United States v. St. Regis Paper Company

• Citation: 355 F.2d 688
• Decision Date: 19 January 1966
• Docket Number: Docket 29746.,No. 62,62
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. ST. REGIS PAPER COMPANY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

355 F.2d 688 (1966)

UNITED STATES of America, Plaintiff-Appellee, v. ST. REGIS PAPER COMPANY, Defendant-Appellant.

No. 62, Docket 29746.

United States Court of Appeals Second Circuit.

Argued September 20, 1965.

Decided January 19, 1966.

COPYRIGHT MATERIAL OMITTED

Horace R. Lamb, New York City (LeBoeuf, Lamb & Leiby, H. Richard Wachtel, James H. Durand, New York City, on the brief), for defendant-appellant.

James F. Buckley, Atty., U. S. Dept. of Justice (Donald F. Turner, Asst. U. S. Atty. Gen., Lionel Kestenbaum, Atty., U. S. Dept. of Justice, Robert L. Wright, Acting Asst. Atty. Gen., Robert B. Hummel, Atty., Dept. of Justice, Washington, D. C., on the brief), for plaintiff-appellee.

Dunnington, Bartholow & Miller, New York City, Briggs & Morgan, St. Paul, Minn., on the brief of Bemis Bros. Bag Co. as amicus curiae, in support of defendant-appellant.

Before MOORE, SMITH and ANDERSON, Circuit Judges.

MOORE Circuit Judge.

In 1959 the Federal Trade Commission (FTC) issued a consent cease and desist order prohibiting appellant, St. Regis Paper Co. and 16 other manufacturers of multiwall paper shipping sacks, from engaging in certain concerted pricing practices. During the years 1962, 1963 and 1964, the Antitrust Division of the United States Justice Department convened two grand juries in the United States District Court for the Eastern District of Missouri to investigate possible violations of the Sherman Act, 15 U.S.C. §§ 1, 2, by appellant and others, arising out of their pricing practices. No indictment, however, was returned against any party. Thereafter, the Attorney General, at the request of the FTC¹ and in reliance on information obtained during the three-year grand jury investigation commenced the present suit in the United States District Court for the Southern District of New York to recover civil penalties under Section 5(l) of the Federal Trade Commission Act (FTCA), 15 U.S.C. 45(l),² in the amount of $230,000 for the alleged violation by appellant of the 1959 FTC consent cease and desist order.

Subsequently, appellant moved to dismiss the complaint asserting that the district court lacked subject matter jurisdiction since the FTC had not, in accordance with its usual practice, certified the case to the Attorney General pursuant to Section 16 of the FTCA, 15 U.S.C. § 56.³ Appellant contended that the requirements of Section 16 were jurisdictional and that the Attorney General had no power to proceed under Section 5(l) absent an FTC certification. The district court denied the motion, finding that the Section 16 certification procedure was not "so essential a part of the statutory scheme" that congressional intent would be frustrated if the Attorney General proceeded under Section 5(l) without it. The court concluded that Section 16 merely defines an administrative function of the FTC, "a method to be used by * * * it in the normal course of discharging its duty," which does not affect the power of the Attorney General to institute civil penalty suits under Section 5(l). United States v. St. Regis Paper Co., 240 F.Supp. 36, 38 (S.D.N.Y.1965).

Upon appellant's motion, the district court amended its decision to conform to the requirements of the Interlocutory Appeals Act, 28 U.S.C. § 1292(b). Thereupon, appellant applied to this court for leave to appeal and the application was granted April 7, 1965.

This appeal very possibly raises for the first time the question of whether Section 16 of the FTCA, which provides that whenever the FTC has reason to believe that anyone subject to a Commission cease and desist order is liable to a penalty under Section 5(l) of the FTCA, "it shall certify the facts to the Attorney General, whose duty it shall be to cause appropriate proceedings to be brought" to enforce Section 5(l), constitutes an absolute limitation on the Attorney General's power to commence suits for civil penalties under Section 5(l). Appellant contends that Section 16 and Section 5(l) of the FTCA must be read and applied together,⁴ and points out that this is the first civil penalty suit in which the Attorney General has proceeded under Section 5(l) on his own motion. The Government, while conceding that civil penalty suits are customarily initiated by FTC certification, regards that procedure as merely a convenient means for informing the Attorney General of possible violations of the Commission's orders. It contends that Section 5(l) fully empowers the Attorney General to initiate civil penalty suits on the basis of independently obtained information, regardless of the Commission's view concerning the alleged violation of its order, and asserts that the courts have implicitly recognized the jurisdictional completeness of Section 5(l). The question of the interrelationship between Section 5(l) and Section 16, however, was not raised in any case cited by the Government, see United States v. American Greetings Corp., 168 F.Supp. 45 (N.D. Ohio), aff'd 272 F.2d 945 (6th Cir. 1958); United States v. Piuma, 40 F. Supp. 119 (S.D.Cal.), aff'd 126 F.2d 601 (9th Cir. 1941); United States v. Hindman, 179 F.Supp. 926 (D.N.J.1960), nor has it been raised in any case litigated to date under the FTCA.

