Opinion ID: 345561
Heading Depth: 2
Heading Rank: 1

Heading: Purpose of Inquiry, Test of Relevancy, and Standard of Judicial Review

Text: 248 The requirement that documents sought by an agency must be reasonably relevant to a lawful investigative purpose constitutes the fundamental limitation on administrative subpoena power. The most astonishing point about the majority opinion's discussion of relevance is that nowhere therein does it define the FTC's purpose in the investigation, nor does it purport to employ a standard of appellate review which is legally definable. 249 Relevance simply cannot be determined in the absence of defined purpose, whether that purpose be as sharply defined as in a criminal trial, less precisely delineated as in a civil proceeding, or more generally defined as in a grand jury inquiry or in an administrative agency investigation as here. 41 In all situations, purpose in some degree must be defined in order that notice be given and relevance thereafter may be assessed. 250 This is the reason for the Administrative Procedure Act requirement 42 that an agency state the purpose of its proposed investigation at the very outset, to give notice to objects of the investigation and all other interested parties, and to set a standard by which the relevance of the agency's demands for tangible evidence and testimony, as well as other actions, may be judged. Without such a requirement for a defined and announced purpose the Federal Trade Commission or any other of our regulatory agencies would speedily metamorphosize into the Roving Commission. In seeking to ascertain the actual purpose of the FTC's investigation, the District Court here understandably looked beyond the FTC's authorizing resolution, for, as written, this broad resolution could have authorized a subpoena covering virtually any information relating to appellees' oil and gas business. And the majority here never came any closer to defining the purpose and scope of the FTC inquiry than this. 251 Where the agency's statement of purpose is not sufficient to permit a relevance determination, the courts may refuse enforcement. 43 Or, even if the statement is somewhat obscure, the court may seek to clarify and determine for itself the agency's actual purpose, as the District Court did here. 44 As written, the resolution certainly furnished no meaningful criteria for measuring the relevance of the data sought. 45 Forced to seek clarification from other sources the District Court asked Trade Commission counsel to define the purpose of the Agency's investigation. He responded as follows: 252 (FTC COUNSEL): . . . (W)hat we are investigating is possible collusive conduct by the natural gas producers in the reporting of these reserves. 253 . . . .NSE 254 (FTC COUNSEL): . . . What we want to find out is whether or not in reporting natural gas reserves there has been collusive conduct in the way these estimates are prepared. 255 THE COURT: Reporting them to whom. 256 (FTC COUNSEL): All right. Reporting them to the American Gas Association, because the American Gas Association data is the only available published data on these reserves. 46 257 In addition, the FTC previously had made the following significant representation to Congress: 258 The subpoena (issued on 24 November 1973) focused on Offshore South Louisiana and revolved around one central premise which is that natural gas producers, for a variety of reasons, make estimates of proven gas reserves. . . . 259 The theory of the investigation is to compare the reserve estimates used by the companies in their internal purposes with the estimates submitted to the American Gas Association that were relied on by the Federal Power Commission. In other words the investigation was not attempting to make new estimates of the proved reserves in South Louisiana but was instead attempting to get at reserve estimates already prepared. 47 260 It seems clear from these sources that the central purpose of the FTC investigation was to compare proved reserve estimates kept by the companies with the proved reserve estimates reported to the AGA. Moreover, since only proved reserves are reported to the AGA and since AGA data is the only published reserve data available, it followed that speculative estimates of possible, potential, or other unproved reserves (e. g., the reserve estimates typically found in raw field data or bid files) could have no relevance to the FTC's investigation into whether in the reporting of natural gas reserves there had been collusive conduct in the way these proved reserve figures were prepared. 261 The District Court was clearly of this opinion, and because this factual determination was well-founded in both logic and evidence, we do not understand how a majority of this court could find it to be clearly erroneous. Likewise, we do not understand how the District Court could have abused its discretion in limiting enforcement of the subpoenas to documents containing or underlying proved reserve estimates. By the Trade Commission's own admissions, before the District Court, in briefs to the court, 48 and in representations to Congress, these were the only documents relevant to the Trade Commission's investigation. 