I. C. C. v. Gould, 79-2556

• Decision Date: 30 June 1980
• Docket Number: No. 79-2556,79-2556
• Citation: 629 F.2d 847
• Parties: INTERSTATE COMMERCE COMMISSION, Appellee, v. James R. GOULD, doing business as Brokers for Agricultural CooperativeAssociations, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 847

629 F.2d 847

INTERSTATE COMMERCE COMMISSION, Appellee, v. James R. GOULD, doing business as Brokers for Agricultural

CooperativeAssociations, Appellant.

No. 79-2556.

United States Court of Appeals, Third Circuit.

Argued March 25, 1980.

Decided June 30, 1980.

Edward J. Schwabenland, Asst. U. S. Atty., Robert J. Cindrich, U. S. Atty., Pittsburgh, Pa., M. Faith Angell (argued), Regional Counsel, Bureau of Investigations and Enforcement, I.C.C., Philadelphia, Pa., Peter M. Shannon, Jr., Director, Bureau of Investigations and Enforcement, I.C.C., Washington, D. C., for appellee.

Donald J. Willy (argued), Donald J. Willy & Associates, Sewickley, Pa., for appellant.

Before ROSENN, GARTH and SLOVITER, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge.

This is an appeal from an order of the district court which granted summary judgment in favor of the Interstate Commerce Commission (ICC) on its petition to require James Gould to allow ICC agents access to his business records. We conclude that the ICC possesses statutory authority to examine Gould's records. Nevertheless, Gould has raised a substantial question regarding the protection afforded him by the fifth amendment, and we therefore remand this case to the district court for further proceedings.

I.

Gould does business in the form of a sole proprietorship, Brokers for Agricultural Cooperative Associations (BACA). ICC agents visited the BACA office on October 5, 1977 and, pursuant to section 220(d) of the Interstate Commerce Act (ICA), 49 U.S.C.A. § 11144(b) (West Supp.1980), ¹ demanded to inspect BACA's transportation-related records. Gould refused to comply with the agents' request. After further communications, the ICC on a number of occasions again requested access to BACA's records. These requests were made pursuant to section 11144(b), as well as ICA § 220(g), 49 U.S.C.A. § 11144(c) (West Supp.1980). ² Gould consistently refused to permit access to his records.

The ICC then filed an action in the District Court for the District of Western Pennsylvania. This action sought an injunction which would compel Gould to grant the ICC access to BACA's records. The court's jurisdiction was invoked pursuant to ICA §§ 204(a)(6), 220(d), 222(b)(1), 49 U.S.C.A. §§ 10321(c)(3), 11144(b), 11702(a)(4) (West Supp.1980). ³ In his submissions, Gould admitted to doing business as BACA, App. at 15 (answer); that he believed that the ICC was investigating him, id. at 15-16; that the ICC had requested access to his records a number of times, id. at 16; and that he had refused to comply with those requests, id. at 17. He also admitted paragraphs 4 and 5 of the ICC complaint, which state:

4. Pursuant to this investigation, on or about October 5, 1977, Agents Martin P. Monaghan, Jr., and John Sopko, duly authorized agents of the Commission, appeared at the defendant's place of business and, after proper display of credentials, made a formal oral demand for access to those transportation-related records and documents maintained by the defendant in the course of his interstate transportation operations under the name of BACA. Said demand was refused by the defendant, James R. Gould.

5. Defendant was re-contacted by Agent Monaghan, on or about October 6, 1977, and at this time Agent Monaghan again requested access to the transportation-related records and documents maintained by the defendant. Said demand was once again refused by the defendant, James R. Gould.

Id. at 6.

In his answer, Gould also raised as separate defenses the ICC's lack of jurisdiction over BACA, that the ICC's request for records was made in bad faith, ⁴ and that the records were shielded from ICC view by the fourth and fifth amendments. ⁵ The ICC moved for summary judgment, which was granted. ⁶

The issues presented in this appeal fall into three broad categories: first, whether the ICC has jurisdiction to conduct its investigation and thus obtain inspection of Gould's papers; second, whether the ICC has followed the procedures required by statute and case law; and, third, whether the Constitution nevertheless shields Gould's records from disclosure. It is to the first category which we now turn.

II.

