Court of Appeals — District of Columbia Circuit

Karen W. Ferguson, Chicago, Ill., for appellants.

Gilbert H. Weil, New York City, with whom William G. Greif, Washington, D. C., was on the brief, for appellee.

Before LEVENTHAL, ROBINSON and ROBB, Circuit Judges.

LEVENTHAL, Circuit Judge:

The central ruling in this case holds that private actions to vindicate rights asserted under the Federal Trade Commission Act may not be maintained.

Claiming to represent the interests of the consuming public and advertising audience,1 the appellants brought this class action against Bristol-Myers Corporation, the manufacturer of Excedrin, a widely sold non-prescription analgesic compound. They allege in essence that Bristol-Myers' representations in a variety of advertisements—that Excedrin is and has been shown to be a more effective pain relieving agent than common aspirin—are false, deceptive and materially misleading; and that, in reliance upon them, persons have been and will be induced to purchase Excedrin in preference to other, equally effective and less expensive analgesics, to their pecuniary loss.

The complaint was grounded on three basic theories: a statutory action based on sections 5, 12 and 14 of the Federal Trade Commission Act (hereafter "Act"), as amended, 15 U.S.C. §§ 45, 52 and 54; a common law action for deceit; and an equitable claim that appellee's advertisements constitute a public nuisance. Appellants sought declaratory and injunctive relief, together with damages, both compensatory and punitive.

The District Court dismissed appellants' statutory and equitable claims for failure to state a claim upon which relief could be granted2 and their common law claims for want of jurisdictional amount. We affirm.

A. Broad Overview of the Issue of Private Actions to Enforce the Federal Trade Commission Act

The central question is whether consumers and members of the public at large may bring a private action to enforce §§ 5, 12 and 14 of the Act, as amended, which prohibit "unfair or deceptive acts or practices in commerce" (§ 5(a)),3 including "any false advertisement . . . which is likely to induce, directly or indirectly the purchase of . . . drugs" (§ 12(a)(1)),4 violations of which are misdemeanors if made "with intent to defraud or mislead" (§ 14(a)).5 The issue has been much discussed by scholars.6 We join in the analysis of the well-reasoned opinion of Judge Jones, that an action of this nature may not be maintained Holloway v. Bristol-Myers Corp., 327 F.Supp. 17 (D.D.C., 1971). We add our opinion primarily to enlarge on the well-nigh dispositive history and structure of the legislation, and in part to amplify and redefine the core analysis.

The Act nowhere purports to confer upon private individuals, either consumers or business competitors, a right of action to enjoin the practices prohibited by the Act or to obtain damages following the commission of such acts. On careful examination of the Act and its legislative history, both when passed in 1914 and amended in 1938, we find strong indication that Congress did not contemplate or intend such a private right of action.

Appellants contend that the courts should, by implication of law, recognize and entertain such an action as a necessary adjunct to the enforcement of the statute's prohibitions.

Appellants point to numerous instances in which civil remedies have been implied as judicially-fashioned corollaries to various Federal regulatory statutes.7 The opinion of Judge Jones analyzes a number of these precedents, including particularly the leading case of J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964). In broad outline, the rationale for implying a private right of action rests upon: (1) a Federal statutory or constitutional prohibition against the acts complained of; (2) inclusion of the defendant in the class upon which the duty of statutory compliance has been imposed; (3) legislative intent to place the party claiming injury within the ambit of the statute's protection or to confer a substantive benefit or immunity upon him; (4) injury or threatened harm proximately resulting from the defendant's breach of duty; and (5) unavailability or ineffectiveness of alternative avenues of redress.

These factors are necessary but not sufficient conditions, and their combined presence does not automatically warrant the implication of a private right of action. The core of our decision rejecting implication of a private action lies in our analysis of the ramifications of the asserted private remedy and a comparison of these with the policies and objectives sought to be advanced by Congress.8 This analysis is conjoined with a further discussion of factors (3) and (5), legislative intent and ineffectiveness of the means provided by Congress for effectuating its objective.

