United States v. St. Regis Paper Company

355 F.2d 688, 1966 U.S. App. LEXIS 7481, 1966 Trade Cas. (CCH) 71,662
Court of Appeals for the Second Circuit·Decided January 19, 1966·No. 29746_1·Published·Cited by 53 cases

Opinions

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 [691] 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(1) 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. § 56.2 3 Appellant contended that the requirements of Section 16 were jurisdictional and that the Attorney General had no power to proceed under Section 5(1) 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(1) 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(1). 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(1) 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(1), constitutes an absolute limitation on the Attorney General’s power to commence suits for civil penalties under Section 5(1). Appellant contends that Section 16- and Section 5(1) 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(1) 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 [692] for informing the Attorney General of possible violations of the Commission’s orders. It contends that Section 5(1) 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(1). The question of the interrelationship between Section 5(0 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.

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United States v. St. Regis Paper Company, 355 F.2d 688, 1966 U.S. App. LEXIS 7481, 1966 Trade Cas. (CCH) 71,662 (2d Cir. 1966).

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