Federal Trade Commission v. Cinderella Career and Finishing Schools, Inc.

al., et TRADE COMMISSION FEDERAL Appellants, FINISH- AND CAREER

CINDERELLA al., INC., SCHOOLS, et ING Appellees.

No. 21118. Appeals Court States

United Circuit. District of Columbia

Argued Oct.

Decided March concerning pend- factual news release

ing adjudicatory proceedings before it. j , Appellee corporations operate and operation franchises for the , »„ , , . . . . offering schools various courses m mod- „ , , , . velmg, merchandising, charm, fashion j n , n i , .. , . (cid:127) self-improvement. appel- The individual ,, , , ,. „ . lee is the . ,, ,, f controlling stockholder two . . . . corporations oi principal and the , ,, ,, appellee corpo- stockholder of the third rayon ' . Following investigation, appel Commission, lant Federal Trade on Feb ruary complaint issued a (Docket against 8729) appellees, No. stating “having appellees reason believe” that the had violated the Federal Trade Commission by engaging Act deceptive in unfair or practices and the use of false and mis leading advertising operation in the business, initiating their proceed- was respect “in thereto in Thereafter, terest.” complaint enu specific constituting merated the details charge quotations and set forth from Atty Weisl, Jr., L. Edwin Asst. Gen. advertigi alleged deCeptive. to be Acting Atty. appellants. Gen. for Asst fal_ complaint alleged identified the Bress, Eardley Messrs. Carl David G. sitieg advertising) in ^ described the Atty Har- Alan S U. S Rosenthal conduet daimed ^ constitute unfair or vey Zuckman, Attorneys, Department L. deceptive practieeSj and concluded with appel- Justice, for were on. the brief customary allegation that the identi Hollander, Attor- Messrs. Morton lant. fied courses of conduct were in vioIation Justice, ney Department Harold gection g Federa, Trade Com. Rhynedance, Jr., Attorney, Federal D. mjssion Act appear- Commission, also entered Trade This appel was mailed to appellants. for ances , February 17, lees on February . . -p. D. 1967. On ^ Cole, Washington, n C., ,, , , Mr. Y. Alan ’ OA ,, , 20, 1967, appellees, mindful ... ... and aware „ J. Gilden .! . Messrs. Herbert with whom horn and Harvev J Rothberv horn ^sumg °f the FTC s news re Practlce Washing- Washing Harvey J. Jeages and resulting adverse effects appel- ton, C., brief, were on t h D. er f e ’ ’ ’ rom,”2 petitioned . 'ee to defer the issuance of news re McGowan, Robin- Tamm and Before respect lease with proceeding, to this Judges. Circuit est, id Docket No. SON, until after adjudication final pro was had in the Judge: TAMM, Circuit ceeding. On March the Com presents, precisely eon- mission peti notified This case that their tion cisely, question denied, noting Federal had been whether the to issue contents is authorized Trade Commission which had been Appellees Brief for at 6. 1. 15 time, preliminary in At the same junction requested domain. issued by appellees was appellees at that furnished thereby granted, and the Commission proposed copy with a time issuing any news re restrained appellees that and advised No. “until the Com in Docket lease on March issued release would news mission, adjudication of a full the after 3.3 case, either cease and desist has issued a appellees commenced March the On dismissing Com or an order the order complaint filing by present action the hearing plaint, pending final and de the Court District in the United States 4 The termination of this cause.” Dis they in of Columbia which the District findings judge, in of fact trict Court against restraining sought order supporting of the in and conclusions junction, law The mo- release. news issuance of of the the issuance found restraining denied order was for the tion adjudication prior final releases to news 2; judge by March on Court District gave appearance constituted, or of pro- 3, the Commission on March and constituting, prejudgment of the issues announcing mulgated and a news adjudi in and that the event of ultimate complaint describing of the the issuance by appellees’ in cation favor the Com result, against appellees. accounts As a damage mission, the them suffered appeared in least two at of the through the news would be be releases Washington newspapers. yond “repair remedy.” or The court also 22, 1967, appellees expressed “grave filed On March doubt” Commis sup- authority an amended and the District Court plemental complaint, seeking sion’s releases issue the injunctive prior adjudication, irrepa to final injury found declaratory against appellees, the Com- relief and rable and defined duty re- “quasi-judicial pro issuance of further respect proceedings ceedings” require to the leases with avoidance of requested prejudgment pre appearance the court or the Docket No. 8729 injunction preliminary judgment. re- to issue a training any the Commis- such action The Commission before seeks charged, Appellees. in affidavits sion. supporting court reverse the District Court’s or- complaint, Com- that the enjoining der the Commission’s issuance resulted can- mission’s news releases denying press releases and its motion students, inquiries cellation of courses complaint. to dismiss the and others from financial institutions doing busi- with whom were II. generally harmful ness and case, At the threshold of this we áppellees’ On business. March question are confronted with District Court a Commission filed jurisdiction whether to consider cross motion to dismiss amended the entire on case the merits or whether complaint. our review is confined at this time to the hearing injunc held in propriety At a the District Court of the issuance of the April pleadings mo the Commission’s tion. The ambiguous us before are at best denied. tion to dismiss was as to whether the Commission at this of the news release The issuance on the issuance of final the Commission’s stage proceedings occasion, in accord On is- order. procedure press relating followed with sues releases to interlocu- tory uniform This Commission’s since 1918. practice matters. (1) to issue Schools, Finishing Cinderella Career (2) filing complaint; the time FTC, (D. Inc. Civil Action No. 503-67 respondent’s filing upon an- 1967). D.C., Apr. 13, Appendix Joint requests respondent (unless other- swer 109a. wise) ; (3) issuance up- decision; (4) hearing examiner’s