49 262 Of course, the majority does not determine the District Court's finding to be clearly erroneous, nor did it find an abuse of discretion. By these accepted tests the trial court action could not possibly be upset. What the majority does do is to brush aside the accepted legal standards of appellate review. In so doing it wriggles and twists to avoid applying the proper standard of judicial review by claiming (h)ere, however, the district court's relevance determinations rested upon and, indeed, were inseparable from its view of the applicable law with respect to the proper scope of the FTC's investigation. 50 After the factual inquiry made by the District Court of FTC counsel, after the FTC's representations to Congress, it is clear that the trial court's determination of the purpose of the FTC investigation was made as a factual matter, not a legal determination. (Tell me what you are trying to do. I don't understand the resolution.) 51 The FTC resolution, the FTC counsel's answers to questions, the FTC statements to Congress (notes 47 and 49, supra ), all are evidentiary facts as to the Commission's stated purpose of its inquiry. 263 A most basic flaw in the majority's analysis concerns their characterization of this inquiry by the trial court into the purpose of the FTC's investigation. A close examination of this characterization is in order, since the majority relies on the characterization as the foundation for its belief that it should completely substitute its judgment for that of the District Court in this case. The majority states that the District Court's relevance determinations rested upon and, indeed, were inseparable from its view of the applicable law with respect to the proper scope of the FTC's investigation. 52 At another point the majority emphasizes that the trial court used its own conception of the proper scope of the FTC's investigation 53 in making its decisions as to relevance. In other words, the majority believes that the District Court imposed on the parties its own view of the proper scope of the investigation and, in effect, decided that the FTCA allowed the FTC to investigate only proved reserves of natural gas. 264 The majority is clearly wrong in its artificial attempt to cast the actions of the trial court as a determination of law. Rather, the trial judge conducted a factual inquiry in order to determine what, in actuality, the FTC was attempting to do in this case. Indeed, at the hearing on 13 December 1973, the District Court, in making its relevance determination as to the bid files, stated that the files were not relevant to the investigation or inquiry that you tell me you are making. . . . 54 The trial court recognized that the breadth of the investigation was primarily for the investigators (the FTC) to determine; in this case, the court was merely trying to develop the necessary factual foundation to make a ruling on relevance. The District Court was clearly not trying to mold the scope of the investigation, but rather to define it; this was not an imposition of the court's view but an inquiry made of those conducting the investigation. In making its relevance determinations the trial court proceeded on the basis of the FTC counsel's representations to the court and not on its own view of the FTC's statutory authority in this area. 265 Not only does the majority repeatedly offer an inaccurate characterization of the trial court's factual inquiry into the FTC's purpose, but they further confuse the issue by failing to be consistent even in their own misconceptions. The majority at one point assert that the trial court's erroneous definition of purpose resulted from its acceptance of the gas producer's concept of purpose in this case. 55 The majority thus switches its position, at various points asserting that the District Court highhandedly shaped the investigation according to its own view of the law, and at another stating that the court totally accepted the view of the private parties in this case. Which is it? Imposition or total acceptance? The truth is that neither characterization is accurate; rather, the trial court conducted a factual inquiry directed to the FTC in order to lay the analytical foundation for the relevance determinations. There is such a basic difference between shaping an inquiry and defining it; the sequence of events as revealed in the record in this case simply does not lend itself to inclusion in the former category. 266 Nor is there any place in the record where the District Judge speculate(d) about the possible charges that might be included in a future complaint, and then . . . determine(d) the relevance of the subpoena requests by reference to those hypothetical charges. 56 Quite to the contrary, the District Judge acted on the basis that (t)he relevance of the material sought by the FTC must be measured against the scope and purpose of the FTC's investigation, as set forth in the Commission's resolution 57 the standard as defined by the majority, supplemented by factual inquiries of FTC counsel and FTC statements to Congress. 