Jaymar-Ruby, Inc. v. FTC
| Citation | 496 F. Supp. 838 |
| Decision Date | 08 September 1980 |
| Docket Number | No. S80-107.,S80-107. |
| Parties | JAYMAR-RUBY, INC. v. FEDERAL TRADE COMMISSION and Michael N. Sohn, General Counsel, Federal Trade Commission. |
| Court | U.S. District Court — Northern District of Indiana |
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James Bush, Charles Stewart, William Spangler, Sr., Merrilville, Ind., for plaintiff.
David Ready, U. S. Atty., South Bend, Ind., Patrick J. Quinlan, Providence, R. I., for defendants.
Jaymar brings this action under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202. Jaymar is an Indiana Corporation with its principal place of business in Michigan City, Indiana. To date, sixteen (16) states have intervened as Defendants, pursuant to Federal Rule of Civil Procedure 24. This Court has jurisdiction over this proceeding, pursuant to 28 U.S.C. § 1331(a) dealing with a federal question in a suit against an agency of the United States. Venue is proper in this Judicial District, pursuant to 28 U.S.C. § 1391(e). Also, this is an actual controversy, definite and concrete, touching the legal relations of parties having adverse legal interests, which admit to specific relief through a decree of the Court. Further, the Court has had the assistance of extensive pleadings, briefs and a hearing on this matter and finds that a Declaratory Judgment will provide an expeditious and economical determination of the entire controversy.
The Federal Trade Commission ("F.T.C.") is an administrative agency, created by the Federal Trade Commission Act ("The Act"), 15 U.S.C. §§ 41 et seq. (1976). The F.T.C. is authorized and directed by Section 5 of the Act, to prohibit unfair methods of competition and unfair or deceptive acts or practices, 15 U.S.C. § 45 (1976). To achieve this goal, it is empowered to gather and compile information; and investigate the organization, conduct, practices and management of corporations in or affecting commerce. It is also authorized to make public such information as it deems expedient in the public interest, and to make reports and recommendations for legislation to Congress. Id. § 46.
Under this statutory mandate, the F.T.C. initiated nonpublic investigation of the Advertising Checking Bureau, an organization which provides advertising services to its clients. Jaymar-Ruby, Inc., ("Jaymar") is a client of the Advertising Checking Bureau, which helps to market Jaymar's product. Pursuant to this investigation, the F.T.C. initiated an investigation of Jaymar and certain of its affiliates. On June 13, 1978, the Commission issued a subpoena duces tecum, requiring Jaymar to furnish the F.T.C. documents relating to its marketing, distribution and pricing practices. Jaymar submitted documents consisting of internal correspondence and memoranda, sales and financial statistics, a sales manual and other documents. Some of these documents reveal the names and addresses of customers, marketing strategies, product allocation programs, and cost and profit data. It is these later items that Jaymar contends are trade secrets in the highly competitive clothing industry, and seeks to prevent their disclosure to the requesting State Attorneys General.
The Commission investigation of Jaymar ended in November, 1979 with the issuance of a Commission Complaint and a Consent Order, requiring Jaymar to cease and desist from certain acts, practices and methods of competition. The Order enjoined Jaymar from fixing, establishing, or otherwise controlling or maintaining the resale prices at which retailers sell its products and from taking steps to enforce such prices through the surveillance of retailers, threatened withholding of advertising allowances, or terminating dealers.
Beginning in September, 1979, the F.T.C. received requests from numerous State Attorneys General for access to the Commission's investigative files on Jaymar. These requests commenced under Section 6(f) of the Act, 15 U.S.C. § 46(f), and the policy enunciated by the F.T.C. of cooperation with state law enforcement agencies. 16 C.F.R. §§ 4.6, 4.11(a)(2). Jaymar then initiated its effort to keep portions of these files closed by requesting a grant of confidentiality from the F.T.C. for certain documents. Their underlying fear being that the release of this information to the State Attorneys General will subject it to disclosure to competitors under the Freedom of Information Act (the F.O.I.A.). Jaymar contends that this would allow competitors to obtain these claimed "trade secrets" from the State Attorneys General, thus gaining advance knowledge of Jaymar's marketing plans and strategies, giving them a competitive advantage. The Court recognizes these as legitimate concerns in the market place but the question of disclosure by the State Attorneys General is not before the Court. In response to Jaymar's request, the Commission issued a letter by its General Counsel, Michael N. Sohn, dated November 27, 1979, stating that the requesting State Attorneys General would be granted access to the files under a caveat of confidentiality. Jaymar opposed this release and initiated further negotiations with the F.T.C. in regard to the proposed release. After at least half a dozen letters and phone calls and three conferences, the Commission notified Jaymar by letter dated April 14, 1980 that it had determined not to alter its decision to release the files to the requesting State Attorneys General. Such a release would be limited to those State Attorneys General willing to sign a commitment to maintain the confidentiality of the file. The letter concluded that in light of the undertaking of confidentiality to be signed, the "release of the Jaymar files to these requesters . . . will not jeopardize the commercial sensitivity and value of the materials to the company. . . .". This letter constituted the final agency action.
On April 24, 1980 Jaymar filed this action, alleging that the decision to release the documents to the state requesters violates Section 6(f) of the F.T.C. Act, the Federal Trade Secrets Act, 18 U.S.C. § 1905, the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), the Fifth Amendment to the United States Constitution and that it is entitled to the return of its documents.
In light of the passage of the Federal Trade Commission Improvements Act of 1980 (the "Improvements Act"), which amended Section 6(f) of the old Act, the threshold inquiry must be what statute applies. Prior to Amendment, Section 6(f) of the Act, 15 U.S.C. § 46(f) read as follows:
Publication of Information; reports (f) To make public from time to time such portions of the information obtained by it hereunder, except trade secrets and names of customers, as it shall deem expedient in the public interest; and to make annual and special reports to the Congress and to submit therewith recommendations for additional legislation; and to provide for the publication of its reports and decisions in such form and manner as may be best adapted for public information and use.
Then, on May 28, 1980, the President signed into law the Improvements Act, which amended Section 6(f) as follows:
The Conference Report on the Improvements Act discusses the purpose of these two amendments:
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...request for disclosure since her disclosure request was initiated after the Act became effective (see, Jaymar-Ruby, Inc. v. Federal Trade Com. (N.D.Ind., 1980), 496 F.Supp. 838), and application of the Act in effect when the court rendered its decision is neither manifestly unjust nor contr......