13H appeal practices ceptive commerce, acts or the denial has endeavored to dis- declared its motion are unlawful. District Court However, complaint. teach- miss the ***(cid:127)»*# Independence Shares Deckert (6) empowered The Commission is Corp., prevent persons, part- and directed to (1940), we do indicates L.Ed. 189 nerships, corporations, except involving authority in a have the case subject banks, common carriers granting right appeal as of regulate commerce, Acts to air car- injunction to take note of the de- of an foreign subject riers and air carriers nial court of a motion trial the Federal Aviation Act of it is of dismiss. While course true persons, partnerships, corpora- question Deckert no' but in there was they subject insofar tions as are to sought appeal had to that defendants Stockyards Act, 1921, the Packers and denying dis- from the motion to the order amended, except provided as in sec- granting of an miss as as from well 227(a) 7, using tion of Title from un- injunction, feel, nevertheless, that the we competition fair methods of in com- language in Court’s that case minimizes deceptive merce and unfair or acts or necessity purely appeal formal practices in commerce. non-appealable order.' of an otherwise Proceeding by Commission; modify- conclude, therefore, We that have the we ing setting and aside orders authority dispose of the case its (b) Whenever the Commission shall merits and that sound adminis- any reason that such believe requires tration us subse- to avoid corporation person, partnership, or has quent unnecessary proceedings in the using any or is unfair method of Obviously, District if con- Court. deceptive competition or unfair or act clude that im- the motion to dismiss was practice commerce, or in if and it shall question properly denied, pro- of the appear pro- to the Commission priety injunction of the is moot. ceeding by respect it in thereof would public, be to interest of the it shall III. upon person, and issue serve such 1914, Congress, in the Federal enacted partnership, corporation or a com- Trade Commission Act.5 The then charges plaint stating in its re- purpose pre broad of the Act was spect containing and a notice of a competition vent unfair in methods hearing upon day place and at a inception. their Federal Trade Comm. thirty days therein fixed at least after Co., v. Raladam complaint. the service of said By (1941). L.Ed. 1336 corporation person, partnership, or so amendment,6 Congress, Wheeler-Lea in complained right shall have section 5 of the Act and broadened appear place at the time so and fixed authority extended the of the Commis why and show cause an order should deceptive sion to unfair or eliminate acts not be entered the Commission re- practices regard or in commerce without quiring person, partnership, such or competition. H.R.Rep.No.1613, 75th corporation to cease and desist Cong., Sess., 1, (1937). 1st chárged so violation law Section 5 of the Federal Trade Com- complaint. Any person, partner- said alia, provides, mission inter Act7 as fol- may ship, corporation applica- or lows: upon tion, good may and shown cause (a) (1) compe- be allowed Unfair the Commission to inter- methods of appear commerce, tition in vene and in said and unfair or de- ch. 52 Stat. Pub.L.No. Pub.L.No. ch.. Stat. 717 (1938). 45§ 15 U.S.C. adapted testimony information best person. be or counsel re- be use. proceeding shall such vides mission duced prohibited business, conduct, practices, and man- of the Commission. using corporation in agement tion opinion partnership, findings common from time requiring or 58 of this such act or Section 6 of the Federal The Investigation (a) commerce, writing in cause power— concerning, Act, pertinent such method To act Commission writing carriers of gather to be served title, 15 U.S.C. § practice. in which or to time the any corporation or sections 41-46 excepting person, cease and desist it shall make of method part: corporation and facts and subject and to corporations If filed in compile informa- * shall shall on such partnership, competition shall ** organization, Trade Com- banks to (1964) pro- competition question investigate shall also have such hear- the office an order state engaged and 47- person, report issue %om and Act or nent et General Procedures timony * visory opinions the record in proceedings disposed sion in ceived title “Federal Trade Commission Deci- tion office of sions.” of consent orders odically and texts cated : Section (except No. 8729 was (1967) ^[******] Information ****** ^[******] (e) (c) provisions: ** and The decisions of the The in adjudicative exhibits evidence received in 1.132 of are copying at the Commission evidence or made included pleadings, official avai]abie adjudicative proceedings initiated, digests and all documents in effect when Dock are be obtained to cease and desist proceedings reports reasonable times. transcript following published of selected following 16 C.F.R. in for under principal camera) as indi- part inspec- classes of perti entry peri- tes- ad- re- 1.- of regulate commerce, to its relation and (g) Additional information con- corporations to and to individ- other cerning the activities the Commis- of associations, partnerships. uals, and sion is released from time time through of

****** the Commission’s Office Information. information; re- of Publication ports IV. appellees, in and their amended time to (f) To make supplemental complaint Dis- filed portions information of the

