Jewel Companies, Inc. v. FTC

• Decision Date: 09 September 1970
• Docket Number: No. 18258.,18258.
• Citation: 432 F.2d 1155
• Parties: JEWEL COMPANIES, INC., et al., Plaintiffs-Appellees, v. FEDERAL TRADE COMMISSION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

432 F.2d 1155 (1970)

JEWEL COMPANIES, INC., et al., Plaintiffs-Appellees, v. FEDERAL TRADE COMMISSION, Defendant-Appellant.

No. 18258.

United States Court of Appeals, Seventh Circuit.

September 9, 1970.

COPYRIGHT MATERIAL OMITTED

J. B. Truly, Asst. Gen. Counsel, E.K. Elkins, Atty., F. T. C., William D. Ruckelshaus, Asst. Atty. Gen., Alan S. Rosenthal, Atty., Dept. of Justice, Harold D. Rhynedance, Jr., Atty., F. T. C., Washington, D. C., for defendant-appellant.

Alex Akerman, Jr., Earl W. Kintner, James F. Rill, Washington, D. C., Theodore A. Groenke, Chicago, Ill., Warren J. Kaps, New York City, Joseph Ryan, Boston, Mass., Eli H. Subin, Orlando, Fla., for plaintiffs-appellees; McDermott, Will & Emery, Myron M. Cherry, Chicago, Ill., John M. Voortman, Arent, Fox, Kintner, Plotkin & Kahn, Mark R. Joelson, James P. Mercurio, Collier, Shannon, Rill & Edwards, Shipley Akerman, Pickett, Stein & Kaps, Rufus W. Peckham, Jr., Washington, D. C., Friedman, Meyers & Keyes, Sylvan Rappaport, Detroit, Mich., Simpson, Thacher & Bartlett, James W. Harrison, Jr., Melvyn L. Cantor, New York City, Lynn, Woodworth & Evarts, Edward J. Duggan, Boston, Mass., Harry E. Jennings, Jr., Bethesda, Md., Stein, Abrams & Rosen, New York City, Roth, Segal & Levine, Orlando, Fla., Beverly & Frates, Don Beverly, West Palm Beach, Fla., of counsel.

Before FAIRCHILD, KERNER and PELL, Circuit Judges.

KERNER, Circuit Judge.

Plaintiffs-appellees, Jewel Companies, Inc., et al., filed suit in the district court seeking to enjoin the defendant-appellant, Federal Trade Commission, from conducting proceedings pursuant to a complaint filed by the Commission charging violations of Section 2(c) of the Clayton Act, 15 U.S.C. § 13(c). The district court entered a temporary restraining order against the Commission and denied the Commission's motion to dismiss. The court, however, certified the question to this court and we granted leave to appeal under 28 U.S.C. § 1292 (b).

Plaintiffs are buyers and "field brokers" of fresh fruits and vegetables. The field brokers perform various services for the buyers "by furnishing information concerning market conditions, by maintaining contact with various sellers, by inspecting and selecting specified qualities and quantities of fresh fruits and vegetables and by negotiating purchases of said products at the most favorable prices." The buyers do not pay for these services. Rather, the field brokers are paid by the sellers. The Commission contends that these facts charge a violation of Section 2(c) of the Clayton Act, as amended by the Robinson-Patman Act, since the sellers pay the field brokers and these brokers are indirectly controlled by the buyers. Two Commissioners dissented from the issuing of the complaint. Specifically, Commissioner Elman in his dissent charged that the issuance of the complaint was not in the public interest and the majority was applying Section 2(c) too strictly. According to Commissioner Elman, the practices in the industry foster competition and lower prices.

Plaintiffs' suit in the district court to enjoin the Commission's proceedings raises four allegations that the Commission in issuing the complaint acted outside its statutory authority: first, the facts as alleged in the Commission's complaint do not as a matter of law state a cause of action under Section 2(c) of the Robinson-Patman Act; second, one of the Commissioners voting for issuance of the complaint misconstrued his discretionary power; third, the Commission did not make a finding that the issuance of the complaint is in the "public interest;" and fourth, the Secretary of Agriculture has exclusive jurisdiction over the subject matter of these complaints under 7 U.S.C. § 499a et seq.

