Jaymar-Ruby, Inc. v. F.T.C.

• Decision Date: 17 June 1981
• Docket Number: JAYMAR-RUB,INC,No. 80-2369,80-2369
• Citation: 651 F.2d 506
• Parties: 1981-1 Trade Cases 64,107 , Plaintiff-Appellant, v. FEDERAL TRADE COMMISSION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 506

651 F.2d 506

1981-1 Trade Cases 64,107

JAYMAR-RUBY, INC., Plaintiff-Appellant, v. FEDERAL TRADE COMMISSION, et al., Defendants-Appellees.

No. 80-2369.

United States Court of Appeals, Seventh Circuit.

Submitted Jan. 23, 1981.

Decided June 17, 1981.

Jeffrey I. Gordon, Mayer, Brown & Platt, Washington, D. C., Charles L. Stewart, Hart, Schaffner & Marx, Chicago, Ill., for plaintiff-appellant.

Edward F. Glynn Jr., F. T. C., Washington, D. C., Patrick J. Quinlan, Providence, R. I., for defendants-appellees.

Before SWYGERT, Circuit Judge, KUNZIG, ^* Judge, and BAUER, Circuit Judge.

KUNZIG, Judge.

The issue here is one of first impression before this court: whether the FTC's decision under the Federal Trade Commission Improvements Act of 1980 to disclose its investigative files to state attorneys general is judicially reviewable. We hold that such decisions are not reviewable, provided that the two statutory prerequisites of (1) confidentiality and (2) official law enforcement purpose are satisfied. We rest principally on the "committed to agency discretion" exception of the Administrative Procedure Act, 5 U.S.C. § 701(a)(2) (1976). ¹

Before relating the facts of this case, we shall briefly describe the statutory mandate underlying the FTC's authority to disclose information obtained in the course of an investigation.

I. BACKGROUND

A. Statutory Background. Section 5(a)(1) of the Federal Trade Commission Act (FTC Act) declares unlawful any "unfair method of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce." 15 U.S.C. § 45(a) (1976). In carrying out this broad declaration, the Federal Trade Commission (FTC or Commission) is empowered to "gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce." 15 U.S.C. § 46(a) (1976). Prior to the enactment of the Federal Trade Commission Improvements Act of 1980 (Improvements Act), Pub.L. No. 96-252, 94 Stat. 374 (1980), the Commission was authorized under § 6(f) of the FTC Act, 15 U.S.C. § 46(f) (1976), to disclose publicly this information, except trade secrets and names of customers, as it deemed expedient in the public interest. ²

The Commission interpreted its authority under this law to permit disclosure of investigative files to state attorneys general conducting similar investigations. Although § 6(f) did not explicitly authorize such disclosure, the Commission's view was upheld in Interco Inc. v. FTC, 478 F.Supp. 103 (D.D.C.1979), appeal dismissed, No. 79-1423 (D.C. Cir. 1980) and Martin Marietta Corp. v. FTC, 475 F.Supp. 338 (D.D.C.1979), affirmed as modified, No. 79-1783 (D.C. Cir. 1980).

In May 1980, Congress enacted the Improvements Act which, among other things, amended § 6(f). The amended § 6(f) authorizes the Commission to share any privileged information with any Federal or State law enforcement agency, provided that the agency certifies that the information will remain confidential and be used only for official law enforcement purposes. ³

The language of amended § 6(f) explicitly demonstrates Congress' intent to adopt and codify the view which the Commission and courts had held of the Commission's authority under the old law. Moreover, as Congressman Preyer, one of the principal architects of the Improvements Act stated:

The purpose of these provisions is to make it crystal clear that the Commission has this authority and that it should be able to exercise it without undue delay and restraint.... By clarifying the law, we hope to put an end to litigation ... which needlessly delays and hampers the ability of our state attorneys general to protect the citizens of their States.

126 Cong.Rec.H.3870 (daily ed. May 20, 1980). Congress was clearly attempting to remove any doubt as to the FTC's authority to share the fruits of its investigations with state officials similarly concerned. ⁴

B. Factual Background. In this action, plaintiff, Jaymar-Ruby, Inc. ("Jaymar") ⁵ seeks to prevent the Commission from sharing its investigative files with some nineteen state attorneys general. ⁶ The relevant facts are not in controversy.

On April 28, 1978, the Commission formally undertook to determine whether certain clothing companies were engaged in illegal activities under the FTC Act. ⁷ Jaymar, a men's sportswear manufacturer and distributor, ⁸ was one such company under investigation. On June 13, 1978, the San Francisco Regional Office of the Commission issued a subpoena duces tecum ordering Jaymar to produce documents relating to its marketing, distribution and pricing practices. Pursuant to that subpoena, Jaymar provided the Commission with voluminous materials in August, November and December, 1978. These materials consisted of internal memoranda and correspondence, sales and financial data, Jaymar's sales manual, model books, order books, order forms, advertising service brochures and fashion portfolios.