time charged Court, trict that while has except it hereunder, trade obtained long-established customers, and “uniform of and names secrets practice” of the Commission issue expedient in- deem shall action, cases, special news releases in its and ; make annual terest and to Congress reports unlawful because Federal Trade to submit and for Act does not authorize such addi- recommendations therewith action legislation; provide for violates and to tional Constitution, Due Process of reports and deci- Clause publication its of may alignment, appear- and constitutes an and manner in such form sions 1.132, quoted text, Procedures are now General found Commission’s 4.9(d), July 1, 1967, (4) reorganized, (e) (e) in 16 C.F.R. and § effective (11), substantially Fed.Reg. provisions same as 8458-9 and (c), (e) (g) section of subsections alignment, pleadings, transcripts testimony, of of anee of the Commission doc- resulting uments, etc., prosecution,” record, in a matters “with the thereof) open public inspection by anyone (or prejudgment appearance in- reviewing complaint prior terested in hear- them allow the merits charged release of ing. Appellees paragraph 14 additional information. These regulations, hold, legal we are exercise their discretionary damage irreparable au- resulted in action thority, broadly release, they, by conferred press subsection them since (f) of 15 subjected 46§ business “are obloquy; disrepute, lose scorn and will Proceeding, then, to consider deprived opportu- be economic whether act af nities; in- will suffer serious economic firmatively and on own initiative jury ; continuing and their will existence publicizing relating pending items ad irreparably impaired.” judicatory by releasing matters factual have no that a We doubt records, information from its own kind herein involved results turn, course, first to the statute creat tarnishing name, repu- substantial empowering the Commission. respond- tation, By and status of the named 45(a) (6) (1964), 15 U.S.C. § throughout ent related business com- “empowered Commission is and directed * * * munity as well as in the some prevent minds unfair methods of portion general public. Three competition in commerce and unfair or eighty-eight ago, hundred volumes it was deceptive practices acts in commerce.” “[wjhere much has been observed required by The Commission is 15 U.S.C. ” * * 9 said, something be believed. will (1964), 45(b) when it “shall rea then, confronted, We are with the not person corpo son to believe” that a or question appellees of the whether been, is, using “any ration has or un damage actual the suffered but whether competition fair of method or or unfair action author- of the Commission is so deceptive commerce,” or in act permitted place ized or in law the as to judgment and if in the Commission’s a suffering position in of the respect in thereto be “would absque injuria. damnum public,” of interest to issue a complaint, respondent, serve it on the in Confronted with the 1933 hearing. and set a date for a com The question right of the to Commission’s plaint (and pleadings or additional open public hold an session for the becomes, orders) pointed as heretofore purpose taking testimony a com out, public a matter of record. That plaint against appellant charg the then purpose protection basic is the the Act advertising and false fraudulent and public clause, is from evident commerce, unfair trade methods we public,” “would be to interest unanimously proceedings ruled that such quoted above, emphasized at and as authority. were within the Commission’s 46(f) (1964), supra, “as it § Hughes, FTC, Griffiths E. expedient public shall in deem in the App.D.C. 386, F.2d 362 hold, Indeed, terest.” court decisions thrust the District order Court’s purpose of the Federal Trade “[t]he granting injunction denying and public, protect Commission Act is' to to Commission’s motion is dismiss * * * punish wrongdoer, not to adjudicatory proceedings while the be stop it is in interest may public they fore the Commission be Regina deception incipiency.” subject press be not of a factual Corporation FTC, F.2d v. release. Section 1.132 and successor sec Bros., (3d 1963), citing Inc. Cir. Gimbel tions 4.8 and 4.9 (2d Procedures, FTC, 1941), supra, make General 116 F.2d Cir. v. Dall.) Respublica Oswald, (1 v. 1 L.Ed. 155 working Tailoring FTC, Progress points Co. far from the scene 1946). hearing, (7th complaint, Commission Cir. other Moreover, action. law is “[t]he not defining In the Commission’s au experts protect pub- made lic, but to thority responsibility protecting multitude which vast includes —that Congress interest, specifi unthinking ignorant, the credulous, cally “[t]o authorized the Commission public making who, purchases, do por from time to time such stop analyze but too often are by it tions the information obtained general governed by appearances and im- * * * it hereunder deem ex shall Aronberg FTC, pressions.” ** pedient interest citing (7th 1942), Florence Cir. 46(f) (1964). reject ap- 15 U.S.C. We Manufacturing Dowd, Co. v. 178 F. 73 pellees’ contention that this is subsection (2d 1910). Cir. applicable only responsi- to the antitrust Commission. bilities of the We construe unsophisticated If the consumer is quoted phraseology in the “hereunder” protected decep- measure applying chapter to the entire 2 Ti- practices, tive or unfair essential U.S.C., tle restricted of course that he be informed in some manner as specific chap- set forth in limitations identity likely most of those ter itself. prey upon utilizing prohibited him through Certainly conduct. advice charged Since the being media as to the actions taken delegation power it to the broad government agency behalf con- in his deceptive unfair or business eliminate step prophylactic stitutes ultimately addressed public interest, practices in and since to the elimination the con- pub specifically authorized to make prohibited by duct statute. acquired by it, con lic information is in fact law au that there clude attempting Commission, acting thority in the bring its to what action relative it has public interest, to alert the to sus reason to is unlawful conduct to believe pected factual of the law violations widely spread public the attention of the whenever press releases, the issuance of factual a re reason believe that shall have spondent is, conclude, acting its author- we within engaged made activities ity by addition, as defined In statute. Act which resulted the have unlawful obviously Congress long observe has that of action the Com initiation the acquiesced been aware of and in the press predicated releases mission. upon. press procedures. Commission’s release of action the Commission official 20; Ann.Rep. 1962 FTC 1961 See: warning or caution to the a constitute public, 20; Ann.Rep. FTC 1956 FTC Ann. of which the Com welfare the 18; Hearings Rep. the Subcom- before charged. We these matters is in mission Independent Appropri- mittee on Office no contention in this there is note that Appropri- ations 1960 the House of allegations in the Commis that the case Cong., Committee, ations 1st Sess. 109 86 knowingly complaint false.10 sion’s Agencies (1959)’. Replies From Federal Questionnaire Spe- legislating to the recognize in the Submitted that We cial Subcommittee on Governmental In- the wel- pro- and for interest acting formation Congress Committee Govern- fare, was afford Cong., Operations, ment comprehensive 1st 84th Sess. and on a broad tection residing 207-221, Nov. of citizens millions scale to accurately summarize the Commission’s in- the case not that does note also We complaint. opinion allegation plaintiff no We intimate 1) that an volve sufficiency complaint containing discriminatory subjected of a exer- a allegations. authority See B. three these C. cise Corp. FDIC, allegation 2) Morton Int’l F.2d v. 305 an releases (1st 1962). fairly and 692 Cir. did not release that the news

