Brown & Williamson Tobacco Corp. v. Engman

527 F.2d 1115
CourtCourt of Appeals for the Second Circuit
DecidedDecember 22, 1975
DocketNos. 398 to 403, Dockets 75-6081, 75-6084, 75-6085, 75-6087, 75-6088 and 75-6090
StatusPublished
Cited by50 cases

This text of 527 F.2d 1115 (Brown & Williamson Tobacco Corp. v. Engman) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brown & Williamson Tobacco Corp. v. Engman, 527 F.2d 1115 (2d Cir. 1975).

Opinion

OAKES, Circuit Judge:

This appeal is from the denial of appellants’ motion for a stay of penalties under Section 5(7) of the Federal Trade Commission Act, 15 U.S.C. § 45(7) (1975 Supp.). The motion for a stay was sought by the six appellants who collectively produce about 99 per cent of the cigarettes manufactured in the United States. They have instituted declaratory judgment actions to obtain review of the Federal Trade Commission’s interpretation of six cease and desist consent orders previously entered against them. Appellants have sought review prior to any enforcement proceedings brought by the FTC. The United States District Court for the Southern District of New York, Charles H. Tenney, Judge, denied the motion for a stay. He concluded that appellants were not entitled to a stay as a matter of law and that they had failed to show that without the stay they will suffer irreparable injury or that the balance of the equities tipped decidedly in their favor. We affirm.1

The consent orders here involved were formally issued by the FTC on March 30, 1972. Essentially they require, in very detailed terms as to size of print, location, color and shape, that appellants include in their newspaper, magazine and other periodical advertising the now famous Surgeon General’s warning reading [1117]*1117“Warning: The Surgeon General has determined that cigarette smoking is dangerous to your health.” The history underlying the consent orders is not particularly relevant for present purposes, so that it is set out only in the margin.2 Suffice it to say that the orders were entered into after negotiations resulting from the FTC’s serving appellants with proposed complaints charging them with deceptive practices under 15 U.S.C. § 45(a) for the failure to disclose in their advertising the hazards of using cigarettes. The important thing for our purposes is that in the consent order each of the appellants waived “any further procedural steps” and “all rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement.” It should also be mentioned that the consent orders required the submission of compliance reports. These reports were filed in September 1972, with the result that the FTC reported to Congress in December 1972 and January 1974 that industry practice was in substantial compliance with the orders. Subsequently, however, the FTC claimed that prior to and since September 1972 appellants had engaged in practices which did not comply with the consent orders’ detailed requirements. Accordingly the Commission initiated a compliance investigation. From November 1974 through January 1975 attempts apparently were made to settle the FTC’s claims of violations of the orders, but the settlement negotiations broke down. The companies claim that the FTC demanded too high a sum as a penalty for past violations and the FTC counters that such a sum was not a condition to further negotiation, and that appellants had refused to accept the staff’s interpretation of the consent orders. On March 17, 1975, appellants asked the FTC Commissioners to reject the staff’s interpretation. On August 1, 1975, the Commission, by letters to the companies, formally indicated that the Commissioners supported the staff’s interpretation and that pursuant to the provisions of 15 U.S.C. § 56(a)3 it would notify the Attorney General of its intention to commence an action for civil penalties and for other relief on the basis of these violations. The letters of August 1 stated, however, that for certain of the [1118]*1118alleged violations of the orders the Commission would hold the civil penalty action in abeyance for 180 days.4 Appellants thereafter, on August 14, 1975, commenced actions for a judgment declaring that the “determinations” in the Commission’s letters of August 1 are inconsistent with the provisions of the orders and that the appellants are not liable for civil penalties. They also sought an order staying pending final judgment the accumulation of penalties for alleged violations of the orders under Section 5 of the Act, 15 U.S.C. § 45.5 The six complaints were consolidated, since they contain identical questions of law, and after a hearing the court denied the motion for a stay of penalties, treating it essentially as an application for a preliminary injunction.

Appellants principally argue that they are entitled to a stay of the accrual of civil penalties as a matter of law. They do so on the basis of a series of Supreme Court decisions which commenced with Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), and include Wadley Southern Railway Co. v. Georgia, 235 U.S. 651, 35 S.Ct. 214, 59 L.Ed. 405 (1915); Oklahoma Operating Co. v. Love, 252 U.S. 331, 40 S.Ct. 338, 64 L.Ed. 596 (1920), and St. Regis Paper Co. v. United States, 368 U.S. 208, 82 S.Ct. 289, 7 L.Ed.2d 240 (1961).6 The argu[1119]*1119ment is that a party whose conduct is made subject to administrative action must be given the opportunity to obtain a judicial test of the validity of such action and, further, as a matter of due process of law, cannot be subjected to the risk that substantial penalties will accumulate during the course of the judicial proceeding. This line of cases is based on the reasoning that, regardless of the ultimate determination on the merits, due process requires that some real opportunity to challenge administrative action be afforded, and that such opportunity cannot exist where penalties are so great that noncompliance and a judicial challenge cannot be risked. The argument is the more compelling, the appellants suggest, in connection with FTC statutory penalties due to recent decisions, including our own United States v. J. B. Williams Co., 498 F.2d 414, 435-36 (2d Cir. 1974), note 5 supra, which hold that penalties imposed for noncompliance with the Commission’s cease and desist order may be computed on the basis of a separate violation for each day and for each advertisement.7 Appellants thus claim that the district court’s endorsement of the Government’s position in this case is directly contrary to definitive Supreme Court decisions which embody the rule that a stay of penalties is required during a good faith judicial challenge to an agency determination.

Young, Wadley, Love and St. Regis, however, do not go as far as appellants suggest. Rather, they establish that one has a due process right to contest the validity of a legislative or administrative order affecting his affairs without necessarily having to face ruinous penalties if the suit is lost.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Snyder Brothers, Inc. v. PA PUC
Commonwealth Court of Pennsylvania, 2020
General Electric Co. v. Jackson
610 F.3d 110 (D.C. Circuit, 2010)
International Business MacHines Corp. v. Johnson
629 F. Supp. 2d 321 (S.D. New York, 2009)
register.com, Inc. v. Verio, Inc.
356 F.3d 393 (Second Circuit, 2004)
Christie-Spencer Corp. v. Hausman Realty Co., Inc.
118 F. Supp. 2d 408 (S.D. New York, 2000)
Housing Works, Inc. v. Safir
101 F. Supp. 2d 163 (S.D. New York, 2000)
California Teachers Assn. v. State
975 P.2d 622 (California Supreme Court, 1999)
Hamilton Bank, N.A. v. Kookmin Bank
999 F. Supp. 586 (S.D. New York, 1998)
Bowen v. Doyle
880 F. Supp. 99 (W.D. New York, 1995)
Louisiana Pacific Corp. v. Beazer Materials & Services, Inc.
842 F. Supp. 1243 (E.D. California, 1994)
Dr Pepper/Seven-Up Companies, Inc. v. Federal Trade Commission
151 F.R.D. 483 (District of Columbia, 1993)
United States v. Louisiana-Pacific Corporation
967 F.2d 1372 (Ninth Circuit, 1992)
Danish Health Club, Inc. v. Town of Kittery
562 A.2d 663 (Supreme Judicial Court of Maine, 1989)
Flowers Industries v. Federal Trade Commission
849 F.2d 551 (Eleventh Circuit, 1988)

Cite This Page — Counsel Stack

Bluebook (online)
527 F.2d 1115, Counsel Stack Legal Research, https://law.counselstack.com/opinion/brown-williamson-tobacco-corp-v-engman-ca2-1975.