The dispute over the ICC's statutory jurisdiction under section 11144(b) to "inspect and copy any record of a . . . broker" poses the question as to whether the ICC has jurisdiction to determine its own jurisdiction. Gould contends that he and BACA are exempt from ICC regulation and has denied that BACA's operations are in any way subject to ICC jurisdiction. Gould argues that section 11144(b) applies only where a business has consented to ICC regulation or has been adjudicated to be subject to ICC jurisdiction. Gould maintains that the ICC may investigate BACA's activities only by resorting to the more cumbersome procedures of ICA §§ 204, 205, 49 U.S.C.A. § 10321 (West Supp.1980). Section 10321 extends the ICC's investigative power to anyone who has information relevant to a transportation-related inquiry, see Comet Electronics, Inc. v. United States, 381 F.Supp. 1233, 1237-40 (W.D.Mo.1974), aff'd mem., 420 U.S. 999, 95 S.Ct. 1439, 43 L.Ed.2d 758 (1975); note 3 supra. ⁷

The ICC, on the other hand, argues that the section 10321 general investigatory power and the section 11144(b) inspection power are equally available alternatives where the person or entity the ICC seeks to inspect arguably falls within ICC jurisdiction. The ICC points out that it must first inspect Gould's BACA records to determine whether or not Gould has subjected himself to ICC jurisdiction either by the nature of his business or by his business dealings:

The purpose of the Commission's inquiry is to determine whether or not the defendant is subject to the provisions of the Interstate Commerce Act, and if so, whether the defendant is in violation of any of the provisions thereof.

App. at 170 (answer to interrogatory).

We find the ICC's argument persuasive. Section 10321 explicitly states, "Enumeration of a power of the Commission in this subtitle does not exclude another power the Commission may have in carrying out this subtitle." This disclaimer belies Gould's claim that section 10321 is in any way exclusive. Moreover, the cases that have examined analogous issues of jurisdiction of other agencies have consistently accorded broad latitude to the agencies' powers, including "jurisdiction to determine jurisdiction" by summary procedures.

First, it is clear that regulatory agencies may inspect records on summary proceedings without any showing of probable cause. See, e. g. United States v. Powell, 379 U.S. 48, 53-54, 85 S.Ct. 248, 253, 13 L.Ed.2d 112 (1964) (Internal Revenue Service). All that is necessary is that the "information sought (be) reasonably relevant," United States v. Morton Salt Co., 338 U.S. 632, 652, 70 S.Ct. 357, 368, 94 L.Ed. 401 (1950) (Federal Trade Commission).

Second, the Supreme Court held in Oklahoma Press Pub. Co. v. Walling, 327 U.S. 186, 66 S.Ct. 494, 90 L.Ed. 614 (1946), that under the Fair Labor Standards Act provision giving the Secretary of Labor the authority to subpoena records summarily, 29 U.S.C. § 209, it was for the Secretary, in the first instance, to determine, by inspecting the records if necessary, whether the particular business was covered by the Act. See 327 U.S. at 209-14, 66 S.Ct. at 505-08. The Court distinguished those situations requiring probable cause, as in the case of a warrant, from situations, like the one presented there, where the investigation was "for a lawfully authorized purpose, within the power of Congress to command," id. at 209, 66 S.Ct. at 505, and where "the documents sought are relevant to the (agency's) inquiry," id. It was in this context that the Court defined the Administrator's subpoena power and the right of summary enforcement. The Court said:

We think, therefore, that the courts of appeals were correct in the view that Congress has authorized the Administrator, rather than the district courts in the first instance, to determine the question of coverage in the preliminary investigation of possibly existing violations; in doing so to exercise his subpoena power for securing evidence on that question, by seeking the production of petitioner's relevant books, records and papers; and, in case of refusal to obey his subpoena, issued according to the statute's authorization, to have the aid of the district courts in enforcing it.

Id. at 214, 66 S.Ct. at 508, see Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 507-09, 63 S.Ct. 339, 342-43, 87 L.Ed. 424 (1943) (Walsh-Healey Public Contracts Act, 41 U.S.C. §§ 35-45). The courts of appeals have followed the same analysis in construing the subpoena power ⁸ of other agencies. In SEC v. Brigadoon Scotch Distributing Co., 480 F.2d 1047 (2d Cir. 1973), cert. denied, 415 U.S. 915, 94 S.Ct. 1410, 39 L.Ed.2d 469 (1974), the Second Circuit wrote:

Appellants argue, therefore, that before the Commission can subpoena information from them, the Commission must demonstrate that there is "reasonable, factual cause for a belief that the sales made by these three (appellants) may constitute the sale of 'securities' or 'investment contracts' within the meaning of Section 2(1) of the Securities Act." In particular, they urge that the district court must make some initial determination as to statutory coverage and that the fourth amendment's "probable cause" requirement demands that the Commission show enough facts to demonstrate that "reasonable grounds" exist for issuing subpoenas to appellants and compelling the production of documents.

Appellants raise serious questions about whether their activities are subject to regulation by the SEC. Should the Commission seek to exercise regulatory control over appellants' business affairs at some future date, whether by means of a section 5 injunctive suit or otherwise, appellants will be entitled to a full hearing on their contentions. However, it has long been...