1315 ultimately responsibility deter V. mining charges pre the merits of so ground, Invoking a constitutional recog fact, procedure In sented. this appellees, proceedings the Dis- nized the Administrative Procedure Court, that the Commis- contended trict Act, II, (Supp. 1965-6), 5 U.S.C. 500 § duty quasi-judicial pro- in a sion has a seq. specifically, et More 5 while U.S.C. giving ceeding prejudgment, to avoid 554(d) 1965-6) (Supp. II, requires § prejudgment, appearance and that adjudicatory separation prose violating program, by press agency, subpart cutorial functions in an duty, of their constitutes a violation this (d) “agen (C) excepts subsection rights. substance, process In it was due cy” or a “member or members of the although that contended body comprising agency” from that ultimately judgment upon pass must requirement. The Federal Trade Com against complaint of its the merits reviewing the rec does, by press appellees, the issuance investiga of subordinate ommendations justify appearing support releases employees of the tive Commission and give action, prejudge appear- —or making then the decision to initiate a prejudging before ance —the clearly exception within respondents have been afforded Procedure Act. Administrative Declaring hearing. process in an due 13.10, p. Law, Davis Administrative § hearing must meet administrative (2d 1959). 242 “It ed. is well settled pro- prescribed standards for criminal investigative that combination of ceedings, appellees conclude agency functions within an does requires process accused “Due process. Zim violate due Belizaro v. jury impartial free a trial receive 1952); merman, (3rd Cir., 200 F.2d 282 Sheppard from outside influences.” v. Shaugh United States ex rel. Catalano v. Maxwell, 86 S.Ct. 1952); nessy, (2nd Cir., F.2d 65 Pointing 16 L.Ed.2d (10th Berkshire, Levers v. the Commission’s out that Mulcahey, Cir., 1947); Roccaforte v. public that set forth to the (D.C.Mass. 1958), per F.Supp. aff’d. sion has found “reason believe” 957; Brikley curiam, Cir., 262 F.2d v. violated, the law has been (10th 1936); Hassig, Cir., members conclude that Davis, Treatise, Law Administrative very pres- real are thereafter under See, Comm. 13.02. Federal Trade justify themselves and to vindicate sure Institute, Cement charges publicity has to which the Pangbum (1948).” 92 L.Ed. given. “[Ajgency members CAB, (1st 311 F.2d Cir. commit- more active affirmative 1962). unwilling go as are While we goals achieving ment and effectu- declaring “the far as the Fifth Circuit by Congress; ating policies the declared press in some contention that the by agency’s success is measured the their petitioner process of manner denied due striving posi- in to obtain those results Hearing prevented Ex law in that the objectives.” Elman, A Ad- Note on tive and the from aminer Judicial Officer Adjudication, Yale L.J. ministrative acting fairly premises in the is frivo (1965). 652, 653 lous,” that we conclude the proc deprived due not been have Congress has, general as a right by press the re ess Commission’s agencies practice, administrative vested in lease this case. specified power in the to act both with through accusatory capacity the initi VI. designed to enforce of an action ation aspect case One further of this prevent compliance further vio or with requires statutory provision and with al- brief comment. As we have lation of a 1966). Department Agriculture, (5th 363 F.2d v. United States Cir. Bowman ready damage noted, practical the effect the vinced that this does not con- release, transgression press appellees’ in this stitute a initial of the legal proceeding, rights. complaint appraising is In other a or somewhat respond- undoubtedly involving gov- deleterious similar situation another community business, agency, economic, and ernment that the “[i]n ents’ held Recognizing result, by discharge Congress the status. of a dominant present proceeding public, in this trust for the benefit subsequent possibility apparently similar in all indi- and loss incidental cases, incorporated and cau- is restrictive vidual sometimes unavoidable.” tionary press Corporation phraseology in its release. American Sumatra Tobacco press SEC, paragraph App.D.C. 259, 262-63, re- The second by March lease issued 120-21 describing complaint filed in The action of District Court against appellees stated: denying the Commission’s motion to dis- reversed, is case is miss remand- (Note complaint is when- issued —A ed that to dis- court with instructions “rea- has found ever the Commission appellees’ complaint. miss law has that son to believe” Reversed. proceeding is that violated empha- It in the interest. III, ROBINSON, W. SPOTTSWOOD complaint that issuance of sized! Judge result): (concurring Circuit in the simply of a formal marks the intiation charges which Coupling the Federal Trade Commis- *** upon ruled after will be statutory prevent sion’s call “to hearing The issu- and on record. competition unfair methods of in com- not indicate ance of a does deceptive merce and unfair acts any adjudication of the mat- or reflect practices in commerce”1 with statu- its * * * charged.) ters tory license “[t]o portions quoted of the information obtain- was intended caution well * * * doubt, ed as it shall deem ex- no We have commendable. interest,”2 pedient however, practical in mini value “authority mizing finds derogatory court in the inferences acting public interest, integrity sion, respondents’ best suspected charge many violations minimal, alert “for will read * * may the law factual the answer who never see Dall.) Oswald, (1 Respublica the Commission shall rea- whenever agree respondent en- son to We believe 1 L.Ed. 155 gaged experienced made unlawful trial activities with the learned which judge ad Trade Act [Federal the final Commission] the event “[i]n the initiation of action judication have resulted in were to be No. 8729 Docket This, favor, the Commission.”3 the court [appellees] Plain Plaintiffs’ hold, do repair seems to or rem able tiffs would hearing, prior com- edy damage without with almost them suffered subsequent plete immunity through issuance and distribution mag- irrespective alteration,4 Unfortunate of these news releases.” injury though may be, relations nitude business we are con- this result Act, Schools, Finishing 2. as Trade Commission Federal 12. Career Cinderella amended, 46(f), quot- (D. 6(f), FTC, § § 15 U.S.C. Action No. 503-67 Civil fully Appendix 1967), in the text at note in- D.C., Apr. 13, more ed Joint 107a. fra. Act, as Trade Commission 1. Federal Supra p. 3. 1314. 45(a) 5(a) amended, (6), § only 4. the court’s The matters intimated subjects opinion possible of my understanding thereby.5 less I concur If of the court’s inflicted Since opinion justifying completely than and the rationale court’s case, correct, they diverg- present I statement ing reaches in this result it my opportunity state views. views as to what Commission had take this promulgated.the in mind when it I precipitated this lawsuit. says designed court the release was as a appel- informed When warning segment public to that of request that lees of the denial of their might with which were or be filing pertaining no news release dealing.8 on the other issued, proffered complaint of hand, suggestion spe- without of so explanation:6 purpose, cial or confined tells us that complaint issuance of a “The broadly the release was more conceived Trade Commission is a matter Federal facilitating as a vehicle dissemination public of interest. The that a fact public large newsworthy issued, has as well as in- complaint, ‘pub- are already the contents of the public formation domain.9 information’, 1.132 lic within Section This difference mention at the I out Commission’sRules of Practice. set because it is in terms fundamental adjudi- pleading is a in an A problem of the nature of the with which proceeding, and as such is not cative we are confronted. “The effective func confidential, either as considered tioning government of a free like ours practice or for rea- matter law depends largely on the force in of an policy. public com- sons of plaints Since Relatively opinion.”10 formed category pub- fall within the readily few matters attract more the in information, objective of the lic people govern terest of the than what Information, Commission’s Office of doing ment people. for the News re issuing releases, is to factual news leasing agencies government whereby provide, a means has technique become a standard available, information is made simul- operations by people kept basis, which are taneously orderly and on an knowledgeable bar, industry members, press, governmental aff public.” and interested members by public airs.11 Press releases of inquiry knowing falsity sequent points are of the Com- during the course of the charging allegations, proceeding, including filing discrimina- qn an- releasing policies, swer, hearing tion its news the issuance of the exam- decision, adjudi- sunmmarization unfair or inaccurate iner’s initial and final p. complaint. supra note 1314 and See cation the Commission. This policy seems to 10. with a accord more informing going as to what pp. 1314, Supra 1315-1316. on before the Commission than with a discloses, this was as the record policy 6. So far alerting preferred only statement unadjudicated charges but vio- of conduct elucidating it made which the basis lative of the Act. contemplated any affect- news release Matteo, 10. Barr v. 360 U.S. ing appellees. (1959) (con- L.Ed.2d 1434 curring opinion). supra p. opinion 1312 at the court’s See note 8. known, widely 11. This is well and the used ju stranger release is no p. Supra diciary. See, e.g., Matteo, supra Barr v. sup- interpretation gains 10; Mining SEC, additional 9. This Kukatush Co. prac- general U.S.App.D.C. 27, port from the Commission’s (1962); respecting Ickes, App.D.C. re- issuance of news Glass tice adjudicatory proceedings. (1940), Such 132 A.L.R. leases only the com- are made not when cert. denied plaint filed, (1941); Brewer, sub- but also at several 85 L.Ed. 468 Mellon v. 1318 really said, if taken for must be what it ficials, “serve useful functioning of role essential is.16 government.” processes of the democratic II

