NC ST. BD. OF REGIS. FOR PRO. ENG. v. FTC

• Decision Date: 15 August 1985
• Docket Number: No. 84-517-Civ-5.,84-517-Civ-5.
• Citation: 615 F. Supp. 1155
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: NORTH CAROLINA STATE BOARD OF REGISTRATION FOR PROFESSIONAL ENGINEERS AND LAND SURVEYORS, Plaintiff, v. FEDERAL TRADE COMMISSION, Defendant.

615 F. Supp. 1155

NORTH CAROLINA STATE BOARD OF REGISTRATION FOR PROFESSIONAL ENGINEERS AND LAND SURVEYORS, Plaintiff, v. FEDERAL TRADE COMMISSION, Defendant.

No. 84-517-Civ-5.

United States District Court, E.D. North Carolina, Raleigh Division.

August 15, 1985.

Wright T. Dixon, Jr., Carolin Bakewell, Raleigh, N.C., for plaintiff.

Fred Dooley, F.T.C., Office of Gen. Counsel, Washington, D.C., for defendant.

ORDER

TERRENCE WILLIAM BOYLE, District Judge.

Plaintiff, North Carolina State Board of Registration for Professional Engineers and Land Surveyors hereinafter "Board", brought this action pursuant to 5 U.S.C. § 704; 15 U.S.C. § 49 and 28 U.S.C. §§ 1331, 1337 and 2201. Plaintiff named as defendant the Federal Trade Commission hereinafter "Commission". The plaintiff Board, an entity created by the North Carolina General Assembly, alleges that the defendant Commission's issuance of a subpoena ad testificandum and a subpoena duces tecum was an ultra vires action not authorized by the Federal Trade Commission Act¹ hereinafter "FTCA". The Board further alleges that the administrative review procedures utilized by the Commission deprived it of procedural due process as guaranteed by the fifth amendment.

The Board seeks declaratory and injunctive relief. Specifically, it requests that the court restrain the Commission from enforcing the two subpoenas issued to the Board and from issuing further subpoenas. Furthermore, the Board requests that the court declare a rule of professional conduct promulgated by the former to be exempt from FTC investigation. The Board has apparently dropped its request for a temporary restraining order in this matter.

The Commission filed a motion to dismiss, alleging that no statutory basis for subject matter jurisdiction exists in this case, and that the plaintiff in any event has failed to state a claim upon which relief may be granted. For the reasons given hereafter, the Commission's motion to dismiss is granted.

FACTUAL BACKGROUND

The facts regarding the Commission's investigation of the plaintiff Board are, for the most part, undisputed. The North Carolina State Board of Registration for Professional Engineers and Land Surveyors was created by the North Carolina General Assembly in 1921. See N.C.Gen.Stat. § 89C-4 (1981). All members of the Board are appointed by the Governor. Id. The Board consists of four registered professional engineers, three registered land surveyors and two public members who are neither professional engineers nor land surveyors. Id. The Board is responsible for promulgating and adopting rules of professional conduct applicable to the practice of engineering and land surveying. N.C.Gen. Stat. § 89C-20 (1981). The Board is required to submit its proposed rules to the North Carolina Attorney General. N.C. Gen.Stat. § 150A-59 (1981).

Pursuant to this legislative authority, the Board in 1979 promulgated and approved Rule 56.071(e)(8) and incorporated the same into its Rules of Professional Conduct. Rule 56.0701(e)(8) provides:

The Engineer or Land Surveyor shall not attempt to supplant another engineer or land surveyor in a particular employment after becoming aware that the other has been selected for the employment.

On April 2, 1984, a staff attorney for the Commission notified the Board's executive secretary that the agency was conducting an investigation to determine whether Rule 56.0701(e)(8) was in violation of § 5 of the FTCA, i.e., 15 U.S.C. § 45. The Commission requested that the Board provide it with certain information regarding the rule. On April 12, 1984, the Board informed the Commission that it would not voluntarily furnish the information requested.

Faced with the Board's refusal to voluntarily submit information pursuant to an investigation, the Commission resorted to compulsory process and issued a subpoena ad testificandum to the Board's Chairman and a subpoena duces tecum to the Board's Executive Secretary. The Board filed a petition to quash these subpoenas on January 16, 1985. The Commission granted the Board an oral hearing on the petition in Washington, D.C. on January 29, 1985. The hearing was held before a single FTC Commissioner, i.e., Commissioner Terry Calvani.² Commissioner Calvani denied the Board's petition to quash in a written decision dated February 11, 1985.

