P. Lorillard Co. v. Federal Trade Commission, 6140.

• Decision Date: 29 December 1950
• Docket Number: No. 6140.,6140.
• Citation: 186 F.2d 52
• Parties: P. LORILLARD CO. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Fourth Circuit

186 F.2d 52 (1950)

P. LORILLARD CO. v. FEDERAL TRADE COMMISSION.

No. 6140.

United States Court of Appeals Fourth Circuit.

Argued November 14, 1950.

Decided December 29, 1950.

L. P. McLendon, Greensboro, N. C. (G. Neil Daniels, Greensboro, N. C., F. J. Daniels and T. L. Perkins, New York City, on brief), for petitioner.

Joseph S. Wright, Asst. General Counsel, Federal Trade Commission, Washington, D. C. (W. T. Kelley, General Counsel; James W. Cassedy, Asst. General Counsel; John W. Carter, Jr., John R. Phillips, Jr., and A. B. Hobbes, Attorneys, Federal Trade Commission, all of Washington, D. C., on brief), for respondent.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

PARKER, Chief Judge.

This is a petition to set aside an order of the Federal Trade Commission which directed that the P. Lorillard Company cease and desist from making certain representations found to be false in the advertising of its tobacco products. The Commission has filed answer asking that its order be enforced. The company was ordered to cease and desist "from representing by any means directly or indirectly:

"(1) That Beech-Nut cigarettes, or any other cigarette composed of substantially the same blend of tobaccos, or the smoke therefrom, will not harm or irritate the throat, or will provide any defense against throat irritation; or that the extra length of Beech-Nut cigarettes, or of any cigarette of substantially the same length, will filter out or eliminate the harmful properties in the smoke from such cigarettes or will cause the smoke from such cigarettes to be cooler than the smoke from cigarettes of standard length; provided, however, that nothing herein shall be construed to prohibit the respondent from representing that during the time the extra length of any such cigarette is being smoked the smoke therefrom will contain less irritating properties and will be cooler than the smoke from standard length cigarettes;

"(2) That Sensation cigarettes, or any other cigarette composed of substantially the same blend of tobaccos, are made of extra-choice imported and domestic tobaccos, or are top quality cigarettes, or are made from the finest tobacco that can be bought;

"(3) That Old Gold cigarettes or the smoke therefrom contains less nicotine, or less tars and resins, or is less irritating to the throat than the cigarettes or the smoke therefrom of any of the six other leading brands of cigarettes; or

"(4) That Friends smoking tobacco, or any other smoking tobacco manufactured in substantially the same manner, is rumcured, or that the process by which a rum flavoring is added to such tobacco enriches the tobacco or causes the smoke therefrom to be any less irritating to the throat or any cooler than if such rum flavoring were not added; or that the smoke from Friends smoking tobacco, or from any other smoking tobacco composed of substantially the same blend of tobaccos, will not irritate the mouth or throat of a smoker, or is cool, or is free from bite, burn, or harshness."

The company does not contend that the falsity of the representations referred to in paragraphs (1), (2) and (4) of the above order was not established by substantial evidence but does make that contention with respect to its advertising of Old Gold cigarettes referred to in paragraph (3). It contends, also, that the Commission was without power to make the order because of alleged procedural irregularities and that the order exceeds the authority and jurisdiction of the Commission and is fatally vague and ambiguous in its terms. Three questions are presented for our consideration: (1) whether the Commission was without power to enter the order complained of because of the alleged procedural irregularities; (2) whether paragraph three of the order relating to Old Gold cigarettes is supported by substantial evidence; and (3) whether the order exceeds the power of the Commission or is otherwise invalid.