12 public dealt nature of the We with conse- and wholesome An incidental adjudicative proceedings general proceed- quence publicity of Hughes, E. Griffiths FTC.17 ings challenging hon- fairness There the charging Hughes filed a esty practices particular commercial unfair trade meth- with may generation of a desirable well be advertising. ods false and fraudulent unnecessary public cau- measure of if Hughes sought injunction, in one re- dealings tion in those identified with spect ap- quite similar to which our Publicity, with such practices.13 pellees awarded, “restraining very also, specter may publicity, in a making the Commission from practical way, on own a de- achieve its taking any testimony in and from deterring regulation by gree of informal making public the tran- might tempted to those who otherwise script Hughes al- testimony.”18 beyond take But liberties with law.14 leged ground relief, injunctive for these factors is the consideration much same vein as our governmental important business of an agency did, “that, because of the announcements everybody’s The business. journals in trade of the issuance know, people want to and are entitled complaint, appellant’s Commission of its know, goes on what government,15 injured business has and that and the thirst for information is not taking testimony aggra- will may limited those who have or ” * * 19 injury, vate and increase the contemplate a direct commercial relation- ship subject governmental with the Hughes’ We noted that case was “con- concern at the moment. The activities fined to assertion that Federal Trade Commission con- right sion has no to determine to hear news, stitute restriction public; evidence in that until de- its final machinery public accessibility wholly termination its function is in- App.D.C. 126, 168, 57 A.L.R. 90-23, 18 (1967) 53 5 Pub.L. 81 Stat. 54 into 1519, 530, cert. denied 48 bearing directly U.S. S.Ct. 552, 275 while not 28, (1927). 72 L.Ed. 409 presented See also case, issue evi- 51, cases cited in purpose notes 49 to congressional infra. dences a clear open possessed by federal the information Ickes, supra 11, App. 12. Glass v. note agencies general administrative 9, D.C. at n. F.2d at 278 n. 9. it is on much the basis that same focusing Publicity directly upon poten litigants agency proceed- accessible to tially products harmful or services ings. frequently employed method to warn passing propriety 16. In on the of the Com public. g., See, Kuka members of the e. action here into contro drawn Mining tush Co. v. SEC and Glass v. grounds versy, we are confined to supra Ickes, both American Truck invoked. See Through Rouke, Law See 1,13- States, Enforcement Ass’n United 364 U.S. Publicity, (1957). 24 U.Chi.L.Rev. (1960); 1570, 4 L.Ed.2d 1527 80 S.Ct. Harrison, F.Supp. See also SEC v. Compensation Unemployment Comm. appeal (D.D.C.1948), dismissed 87 Territory Aragan, of Alaska U.S.App.D.C. 232, (1950), 184 F.2d 691 143, 155, L.Ed. 136 vacated 340 U.S. 71 S.Ct. Chenery (1946) Corp., ; SEC v. (1951). L.Ed. 656 (1943). L.Ed. 626 Cross, Peoples’ Right to Know 197- App.D.C. 386, 17. 61 63 F.2d 362 18. Id. at 63 F.2d at 363. “Freedom of Information so-called 89-487, (1966), Act,” Pub.L. Stat. 250 19. Ibid. incorporated July 4, effective necessarily press quisitional, not focus the therefore of the is attention pointed response, to that In information. And individual while secret.”20 public opening could, pur- rules citizens poses, for informational inspection papers in the case and themselves examine the hearings complaints public specifying pub- on sion’s and attend the records proceeding, provisions lic to which not should be could Commission public,21 affirmatively stamp our we affixed the assist in the transmission approval.22 And, distinguishing through in- of the the disclosure same information to them regular statutorily protected, we turn formation news channels. I now notoriety legally innocuous consider deemed whether the restriction appellees pendency required the adminis- which associated with contend is ei- proceeding: ther trative Act Constitution. hearing as “Doubtless on such a provided the has dis- here Commission Ill cretion, showing hear- that such on a The Act commands Commission trade secrets would disclose gather compile information “[t]o concerning, destructive other data itself investigate time and to investigation, to do under business organization, business, to time the duct, con necessary to proper and whatever management practices, of” where, as consequences, avoid these but “engaged unexempted corporations alleged, possibility of loss is here It also authorizes commerce.”24 wholly public knowl- is founded edge public Commission from time “[t]o investigation has been that an portions to time such the information good can exists or ordered, no reason hereunder, except obtained trade hearing why public be shown customers, secrets and names of as not continue.” should expedient public interest.” shall deem in the on so broad do not Our legislative history 2 Its attests Hughes. They do not vie a front as did congressional amply purpose to create hearings nonpublic

