Crush International Limited, et al. (and related dockets 8854-8859)

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INTERLOCUTORY ORDERS, ETC. 1023 policies, acts and practices of that corporation is not sufficient grounds for concluding that it is no longer necessary to hold him as a respondent in order to serve this purpose. Petitioners having failed to show that changed conditions of fact or law require that the order be set aside as to respondent Ira Rubin, or that the public interest so requires, as provided by Section 3.72(b) (2) of the Rules of Practice:

It is ordered, That petitioners’ request that the order to cease and desist be set aside as to Ira Rubin in his individual capacity be, and it hereby is, denied.

CRUSH INTERNATIONAL LIMITED, ET AL. Docxer 8853 DR. PEPPER COMPANY Docker 8854.

THE COCA-COLA COMPANY, ET AL. Docker 8855 PEPSICO, INC. Docser 8856 THE SEVEN-UP COMPANY Docger 8857 NATIONAL INDUSTRIES INC., ET AL. Docker 8859 Order, March 28, 1972 Order denying respondents’ motions to dismiss complaints for failure to join respondents’ bottlers as indispensible parties. Orver Ruiine on Mortons to Dismiss ror Famure To JOIN INDISPENSABLE PARTIES This matter is before the Commission upon requests for permission to file interlocutory appeals by the respondents in Docket Nos. 8853— 8857 and Docket No. 8859, upon complaint counsel’s response thereto, filed February 17, 1972, and upon respondent Dr. Pepper Company’s response to complaint counsel’s reply, filed February 29, 1972.1 Al- 1The motions are as follows: Crush International Limited, Docket No. 8853—application for leave to file an interlocutory appeal or to treat motions as certified filed February 4, 1972; Dr. Pepper Company, Docket No. 8854—request for permission to file an interlocutory appeal from the order of the hearing examiner denying respondent's motion to dismiss the complaint for failure to join indispensable parties and for a stay of proceedings, and request for permission to file an interlocutory appeal from the order of the hearing examiner denying respondent’s motion to amend the complaint to join the Dr. Pepper Company bottlers as co-respondents filed February 4, 1972. The Coca-Cola Company, Docket No. 8855—application (I) for leave to file interlocutory appeals and (II) to treat motions to dismiss as certified filed January 18, 1972; Pepsico, Inc., Docket No. 8856—application for leave to file interlocutory appeal or to treat motions as certified filed January 31, 1972; The Seven-Up Company, Docket No. 8857T— application for permission to file (1) appeal for de novo consideration of respondent's motion to dismiss, or (2) interlocutory appeal filed January 31, 1972; National Industries, Inc., Docket No. 8859—respondents’ request for permission to file interlocutory appeal from the hearing examiner's order denying motion to dismiss the complaint for failure to join indispensable parties filed February 3, 1972. INTERLOCUTORY ORDERS, ETC. 1023 policies, acts and practices of that corporation is not sufficient grounds for concluding that it is no longer necessary to hold him as a respondent in order to serve this purpose. Petitioners having failed to show that changed conditions of fact or law require that the order be set aside as to respondent Ira Rubin, or that the public interest so requires, as provided by Section 3.72(b) (2) of the Rules of Practice:

It is ordered, That petitioners’ request that the order to cease and desist be set aside as to Ira Rubin in his individual capacity be, and it hereby is, denied.

CRUSH INTERNATIONAL LIMITED, ET AL. Docxer 8853 DR. PEPPER COMPANY Docker 8854 THE COCA-COLA COMPANY, ET AL. Docxer 8855 PEPSICO, INC. Docker 8856 THE SEVEN-UP COMPANY Docker 8857 NATIONAL INDUSTRIES INC., ET AL. Docker 8859 Order, March 28, 1972 Order denying respondents’ motions to dismiss complaints for failure to join respondents’ bottlers as indispensible parties. Orver Ruuine on Motions tro Diswziss ror FAILURE To JOIN INDISPENSABLE PARTIES This matter is before the Commission upon requests for permission to file interlocutory appeals by the respondents in Docket Nos. 8853- 8857 and Docket No. 8859, upon complaint counsel’s response thereto, filed February 17, 1972, and upon respondent Dr. Pepper Company’s response to complaint counsel’s reply, filed February 29, 1972.1 Al- 17The motions are as follows: Crush International Limited, Docket No. 8853—application for leave to file an interlocutory appeal or to treat motions as certified filed February 4, 1972; Dr. Pepper Company, Docket No. 8854—request for permission to file an interlocutory appeal from the order of the hearing examiner denying respondent’s motion to dismiss the complaint for failure to join indispensable parties and for a stay of proceedings, and request for permission to file an interlocutory appeal from the order of the hearing examiner denying respondent’s motion to amend the complaint to join the Dr. Pepper Company bottlers as co-respondents filed February 4, 1972. The Coca-Cola Company, Docket No. 8855—application (I) for leave to file interlocutory appeals and (II) to treat motions to dismiss as certified filed January 18, 1972; Pepsico, Ine., Docket No. 8856—~application for leave to file interlocutory appeal or to treat motions as certified filed January 31, 1972; The Seven-Up Company, Docket No. 8857— application for permission to file (1) appeal for de novo consideration of respondent’s motion to dismiss, or (2) interlocutory appeal filed January 31, 1972; National Industries, Inc., Docket No. 8859—respondents’ request for permission to file interlocutory appeal from the hearing examiner’s order denying motion to dismiss the complaint for failure to join indispensable parties filed February 3, 1972. though the motions are not identically styled and vary somewhat in the specific relief sought, they nevertheless involve the same question and will therefore be considered together.

