Interco, Inc. v. Federal Trade Commission

• Decision Date: 21 December 1979
• Docket Number: Civ. A. No. 78-2486.
• Citation: 490 F. Supp. 39
• Parties: INTERCO, INC., Londontown Corp., Queen Casuals, Inc., Plaintiffs, v. FEDERAL TRADE COMMISSION, Secretary of Federal Trade Commission, General Counsel, Federal Trade Commission, Defendants.
• Court: U.S. District Court — District of Columbia

490 F. Supp. 39

INTERCO, INC., Londontown Corp., Queen Casuals, Inc., Plaintiffs, v.FEDERAL TRADE COMMISSION, Secretary of Federal Trade Commission, General Counsel, Federal Trade Commission, Defendants.

Civ. A. No. 78-2486.

United States District Court, District of Columbia.

December 21, 1979.

Jeffrey I. Gordon, Mayer, Brown & Platt, Washington, D. C., for plaintiffs.

Michael Sohn, W. Dennis Cross, Joanne L. Levine, Ellen Sazzman, Federal Trade Commission, Fred Cohen, Betsy Ginsberg, Dept. of Justice, Washington, D. C., for defendants.

MEMORANDUM OPINION

JOHN H. PRATT, District Judge.

This matter is again before us upon a remand of the record on May 17, 1979 by the United States Court of Appeals for the District of Columbia Circuit.The order of remand was in response to appellant's¹motion for an injunction pending appeal and barred the release of any "documents at issue in this litigation until further order of the Court."The memorandum accompanying the remand indicated that the Findings of Fact and Conclusions of Law which we entered on April 11, 1979 should be further considered in light of a Supreme Court decision, Chrysler Corp. v. Brown,441 U.S. 281, 99 S.Ct. 1705, 60 L.Ed.2d 208(1979), which was issued six days later.Our original decision denied plaintiffs' motion for a preliminary injunction against the release of documents by the Federal Trade Commission to several state attorneys general.The pertinent facts and legal issues are set forth in that decision.²The parties to this action have submitted extensive supplemental memoranda which address the issues raised in the Court of Appeals memorandum.On November 9, 1979, the Federal Trade Commission, in further support of defendant's previously filed supplemental memorandum, has submitted a Statement Concerning Nonpublic Disclosures to State Attorneys General of Information Obtained by the Commission with supporting appendices, affidavits and attachments.(hereinafter referred to as Commission Statement).

The Court of Appeals memorandum specifically referred to a need for an evaluation of three issues which arose from the Chrysler decision: (1) whether the documents at issue in this litigation contain information which is protected from disclosure under a criminal statute, 18 U.S.C. § 1905;(2) if these documents contain the sort of information protected under 18 U.S.C. § 1905, whether there is legal authority for the release of the documents; and (3) the age and contents of the documents as determining "the potential injury that the release of the documents could cause Interco."After reconsidering our previous denial of plaintiffs' motion for a preliminary injunction in light of the decision in Chrysler and the Court of AppealsMay 17, 1979 memorandum, we are persuaded that the documents at issue in this litigation are releasable to state attorneys general under the authority of § 6(f) of the Federal Trade Commission Act, 15 U.S.C. § 46(f).We reach this decision regardless of whether the documents may otherwise fall within 18 U.S.C. § 1905.³

I.Chrysler Decision

The Supreme Court's decision in Chrysler addressed a "reverse FOIA" situation in which a private party sought to enjoin the release of documents by an agency.The plaintiff there claimed that the documents at issue could not be released because they were covered by the language of the (b)(4) exemption to FOIA,5 U.S.C. § 552(b)(4) and that it therefore would have been an abuse of agency discretion to release them.The court in Chrysler held that the FOIA,5 U.S.C. § 552 does not create a private right of action to enjoin an agency from releasing documents within the coverage of exemption (b)(4)(trade secrets and commercial or financial information obtained from a person and privileged and confidential).The court, however, held that a private party could review an agency's decision to release (b)(4) documents under § 10(e) of the Administrative Procedure Act,5 U.S.C. § 706(2)(A).This section authorizes a court to set aside agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."

In its ruling on the merits, the Supreme Court held that whether to assert a FOIA exemption was not a mandatory agency obligation but was instead a matter resting within the discretion of the agency.The court then ruled that it may be an abuse of agency discretion to release documents which are covered by the Trade Secrets Act, 18 U.S.C. § 1905, which makes it a criminal violation for an officer or employee of an agency to disclose information concerning "trade secrets,""confidential statistical data," and the "amount or source of any income, profits, losses or expenditures . . .."⁴The court recognized, as does the Trade Secrets Act, that documents which do fall within the coverage of the Act may nevertheless be released if otherwise "authorized by law."

