Court Opinion

ID: 8912632
Source: CourtListenerOpinion
Date Created: 2022-11-27 03:39:55.054223+00
Date Added: 2024-06-11T17:08:39.901616
License: Public Domain

MANSFIELD, Circuit Judge
(dissenting):
I respectfully dissent for the reason that the steps promptly taken by the American Medical Association to modify and up-date its ethical standards after the Supreme Court’s decision in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975) revisions that were commenced prior to the FTC’s initiation of the present proceeding-satisfy me that the Commission proceeding has been unjustified, unnecessary, and a waste of administrative and judicial resources. In essence the Commission’s order, as somewhat watered down by the majority opinion here, is based on outdated facts that long since have ceased to exist. It merely requires the Association to do what it is doing anyway and prohibits it from doing what it is not doing. Notwithstanding the mootness of the issues and the absence for years of “a reasonable likelihood that the past wrongdoing will recur,” SEC v. Bausch & Lomb, Inc., 565 F.2d 8, 18 (2d Cir. 1977), the Commission insisted on pressing for its pound of flesh. In my view the FTC is engaged in the futile business of beating a dead horse.
Before proceeding to the merits I agree that the Commission had jurisdiction over the subject matter pursuant to §§ 5(a)(2) and 4 of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a)(2) and 44.1 However, I cannot agree with the majority that such jurisdiction exists whenever the business interests of associations are “secondary to the charitable and social aspects of their work,” which would confer jurisdiction whenever a non-profit organization serves any business interest.2 Although trade associations, which are primarily vehicles for the pecuniary gain of their members, fall within the definition of § 4 of the Act, FTC v. National Commission on Egg Nutrition, 517 F.2d 485, 488 (7th Cir. 1975), cert. denied, 426 U.S. 919, 96 S.Ct. 2623, 49 L.Ed.2d 372 (1976), professional organizations were not discussed in the legislative history of the statute and jurisdiction over nonprofit organizations was denied by Congress, see H.R.Rep. No. 95-339, 95th Cong., 1st Sess. 120 (1977). In view of this history the appropriate test in my view would be whether the association engages in a substantial amount of activity for the pecuniary gain of its members. Where its activities designed to help its members’ economic status are purely incidental or de minimis in comparison with the organization’s nonremunerative activities, jurisdiction does not exist.
However, the Association’s business-related activities are sufficient to bring it within the FTC’s jurisdiction under even this quantitative test. Its lobbying efforts and advice on office and business practices-all designed to furnish assistance of economic value to its members-form a substantial part of its activities. The Association therefore bears a closer resemblance to a trade organization than to a strictly fraternal, scientific or charitable association.
I also agree, although somewhat dubitante, that prior statements of Chairman *455Michael Pertschuk of the Commission, who participated in the oral argument, deliberations and decision in this case, did not call for his recusal or disqualification on the ground that he had “in some measure adjudged the facts as well as the law” of the case. Gilligan, Will & Co. v. SEC, 267 F.2d 461, 469 (2d Cir.), cert. denied, 361 U.S. 896, 80 S.Ct. 200, 4 L.Ed.2d 152 (1959). See also Cinderella Career and Finishing Schools, Inc. v. FTC, 425 F.2d 583, 591 (D.C.Cir. 1970). Although an FTC Commissioner may form and express general views about law and policy, see FTC v. Cement Institute, 333 U.S. 683, 702, 68 S.Ct. 793, 804, 92 L.Ed. 1010, 1035 (1948); Rombough v. Federal Aviation Administration, 594 F.2d 893, 900 (2d Cir. 1979), Chairman Pertschuk’s statements here came extremely close to the line of prejudgment. For instance, in a prepared statement dated October 10,1977, which was not given, he said:
“While it would probably be excessive to say that the fox is guarding the chicken coop, it is undeniable that a great many critical judgments in this field are being made by persons with a direct economic stake in particular outcomes.... The vast majority of physicians and their organizations sincerely believe that they are acting in the public interest. Yet this is not enough. To be genuinely well served, the public must have assurance that those in control are responsive to consumer needs.”
Although this and similar statements have the earmarks of prejudgment, see Cinderella Career and Finishing Schools, Inc. v. FTC, 425 F.2d 583, 589-90 (D.C.Cir.1970); Texaco v. FTC, 336 F.2d 754, 759-60 (D.C. Cir.1964), I am willing in this instance to give the speaker the benefit of the doubt.
Turning to the merits, it was not until the Supreme Court’s June 16, 1975, decision in Goldfarb, supra, that the Association knew that it was subject to the provisions of the Sherman Act. It is undisputed that it promptly instituted on its own a review of its “Principles of Medical Ethics,” which had been approved in 1957 by its House of Delegates, and its interpretations of these principles for its members, which had been published in 1971 in a statement of Opinions and Reports. The purpose (and in my view, the effect) of the review was to bring its activities in compliance with antitrust requirements. The review led to the Association’s issuance on April 9,1976, of a revised statement of the Principles and in March, 1977, of a new edition of the Opinions and Reports. It is clear that the Association was already engaged in its bona fide revision of its ethical standards3 when the Commission instituted the present proceeding on December 19,1975, and that the FTC had not yet taken any irrevocable action in the case before the revision was completed. (The ALJ’s Initial Decision did not issue until November 13, 1978.) Moreover, although the Association’s 1971 publication of Opinions and Reports had contained some anti-competitive features that were objectionable from an antitrust law standpoint, these provisions had not been generally enforced; indeed, they were hardly enforced at all. For these reasons I believe that the Association should be judged by its 1976 and 1977 revised principles and interpretations rather than by the earlier ones.
