SOUP, INC. v. FTC

• Decision Date: 27 July 1971
• Docket Number: No. 24476.,24476.
• Parties: S.O.U.P., INC., a Corporation, Petitioner, v. The FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

449 F.2d 1142 (1971)

S.O.U.P., INC., a Corporation, Petitioner, v. The FEDERAL TRADE COMMISSION, Respondent.

No. 24476.

United States Court of Appeals, District of Columbia Circuit.

Order Filed July 27, 1971.

Suggestion for Rehearing Denied November 19, 1971.

Before BAZELON, Chief Judge FAHY, Senior Circuit Judge, and WILKEY, Circuit Judge.

Suggestion for Rehearing En Banc Denied November 19, 1971.

ORDER

PER CURIAM.

Petitioner S.O.U.P., Inc., a corporation, has filed a motion to proceed in forma pauperis in the above entitled case. At the request of members of the Court, a financial statement of each of the small number of members of the corporation was filed. In light of the statute governing forma pauperis appeals, 28 U.S.C. Section 1915(a), which we are bound to construe reasonably, assuming arguendo that a corporation may proceed in forma pauperis, we think it would be inconsistent with the congressional intent to hold that this corporation should be allowed to proceed in that manner in view of the financial data submitted since it is likely that the costs of proceeding would not exceed $100.00. We think we would not comply with the statute, properly construed in the situation presented, if we granted the application, although in so deciding we appreciate the good faith of applicants and their public interest motivation. Accordingly, it is

Ordered by the Court that petitioner's aforesaid motion for leave to proceed in forma pauperis is denied.

Statement of Senior Circuit Judge FAHY in support of the order of the court, in which Circuit Judge WILKEY concurs.

SOUP is not prevented by our order from proceeding with the litigation. It can easily arrange for the small item of costs by assessment or voluntary contribution of its members. The corporate form is a convenient, organizational vehicle, but its convenience does not justify turning it into a vehicle also for avoiding the costs involved in a lawsuit as if it were a pauper. The public interest motivating SOUP's members, which I join in applauding, does not help make the corporation "a person * * * unable to pay such costs or give security therefor." 28 U.S.C. § 1915(a).

The text of the statute reflects the congressional intent and purpose to enable "persons" to obtain exemption, not corporations formed by persons who themselves do not come within the exemption. The statute has the salutary purpose of opening the doors of the courts to poor persons on a basis of equality with the more well-to-do, not to open the doors to "poor" corporations formed by nonpoor members as a convenient form by which to organize and litigate. If the statute is to be enlarged as SOUP contends, I think it should be done by legislation rather than by a strained construction which does not reflect the statute's purposes.

The "time-consuming" responsibility the court has had to assume in this matter, and the "remarkably poor economics" of the court's involvement, referred to by our dissenting colleague, are not the answer to the problem, for the court does not pass over problems which are presented because to decide them consumes judicial resources.

BAZELON, Chief Judge (dissenting).

This case presents an important question concerning the right of a corporation to sue without prepayment of costs under 28 U.S.C. § 1915(a) (1970).¹ A majority of this panel has concluded that even if the statute applies to corporations, this petitioner has not made a showing sufficient to warrant in forma pauperis treatment. Because I believe that the statute does apply to corporations and that the petitioner has satisfied all reasonable standards which might be applied to test such applications, I would grant leave to proceed without payment of costs.

Students Opposing Unfair Practices, Inc. (SOUP) is a private, non-profit corporation designed primarily to assist the Federal Trade Commission in "more vigorously protecting the consumers' rights to fair and honest advertising."² Pursuant to this goal, SOUP attempted to intervene in an FTC proceeding against the Campbell Soup Company. The case is now before this Court on SOUP's petition for review of an FTC order accepting a consent decree against Campbell. Petitioner challenges both the adequacy of the decree as a remedy for alleged violations of the Federal Trade Commission Act, and the agency's refusal to grant SOUP full rights to intervene in the proceeding before it.

I.

Section 1915(a) provides that a federal court may authorize litigation without prepayment of costs "by a person who makes affidavit that he is unable to pay such costs or give security therefor." Emphasis added. The statute's reference to "person" does not indicate, however, that the section has no application to corporations. On the contrary, the statutory guidelines for the interpretation of Congressional acts, 1 U.S.C. § 1 (1970), make clear that the term "person" should ordinarily be taken to "include corporations * * * as well as individuals." Moreover, there is no indication in the legislative history of § 1915 that Congress intended to depart from this well-established canon of statutory construction.³ But my conclusion that § 1915(a) applies to corporations rests on more than this admittedly formal approach to the statute's interpretation. The purpose of the in forma pauperis statute is to insure that indigent parties will not be precluded from litigating significant questions merely because they are unable to pay a relatively small fee. Like an individual, a corporation may lack the means to meet this threshold expense, and thus it too may be barred from the courtroom without regard to the merits of its claim. I can find no reason to believe that Congress's concern for the obstacles facing an indigent litigant extended only to natural persons, and I would therefore hold the statute applicable to corporations.

II.

We are not required at this time to delineate comprehensive principles to govern the application of § 1915(a) to corporations. I am persuaded that SOUP's motion should succeed under any set of guidelines that we might eventually prescribe.

First, SOUP's appeal to this Court is neither frivolous nor malicious, as indicated by the vigorous dissenting opinions of two of the FTC's five Commissioners.⁴ Second, since the members of the corporation have no personal financial stake in the outcome of the litigation, it seems unlikely that they have adopted the corporate form as a subterfuge to avoid the payment of court costs.⁵ To be sure, there is potential for abuse in the in forma pauperis scheme as applied to corporations no less than as applied to individuals. But an excessive concern with this potential at this stage is, to say the least, premature. Neither this Court nor a corporation's adversary in litigation lacks the means to expose abuse and to take corrective action when it does appear.⁶ Moreover, the fact that SOUP is apparently the first corporation to apply to this Court for in forma pauperis treatment since the enactment of the statute would seem to belie any fears that we are soon to be deluged with such applications.

The real difficulty with SOUP's motion, it seems, concerns the assertion of indigency. SOUP is conceded to lack the corporate resources to pay the costs of proceeding in this Court.⁷ Indeed, the FTC not only accepts the corporation's claim of indigency, but itself permitted SOUP to proceed in forma pauperis before the agency. Nevertheless, this Court has apparently concluded that a corporation cannot be indigent for purposes of § 1915(a) so long as its members have the personal means to pay the costs of the proceeding. This approach, which disregards the petitioner's corporate form and treats it as a collection of individual litigants, imposes unnecessary administrative burdens on this Court and may effectively discourage...