II.Impact of Chrysler Decision

The Supreme Court decision in Chrysler is consistent with our previous ruling⁵ that the Federal Trade Commission was not required to assert exemption (b)(4) for those Interco documents which the Federal Trade Commission planned to release to state attorneys general.Holding that the FOIA is exclusively a disclosure statute affording no private cause of action to enjoin disclosure, the decision implicitly recognized that an agency may have the authority to release documents within the coverage of exemption (b)(4) if those documents are outside the scope of the Trade Secrets Act, 18 U.S.C. § 1905.⁶The Court of Appeals in its memorandum has recognized such authority in § 6(f) of the Federal Trade Commission Act, 15 U.S.C. § 46(f) to release to the public all documents other than trade secrets and customer lists.⁷As stated in the court's memorandum, "if the Interco documents involved do not contain either trade secrets or names of customers, the Commission in its discretion may release them to the public as well as to state attorneys general."Interco v. Federal Trade Commission,No. 79-1424(D.C.Cir.May 17, 1979).The Chrysler decision as interpreted by the Court of Appeals thus authorizes the Federal Trade Commission to release all Interco documents other than trade secrets or names of customers.The Court of Appeals, however, left open the question of whether there is authority consistent with the Trade Secrets Act for the release of trade secrets and names of customers to state attorneys general.⁸It is this question which remains for our decision on remand of the record.We answer it below by holding that § 6(f) of the Federal Trade Commission Act, 15 U.S.C. § 46(f) authorizes the release of all Interco documents, whether or not they include trade secrets and customer lists, to state attorneys general who provide reasonable assurances that the documents will be held in confidence.⁹

III.Authorization for Release of Documents Under Section 6(f) of The Federal Trade Commission Act

A.The Confidential Commercial and Financial information sought to be released does not include "trade secrets" or "names of customers"

In our decision of April 11, 1979 denying Interco's motion for a preliminary injunction, we held that § 6(f) of the Federal Trade Commission Act, 15 U.S.C. § 46(f), authorized the Commission to make nonpublic disclosures for law enforcement purposes, of confidential information, including trade secrets and names of customers.More specifically, we found that the release of such documents "to state attorneys general for the purpose of investigating illegal competitive practices is not a release to the `public' within the meaning of either 5 U.S.C. § 552(a)and15U.S.C. § 46(f) where state attorneys general have given reasonable assurances that these documents will not be generally released to the public," citing Ashland and Exxoncases.We did not determine whether such documents, in fact, contained "trade secrets" or "names of customers."The record showed merely that the parties had agreed that some of the material supplied to the Commission was confidential information within the meaning of 5 U.S.C. § 552(b)(4).SeeFindings of Factat 11.Instead, we emphasized the non-public nature of the disclosure, irrespective of the contents of the documents.

To place this litigation in context, the Commission, after an extensive investigation commenced in August, 1976 of Interco's practices in the footwear and apparel industries to determine possible antitrust violations, in July, 1978, accepted a proposed consent order with Interco and placed it on the public record for comment.At the same time, in order to facilitate comment on the proposed order, the Commission made public by placing in the public file the bulk of the documents in the footwear file.Documents in the apparel file were not placed in the public record because of certain on-going investigations of other apparel companies.It was at this point that various state attorneys general, wishing to determine whether Interco had violated the antitrust laws of their respective states, asked for the disclosure, on a confidential basis, of documents in the non-public files.In August, 1978, the Commission's general counsel, acting pursuant to delegated authority (16 C.F.R. § 4.11(b)) and after determining that access was in accord with Commission policy to cooperate with other government agencies engaged in law enforcement (16 C.F.R. § 4.6), indicated his intention to make the disclosure requested.Interco, in a complaint filed on September 6, 1978 in the United States District Court for the Eastern District of Missouri and transferred on December 29, 1978 to this court, sought to enjoin the disclosure to any state attorney general of "general confidential commercial and financial information" in the Commission's files relating to Interco.¹⁰(Verified Complaint, p. 13, ¶ 5).In support of its complaint, plaintiff relied upon § 6(f) of the Federal Trade Commission Act, the Freedom of...