Source: http://openjurist.org/682/f2d/554
Timestamp: 2013-05-23 20:43:43
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Matched Legal Cases: ['§ 5', '§ 45', '§ 554', '§ 3', '§ 3', '§ 554', '§ 554', '§ 554', '§ 554', '§ 554', '§ 554', '§ 554', '§ 554', '§ 556', '§ 554', '§ 3', '§ 3', '§ 556', '§ 3', '§ 3']

682 F2d 554 Gibson v. Federal Trade Commission H R Gibson | OpenJurist
682 F. 2d 554 - Gibson v. Federal Trade Commission H R Gibson	Home682 f2d 554 gibson v. federal trade commission h r gibson
682 F2d 554 Gibson v. Federal Trade Commission H R Gibson 682 F.2d 554
1982-2 Trade Cases 64,971
Herbert R. GIBSON, Jr., Gerald P. Gibson, Gibson's Inc.,Gibson's Discount Centers, Inc., Ideal TravelAgency, Inc., Gibson Warehouse, Inc. andGibson's Products Co., Inc., Petitioners,v.FEDERAL TRADE COMMISSION, Respondent.H. R. GIBSON, Sr., et al., Petitioner, v. FEDERAL TRADECOMMISSION, Respondent,
Nos. 80-1743, 80-1746.
As the curtain rises, the Gibsons appear before us once more for what we hope will be the final act in this almost 15 year drama starring the Gibsons, masters of discount merchandising, and the Federal Trade Commission (FTC). Unlike the earlier scenes in this Court1, this time we are to arrive at the merits as we review the FTC's final order enjoining the Gibson Petitioners from engaging in assorted trade practices. As the curtain falls, we affirm the order and direct enforcement.2 No encores please.
The FTC, however, clearly holds the trump in this hand, relying first on the Commission's organic legislation providing for the Commission to issue administrative complaints and subsequently sit as an adjudicative body. Federal Trade Commission Act § 5(b), 15 U.S.C. § 45(b). The combination of investigative and judicial functions within an agency has been upheld against due process challenges, both in the context of the FTC and other agencies. FTC v. Cinderella Career and Finishing Schools, Inc., 404 F.2d 1308, 1315 (D.C.Cir.1968); Pangburn v. CAB, 311 F.2d 349, 356 (1st Cir. 1962); FTC v. Cement Institute, 333 U.S. 683, 700-03, 68 S.Ct. 793, 803-04, 92 L.Ed. 1010, 1035 (1948); Withrow v. Larkin, 421 U.S. 35, 51-56, 95 S.Ct. 1456, 1466-69, 43 L.Ed.2d 712, 726-28 (1975). Further, the participation of the staff attorney in both the investigation and subsequent prosecution of a case is clearly allowed under 5 U.S.C. § 554(d). Nor is there any merit to the Gibsons' contention that they were denied due process by the 13-year delay. First, although the initial decision to investigate the Gibsons occurred in 1967, the administrative complaint was not issued until 1975. Second, as the FTC points out, the delay must be credited in part to the Gibsons themselves. See FTC v. Gibson Products of San Antonio, Inc., 569 F.2d 900 (5th Cir. 1978); FTC v. Gibson, 460 F.2d 605 (5th Cir. 1972). As to the argument that consent decrees are used for coercion, we find this point irrelevant since the Gibsons are not here seeking to be relieved of a consent order and have failed to indicate how this argument has any connection with the merits of their own case. Forcing the Gibsons to choose between consenting to an order or incurring the burdens and expenses of a defense is inherent in the adversary process and is basically "part of the social burden of living under government." FTC v. Standard Oil Co., 449 U.S. 232, 244, 101 S.Ct. 488, 495, 66 L.Ed.2d 416, 427 (1980), quoting Petroleum Exploration, Inc. v. Public Service Commission, 304 U.S. 209, 222, 58 S.Ct. 834, 841, 82 L.Ed. 1294 (1938).