It is generally recognized that whether procedural requirements such as those set forth in Section 16 of the FTCA are mandatory cannot be determined by merely examining the form of the statute involved, i. e., by a mere literal reading of the law, but "can only be determined by ascertaining the legislative intent. If a requirement is so essential a part of the plan that the legislative intent would be frustrated by a noncompliance, then it is mandatory." Vaughn v. John C. Winston Co., 83 F.2d 370, 372 (10th Cir. 1936); Van Keppel v. United States, 206 F.Supp. 42 (D.Kan. 1962). See generally 3 Sutherland, Statutory Construction §§ 5801-5826 (3d ed. 1943). Unfortunately, the legislative history of Sections 16 and 5(l) is sparse and unilluminating and, thus, sheds little light on their intended relationship. Both provisions were enacted as part of the 1938 Wheeler-Lea Amendment to the FTCA which was aimed primarily at broadening the FTC's jurisdiction by granting it power to regulate "unfair or deceptive acts or practices in commerce" in addition to "unfair methods of competition in commerce," and at eliminating the cumbersome procedures for the enforcement of FTC cease and desist orders by providing that they would become final unless an appeal were taken within the statutory time period provided. 15 U.S.C. §§ 45(a), (g). Both Section 5(l) and Section 16 were introduced into Congress and included in the 1938 amendment with little explanation or elaboration in hearings or debates.⁵ See Austern, Five Thousand Dollars a Day, ABA Section of the Antitrust Law 285, 289 (1962). The Government urges, however, that a remark made by Congressman Lea while discussing the relation between Section 16 and Section 14 of the FTCA, 15 U.S.C. § 54, which provides for fines and imprisonment for false advertising in violation of 15 U.S.C. § 52(a),⁶ to the effect that the Attorney General could prosecute violations of that section on his own motion, without awaiting FTC certification,⁷ demonstrates that certification is equally dispensable with respect to Section 5(l) civil penalty suits. We do not feel that this expression of opinion has any significance for the problem presented here. The Government's position fails to recognize the fundamental difference in kind between the rule of conduct enforced under Section 5(l) — a cease and desist order issued by the FTC in an adjudicatory proceeding or with the consent of the party proceeded against, and the rule of conduct enforced under Section 14(a) a federal criminal statute. While it is reasonable to presume that when Congress enacts a criminal statute it intends to authorize the Attorney General to enforce the statute on his own motion, i. e., public policy favors the unencumbered enforcement of criminal laws, no such presumption of public policy operates here where the authority of the Attorney General to punish violations of FTC cease and desist orders is at issue.

Since there is no direct evidence of congressional intent with respect to the relation between Section 5(l) and 16, it must be ascertained by examining the purposes and objectives of the FTCA as a whole in terms of objective criteria, i. e., the relevant inquiry is "how, one supposes, it the legislative scheme * * * would appear to a `reasonable' interpreter." Bishin, The Law Finders: an Essay in Statutory Interpretation, 38 So.Cal.L.Rev. 1, 3 (1965). We regard the view that Section 5(l) fully empowers the Attorney General to initiate civil penalty suits as inconsistent with the grant of far-reaching and exclusive regulatory power to the FTC in Section 5 of the FTCA, 15 U.S.C. § 45(l). It is highly unlikely that Congress intended to grant the Attorney General plenary power to punish violations of Commission orders in view of the fact that when it enacted Sections 5(a) and (b) of the FTCA, 15 U.S.C. § 45(a), (b), it granted the FTC exclusive authority to enforce the proscription against unfair methods of competition and deceptive acts or practices in commerce and, also, granted the FTC exclusive authority to issue orders to cease and desist from such practices.⁸ The duty and responsibility for determining what business practices fall within the purview of Section 5 and for determining whether cease and desist orders issued to eliminate the anti-competitive effects of those practices have been complied with or violated was delegated solely to the FTC. While one objective of the 1938 Wheeler-Lea amendment, including Section 5(l), was to "streamline" the procedure for enforcing the Commission's cease and desist orders, it is nowhere indicated that Congress by providing a civil penalty enforcement procedure intended to transfer the responsibility for interpreting and investigating violations of such orders to ...