'for records or sealed independent agency empowered not They do adjudicative proceeding. in the only investigate adjudicate, but say en- not the Commission convey fruits also to the informational publicity the attendant hance of its labors to the American public.26 promotive of rath- proposition release—a pa- Thus, litigation er results. while curious ad When pers level, constitute on file had ministrative Commission record, could information classified as rule pleadings, transcript to the record. attention attract of testi “[t]he might reporter enterprising mony, While an all documents re exhibits and newsworthy part information from flush out ceived in evidence or made a docket, adjudicative proceedings (ex could Commission record in Act, 20. Ibid. 25. Federal Trade My amended, 46(f). 6(f), § § 15 U.S.C. operative when Ibid. The rules interpretation provision, of this like request appellee’s Commission denied supra pp. 1313-1314, it in- court’s 1.132 16 C.F.R. §§ to the same effect. adjudicative proceedings. See cludes (1967). 3.16(a) (e), Co., v. Morton Salt United States 632, 649-651, 357, 94 L.Ed. Hughes, FTC, su- 22. E. Griffiths pra App.D.C. 387, 63 F.2d at 363. S.Rep.No. Cong., 2d See 63rd Sess. (1914); H.R.Rep.No. 63rd F.2d at 364. Id. at Cong., (1914); H.R.Rep. 2d Sess. Act, Cong., No. 63rd 2d Sess. 18-19 Federal Trade 46(a). 6(a), amended, § 1320 garners intelligence camera),”27'' propagate the it to cept received evidence only operations. Not in course of provided that “[additional and had prohibit “trade concerning of it the disclosure of did the activities formation trade names of customers” time secrets and released the Commission is but, by publication providing of of through the Office time * * * half-century, portions of information. “such aFor Information.” 28 public expedient in it deem policy issu as shall pursued a had preconditions interest,” it two upon articulated the initiation news releases divulgence impor other of information adjudicative proceedings at judicious type. proc exercise during The first points is course of such tant preceding a re practice, in administrative discretion This consistent eedings.29 point solve underscored in