Subsequently, von Brand presided over the ten-month trial, during which no objection was raised concerning von Brand's qualification. On February 26, 1979, von Brand issued his initial decision and order. This decision was appealed to the Commission which issued a decision and order on April 30, 1980. Not until June 12, 1980 did the Gibsons seek von Brand's disqualification, in a petition for reconsideration of the Commission's order. The Commission, in an order of August 8, 1980, refused this relief. The basis for the Commission's decision was threefold: (1) failure by the Gibsons to file a disqualification motion and supporting affidavits as required by the Commission's rule § 3.42(g)(2), 16 C.F.R. § 3.42(g)(2); (2) failure to file a timely objection; (3) no demonstration or assertion of prejudice. In its opinion, the Commission devoted substantial attention to the Ninth Circuit opinion in Grolier, Inc. v. FTC, 615 F.2d 1215 (9th Cir. 1980), discussed in more detail below.
The Gibsons' primary argument is that Section 5 of the Administrative Procedure Act (APA), 5 U.S.C. § 554(d),8 by prohibiting an "employee or agent" from performing "investigative or prosecuting functions" and also participating or advising in the decision, places on the adjudicative process limitations which are essentially jurisdictional, and in addition, cannot be waived. The Gibsons contend that an attorney-advisor, as opposed to a Commissioner, is not exempt from the disqualification by 5 U.S.C. § 554(d)(2) (C). To the Gibsons, the basic concern of § 554(d) is the public interest in fairness, an interest that may not be waived. The Gibsons assert that their right to insist upon the disqualification of von Brand is "secondary to the public interest." Finally, in response to any criticism of the Gibsons' delay in raising this issue, they maintain that the right of disqualification was not apparent until the Ninth Circuit decision in Grolier, supra.
The Ninth Circuit, in an opinion issued January 24, 1980 as amended on denial of rehearing April 17, 1980, determined that the exemption under 5 U.S.C. § 554(d)(2)(C) did not apply to ALJ von Brand once he was no longer an attorney-advisor. The Court specifically rejected the per se disqualification argument of Grolier that the ALJ was chargeable with knowledge of all investigative and prosecutorial activities undertaken by the FTC during his tenure as an attorney-advisor. In adopting a test focusing on the activity of the ALJ at the time that he served as an attorney-advisor, the Ninth Circuit indicated that disqualification was necessary only if the ALJ "was sufficiently involved with the case to be apprised of ex parte information, ..." Grolier, 615 F.2d at 1221. The Court also placed the burden of showing the ALJ's prior acquaintance with ex parte information on Grolier, the party challenging the qualification of the ALJ. After determining that the FTC wrongly concluded that attorney-advisors do not perform "investigative or prosecuting functions" within the meaning of § 554(d), the Ninth Circuit remanded the case to the FTC for reconsideration of the denial of discovery and in light of the results of that reconsideration, the disqualification motion. The Court very clearly indicated that the FTC did not necessarily have to grant discovery but it could not simply rely on a flat refusal to disclose anything concerning von Brand's involvement. The Court suggested that the FTC might initially respond through affidavits concerning the extent of von Brand's involvement with the Grolier case while he served as attorney-advisor.9
Nor are we convinced by the Gibsons' argument that they were afraid to raise the issue of von Brand's participation for fear of antagonizing the ALJ. Counsel for Gibson, Sr. would have us believe that his reticence was based on his personal familiarity with the Grolier case, hearings on which were also being held in the Dallas FTC offices at the same time. We are not persuaded. Counsel for Grolier obviously harbored no such fear, filing timely an objection to von Brand's participation. Even if we were to acquiesce in this excuse for failing to raise the issue before von Brand, this argument offers no succor for the Gibsons' failure to raise the issue subsequently before the Commission. Certainly the Gibsons did not hesitate to contest the ALJ's opinion in other aspects, objections which called into question prior opinions of the FTC in other areas. Rather we are presented with a situation where, due to the fortuitous intervening decision of the Ninth Circuit in Grolier, the Gibsons are now able to advance, retrospectively, an argument for disqualification of the ALJ. They are, however, unable to convince us of the applicability of Grolier to an express waiver of the kind involved here. The attempted end run around the need for timely objection through the argument of a situation analogous to exhaustion of remedies provides no yardage. While the Gibsons rely on Board of Education v. Harris, 622 F.2d 599 (2d Cir. 1979), cert. denied sub nom., Hufstedler v. Board of Education, 449 U.S. 1124, 101 S.Ct. 940, 67 L.Ed.2d 110 (1981), that case specifically distinguishes the issue of exhaustion from waiver of objection.
