Mono-Therm Industries, Inc. v. F.T.C., MONO-THERM

• Decision Date: 14 July 1981
• Docket Number: MONO-THERM,No. 80-2113,80-2113
• Citation: 653 F.2d 1373
• Parties: 1981-2 Trade Cases 64,159 INDUSTRIES, INCORPORATED and Con-Serv, a Division of Bay State Gas Company, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1373

653 F.2d 1373

1981-2 Trade Cases 64,159

MONO-THERM INDUSTRIES, INCORPORATED and Con-Serv, a Division

of Bay State Gas Company, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

No. 80-2113.

United States Court of Appeals, Tenth Circuit.

Submitted Jan. 28, 1981.

Decided July 14, 1981.

William J. Kenney of William J. Kenney & Associates, John P. Wintrol and Frederick

H. Graefe of Perito, Duerk, Carlson & Pinco, P. C., Washington, D. C., Steven W. Hale and Paul Barrett of Cable, Barrett, Langenbach & McInerney, Seattle, Wash., for petitioners.

James H. Sneed, Acting Gen. Counsel, Howard E. Shapiro, Deputy Gen. Counsel, W. Dennis Cross, Asst. Gen. Counsel, and Theodore H. Hoppock, Atty., F. T. C., Washington, D. C., Paul Petruccelli, Michael L. Rodemeyer and Kent C. Howerton, Attys., Bureau of Consumer Protection, F. T. C., Washington, D. C., of Counsel, for respondent.

Before DOYLE, LOGAN and SEYMOUR, Circuit Judges.

SEYMOUR, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); Tenth Cir.R. 10(e). The cause is therefore ordered submitted without oral argument.

The FTC has moved to dismiss as untimely a petition filed by Mono-Therm Industries, Inc. and Con-Serv, a Division of Bay State Gas Co. (collectively "Mono-Therm"), for review of a trade regulation rule promulgated by the FTC under section 18 of the Federal Trade Commission Act, 15 U.S.C. § 57a. ¹ The challenged rule, entitled "Labeling and Advertising of Home Insulation" and commonly known as "the R-Value Rule," governs the labeling and advertising of home insulation products. It appeared in the Federal Register on August 27, 1979. See 44 Fed.Reg. 50,218-45 (1979) (codified at 16 C.F.R. § 460 (1980)). By agency regulation, a rule is deemed promulgated four days after publication. See 16 C.F.R. § 1.14(d) (1980); see also id. § 1.26(d). Thus, the promulgation date for the R-Value Rule is August 31, 1979.

Under 15 U.S.C. § 57a(e)(1)(A), a petition for judicial review of a section 57a rule must be filed within sixty days after promulgation. The only petitions for review filed within sixty days of August 31, 1979 were those of Johns-Manville Corporation, Certanteed Products, and certain others. See generally Johns-Manville Corp. v. FTC, No. 79-1955, (10th Cir., petition filed Aug. 31, 1979). Mono-Therm did not file a review petition until September 26, 1980. It did so in the Ninth Circuit Court of Appeals, together with an emergency motion to stay the Rule's effective date, which by then had been set for September 29, 1980. See 45 Fed.Reg. 54,702 (1980). The Ninth Circuit denied the stay motion and transferred the entire matter to this court pursuant to 28 U.S.C. § 2112.

Mono-Therm renewed its stay motion in this court and requested further emergency relief from FTC enforcement during the pendency of this appeal. On March 24, 1981, however, the FTC tentatively decided to grant certain cellulose producers, Mono-Therm among them, a partial exemption from the requirements of 16 C.F.R. § 460.5, the essential portion of the R-Value Rule at issue here. See 46 Fed.Reg. 18,307, 29,256 (1981). This renders moot Mono-Therm's present request for emergency relief, so that what remains before this court are Mono-Therm's review petition and the FTC's dismissal motion for lack of subject-matter jurisdiction.

Mono-Therm's review petition is clearly untimely unless actions taken by the FTC within sixty days prior to September 26, 1980 amount to rulemaking, because 15 U.S.C. § 57a(e)(1)(A) vests the court of appeals with jurisdiction to review only "rules." Contrary to Mono-Therm's arguments, the events between August 31, 1979, when the R-Value Rule was promulgated, and August 15, 1980, the date Mono-Therm contends the rule was finally promulgated, fail to show any amendatory rulemaking by the FTC. Consequently, we must dismiss Mono-Therm's review petition as jurisdictionally out of time under 15 U.S.C. § 57a(e) (1)(A).