The question arises as a result of complaints issued by the Commission against several soft drink companies challenging the legality of respondents’ contracts with their respective bottlers. Respondents take the position that their bottlers are indispensable parties to these proceedings and that absent their joinder the complaints should be dismissed. Motions to this effect were denied by the examiner and these requests for permission to appeal followed. Before considering these requests we will deal with the procedural issues of the examiner’s authority to rule on a motion to amend the complaint by the addition of parties to Commission proceedings and his authority to rule on motions to dismiss.

I The Commission has consistently taken the position that the examiner has no authority to amend a complaint by the addition or deletion of parties except to the extent that his ruling deals with matters of procedure rather than substance such as the deletion of an individual respondent who has deceased or the substitution of respondents improperly named, etc. The same applies to motions to dismiss because both involve the “reason to believe” concept of Section 5 which only the Commission itself can express. Both issues were involved in the Suburban Propane Gas Corp. case, Docket No. 8672, Order Ruling on Interlocutory Appeals, May 25, 1967, CCH Trade Reg. Rep. [1967-1970 Transfer Binder] §17,965 [71 F.T.C. 1695]. On the issue to amend the complaint by a joinder of an additional party we there held that it should have been certified to the Commission. As to the motion to dismiss we stated as follows: The examiner recognized that the question involved the administrative diseretion in issuing a complaint and that it presented an issue on which he had no authority to rule. Nonetheless, he denied the motion. The matter should have been certified to the Commission with the examiner's recommendation. Section 3.6(2), Commission's Rules of Practice; Drug Research Corp., Docket No. 7179 (October 8, 1962). [Footnote omitted] Respondent. however, has not been prejudiced. since the matter is now before the Commission for de novo consideration and determination. at 20,337.

The Commission has made a distinction however, betaveen those instances in which the motion to dismiss challenges the Commission’s legal power to issue the complaint and those in which it seeks to probe the Commission’s discretion or judgment on whether or not a proceeding would be in the public interest. It is only in the latter instance in which the examiner is considered to be without authority to rule. See, The Drine-X Company, Inc., Docket No. 8615, Order INTERLOCUTORY ORDERS, ETC. 1025 Denying Application for Leave to File Interlocutory Appeal or in the Alternative for an Order Requiring Certification of Question, June 10, 1964. While it is clear that the present situation falls within the former, ie¢., the category of cases challenging the Commission’s legal authority to issue the complaint, and hence within the examiner’s authority to decide, we have nevertheless determined that that question is so intertwined with the question of amending the complaint by the addition of parties that both should have been certified to the Commission.

Although the matter has not been so certified. we are not precluded from considering it, since it is before us upon respondents’ request for leave to file interlocutory appeals. A similar procedure was followed in Afaremont Corp., Docket No. 8763, Order Denying Respondent’s Request to File Interlocutory Appeal and Motion to Dismiss the Complaint or Stay Proceedings, October 3, 1968, CCH Trade Reg. Rep. [1967-1970 Transfer Binder] § 18,542 [74 F.T.C. 1614]. There we held as follows:

Respondent argues first that the examiner erred in ruling on the motion, which it asserts to be beyond his jurisdiction, and, secondly, that its request is justified on the merits. We agree that the hearing examiner erroneously ruled on the request to dismiss the complaint or stay the proceeding. The motion clearly is addressed to the Commission’s administrative discretion and does not concern adjudicative factfinding functions delegated to hearing examiners. Graber Manufacturing Company, Inc., Docket No. 8088 (order issued October 15, 1964). The hearing examiner should properly have certified this part of respondent’s motion to the Commission for the Commission's determination and action. Nevertheless, in view of respondent's application for permission to file an interlocutory appeal, the matter is now before the Commission in the same posture as it would have been had the examiner certified it. Accordingly, while our holding is that the hearing examiner erred in failing to certify the motion, this in the circumstances was not to respondent’s prejudice and the motion will now be treated as though it has been properly certified. at 20,889.

