Standard Oil Co. of California v. F. T. C., 75-3678

• Decision Date: 18 May 1979
• Docket Number: No. 75-3678,75-3678
• Citation: 596 F.2d 1381
• Parties: 1979-1 Trade Cases 62,710 STANDARD OIL COMPANY OF CALIFORNIA, Plaintiff-Appellant, v. FEDERAL TRADE COMMISSION, Lewis A. Engman, Chairman; Paul Rand Dixon, Member, Mayo J. Thompson, Member, Mary Elizabeth Hanford, Member, Stephen A. Nye, Member, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1381

596 F.2d 1381

1979-1 Trade Cases 62,710

STANDARD OIL COMPANY OF CALIFORNIA, Plaintiff-Appellant, v. FEDERAL TRADE COMMISSION, Lewis A. Engman, Chairman; Paul Rand Dixon, Member, Mayo J. Thompson, Member, Mary Elizabeth Hanford, Member, Stephen A Nye, Member, Defendants-Appellees.

No. 75-3678.

United States Court of Appeals Ninth Circuit.

May 18, 1979.

George A. Sears, San Francisco, Cal., for plaintiff-appellant.

Michael Kimmel, Washington, D. C., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before ELY, CARTER and TANG, Circuit Judges.

TANG, Circuit Judge.

Standard Oil Company of California (SOCAL) appeals from a judgment dismissing an action in which SOCAL sought review of certain aspects of the Federal Trade Commission's (FTC) decision to issue an administrative complaint under § 5(b) of the Federal Trade Commission Act, 15 U.S.C. § 45(b) (1970) (amended Supp. V 1975). The issue raised is to what extent the provisions of the Administrative Procedure Act, 5 U.S.C. §§ 701-706 (1976), allow the district court to review the FTC's stated determination that it has "reason to believe" that SOCAL is engaged in monopolistic practices in violation of law. Under 15 U.S.C. § 45(b), this "reason to believe" determination is a prerequisite to the issuance of an FTC complaint. ¹ We conclude here that what constitutes "reason to believe" is unreviewable because the "reason to believe" determination is committed to the FTC's discretion. However, we also conclude that the issue whether the FTC did or did not in fact make a "reason to believe" determination is reviewable.

FACTS

Because SOCAL's complaint was dismissed for failure to state a claim upon which relief can be granted, the following facts alleged in SOCAL's complaint must be accepted as true. East Oakland-Fruitvale Planning Council v. Rumsford, 471 F.2d 524, 527 (9th Cir. 1972).

In December 1971, the FTC issued a resolution stating its intention to investigate whether the petroleum industry was engaged in unfair trade practices. Seventeen months passed and the FTC made no apparent effort to investigate SOCAL either through examination of its officers or employees or through review of corporate records. Then, on May 31, 1973, Senator Henry M. Jackson, Chairman of the Senate Interior and Insular Affairs Committee and of the Permanent Investigation Subcommittee of the Senate Committee on Government Operations, sent a letter to FTC Chairman, Lewis A. Engman, requesting that, within 30 days, the FTC provide a report on the relation between the petroleum and related industries and the current and prospective shortages of petroleum products. One day after the letter was sent, the FTC issued subpoenas to three SOCAL officers and shortly thereafter on July 6, 1973, the FTC issued SOCAL a subpoena duces tecum to produce certain corporate books and records.

On July 6, 1973, the FTC also responded to Senator Jackson's request for a report by transmitting to him an undated document entitled "Preliminary Federal Trade Commission Staff Report on Its Investigation of the Petroleum Industry." Chairman Engman's letter accompanying the report stated: "This report has not been evaluated or approved by the Commission, and the findings and conclusions contained in the report do not necessarily reflect the views of the Commission."

On July 13, Senator Jackson released the preliminary FTC report for publication as a committee print. In the week following, the FTC issued complaint number 8934 charging SOCAL and seven other oil companies with various antitrust violations. However, just two days prior to Senator Jackson's release of the report for publication, Chairman Engman had warned that publication of the report would be "inconsistent with (the FTC's) duty to proceed judiciously and responsibly" in determining what, if any, further action should be taken by the FTC.

Prior to the filing of its district court complaint, SOCAL sought relief in the administrative proceeding. In January 1974, SOCAL filed a motion in the FTC proceeding for dismissal of the complaint without prejudice. It argued that Congressional pressure alone had led to the premature termination of the FTC investigation and that the FTC had issued the complaint without "reason to believe" SOCAL had committed a violation. In February, after an administrative law judge certified SOCAL's motion to the FTC, the motion was denied. Later the FTC refused SOCAL's motion for reconsideration.

