Reuben H. Donnelley Corp. v. F. T. C.

• Decision Date: 02 August 1978
• Docket Number: 78-1194,Nos. 78-1052,s. 78-1052
• Citation: Reuben H. Donnelley Corp. v. F. T. C., 580 F.2d 264 (7th Cir. 1978)
• Parties: 1978-2 Trade Cases 62,171, 1979-1 Trade Cases 62,486 REUBEN H. DONNELLEY CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. FEDERAL TRADE COMMISSION and Michael Pertschuk, Paul Rand Dixon, Elizabeth Hanford Dole, Calvin J. Collier and David Clanton, Individually and as members of the Commission, Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 264

580 F.2d 264

1978-2 Trade Cases 62,171, 1979-1 Trade Cases 62,486

REUBEN H. DONNELLEY CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. FEDERAL TRADE COMMISSION and Michael Pertschuk, Paul Rand Dixon, Elizabeth Hanford Dole, Calvin J. Collier and David Clanton, Individually and as members of the Commission Defendants-Appellees, Cross-Appellants.

Nos. 78-1052, 78-1194.

United States Court of Appeals Seventh Circuit.

Argued April 10, 1978.

Decided Aug. 2, 1978.

George W. McBurney, Chicago, Ill., for plaintiff-appellant, cross-appellee.

David C. Shonka, Atty., Washington, D. C., for F. T. C., defendants-appellees, cross-appellants.

Before SWYGERT and TONE, Circuit Judges, and JAMESON, Senior District Judge. ^*

SWYGERT, Circuit Judge.

The threshold and dispositive issue presented in this appeal relates to the venue provision covering suits against federal officers and agencies.

I

On April 13, 1976 the Federal Trade Commission issued an administrative complaint against the Reuben H. Donnelley Corporation, a publishing company incorporated in Delaware with its principal place of business in New York. In its complaint the Commission charged that Donnelley's publishing policies for the Official Airline Guide, a bi-monthly publication which combines in one directory the passenger flight schedules and fares of all scheduled air lines in North America, violated section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1). More specifically, the Commission alleged that the manner in which the Guide displays the schedules and fares of the various classes of air carriers acts to the disadvantage of the smaller carriers and stifles competition within the airline industry.

Donnelley subsequently filed with the administrative law judge a motion to dismiss for want of subject matter jurisdiction. Donnelley asserted that because the Commission has no jurisdiction over air carriers under 15 U.S.C. § 45(a)(2), it also has no jurisdiction over the business of air carriers, the only commerce alleged by the Commission to be affected by Donnelley's publishing policies. On March 30, 1977, the administrative law judge issued an order denying the motion to dismiss, noting that Donnelley is not an air carrier and that the statutory exemption of the Federal Trade Commission Act applies only to air carriers.

On June 20, 1977 Donnelley filed this action in the United States District Court for the Northern District of Illinois against the Commission and each of its five individual commissioners. Donnelley sought to prevent the administrative hearings from commencing as scheduled, again asserting that the Commission lacked jurisdiction over its proceedings against it. The Commission moved to dismiss or, in the alternative, for summary judgment. It argued that venue was improperly laid in the Northern District of Illinois, that the district court lacked subject matter jurisdiction because Donnelley had failed to exhaust its administrative remedies before the Commission, and that, since Donnelley is not an air carrier, it and its activities are not statutorily exempt from the Federal Trade Commission Act.

The district court on October 31, 1977 rejected all of the Commission's contentions. The court held that venue in the Northern District of Illinois was proper under 28 U.S.C. § 1391(e)(1) because, in its opinion, the Commission is a resident of Chicago through its regional office. ¹ The court also found that the Commission had exceeded its statutory authority in proceeding against Donnelley, and that Donnelley was therefore not required to exhaust its administrative remedies. Accordingly the court enjoined the Commission from pursuing its proceedings. ²

The Commission thereafter moved for reconsideration of the October order, advising the court of our then recent opinion in Squillacote v. International Brotherhood of Teamsters, 561 F.2d 31 (7th Cir. 1977). Upon reconsideration, the district court on December 20, 1977 issued a second order in which it concluded that its original decision holding Donnelley's action within an exception to the exhaustion doctrine was erroneous in light of Squillacote. Accordingly the court vacated its October order and dismissed Donnelley's complaint for failure to exhaust administrative remedies. (In view of its holding, the court deemed it unnecessary to reconsider its prior ruling that venue was proper.) From that ruling Donnelley appealed and the Commission cross-appealed.