volving it an administrative does publish,33 legislative Act’s terpretation under which of the statute history.34 second, incorporated functions, in the decisional entitled to is provided, expedience where, standard peculiar weight,30 particularly Thus ac disclosure in the here, made known has been interest.35 propriety of an informational quiesced I conclude Congress.31 considered, neces that, to news media is not established sarily all circumstances automatically fully the institu make authorized media, complaint proceeding, available to news interest, factually tion of a albeit accurate summaries alleged one ad directed toward false adjudi significant developments in the vertising pract deceptive commercial against cative instituted func And both discretional ices.36 appellees.32 tion and determination the Commission’s clearly however, up Congress not, re did confer terms interest adequate unqualified quire license consideration suit Commission an Corp. 1.132(e) (1967). note 33. See American Sumatra Tobacco 27. See 16 C.F.R. § supra. SEC, App.D.C. 259, 262, 21, F.2d v. 110 71 117, (1940). 120 See also E. Griffiths 1.132(g) (1967). note 28. See 16 supra C.F.R. Hughes, FTC, 17, note 61 Inc. v. supra. 21, App.D.C. 387, F.2d at at 363. 63 supra p. opinion 1310 at 29. See the court’s investigations may 34. “All hereafter such 3. note be made the initiative the com- limitations, mission, constitutional within 1, 11, Tallman, 85 380 U.S. 30. v. See Udall may be and the information obtained (1965); 792, 13 Bowles 616 L.Ed.2d S.Ct. public entirely made at the discretion 414, 410, Co., Rock U.S. v. Seminole 325 H.R.Rep.No. 533, the commission.” 63rd (1945); 1215, L.Ed. 65 S.Ct. 89 1700 Cong., (1914). 2d And note Sess. 3 see States, Norwegian Nitrogen United Co. v. 26, supra. 350, L.Ed. 53 S.Ct. 77 288 U.S. 796 Corp. Tobacco See American Sumatra SEC, supra 33, App.D.C. at v. note 71 483, 472, Udall, v. U.S. 373 See Boesche 262-63, at 110 F.2d 120-121. (1963); 1373, L.Ed.2d 491 10 S.Ct. 83 Helvering Co., Reynolds Tobacco v. R .T. SEC, R. A. 112 36. See Holman & Co. v. 423, 115, 110, L.Ed. 83 306 U.S. 48-49, 127, U.S.App.D.C. 43, (1939); Mutual Life Massachusetts 911, 131-32, denied, cert. 82 S. States, v. United Insurance Co. 1257, (1962); Ameri 8 L.Ed.2d 404 Ct. 337, L.Ed. 739 Corp. SEC, su Tobacco v. can Sumatra opinion, su the court’s also See pra App.D.C. 262-263, 110 at note pra p. 120-121; To F.2d at American Sumatra Corp. SEC, App.D.C. 77, bacco statutory “[t]o authorization (1937); E. 93 F.2d Griffiths * * * clearly information” supra FTC, Hughes, note Mining Co. Kukatush suffices. See App.D.C. at F.2d at 364. U.S.App.D.C. supra SEC, 30-31, 650-51. worthy open damage already private information weighing able nothing public. widespread publicity There record property which suggest substantially charges may unadjudicated same calculated considerations did not underlie Com- to produce.37 proposal re- to issue additional basis, however, perceive on I no proceeding progressed.40 leases as interfering with record for regular There is no hint that the course sion’s observance of its contemplated during a mani periodic was against app festation of discrimination course of the administrative against What Commission wanted appellees. justification of its In ellees.41 doing filing to do in this case it had been con publicize decision to complaint, sistently uniformly period a over pointed adjudicative public proc several in its decades all fact that the interested was adjudicative proceedings fur- Nor indication and to the is there eedings42 that the time envis Commission at complaint it filed ther fact that the had any ioned a release that would be objective public was a document.38 thing fair, other than a accurate sum release, said, provide a it “is to mary developments imparting whereby public information means such news value to the event to be reported.43 available, simultaneously is made orderly industry basis, bar, an skimpy The record to some of the members, press, and interested mem- transpirations prior appellees to the time was, then, public.” bers of the an This came to the From District Court.44 determination, administrative con- however, gleaned, what can be there formity long standing policy, with fa- fairly held no which it can be basis cilitate the dissemination to the that remiss in its was through usual news media of news- statutory Appellees responsibilities.45 Compare 37. American Sumatra Tobacco Comm., 184, Public Serv. N. Wis. Corp. SEC, supra 33, App. v. note 48, W. And see note D.C. at n. 110 F.2d at n. infra. considering pro where a section Supra * * * p. 38. viding agency “may, 1317. that make available to the the informa Supra p. tion contained in” documents submitted registrant “only of securities when pp. 40. See the text at 1321-1322. infra judgment in its a disclosure of in FDIC, Corp. public interest,” B. C. Morton Int’l v. formation is in the we Cf. 1962). (1st 305 F.2d 692 Cir. viewed the section “a means of avoid hardships partic the infliction supra p. opinion 42. See the court’s 1310 at ular cases where full disclosure would note 3. likely regis more result in harm to the public.” trant than in benefit to the And Corp. FDIC, B. Int’l C. Morton v. Cf. Hughes, FTC, E. see Griffiths su supra note 41. pra App.D.C. note at by- where, speaking 44. This have been an inevitable at that fact product by appellees pitch specify of a decision the Act does not that the Com adjudicatory hearings the main battle in the rather than must be public, pointed “[djoubtless the administrative arena. But see FCC out Schrieber, 279, 290-291, Congress might there be considered 14 L.Ed.2d 383 unjust occasions it when would be person corporation proceeded against prior 45. On the basis of require public hearings left investigation it found “reason to believe” decision such cases to the board.” See appellees were violation of the SEC, supra and, acting purportedly also R. A. Holman & Co. Act in “the inter- U.S.App.D.C. 48-49, public,” lodge est of the it resolved to 131-132; Halsey, complaint. investigation, Stuart & Co. v. as distin- presented petition reasons, to the Commission lar interest would be grievance incorporating by doing their and their served so. request, presumably they the facts Congress guardianship committed the Commission, support deemed to it. The interest “[ajfter consideration” careful and it for it to determina request light specified public tion subjected which later factors, interest found “no reason judicial scrutiny. consid Constitutional deferring appropriate issuance aside, erations Commission’s action concerning the news release” filed com- only properly could if overturned plaint.46 appellees’ If I am to abide beyond statutory powers were if argu- interpretation, implicit proven arbitrary.47 their I to be think here, necessary ments that evinced Commission had pursue authority, sup standard news sion resolve and the record does not releasing subsequent port policy ad- as to conclusion of arbitrariness.48 Un accept constitutionally developments, infirm, I must less ministrative that action that, appraisement permitted simi- an it also as should have been to stand. adjudicative proceeding 36, SEC, supra U.S.App.D.C. guished note from the 112 properly complaint, 49, conducted at was F.2d at 133. on the 299 787, Baer, parte. 142 F.2d Bowles ex v. Appellees’ countervailing 48. in- claim is of 1944); Woolley (7th v. Cir. 788-789 jury publicity. businesses to their (9th States, 258, 262 Cir. F.2d 97 United record, petition is While their not 614, 1938), 59 S.Ct. denied 305 U.S. cert. willing they I am to assume that confided (1938); 73, Ad see also 391 L.Ed. 83 apprehensions their to the Commission Act, 6(b), 60 § Procedure ministrative token, and, that the same must assume 555(b), (1946), 240 5 Stat. gave considera- them due opportunity the decision to contest no tion, yet I would not that conclude required. complaint bring The news re- Commission’s decision to make implicit preliminary determination without leases was rational foundation. has been the Act believe” “reason being The interest informed statutory prerequisite infringed is but the government strong. The business filing which pleadings proceeding re- and as well the process. adjudicative See launches Ewing public. open The Commis- mained Casselberry, Inc., Mytinger & v. proposal informa- sion’s tion, was to release 870, 94 L.Ed. 70 S.Ct. 339 U.S. only pro- not initiation of effectuation 1088 forthcoming major ceeding, as the therein but events order must administrative they unfolded, irrespective fa- of whom hearing only an administrative await belongs private injury on vored. While charges but made in on exercised, see when discretion is scale review of desired also supra, 37, decision note administrative “ o [N] hear decision. final administrative simply legal within bounds not vitiated stage required preliminary at injury Ewing may follow. because such requisite process long as the due so Inc., supra Mytinger Casselberry, v. & hearing adminis the final is held before 599-600, 45, note at S.Ct. 70 Id., at effective.” order becomes trative 870; v. Bitumi- Fuel Co. National Utah Kukatush also 598, at See 872. Comm., 61-62, 56, 59 nous 306 Coal 11, supra Corp. SEC, Mining note 114 v. 409, (1939); Kuka- L.Ed. 83 483 650; 30, A. U.S.App.D.C. R. F.2d at 309 11, Mining Corp. SEC, supra v. note tush 36, supra SEC, note Co. v. & Holman 2, U.S.App.D.C. at F.2d 114 31 n. 309 47-48, U.S.App.D.C. F.2d at 299 at 112 SEC, 2; R. A. v. at n. & Co. Holman 131-132. supra 36, U.S.App.D.C. 47- at note 131-132; 48, American Su- F.2d at p. quoted supra explanation 46. With supra Corp. SEC, note matra v. Tobacco App.D.C. 262-263, at at Corp. 120-121; Lind, Bros. Tobacco Heller Co. v. American Sumatra See App.D.C. App.D.C. 306, 307-308, supra SEC, at 863- v. note particularly 120; Grif- E. Griffiths And see E. F.2d at F.T.C., supra supra Hughes, SEC, note Hughes, fiths Inc. App.D.C. 387-388, at App.D.C. at 363- 63 F.2d 63 F.2d quoted supra p. & A. Holman Co. v. also R. See releasing news