In the second paragraph of the opinion, Commissioner Calvani directed the Board's attention to FTC Rule 2.7(f), which provides for a three day period within which to file a request with the Secretary of the FTC for a full Commission review. Commissioner Calvani also referred to a notice found in the Federal Register which explicitly stated that full Commission review of an initial ruling would be available only "if a request for a review is received within three days after service of the ruling." 49 Fed.Reg. 6089 (February 17, 1984).

The Board submitted a request for a full Commission review of Commissioner Calvani's decision. This request was mailed on February 14, 1985, and received by the Commission on February 19, 1985 — the first working day following the three-day time period established by Commission Rule of Practice 2.7(f). The Commission denied the Board's request for a full Commission hearing on March 8, 1985. The full Commission cited the Board's failure to timely file its request as the reason for refusing to review Commissioner Calvani's decision.

The Commission set March 14, 1985, as the deadline for compliance with its subpoenas. On March 13, 1985, the Board filed a motion for a rehearing on its request for a full Commission review of Commissioner Calvani's decision. That motion was denied by the Commission on March 22, 1985. The Board filed this complaint on March 28, 1985. Thereafter, the Commission filed a request for documents with the Board pursuant to the North Carolina Public Records Act, N.C.Gen.Stat. §§ 132-1 through -9 (1981). The Board has complied with this request.

APPLICABLE LAW

The Board's complaint effectively contains two causes of action. The Board alleges a deprivation of its constitutional right to due process of law, and also maintains that Rule 56.0701(e)(8) is exempt from FTC investigation. The latter claim arises under two separate theories, i.e., that the rule in question does not affect interstate commerce, and that the rule constitutes "state action" exempt from antitrust scrutiny pursuant to Parker v. Brown and its progeny.

A. Due Process Claim

The court considers the Commission's motion to dismiss the Board's due process claim to be a 12(b)(6) motion to dismiss for failure to state a claim: the court has subject matter jurisdiction over these claims by virtue of the constitutional implications which they raise. Since this motion was accompanied by affidavits and exhibits, the court will treat it as a motion for summary judgment. Fed.R.Civ.P. 12(b)(6).

The Board alleges that the processing and denial of its request for a full Commission review of Commissioner Calvani's order deprived the state agency of its right to due process as guaranteed by the fifth amendment. The Board cites the short amount of time (three days) within which the request for review must be received by the Commission in Washington, as well as the Commission's failure to apprise the Board of FTC Rule of Practice 4.4(b) which specifically stated that the three day time period referred to receipt of the request (as opposed to mere mailing of the same). See 16 C.F.R. § 4.4(b) (1985).

Prior Supreme Court cases foreclose any constitutional argument the Board may make in this case. The Due Process Clause is not offended when an administrative agency uses its subpoena power to gather evidence adverse to an individual or entity. SEC v. Jerry T. O'Brien, Inc., ___ U.S. ___, 104 S.Ct. 2720, 2725, 81 L.Ed.2d 615 (1985). The Due Process Clause is not implicated because an administrative investigation does not adjudicate legal rights. Id. See also Hannah v. Larche, 363 U.S. 420, 440-43, 80 S.Ct. 1502, 1513-15, 4 L.Ed.2d 1307 (1959). In the case at bar, the administrative proceedings are still in an investigative stage, and the Board's legal rights are not being adjudicated. Moreover, the Commission's subpoenas are not self-enforcing; the Board will not subject itself to penal sanctions until the Commission attempts to enforce the subpoenas in federal district court. See 15 U.S.C.A. § 49 (1973 & Supp.1985). Consequently, the court finds that the Board's procedural due process claim fails to state a claim upon which relief may be granted. The Commission's motion to dismiss is therefore granted as to the Board's fifth amendment claim.

B. Exemption Claim

As a general rule, a private party may not bypass the specific statutory scheme enacted by Congress for judicial review of adverse agency action. General Finance Corp. v. FTC, 700 F.2d 366, 368 (7th Cir.1983). Consequently, a party may not obtain review of an agency decision by circumventing the Administrative Procedure Act's³ review provisions via a request for declaratory or injunctive relief pursuant to 28 U.S.C. § 1331 or § 1337. See id. However, there exists a notable exception to this general rule requiring adherence to congressionally created judicial review procedures. If an agency acts in "brazen defiance" of its statutory authorization, courts will entertain a cause of action based on § 1331 or § 1337 jurisdiction. Phillip Morris, Inc. v. Block, 755 F.2d 368, 369-70 (4th Cir.1985). This exception enables courts to preserve the status quo, to prevent infringement of substantial rights that might otherwise be sacrificed, and to protect against the subversion of congressional policy. See Mayor and City Council of Baltimore v. Mathews, 562 F.2d 914, 920 (4th Cir.1977). See also Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958).

Pursuant to the APA, judicial review is appropriate only where agency action is made reviewable by statute or where "final agency action" is taken for...