Judicial implication of ancillary Federal remedies is a matter to be treated with care, lest a carefully erected legislative scheme—often the result of a delicate balance of Federal and state, public and private interests—be skewed by the courts, albeit inadvertently. This caution is especially apposite in situations where, as here, the substantive prohibitions of the statute are inextricably intertwined with provisions defining the powers and duties of a specialized administrative body charged with its enforcement9 and where Congress has superimposed a structure of Federal law upon the existing system of common law remedies for fraud and deceit without preempting or superseding the latter.

B. The 1914 Statute

The Federal Trade Commission was created in 1914 as part of a two-pronged effort by Congress to improve enforcement of the anti-trust laws.10 One branch of this program consisted of specifically prohibiting certain types of conduct—i. e.: price discrimination, price fixing, exclusive dealing, anti-competitive mergers and acquisitions, and interlocking directorates—that tended to encourage the formation of monopolies. These detailed prohibitions were set forth in the Clayton Act, 15 U.S.C. §§ 12-27, which became law on October 15, 1914. In this area, Congress provided a maximum of enforcement authority: criminal penalties, see 15 U.S.C. § 24; actions brought by the Justice Department to enjoin violations, see 15 U.S.C. § 25; authorization to the FTC and certain other agencies to issue cease and desist orders to restrain violations by enterprises subject to their respective jurisdictions, see 15 U.S.C. § 21. In addition, the Clayton Act expressly authorized private actions, both for treble damages and equitable relief, by any "person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws," 15 U. S.C. §§ 15, 26, and provided that judgments obtained by the United States against the same defendant shall be prima facie evidence of a statutory violation in any subsequent private litigation, see 15 U.S.C. § 16.

Congress recognized, however, that any attempt at an exhaustive catalogue of anti-competitive practices would only tempt those bent upon thwarting or circumventing the anti-trust laws to adopt new and different artifices to achieve the same ends.11 The legislature felt, moreover, that there was need for action of an early, preventive nature, to strike down devices and schemes in their incipiency, before they became entrenched in structure and industrial concentration.12 These factors suggested a statute whose prohibitions were couched in broad, generic terms, permitting application in a wide variety of commercial contexts and coping with evasive tactics. Yet this breadth of prohibition carried with it a danger that the statute might become a source of vexatious litigation. Expertise was called for,13 both to identify trade practices that posed the threat of monopoly and to avoid using the statute as a vehicle for trivial or frivolous claims. There was, furthermore, a need to develop a central and coherent body of precedent, construing and applying the statute in a wide range of factual contexts, so as to define its operative reach.14 Finally, it would be of assistance to create a specialized forum where businessmen whose methods had been called into question could voluntarily revise their practices without the need to resort to the courts.15 It was in response to these needs that, on September 26, 1914, Congress passed the Federal Trade Commission Act and established the Federal Trade Commission.

As enacted in 1914,16 section 5(a) of this Act provided:

Unfair methods of competition in commerce are hereby declared unlawful.
The Federal Trade Commission is hereby empowered and directed to prevent persons, partnerships, or corporations . . . from using unfair methods of competition in commerce.

These two paragraphs follow immediately upon one another, both in the same enumerated subsection. The Act continued, § 5(b):

Whenever the Commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair methods of competition in commerce, and if it shall appear to the Commission that a proceeding by it in respect thereof would be in the interest of the public, it shall serve upon such person, partnership, or corporation a complaint . . . . (emphasis supplied)

The statute went on to detail a procedure whereby the FTC, following notice and hearing, might enter an order directing the respondent to cease and desist from the practice complained of and was empowered to seek enforcement of its order in an appropriate Court of Appeals.

Although the Federal Trade Commission Act and the Clayton Act were coordinate statutes, both furthering the same general objective of avoiding monopoly and concentrations, different means of implementation were selected...

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