IV reference to is the Com- chairman, only he checks plea Appellees’ is an constitutional proposed accuracy. releases for mini- So preparation equate effort to participation strictly mal a factual in a prehearing dis- summary pending charges hardly pro- penses prejudgment of the admin- with subjective impact duces so inimical to yet heard. It istrative issues process fairness as tender a due appears cleared all releases are issue.52 attorney the Commis- a Commission chairman, are distributed sion’s then of Informa- the Commission’s Office contention, appellees’ gist tion. respected, is which the District Court made, release, presents once such a objectivity. obstacle to an insurmountable position support of lacks the This occasionally,

judicial opinion. While facts, predecisional particular FIELDS, Petitioner, Norman appear- for the outside has been criticized created,49 to reflect no case seems ances depri- practice COLUMBIA, Respondent. works view that the DISTRICT OF process, cases few of due vation addressing No. 21185. question that it have held Appeals United States Court sustained not.50 others have does Still District of Columbia Circuit. to due without allusion 2, Decided Feb. apparently suffi-

process,51 for lack of presentation of the cient induce merit to point treatment. its or to entice unpersuaded colleagues, my I am

Like argument, particularly

by appellees’ the circumstances

must be related to appears, the From all that this case. responsi- adjudicative

only person with activity performs with

bilities who SEC, Organ relevance, 293 & its N. Co. v. constitutional the re- 49. See Sims that 1961), 78, (2d denied cert. leases would be taken as mani- F. 2d Cir. external 440, prejudgments 968, L.Ed.2d 396 festations 82 S.Ct. Com- 368 U.S. SEO, Gilligan, supra (1962); & v. Will Co. mission. See the cited notes eases (2d Cir.), 461, Moreover, denied cert. and 51. F. 2d 468-469 issuing 4 L.Ed.2d succeeded Commission dis- played prominently (1959) . note: “A is issued whenever SEO, Organ su & Co. v. N. Sims 50. See has ‘reason to be- found 81; pra Bowman v. F.2d note lieve’ law has violated Agriculture, Dep’t of States United proceeding that a 1966). (5th See also Cir. emphasized It interest. is- CAB, v. Air Lines Eastern complaint simply marks suance of 1959), (2d denied 362 cert. Cir. 757-758 of a initiation formal L.Ed.2d 901 charges which the will (1960) . hearing be ruled after a and on Oorp. Mining g., See, e. Kukatush The issuance a- com- record. supra SEC, also United note See plaint does or reflect indicate Mfg. Corp., Diapulse 262 F. States adjudication charged.” of the matters Supp. (D.Conn.1967). present tells us CAB, incorporate Compare notice su- is to such a Air Lines v. Eastern pra Nor in all releases. F.2d at 757-758. assuming theory, accept appellees’ I can

Case Details

Case Name: Federal Trade Commission v. Cinderella Career and Finishing Schools, Inc.

Court Name: Court of Appeals for the D.C. Circuit

Date Published: Mar 12, 1968

Citation: 404 F.2d 1308

Docket Number: 21118_1

Court Abbreviation: D.C. Cir.