We will follow this procedure in the instant proceeding. At the same time we will consider the examiner’s ruling as his recommendation to the Commission for the disposition of this matter. nag The question presented for our decision is whether respondents’ bottlers who are parties to the contract being challenged by the complaint are indispensable parties to this proceeding. In essence the position urged upon us by the respondents is that an adjudication of these contracts involves substantial rights of the bottlers who, over the years, have expended goodly sums of money in the development of their business operations in reliance on the terms of their contracts and hence due process requires that they be made a party so that they may be bound by the outcome of this proceeding as well as protect their interests. Respondents are also concerned that the failure of joinder may subject respondents to multiple litigation with their bottlers and result in inconsistent future adjudications. Absent a joinder of the bottlers, respondents ask that the complaints be dismissed.

The examiner’s ruling complained of contains the following statements:

It is quite apparent that an ultimate decision by the Commission striking the exclusive territorial provisions from the various franchise contracts that the respondents have with their bottlers may very well directly affect substantial property rights these bottlers have acquired and own as a result of their franchise contracts. If a bottler were to lose its exclusive territory within which to sell the respondents’ trademarked products, it would be without recourse to sue the respondents for damages or for injunctive relief requiring them to provide the protection against competition from other bottlers who mmay well invade its territory. To that extent, therefore, the bottlers may be considered indispensable.

As a practical matter, however, it is not feasible to join all of the respondents’ bottlers as parties to this proceeding. In the first place, the large number of them (1186) would create a completely unmanageable situation for trial purposes. Secondly, it is presumed that a substantial number of such bottlers operate within a smali territory within a state, and consequently, may well not be engaged in commerce thereby depriving the Commission of jurisdiction over such bottlers. Order Denying Motion to Dismiss the Complaint for Nonjoinder of Indispensabie Parties, January 7, 1972, page 3-4. The examiner was guided in his decision by Rule 19 of the Federal Rules of Civil Procedure and Provident Bank v. Patterson, 390 U.S. 102 (1968) a case interpreting the requirements of Rule 19. Traditionally, of course, antitrust proceedings and decrees have taken little, if any, notice of third parties to any contract held to be in contravention of one of the antitrust laws perhaps because the vindication of public rights, even though they run counter to contractual rights between defendants and third parties, may be accomplished without joining these third parties. This reasoning is advanced by Professor Moore in 834 MOORE’s FEDERAL PRAC- TICE, Section 19.10 at 2344. Respondents invite attention to two 1921 proceedings involving this Commission which allegedly support the proposition that the complaint should be dismissed for failure to join indispensable parties. The first is Fruit Growers’ Lapress Inc., v. F.T.C., 274 F.205 (7th Cir. 1921) in which the court vacated a Commission cease and desist order on the ground that the Commission was without jurisdiction because the facts involved common carriers who are within the sole jurisdiction of the Interstate Commerce Commission. The second is Sinclair Refining Co., v. F.T.C., 276 F.686 INTERLOCUTORY ORDERS, ETC. 1027 (7th Cir. 1921), in which the failure to join what the reviewing court considered to be an indispensable party was advanced as one of the reasons for setting aside an order to cease and desist after the court had decided that no violation had been shown. Neither case can be considered a viable precedent for the proposition advanced here. Moreover, a subsequent decision by the same court specifically upheld the Commision’s view and with specific reference to these two decisions Automatic Canteen v. F.T.C., 194 F.2d 483 (7th Cir. 1952), rev'd in part on other grounds, 346 U.S. 61 (1953). Finally, the courts in a procession of decisions have failed to join or otherwise consider indispensable third parties to a contract the legality of which was being challenged under the antitrust laws. See, U/nzted Shoe Machénery Corp. v. U.S., 258 U.S. 451 (1922); U.S. v. Paramount Famous Lacky Corp., 282 U.S. 30 (1930); Interstate Circuit, Ine, v. US., 306 U.S. 208 (1939); U.S. v. Bausch & Lomb Optical Co., 321 US. 707 (1944); U.S. v. National Lead Co., 332 U.S. 319 (1947); U.S. v. Schine Theatres, Inc., 384 U.S. 110 (1948) ; and 7S. v. International Bowing Club of New York, Inc., 171 F. Supp. &41 (S.D.N.Y. 1957), aff'd 348 U.S. 242 (1959). The last time this Commission had to consider this question was in L. G. Balfour Co., Docket No. 8435, July 29, 1968, CCH Trade Reg. Rep. [1967-1970 Transfer Binder] { 19,485 [74 F.T.C, 345] in which it came to the same conclusion. In Fastman Kodak Co., Docket No. 6040, similar arguments were advanced with respect to the challenged resale price maintenance contracts Kodak had with over 6,000 retailers. What we said there is pertinent here: It is true that if an order prohibiting respondent from fixing and maintaining resale prices in accordance with its agreements with these dealers is issued, it would affect their contractual rights. However, no such prohibition will be issued herein unless the Commission determines that these agreements are in unreasonable restraint of trade and should not be continued, The courts have regularly struck down systems deemed violative of the antitrust laws even though such systems included leases, licenses and other forms of agreements where the other parties thereto were not before the court and where the enjoined covenants were clearly of benefit to said other parties. Order Disposing of Motion to Strike and Respondents’ Motion to Dismiss, September 25, 1953.