Case law supports the concept of timely objection with its complementary notion of waiver within the context of disqualification under § 554(d). In International Paper Co. v. Federal Power Commission, 438 F.2d 1349 (2d Cir.), cert. denied, 404 U.S. 827, 92 S.Ct. 61, 30 L.Ed.2d 56 (1971), the Second Circuit, in considering alleged violations of due process and § 554(d) based on the participation of the general counsel and other FPC employees in both prosecutorial and decision making functions, found a waiver from the failure of a party to object timely.
438 F.2d at 1357. The D.C. Circuit in Democrat Printing Co. v. FCC, 202 F.2d 298 (D.C.Cir.1952) also found a waiver from the failure to raise a timely objection.
Aside from these specific interpretations of § 554(d), the requirement for filing of a timely objection finds support in the language of § 556(b) of the APA which provides: "On the filing in good faith of a timely and sufficient affidavit of personal bias or other disqualification of a presiding or participating employee, the agency shall determine the matter as a part of the record and decision in the case." The Ninth Circuit, in considering a motion of disqualification based on bias on the part of a Commissioner, in Safeway Stores, Inc. v. FTC, 366 F.2d 795, 802 (9th Cir. 1966), cert. denied, 386 U.S. 932, 87 S.Ct. 954, 17 L.Ed.2d 805 (1967), found that a motion was not timely where the objecting party had been silent during trial, briefing, and argument to the Commission and had only raised the argument several months after the Commission issued an unfavorable decision. In Marcus v. Director, Office of Workers' Compensation Programs, 548 F.2d 1044, 1050-51 (D.C.Cir.1976), the D.C. Circuit, while indicating that disqualification under § 554(d) is mandatory, also stated:
The Commission, in denying the Gibsons' motion for reconsideration, indicated that disqualification claims must be raised as soon as practicable and cited several cases in support. In addition, the Commission relied on its Rule of Practice § 3.42(g)(2) governing the filing of disqualification motions.10 The motion and supporting affidavits must set forth the grounds for disqualification. The ALJ has ten days within which to disqualify himself. Should he not do so, he must certify the motion to the Commission which must determine promptly the validity of the claim. As the Commission indicated in its denial of the Gibsons' motion for reconsideration:
The requirement of affidavits (under Rules of Practice § 3.42(g) ), grounded in 5 U.S.C. § 556 (1976), is not an empty formality to be cast aside unilaterally by a party to a Commission proceeding. There are many reasons for such a requirement. An affidavit provides an exact, sworn recitation of facts, collected in one place; a disqualification motion must not be made by a party, nor taken by the Commission, lightly.... Accordingly, the affidavit requirement serves not only to focus the facts underlying the charge, but to foster an atmosphere of solemnity commensurate with the gravity of the claim. Respondents' failure to submit affidavits is thus an independently sufficient basis to deny their petitions in this respect.