The effect of the revised principles and interpretations was to revoke and rescind the earlier ones. There is no evidence from which it might reasonably be inferred that the Association, its affiliates and members would not adhere to the revised principles in lieu of the earlier ones. In my view the 1976 principles as interpreted in 1977 substantially comply with antitrust requirements and overrule those prior interpretations which might have offended the Sherman Act. The new Opinions and Reports states that dissemination of non-deceptive information, including fee information, is ethical. “Solicitation,” which is narrowly defined to cover only certain deceptive pro*456motional devices which clearly have a significant capacity to mislead (e. g., claims intended or likely to create inflated or unjustified expectations of favorable results, self-laudatory statements implying that a physician has superior skills, and other factual misrepresentations) is properly condemned as unethical. Such restraints hardly suppress competition. See National Society of Professional Engineers v. United States, 435 U.S. 679, 691, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978); Semler v. Board of Dental Examiners, 294 U.S. 608, 612, 55 S.Ct. 570, 572, 79 L.Ed. 1086 (1935).
Advertising by doctors of fee information is permitted, and useful information may be published in “office signs, professional cards, dignified announcements, telephone directory listings and reputable directories.” Physicians may ethically be employed on a contract basis, provided they “should not be subjected to lay interference on professional matters and that their primary responsibility should be to the patients they serve.” This reasonable provision eliminates the earlier restrictions on contractual arrangements found in the 1971 Opinions and Reports and the 1974 Report on Physician Hospital Relations.
In short, a review of the 1977 Opinions and Reports, considered in the light of the other record evidence, demonstrates that the Association, long prior to any order in this case, had changed its ethical standards to insure reasonable compliance with the law and at the same time properly to “discourage abusive practices that exploit patients and the public and interfere with freedom in making an informed choice of physician and free competition among physicians.” (AMA Statement of April 9, 1976.) It is significant that in Bates v. State Bar of Arizona, 433 U.S. 350, 369 n.20, 97 S.Ct. 2691, 2701, 53 L.Ed.2d 810 (1977), the Supreme Court cited with approval the Association’s revised standards, stating:
“Indeed, it appears that even the medical profession now views the alleged adverse effect of advertising in a somewhat different light from the appellee. A Statement of the Judicial Council of the American Medical Association provides in part:
“ ‘Advertising-The Principles [of Medical Ethics] do not proscribe advertising; they proscribe the solicitation of patients. . .. The public is entitled to know the names of physicians, the type of their practices, the location of their offices, their office hours, and other useful information that will enable people to make a more informed choice of physician.
“ ‘The physician may furnish this information through the accepted local media of advertising or communication, which are open to all physicians on like conditions. Office signs, professional cards, dignified announcements, telephone directory listings, and reputable directories are examples of acceptable media for making information available to the public.
“ ‘A physician may give biographical and other relevant data for listing in a reputable directory.... If the physician, at his option, chooses to supply fee information, the published data may include his charge for a standard office visit or his fee or range of fees for specific types of services, provided disclosure is made of the variable and other pertinent factors affecting the amount of the fee specified. The published data may include other relevant facts about the physician, but false, misleading, or deceptive statements or claims should be avoided.’ 235 J.A.M.A. 2328 (1976).’’
Any possible lingering doubt about the Association’s independent voluntary compliance with the law is dispelled by the adoption by its House of Delegates on July 22,1980, of new “Principles of Medical Ethics” which completely eliminate the controversial former provisions attacked by the FTC despite their reasonableness as construed by the Association’s Opinions and Reports. The new ethics code, a copy of which is printed in the margin,4 omits Sec*457tion 5 of the former Principles of Ethics which provided that a physician “should not solicit patients” and Section 6, which specified that “A physician should not dispose of his services under terms or conditions which tend to interfere with or impair the free and complete exercise of his medical judgment and skill or tend to cause a deterioration of the quality of medical care.” Thus the Commission’s order deals with practices that are now ancient history rather than with the facts as they now exist. Instead of facing reality it has set up the equivalent of a “straw man” to accommodate its desire to regulate the Association.
The burden is on the Commission to show that injunctive relief is warranted, SCM Corporation v. FTC, 565 F.2d 807, 812 (2d Cir. 1977), and that there is “positive proof of a reasonable likelihood that past wrongdoing will recur.” SEC v. Bausch & Lomb, Inc., 565 F.2d 8, 18 (2d Cir. 1977); SEC v. Commonwealth Chemical Securities Inc., 574 F.2d 90, 99 (2d Cir. 1978); SCM Corporation v. FTC, supra. The relevant proof, which in my view consists of the Association’s post-Goldfarb activities, does not provide substantial evidence supporting a finding of liability. Moreover, since there is no evidence of likelihood that pre-Goldfarb activity will recur, the Commission’s order in my view constitutes an abuse of discretion.
For these reasons I would deny enforcement.