The issue presented is whether the plaintiffs must exhaust their administrative remedies before attacking the authority of the Commission. Section 5 (c) and (d) of the Federal Trade Commission Act, 15 U.S.C. § 45(c) and (d), confer jurisdiction on the court of appeals to review final orders of the Federal Trade Commission and the Commission contends that the district court does not have jurisdiction to entertain attacks on the Commission's authority. Switchman's Union v. National Mediation Board, 320 U.S. 297, 64 S.Ct. 95, 88 L.Ed. 61 (1943); Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938). We disagree with this broad stand. In Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938), the plaintiff filed suit in the district court claiming that the National Labor Relations Board had no jurisdiction because the company did not conduct business in interstate commerce. The Supreme Court held that the plaintiff must exhaust his administrative remedy since all questions of jurisdiction may be raised in court when and if the Board attempts to enforce an order against the plaintiff. "Obviously, the rule requiring exhaustion of administrative remedy cannot be circumvented by asserting that the charge on which the complaint rests is groundless * * *." 303 U.S. at 51, 58 S.Ct. at 464. Cf. McKart v. United States, 395 U.S. 185, 193-194, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969). While the plaintiff in Myers presented his claim as jurisdictional, the question of whether the company is engaged in interstate commerce is a factual one to be determined in the first instance by the agency charged with enforcing the statute involved. Cf. Lone Star Cement Corp. v. Federal Trade Commission, 339 F.2d 505 (9th Cir. 1964).

In contrast to Myers, the Court in an earlier opinion, Skinner & Eddy Corp. v. United States, 249 U.S. 557, 39 S.Ct. 375, 63 L.Ed. 772 (1919), held that the district court had jurisdiction where plaintiffs claimed that the Interstate Commerce Commission's rate increase granted without a hearing violated Section 4 of the Act to Regulate Congress, as amended by Act of June 18, 1910, c. 309, § 8, 36 Stat. 539, 547. The Court reasoned if the plaintiffs had attempted to seek relief before the Commission on the basis that the rates were confiscatory, the Court on review would be bound by the Commission's determination of reasonableness if supported by substantial evidence, but such review would be inadequate where the claim is that the Commission acted outside its statutory authority, 249 U.S. at 562, 39 S.Ct. 375 and, therefore, found jurisdiction. Thus, the difference between Skinner & Eddy and Myers is whether the appellant has an adequate remedy in the court of appeals to review the agency determination.

The Court in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), followed the principle in Skinner & Eddy. The Court concluded that the district court had jurisdiction where the agency had violated its statutory command by failing to allow professional employees to vote on whether they desired to be included in a unit with non-professionals, and the professionals had no effective way of presenting the claim of invalidity at any later date. The approach in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), has been broadened by the Court in McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 83 S.Ct. 671, 9 L.Ed.2d 547 (1963), in a limited situation where "the overriding consideration is that the Board's assertion of power to determine the representation of foreign seamen aboard vessels under foreign flags has aroused vigorous protests from foreign governments and created international problems for our Government." 372 U.S. at 16-17, 83 S.Ct. at 675. The opinion may be "saying between the lines that a court has a discretionary power to require exhaustion or not. * * *" Davis, 3 Administrative Law Treatise, § 20.02 at 23 (1965 Supp.). But see Boire v. Greyhound Corp., 376 U.S. 473, 84 S.Ct. 894, 11 L.Ed.2d 849 (1964).

Leedom's progency includes Elmo Division of Drive-X Company v. Dixon, 121 U.S.App.D.C. 113, 348 F.2d 342 (1965), where the company sought to prevent the Commission from proceeding pursuant to a complaint on the grounds that the Commission was bound by a previous consent decree "to proceed by way of reopening that case." 348 F.2d at 343. The court held that the procedural error asserted could not be vindicated after the proceedings took place. Under these cases we must decide whether the plaintiffs will have an opportunity to present their claims in the court of appeals and whether that remedy is adequate.

Here, plaintiffs present four separate claims alleging that the Commission is acting outside its jurisdiction. Plaintiffs in their complaint first allege that the Commission's complaint does not as a matter of law charge a violation of Section 2(c) of Robinson-Patman. Congress has charged the Federal Trade Commission with enforcement of the Robinson-Patman Act, 15 U.S.C. § 21, and the sufficiency of the complaint must first be challenged in the agency and not in the court. Cf. Elmo Division of Drive-X Company v. Dixon, 121 U.S. App.D.C. 113, 348 F.2d 342 (1965). Plaintiffs rely heavily on Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681. However, Abbott Laboratories was concerned with review of an industry-wide order which is the end product of the administrative legislative process. Here, we are concerned with the adjudicative process and there is no reason to conclude that the plaintiffs will not have an opportunity to obtain judicial review at the conclusion of the agency's proceedings. We agree with the Commission that the district court has no jurisdiction to determine the merits of this claim.

The plaintiffs' second challenge to the jurisdiction of the Federal Trade Commission is that one of the Commissioners did not properly exercise his statutory discretion in voting for the issuance of the complaint. Of the three Commissioners who voted for the issuance of the complaint, Commissioner MacIntyre construed the Commission's obligation of enforcement under Sections 2(c) and 11 of the...