666 F.2d at 121. See also In re International Business Machines Corp., 618 F.2d 923, 932 (2d Cir. 1980); United States v. Conforte, 624 F.2d 869, 879-80 (9th Cir.), cert. denied, 449 U.S. 1012, 101 S.Ct. 568, 66 L.Ed.2d 470 (1980); Marcus, supra, and cases cited therein at n.21; Duffield v. Charleston Area Medical Center, Inc., 503 F.2d 512, 515-16 (4th Cir. 1974). The same policies supporting timely objection or motions to disqualify judges are equally applicable to administrative law judges. A party should not be able to manipulate the rules by the use of an express waiver only to attempt later to avoid the effects of this waiver. Granted, as the Gibsons assert, "(w)hat is as stake here is not so much the right of an individual FTC Respondent ... but the public interest, the confidence of the public in the fairness of the adjudicative system of the FTC, and the entire administrative action of the FTC," we must emphasize that the public has an interest as well in conserving judicial and quasi-judicial resources and in ensuring the integrity of adjudicative process. Allowing a party to waive expressly an objection and then later seek to avoid it undermines the integrity and finality of administrative procedures.
The All Stores letter concerning Toastmaster is, at the minimum, an invitation to boycott, specifically requesting that the stores refrain from dealing with Toastmaster. The letter is certainly stronger than that found sufficient in Eastern States Retail Lumber Dealers' Association v. United States, 234 U.S. 600, 34 S.Ct. 951, 58 L.Ed. 1490 (1914). Nor is it necessary for a group boycott that there be an express mutual agreement to refuse to deal. The contemplation and invitation for concerted action along with acquiescence is sufficient. From the evidence presented, the Commission found that a substantial number of stores had acquiesced in the request by Gibson Products Company. Although some of this evidence was in the form of hearsay testimony, the Commission Rules of Practice permit the introduction of hearsay evidence, provided that it meets the standards of materiality, reliability and relevance. See 16 C.F.R. § 3.43(b); Resort Car Rental System, Inc. v. FTC, 518 F.2d 962, 963 (9th Cir.), cert. denied, 423 U.S. 827, 96 S.Ct. 41, 46 L.Ed.2d 42 (1975). The evidence that Toastmaster representatives were told by Gibson franchisees that there was a boycott, along with the actual letter and the substantial drop in sales by Toastmaster to the Gibson stores, amply support the Commission's finding of a group boycott.
The findings of the Commission must be accepted if there is substantial evidence on the record considered as a whole to support them. FTC v. Standard Education Society, 302 U.S. 112, 117, 58 S.Ct. 113, 115, 82 L.Ed. 141, 145 (1937); FTC v. Algoma Lumber Co., 291 U.S. 67, 73, 54 S.Ct. 315, 318, 78 L.Ed. 655, 660 (1934). Where there is the possibility of drawing two inconsistent inferences from the evidence, the Commission may make the choice. Corn Products Refining Co. v. FTC, 324 U.S. 726, 65 S.Ct. 971, 89 L.Ed. 1338 (1945). In this case, the Commission, based on the All Stores letter and the testimony of Toastmaster's agent, drew the inference that the substantial decline in Toastmaster's sale was as a result of the boycott, a determination which is supported by substantial evidence. The Commission's findings that the boycott of Toastmaster continued until at least 1974 is also supported by substantial evidence. From this finding, the Commission determined that the "institutional management" of the boycott, at least in the post-November 1, 1972 period was in the hands of Gibson's, Inc. There is also substantial evidence to support the Commission's determination that there was substantial commonality of interest prior to November 1, 1972 and that the operations of the Gibsons were sufficiently integrated to require an order covering all petitioners. The Commission, as discussed below, has wide discretion in determining the type of order necessary to remedy unfair practices.