When the R-Value Rule appeared in the Federal Register in August 1979, its primary purpose was described as follows:

"The primary purpose of the Rule being promulgated today is to correct the failure of the home insulation marketplace to provide ... essential pre-purchase information to the consumer (for home insulation products). The information will give consumers an opportunity to compare relative insulating efficiencies, to select the product with the greatest efficiency and potential for energy savings, to make a cost-effective purchase, and to consider the main variables limiting insulation effectiveness and realization of claimed energy savings."

44 Fed.Reg. 50,218 (1979). One of those variables limiting insulation effectiveness, and the one at the heart of the present controversy, is "settled density" for loose-fill insulation products.

"(L)oose-fill cellulosic and mineral wool materials always settle in attics, and will also settle in walls if not installed to the proper density. This settling reduces the R-value ² of the insulated area."

44 Fed.Reg. 50,228 (1979) (footnote omitted). To prevent this from becoming a source of deception for the consumer, 16 C.F.R. § 460.5 was written to require that R-values for loose-fill materials be tested at "settled density":

"460.5 R-value tests

"R-values measure resistance to heat flow. R-values given in labels, fact sheets, ads, or other promotional materials must be based on tests done under the methods listed below. They were designed by the American Society of Testing and Materials (ASTM). The test methods are:

"...

"(2) For cellulose, the tests must be done at the settled density determined under GSA Specification HH-I-515D.

"(3) For loose-fill mineral wool, the tests must be done on samples that fully reflect the effect of settling on the product's R-value. When a settled density procedure becomes part of a final GSA Specification for loose-fill mineral wool, the tests must be done at the settled density determined under the GSA Specification."

16 C.F.R. § 460.5(a)(2), (3) (1980).

Mono-Therm produces and sells only cellulose insulation. The testing procedure for this material in General Services Administration Specification HH-I-515D is commonly known as the "drop test." Regarding its treatment of cellulose versus mineral wool materials, the FTC explained:

"This settled density test (the 'drop test') for cellulose represents a significant technological advance in the art of insulation testing....

"No final settled density testing procedure has yet been accepted for loose-fill mineral wool. However, the mineral wool manufacturers contend that the coverage charts for their loose-fills take settling into account, and that if the coverage information is followed, the consumer will attain the represented R-value. Under these circumstances, the Commission is presently imposing a general requirement that loose-fill mineral wool R-values be based on tests that take the adverse effects of settling into account. In addition, section 460.5(a) of the Rule states that as soon as a settled density test for loose-fill mineral wool becomes part of a final GSA Specification, R-value tests for that product must be done at the settled density determined under the GSA Specification."

44 Fed.Reg. 54,228 (1979) (emphasis added) (footnotes omitted).

Thus, the August 1979 promulgation of the R-Value Rule reflects a contemplation that the General Services Administration would adopt some specification in the future and that a settled-density testing procedure for mineral wool insulation would be included in such specification. Mono-Therm contends that the FTC assured it, throughout the rulemaking proceeding and thereafter, that the Rule would not go into effect before the GSA adopted the contemplated specification. Whatever the merit of that contention, however, such specifications did not materialize before the FTC finally announced about a year later, on August 15, 1980, that section 460.5 would become effective on September 29, 1980. See 45 Fed.Reg. 54,702 (1980).

The effective date of the R-Value Rule had originally been announced as November 30, 1979. But this was stayed first by the FTC itself and then by Congress, until May 31, 1980. See id. In early June 1980, the FTC invited public comment on its proposal to further stay certain provisions of the R-Value Rule, other than section 460.5, in connection with the Johns-Manville appeal, No. 79-1955 (10th Cir., petition filed Aug. 31, 1979). On August 15, 1980, the FTC announced that provisions not stayed in connection with that appeal would become effective September 29, 1980.

Mono-Therm reacted by submitting to the FTC a petition "to Stay the Commission's Rule on Home Insulation for the Purpose of Taking Additional Evidence." In a lengthy letter, the FTC on September 25, 1980 denied this petition in all respects. Mono-Therm's instant appeal followed.

Mono-Therm's review petition, as amplified by its filings in this court, claims essentially that the R-Value Rule unfairly discriminates against cellulose producers like Mono-Therm and in favor of its competitors, mineral wool producers. More specifically, Mono-Therm contends that the rule, as finally made effective, places cellulose producers at a competitive disadvantage relative to mineral wool producers because section 460.5 unfairly imposes disparate testing requirements on each group regarding settled density; section 460.6 does the same for representative thickness testing; and section 460.12(b) unfairly imposes disparate disclosure requirements. Mono-Therm also contends that the rulemaking proceeding on the R-Value Rule was tainted by improper ex parte communications between the FTC and others, and by the FTC's improper delegation of its rulemaking authority to other federal agencies.

In support of...