II

At oral argument the parties agreed that venue is the threshold question. Venue in civil actions against federal officers and agencies is governed by 28 U.S.C. § 1391(e). That section provides that an action may be brought in any judicial district in which:

(1) a defendant in the action resides, or

(2) the cause of action arose, or

(3) any real property involved in the action is situated, or

(4) the plaintiff resides if no real property is involved in the action.

Donnelley argues that venue is proper under clauses (1), (2), and (4).

A

Section 1391(e)(1) provides that venue is proper in any district in which "a (federal) defendant in the action resides." The district court concluded that because the Commission maintains a regional office in Chicago, it is a resident of the Northern District of Illinois and therefore venue is proper. ³ We disagree.

Prior to the enactment of § 1391(e) in 1962, a federal official or agency could be sued only at the place of official residence. ⁴ Under the prior practice, the Commission could be sued Eo nomine only in the District of Columbia. The district court believed that the enactment of § 1391(e) changed this practice. In its opinion, limiting the residence of a federal agency such as the Federal Trade Commission solely to the District of Columbia would defeat the congressional purpose of liberalizing the venue provision covering federal defendants.

The congressional purpose in enacting § 1391(e) was indeed to broaden the number of places where federal officials and agencies could be sued. The manner which Congress chose to effectuate this objective was by adding additional venue choices to a plaintiff, not by changing previously established definitions of residence. There is nothing in the statute or its legislative history which suggests that Congress also sought to allow a federal agency to be sued Eo nomine wherever it may maintain an office. To the contrary, the wording of the statute itself precludes such an expansive interpretation.

To hold that a federal agency can be sued Eo nomine wherever it maintains an office would, as a practical matter, render subsections (2), (3), and (4) superfluous. With the vast growth of the federal bureaucracy, federal agencies undoubtedly have offices in most, if not all, judicial districts. That being true, there would have been little need for the subsections dealing with the specifics of where the cause of action arose, where the plaintiff resides, and where relevant real estate is situated, if such an expansive interpretation of residency of defendant were intended by Congress. Moreover, such an interpretation would mean that a plaintiff could file a suit in any district regardless of how remote that district's contact may be with the litigation. "The venue statute was not intended to permit forum-shopping, by suing a federal official wherever he could be found, or permitting test cases far from the site of the actual controversy." Hartke v. Federal Aviation Administration, 369 F.Supp. 741, 746 (E.D.N.Y.1973). ⁵

There is nothing inequitable in limiting the residence of a federal agency to the District of Columbia. That has been the settled law for decades. At least since 1962 plaintiffs have had three venue choices which were previously unavailable. ⁶

B

Donnelley alternatively argues that the cause of action arose in the Northern District of Illinois and therefore venue is proper under § 1391(e)(2). It takes this position for two reasons: first, the Official Airline Guide is published in the Chicago metropolitan area and the publishing policies which are alleged to violate the Federal Trade Commission Act were formulated there, ⁷ and second, the impact of any Commission action, for example, a cease and desist order, will be felt by Donnelley in Illinois.

Donnelley's first argument suffers from a basic flaw. It confuses its cause of action against the Commission with the Commission's cause of action against Donnelley. The subject matter of Donnelley's action arose when the Commission filed a complaint against Donnelley. The administrative complaint was issued in Washington, D. C. The administrative law judge, who Donnelley alleges improperly denied its motion to dismiss, resides in the District of Columbia. The administrative proceedings and hearing have been held in Washington. In short, all of the actions which underlie Donnelley's suit against the Commission took place in the District of Columbia.

Donnelley's second argument that the cause of action arose in the Northern District of Illinois because "any cease and desist order which Might be issued by the Commission against Donnelley and the (Guide ) would have its impact in the Northern District" presents a novel extension of the federal venue provisions. Federal courts have used a number of different approaches in determining the place where "the cause of action arose." See cases collected in Note, Federal Venue: Locating the Place Where the Claim Arose, 54 Texas L.Rev. 392 (1976). One such approach has been the place where the injury has occurred because injury is viewed as an essential element of a cause of action. ⁸ See, e. g., Maney v. Ratcliff, 399 F.Supp. 760, 766-67 (E.D.Wis.1975). The injury which Donnelley speaks of, however, is not the injury which comprises part of its present cause of action; rather it is the impact which may result at the end of the administrative proceeding. To base a venue determination on the possibility of some future...