Tt is well established, therefore, that third parties to a contract the legality of which is being challenged under the antitrust laws need not be joined in a suit against the first party and are thus not considered indispensable parties. In National Licorice Co. v. N.L.R.B., 309 U.S. 350 (1940) the court observed that “in proceedings before the Federal Trade Commission, the order restraining unfair methods of competition may preclude the performance of outstanding contracts by the offender. Such orders have never been challenged because the holders of the contracts were not made parties.” at 366. In light of the foregoing we believe respondents’ claim that due process. requires the joinder of the bottlers as indispensable parties and absent that, a dismissal of the complaints, to be without merit. Respondents also assert that the failure to join the bottlers may subject respondents to the risks of multiple litigation and inconsistent future adjudications. Our own understanding of the applicable legal principles leads us to conclude that such an eventuality is highly unlikely. A contract which has been declared illegal cannot be enforced by either party.

A party to an illegal bargain can neither recover damages for breach thereof nor, by rescinding the bargain, recover the performance that he has rendered thereunder or its value. * * * Restatement of Contracts, Section 598 (1932) Similarly, supervening illegality renders a contract unenforceable even if it was legal when entered into Restatement of Contracts, Section 548, In this regard, administrative proceedings are considered to have the same effect as do statutory provisions. Clearly prevention by an executive and administrative order designed for the benefit of the general public may be considered excusable impossibility whether the order is directed to the general public or to an individual. 6 Williston on Contracts, Section 193 (Rev. Ed., 1988). We turn now to the question of whether, by using Rule 19 of the Federal Rules of Civil Procedure, a different result would be dictated. The Federal Rules of Civil Procedure are not, of course, applicable to administrative agency proceedings which are governed by their own rules of practice. Nevertheless, they can provide an analytical framework for the disposition of related issues. Rule 19(a) provides that:

A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. As to (1), it is clear that depending on the outcome, complete relief can be acorded in this proceeding without joining the bottlers. Should the allegations of the complaint be upheld, the relief sought by the order, the termination of the exclusive territorial contracts, can be accomplished by an order to cease and desist naming the INTERLOCUTORY ORDERS, ETC. 1029 presently named respondents. The second part of Rule 19(a) is divided into two parts—an unprotected interest and a substantial risk of incurring inconsistent obligations in relation to that interest. If, however, that interest is not a legally protected one, as for example rights pursuant to a contract declared illegal under the antitrust laws, it cannot serve as a basis for a joinder of allegedly indispensable parties. The fact that a contract may have previously not been illegal does not alter this result. The Commission was created for, among others, the purpose of prohibiting hitherto unchallenged trade restraints. 7.7.0. v. Sperry & Hutchinson Co., 405 U.S. 233 1972. As for the risk of incurring inconsistent obligations due to the failure to join the bottlers, Rule 19 requires that risk to be substantial before it will be considered as a reason for a joinder of additional parties. As we have mentioned above, that risk cannot be considered substantial. Our review of the applicable case law convinces us that the bottlers are not indispensable parties within the meaning of Rule 19. See, ¢.7., Bennie v. Pastor, 393 F.2d 1 (10th Cir. 1968), citing Shields v. Barrow, 58 U.S. (17 How.) 129 (1854) and Provident Bank v. Patterson, 390 US. 102 (1968); Chiodo v. General Waterworks Corp., 880 F.2d 860 (10th Cir. 1967), cert. denied, 389 U.S. 1004; Stevens v. Loomis, 384 F.2d 775 (5th Cir. 1964). mH One final aspect of this matter need be considered. In its request, the Coca-Cola Company points to The Coca-Cola Bottling Co. v. The Coca-Cola Co., 269 ¥.796 (D. Del 1920) as supportive of its position. There, in a dispute over the contract, the court found these exclusive territorial contracts to be lawful and as not “having an effect or intended to have an effect to defeat or lessen competition or to encourage or tend to create a monopoly, nor do I find anything therein that may be said to be in unreasonable restraint of trade.” at 814. We have carefully reviewed that decision and conclude that it does not support respondent Coca-Cola’s position.

Iv A number of the respondents have requested the opportunity for oral argument. Under the circumstances, we do not believe that an oral argument would serve any useful purpose. Accordingly, lt is ordered, That the motions to dismiss for failure to join indispensable parties be, and they hereby are, denied.