The Gibsons' second jurisdictional argument is that there was no showing of a discrimination in price. For support, the Gibsons rely on FTC v. Henry Broch & Co., 363 U.S. 166, 80 S.Ct. 1158, 4 L.Ed.2d 1124 (1960). First, Section 2(c) on its face absolutely prohibits the payment of brokerage except for services rendered and contains no requirement that a price discrimination occur. Second, Broch concerned variable brokerage fees charged for the purpose of creating discriminatory price advantages, rather than the situation here of a broker splitting part of his commission with the buyer. In fact, in Broch, the Supreme Court, in reviewing the legislative history of Section 2(c), stated:
363 U.S. at 169, 80 S.Ct. at 1160, 4 L.Ed.2d at 1128 (footnote omitted). We agree with the Commission that Section 2(c), in light of the language and purpose, requires no price discrimination in a situation of dummy brokerage such as is involved here.
Next the Gibsons maintain that there is no proof to support the Section 2(c) violation. Gibson, Sr. contends that the check issued on September 23, 1972 from Barshell, rather than being illegal brokerage, was an unrelated 3% commission due Gibson, Sr. for sales by the Gibson Trade Show of beauty and health products belonging to Barshell. Miller, Barshell's sole stockholder, identified the check in question as a payment of brokerage fees and also testified that Gibson, Sr. would periodically review Barshell's commission statements to assess a charge as his fee upon this commission. Lynn Lowe, a trade show buyer for Gibson, Sr., provided contrary testimony indicating that the check was in payment for the trade show's sales of Barshell's health and beauty aids. The ALJ and the Commission found Lowe's argument would not wash. There was evidence that Miller sold his health and beauty aids not through Barshell, but through his other corporation, Progressive Brokerage. In fact, Miller testified that Barshell was formed specifically to be a housewares distributor and for that reason the Ray-O-Vac account moved through Barshell. The ALJ and the Commission were entitled to draw the inference that had the payments been for the purpose described by Lowe the check would have been made out by Progressive Brokerage, rather than Barshell. Although conflicting testimony was presented, there was substantial evidence from which the Commission could find a violation of Section 2(c). Our task is not to reweigh the evidence but only to determine whether there is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Steadman v. SEC, 450 U.S. 91, 99, 101 S.Ct. 999, 1006, 67 L.Ed.2d 69, 77 (1981), quoting Consolo v. FMC, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131, 140 (1966).
The Commission clearly found that a broad order was necessary for effective enforcement in light of the interrelationship among the Gibson family members and corporations. "At least since November 1, 1972, there has been an enhanced potential for Gibson, Sr. to act as agent or intermediary for retail stores owned by other members of the Gibson family. Indeed, he owns no stores outright at this time, meaning that, leaving aside the possibility of treating all respondents as a 'single enterprise,' an order limited to Gibson, Sr. as a buyer might have little practical effect." The Commission has wide discretion in determining what type of order is necessary to remedy the unfair practices found. Jacob Siegel Co. v. FTC, 327 U.S. 608, 611, 66 S.Ct. 758, 760, 90 L.Ed. 888, 892 (1946); FTC v. National Lead Co., 352 U.S. 419, 428-29, 77 S.Ct. 502, 508-09, 1 L.Ed.2d 438, 444-45 (1957); Alterman Foods, Inc. v. FTC, 497 F.2d 993, 1001 (5th Cir. 1974). "(T)he courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist." National Lead, 352 U.S. at 428, 77 S.Ct. at 508, 1 L.Ed.2d at 444. The use of a broad order within the context of interwoven corporate entities is within the Commission's discretion where the remedy is reasonably related to the violation. See Sunshine Art Studios, Inc. v. FTC, 481 F.2d 1171 (1st Cir. 1973); Delaware Watch Co. v. FTC, 332 F.2d 745 (2d Cir. 1964). In this case where there is a substantial interrelationship among the Gibson family members and corporations, and where the trade show and franchising aspects overlap, the FTC order, by enjoining the Gibson sons, Belva, and the corporations as well as Gibson, Sr., is reasonably related to the remedies sought, that is to restrain further violations of Section 2(c) and to block possible group boycotts of the type here found.
Rule of Practice § 3.42(g)(2) as in effect at the time provides:
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