This action was filed in May 1975. SOCAL prayed that the district court compel the FTC to withdraw or dismiss the administrative complaint. SOCAL claimed that the FTC had arbitrarily and capriciously issued the complaint without facts sufficient to warrant a reasonable belief that SOCAL had violated the law. SOCAL also claimed that, in deciding to issue the complaint, the FTC had improperly considered Congressional pressure and legally irrelevant political and economic factors.

SOCAL also pleaded other facts to support its claim that the agency lacked "reason to believe" SOCAL had violated the Act. For example, counsel for the FTC was unable to provide a satisfactory list of witnesses or documents as ordered by the administrative law judge. Apparently, the FTC did not have even one proposed witness to be called in the proceeding. Also, in light of the FTC's discovery problems, the administrative law judge had recommended in October 1974 that the FTC withdraw the complaint pending further investigation. The FTC rejected this suggestion.

In sum, SOCAL claimed that the FTC had abused its power to issue complaints under 15 U.S.C. § 45(b). The district court, however, dismissed SOCAL's action on grounds that it did not have authority to inquire into what constituted "reason to believe" under 15 U.S.C. § 45(b).

DISCUSSION

SOCAL argues that it is entitled to relief under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701-706. The FTC is an agency subject to the APA. United States v. Morton Salt Co., 338 U.S. 632, 644, 70 S.Ct. 357, 94 L.Ed. 401 (1950). Moreover, as SOCAL pleaded, the district court had jurisdiction under 28 U.S.C. § 1331. See Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977).

Nevertheless, the FTC claims that the issuance of the administrative complaint is not within the purview of the APA because it is not "agency action" under 5 U.S.C. §§ 551(13) and 702. ² We disagree. The language of § 551(13) admits of the interpretation that the subsection is illustrative rather than exclusive. Moreover, Congress has manifested its intent that the APA cover a "broad spectrum of administrative actions." Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). Consequently, the APA's generous review provisions are given a hospitable interpretation. Id. at 140-41, 87 S.Ct. 1507. There is also a presumption of judicial review under the APA unless there is clear and convincing evidence that Congress intended to foreclose review of a final agency action either by a specific statute or by committing action to agency discretion. See, e. g., Morris v. Gressette, 432 U.S. 491, 500-01, 97 S.Ct. 2411, 53 L.Ed.2d 506 (1977); Dunlop v. Bachowski, 421 U.S. 560, 567, 95 S.Ct. 1851, 44 L.Ed.2d 377 (1975); Abbott Laboratories v. Gardner,supra, 387 U.S. at 140, 87 S.Ct. 1507; Washington v. United States Environmental Protection Agency, 573 F.2d 583, 587 (9th Cir. 1978); Montana Chapter of Association of Civilian Technicians, Inc. v. Young, 514 F.2d 1165, 1168 (9th Cir. 1975). Therefore, the relevant question is not whether the FTC's issuance of complaint number 8934 is "agency action" as to SOCAL for almost any act an agency takes can be "agency action" but whether, under the APA, it is reviewable agency action. The latter inquiry triggers the following questions: first, whether a statute precludes judicial review, 5 U.S.C. § 701(a)(1); second, whether agency action is committed to agency discretion by law, 5 U.S.C. § 701(a)(2); and, third, whether there is final agency action for which there is no adequate judicial remedy other than review under the APA. ³

There is no statute precluding judicial review of the FTC's determination that there is "reason to believe" the charged party has violated the law. Therefore, inquiry proceeds to whether the "reason to believe" determination lies entirely within the FTC's discretion. 5 U.S.C. § 701(a)(2). The APA's exception for actions committed to agency discretion applies " in those rare instances where 'statutes are drawn in such broad terms that in a given case there is no law to apply.' " Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 821, 28 L.Ed.2d 136 (1971). When no law fetters the exercise of discretion, the courts have no standard by which to measure the lawfulness of agency action, and consequently, the action is not susceptible of judicial review. City of Santa Clara v. Andrus, 572 F.2d 660, 666 (9th Cir. 1978), Cert. denied, --- U.S. ----, 99 S.Ct. 177,58 L.Ed.2d 167 (1978).

Under this standard, a determination by the FTC that there is "reason to believe" a violation of law has occurred is within the agency's discretion and not reviewable in the district court under the APA. In Hills Bros. v. Federal Trade Commission, 9 F.2d 481, 483-84 (9th Cir.), Cert. denied,270 U.S. 662, 46 S.Ct. 471, 70 L.Ed. 787 (1926), this Court stated that a determination that an FTC complaint would be in the public interest, like the determination that there is "reason to believe" the law has been violated, lies within the FTC's discretion. Later case law upholds the validity of this early statement. Section 5 of the Federal Trade Commission Act is a broad delegation of power by Congress to the FTC. The Act empowers the FTC to determine in the first instance whether a method of competition or an act or practice is unfair. See, Atlantic...