The investigation of Jaymar resulted in the issuance of a Commission Complaint and the entry of a cease and desist Consent Order. The Order, dated November 9, 1979, prohibited Jaymar from "fixing, establishing, controlling or maintaining, directly or indirectly, the resale price at which any dealer may advertise, promote, offer for sale or sell any products of the sale period of any dealer." Jaymar was further enjoined from pursuing enforcement of such prices through surveillance of retailers, coercion, threatened withholding of advertising allowances or terminating dealer relationships. Upon entry of the Consent Order, the Commission ended its investigation of Jaymar. ⁹

Beginning in September 1979, the Commission received requests from various state attorneys general pursuant to § 6(f) of the FTC Act. ¹⁰ See also 6 C.F.R. §§ 4.6, 4.11(b)(2) (Commission policy of cooperation with state law enforcement officials). The state attorneys general sought access to the Commission's investigative file to determine if Jaymar had violated various state antitrust laws or state deceptive trade practices acts. ¹¹

Following nearly fourteen months of discussion, correspondence and negotiation between Jaymar, the Commission, and the state attorneys general concerning the measures to be taken to insure the protection of materials alleged by Jaymar to be confidential, the Commission, by a letter dated April 14, 1980, notified Jaymar that "release of the Jaymar-Ruby files to these requesters * * * will not jeopardize the commercial sensitivity and value of the materials to the company, since no public disclosure or commercial use of the documents is contemplated." ¹² This letter constituted final agency action. Ten days later, Jaymar instituted suit in the United States District Court for the Northern District of Indiana seeking a declaratory judgment and injunctive relief barring the proposed disclosures.

After a hearing on Jaymar's motion for a preliminary injunction, the district court enjoined the Commission's proposed release of its investigative files until August 6, 1980. ¹³ On September 8, 1980, the district court entered a Memorandum and Order dismissing Jaymar's complaint and dissolving the injunction against the Commission's release of the materials. ¹⁴ In its ruling, the district court held, inter alia, that the Commission's decision to release the materials fell within the agency's unreviewable discretion under § 701(a)(2) of the APA. See infra n.1 at 507. On this appeal, the parties essentially contest the validity of that holding. ¹⁵ We are satisfied that when the Commission decides to release materials to state attorneys general, this decision is unreviewable, except to assure compliance with the statutory criteria of confidentiality and official law enforcement purpose.

II. ANALYSIS

A. The "Committed to Agency Discretion" Exception. We begin with the observation that there is no specific statutory authorization in the Improvements Act for judicial review of the type of decision involved in this case. By contrast, in various other sections of the Improvements Act, Congress expressly did provide for judicial review of Commission actions with respect to certain confidential materials. See 15 U.S.C.A. § 57b-1(g) (Sept. 1980 Supp. West) (judicial review of FTC "custodianship" of investigative materials); 15 U.S.C.A. § 57b-2(c)(3) (Sept. 1980 Supp. West) (judicial review of public disclosure of materials asserted to be confidential). It is reasonable, therefore, to infer that Congress did not intend judicial review of FTC disclosure determinations pursuant to § 6(f). See Board of Trade v. Commodities Futures Trading Commission, 605 F.2d 1016 (7th Cir. 1979), cert. denied, 446 U.S. 928, 100 S.Ct. 1866, 64 L.Ed.2d 281 (1980); Southern Ry. Co. v. Seaboard Allied Milling Corp., 442 U.S. 444, 99 S.Ct. 2388, 60 L.Ed.2d 1017 (1979).

We recognize, on the other hand, that the Supreme Court has enunciated a strong presumption against precluding judicial review, see Morris v. Gressette, 432 U.S. 491, 501, 97 S.Ct. 2411, 2418, 53 L.Ed.2d 506 (1977); Dunlop v. Bachowski, 421 U.S. 560, 567, 95 S.Ct. 1851, 1857, 44 L.Ed.2d 377 and has held that "clear and convincing evidence" of congressional intent to preclude such review is necessary, Abbott Laboratories v. Gardner, 387 U.S. 136, 139-141, 87 S.Ct. 1507, 1510-1511, 18 L.Ed.2d 681 (1967). We find that § 701(a)(2) of the APA provides such conclusive evidence. While this statute was enacted prior to the Improvements Act, it evinces congressional intent that essentially discretionary agency actions should be nonreviewable.

The dominant precedent for determining whether agency action falls within the "committed to agency discretion" exception is Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). In that case, the statutes at issue...