267 The majority's mistaken speculation that the District Court equated its definition of purpose with a particular theory of violation 58 is grossly deficient in several respects. First, there is no evidence that the trial court required a narrowly focused theory of a possible future case 59 as the only acceptable definition of purpose. Indeed, the District Court did not require it; we in the dissent do not suggest it; the precedents do not mention it; and logic, reason, and clear thinking do not dictate such a narrow focus. What the District Court, we in the dissent, the precedents, and logic do suggest is that some refinement of the FTC's extraordinarily broad investigatory resolution is in order. What the majority has done in suggesting that a particular theory of violation is the only acceptable refinement of purpose is to set up a straw man against which to argue its case for complete substitution of judgment on factual matters. Straw men are easy to knock down; it is far more difficult to provide a response to the eminently sensible proposition that some refinement of purpose is needed if the court is to have any role in considering the rights of all the parties who stand before it in a subpoena enforcement proceeding. 268 Returning to the question of the proper standard of review of the trial court's relevance determination, after the majority rejected the clearly erroneous and abuse of discretion standards, what standard did the majority set for itself? The standard is substitution of judgment about that there is no doubt or disagreement. The truly novel element of this substitution standard is the justification put forth by the majority for its use in this case. The majority states that it has substituted its judgment here because the (relevance) determinations of the trial court were dependent on, and integrally related to, a legal premise. 60 The majority does not venture beyond this conclusory statement in defense or explanation of its standard of review. In what way are the determinations as to purpose related to the legal premise so as to justify this standard of review? Are all fact determinations made in pursuit of a relevance determination (the legal premise) subject to being disregarded under the substitution standard? What is the relationship between law and fact in this case which calls for the appellate court to substitute its view for that of a United States district judge? These are but a few of the vital questions left unanswered by the majority in this case. 269 The majority concedes that (w)hen relevance determinations are, in essence, factual judgments, they are normally entitled to special deference from appellate courts . . . . 61 As noted previously, the majority has attempted to cast the actions of the trial judge as determinations of law by inaccurately characterizing the events in the District Court. Once this false characterization is stripped away, we are left with a factual determination of purpose made by the District Court. How was this factual determination clearly erroneous? The majority dare not make this claim, for it was the FTC which provided the facts for the trial court's finding related to purpose. And if it is not clearly erroneous, we must accept it; if we must accept it, the modifications fashioned by the District Court in the name of relevance must be seen as sensible. And, further, when the majority's straw man who advocates a particular theory of violation 62 as the only acceptable statement of purpose is removed from the scene (and this straw man is the only advocate of such a narrow focus), the scope of the District Court's refinement of the FTC's purpose emerges as a moderate and sound method to accommodate the rights of all the parties to this case. 270 We are well aware that the distinction between questions of law and questions of fact is often an elusive one. We have, however, shown that the District Court's inquiry into the purpose of the FTC's investigation was essentially of a factual nature to elicit from the FTC information (facts) relating to the purpose for investigating the gas industry at this time. The majority believes it is sufficient to say that the relevance determinations involved a legal premise and thus are subject to a substitution of judgment. But they have not told us why this is a question of law; instead, the label legal premise is supposed to be taken as a sufficient basis for the appellate court's usurpation of the trial court's fact-finding role. The failure to explain the circumstances under which the mere existence of a legal premise can trigger de novo review in the appellate court is most disturbing. By failing so to explain, the majority has established a standard which can be employed by the simple unexplained step of denominating a trial court's decision as resting on a legal premise. All litigation is premised on the law; until we have further clarification and analysis of this point from the majority, this standardless form of review can be imposed whenever more than half of the judges sitting on a case decide that they want to substitute their own preferences for the careful hearings of the trial judge. 271 The majority have correctly observed that there is a limited role assigned to the federal courts in (subpoena) enforcement proceedings. 63 We fail to see how this observation can be reconciled with the complete substitution of judgment which the majority undertakes in this case. The directionless, standardless review employed by the majority in order somehow to vindicate a legal premise does no credit to an appellate tribunal. 272