1. The Procedural Questions.

The principal procedural question raised by the company is whether the Commission, after approving a fact stipulation, could rescind its order to that effect and direct the taking of testimony in the case. The facts are that after the proceeding was instituted, counsel for the company and the Commission agreed upon a stipulation as to the facts with respect to most of the questions presented but provided for the taking of testimony as to two of them. The Commission approved the stipulation and set the case down for hearing. It later discovered that facts in the case which it regarded as highly important had not been stipulated, viz., facts relating to the nicotine, tar and resin content of Old Gold cigarettes as compared with other leading brands of cigarettes. Upon the refusal of the company to agree to an amendment of the stipulation so as to cover this matter, counsel for the Commission moved that it withdraw its approval of the stipulation. This motion was allowed and the order of approval was rescinded and the case was reopened for the taking of additional testimony. The company made a motion to strike this order from the record which the Commission denied, setting forth at length its reasons for the action taken as follows:

"In approving these stipulations, the Commission acted under the erroneous impression, not in any way due to respondent, that with the exception of the two charges mentioned the stipulation covered all other material issues raised by the complaint. When, however, the matter came on for final consideration and the preparation by the Commission of its findings as to the facts and order to cease and desist, it was found that the facts stipulated afforded no basis for findings as to the facts and order to cease and desist with respect to charges in the complaint that Old Gold cigarettes contain tobaccos other than `prize crop' tobaccos, that the tobaccos in Old Golds are not the finest money can buy, and that of the so-called seven leading brands of cigarettes Old Golds are not lowest in nicotine content or in throat-irritating tars and resins.

"At the time of the issuance of the complaint the Commission had reason to believe that these charges were well founded, and there had been no intervening cause for any change in this belief. The Commission was further of the opinion that the charge concerning nicotine, tar, and resin content as set out in subparagraph (f) of paragraph four and controverted in subparagraph (8) of paragraph nine of the complaint, from the standpoint of the public interest, was perhaps the most important charge in the complaint.

"In these circumstances, at the direction of the Commission that appropriate action be taken to provide for determination of these issues upon their merits, the Chief Counsel on March 17, 1945, filed a motion to withdraw approval of the stipulations and reopen the case. Thereafter, pursuant to a rule to show cause, hearing was had upon this motion, and on June 2, 1945, the Commission entered an order rescinding approval of the stipulations and reopening the case for the taking of testimony in support of and in opposition to the allegations of the complaint.

"From time to time in proceedings before the Commission, after entering into stipulations as to the facts with the Commission or filing admission answers to complaints, respondents have requested that the stipulations be set aside or asked leave to withdraw the admission answers. The grounds for such requests have been various and have included matters such as mistake, failure to appreciate the significance of the act, misunderstanding, and others. It has been, and is, the policy of the Commission to grant such requests and thereafter proceed to a determination of the issues upon such facts as may be established in the course of the trial of the case.

"The Commission having fully considered the present matter, including the mistake of fact which resulted in approval of the stipulations, and being of the opinion that there is no warrant for an abandonment of the aforesaid charges, which would result from granting respondent's motion, that the public interest will be best served, and that the rights of respondent will be protected by an adjudication based upon a record established in the trial of the issues; * * *."

Little need be added to what the Commission itself has said with respect to the reopening of the case. Fact stipulations approved by the Commission certainly have no greater sanctity than pretrial stipulations approved by a judge; and no one would contend that a judge could not relieve against fact stipulations upon such a finding as was made by the Commission here. Fed. Rules Civ. Proc. rule 16, 28 U. S.C.A. It must not be forgotton that the Commission is not a private party, but a body charged with the protection of the public interest; and it is unthinkable that the public interest should be allowed to suffer as a result of inadvertence or mistake on the part of the Commission or its counsel where this can be avoided. As said by this court in National Labor Relations Board v. Baltimore Transit Co., 4 Cir., 140 F.2d 51, 55:

"An administrative agency, charged with the protection of the public interest, is certainly not precluded from taking appropriate action to that end because of mistaken action on its part in the past. Cf. Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 145, 60 S.Ct. 437, 84 L.Ed. 656; Houghton v. Payne, 194 U.S. 88, 100, 24 S.Ct. 590, 48 L.Ed. 888. Nor can the principles of equitable estoppel be applied to deprive the public of the protection of a statute because of mistaken action or lack of action on the part of public officials. United States v. City & County of San Francisco, 310 U.S. 16, 32, 60 S.Ct. 749, 84 L.Ed. 1050; Utah Power & Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 61 L.Ed. 791; United States v. City of Greenville, 4 Cir., 118 F.2d 963, 966."

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