. Under § 5(a)(2) of the FTC Act, 15 U.S.C. § 45(a)(2), provides in pertinent part:
“The Commission is empowered and directed to prevent ... corporations ... from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.”
Section 4 of the Act, 15 U.S.C. § 44, defines “corporation” as:
“any company, trust, so-called Massachusetts trust, or association, incorporated or unincorporated, which is organized to carry on business for its own profit or that of its members.”

. The decisions cited by the majority do not support the proposition that a non-profit association’s engagement in any business activity secondary to its charitable and social work confers jurisdiction on the FTC. Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), arose under the Sherman Act, which has no jurisdictional limitations as does the FTC Act. The Sherman Act, unlike the FTC Act, contains no provision excluding non-profit organizations from its coverage. In FTC v. Ernstthal, 607 F.2d 488 (D.C.Cir.1979), the FTC had commenced an investigation. When its jurisdiction was challenged, the court merely held that since the question of whether there was jurisdiction turned on the activities of the organization, which could only be ascertained in the investigation, it was too early for the court to rule one way or the other on the jurisdictional issue.

. The Administrative Law Judge’s decision states (at p. 227):
“The proposal for a new ‘updated’ edition of the 1971 Opinions and Reports was formally sanctioned at a meeting of the Judicial Council in November 1975 (Tr. 4336; RX 621).”

. The new Principles of Medical Ethics adopted by the Association on July 22, 1980, provide:
“PREAMBLE
“The medical profession has long subscribed to a body of ethical statements devel*457oped primarily for the benefit of the patient. As a member of this profession, a physician must recognize responsibility not only to patients, but also to society, to other health professionals, and to self. The following Principles adopted by the American Medical Association are not laws, but standards of conduct which define the essentials of honorable behavior for the physician.
[I.]
“A physician shall be dedicated to providing competent medical service with compassion and respect for human dignity.
[II.]
“A physician shall deal honestly with patients and colleagues, and strive to expose those physicians deficient in character or competence, or who engage in fraud or deception.
[III.]
“A physician shall respect the law and also recognize a responsibility to seek changes in
those requirements which are contrary to the best interests of the patient.
[IV.]
“A physician shall respect the rights of patients, of colleagues, and of other health professionals, and shall safeguard patient confidences within the constraints of the law.
[V.]
“A physician shall continue to study, apply and advance scientific knowledge, make relevant information available to patients, colleagues, and the public, obtain consultation, and use the talents of other health professionals when indicated.
[VI.]
“A physician shall, in the provision of appropriate patient care, except in emergencies, be free to choose whom to serve, with whom to associate, and the environment in which to provide medical services.
[VII.]
“A physician shall recognize a responsibility to participate in activities contributing to an improved community.”