Gibson, Herbert R., Sr

Text (OCR of the scan at left; may contain errors)

IN THE MA TI'R OF HERBERT R. GIBSON, SR., ET AL.

MODIFYING ORDER AND OPINION IN REGARD TO ALLEGED VIOLATION OF SEC. 2 OF THE CLAYTON ACT AND THE FEDERAL TRADE COMMISSION ACT Docket 9016', Final Order, April 30, 1980-Modifying Order, Aug. 8, 1980 This order, granting in part, and denying in part, respondents' petitions for reconsideration, modifies the order issued on April 30, 1980, 45 FR 38352, 95 C. 564, by inserting the word "while" before the word "acting, " in paragraph 1, line 2 of Section II; and by inserting a comma and the phrase while acting as a buyer or acting for in behalf of or subject to the direct or indirect control of a buyer " after the word "respondent(s)," in paragraph 2 line 3 of Section II.

ORDER GRANTING IN PART, AND DENYING IN PART, RESPONDENTS PETITIONS FOR RECONSIDERATION An opinion and final order in this matter having been issued on April 30, 1980; respondents having been served by mail with the said opinion and order on May 20, 1980 and May 21, 1980; respondents having petitioned for reconsideration of said opinion and order on June 12, 1980; and the Commission, for the reasons stated in the accompanying opinion, having determined to grant in part, and deny in part, respondents' petitions for reconsideration; It is ordered, That the final order to cease and desist be, and hereby is, modified as follows:

In paragraph 1 of Section II of the Order, line 2, insert the word while" in front of the word "acting; and In paragraph 2 of Section II of the Order, line 3, after the word respondent(s)," insert a comma and the phrase "while acting as a buyer or acting for or in behalf of or subject to the direct or indirect control of a buyer OPINION OF THE COMMISSION By CLANTON Commissioner:

Respondents have filed two petitions for reconsideration of our recent opinion and order. Each petition asserts: (1) that the language and coverage of Section 1I of the Final Order should be changed; (2) that application of the opinion of the Court of Appeals in Grolier, Inc. v. FTC, 615 F.2d 1215 (9th Cir. 1980), requires disqualification of the administrative law judge ("ALJ"), Theodor P. von Brand, and hence g..

HERBERT R. GIBSON, SR., ET AL. 127 126 Opinion dismissal or remand of the case; and (3) that certain actions taken by the Commission during periods of allegedly lapsed appropriations, including actions taken in the investigation and adjudication of this case, violated the Antideficiency Act, 31 VB. C. 665(a) (1976), and hence require dismissal or remand of the case. Section 3.55 of the Commission s Rules of Practice limits the scope of a petition for reconsideration to "new questions raised by the decision or final order and upon which the petitioner had no opportunity to argue before the Commission." While certain of respondents' objections are appropriate for disposition by reconsideration, other contentions are not new or are untimely. We consider each of the objections raised seriatim. The petition fied by Herbert R. Gibson, Jr., Gerald P. Gibson and others objects to the inclusion of any respondent other than Herbert R. Gibson, Sr. in the provisions of Section II of the Final Order which essentially enjoins respondents from violating Section 2(c) of the Clayton Act, 15 UB.C. 13(c) (1976), as amended. This issue of order coverage is not new and these respondents l1ad . ample ..ppoE!llnjt)',\Which they ex rcised, to address this q\lestion during . Commission. See,Jl1e course of trial and on appe"l to the Answering Brief of Herbert R. Gibson, Jr., fied May 29, 1979 , at 9. The instant request is, therefore, inappropriate, cf Interstate Builders, Inc., 72 F. C. 1009, 1010 (1967); Lester S. Cotherman, 77 F. 1621 1622 (1970), and is denied.

The petition filed by Herbert R. Gibson, Sr. and Belva Gibson notes that the language of paragraphs 1 and 2 of Section II of the Final Order are at variance, in that only the former includes the phrase "as a buyer or acting for or in behalf of or subject to the direct or indirect control of a buyer. " The petition requests that the latter paragraph be altered to conform to the former. As the petitioners surmise, it was the Commission s intention that this phrase appear in both paragraphs, and an appropriate order correcting this typographical omission is annexed. To sum up, all Gibson respondents, except dissolved corporations, are bound by Section II of the Final Order not to receive or induce payments which would violate Section 2(c) of the Clayton Act. This proscription applies irrespective of whether the respondent acts as a buyer, or on behalf of or subject to the control of a buyer.

Opinion 96 F.

All respondents petition for reconsideration of the Commission opinion and order in light of Grolier, Inc. v. FTC, 615 F.2d 1215 (9th Cir. 1980). In that case, the Commission issued a complaint charging Grolier with violating Section 5 of the Federal Trade Commission Act. During the course of the hearings, Administrative Law Judge von Brand advised the parties that he had previously served as an attorney-advisor to former Commissioner Everette MacIntyre from 1963 to January 1971, during which time the Commission was investigating Grolier and its subsidiaries. "Upon learning of ALJ von Brand' s advisory responsibilty during the eight-year period, Grolier requested that the judge disqualify himself from further participation in the proceedings. " 615 F.2d at 1217. Judge von Brand declined to recuse himself, and the Commission affrmed Judge von Brand' decision in an interlocutory order, 87 F. C. 179, 179-81 (1976), and again in its final order and opinion, 91 F. C. 315, 485-86 (1978). On appeal, the Ninth Circuit concluded that the Commission had incorrectly interpreted Section 5(c) of the Administrative Procedure Act, 5 U.s.c. 554(d) (1976), in ruling on Grolier s disqualification challenge, and remanded the case to the Commission. Although respondents in this case have not submitted a motion and affdavits as required by Rules of Practice Section 3.42(g)(2),' we understand the facts to be essentially as follows. Beginning in 1967 the Commission and its staff investigated respondents; the investigation culminated in a complaint issued in 1975. Judge von Brand presided over the proceedings from the issuance of the complaint through trial (which began on December 19, 1977), and until his issuance of the initial decision in early 1979. Judge von Brand had previously served with the Commission as an attorney-advisor to Commissioner MacIntyre from 1963 until 1971. During Judge von Brand's tenure as attorney-advisor to Commissioner MacIntyre, the Commissioners themselves, including Commissioner MacIntyre, participated in certain decisions connected I In relevant part, Rules of Practice Section 3.42(g), 16 C. R 3.42(g), provides: "Whenever any party shal! deem t.he Administrative Law Judge for any reason to be disqualified to preside, ur to continue to preside, i particular procrwling, such party may fie with the Secretary, II motio addres to the Administr"tive Law Judge ' . . to be support by affdavits s.tting forth the alleged grounds for disualification." The requirement of affdavits, grounded in 5 US. 556 (1976), is not an empty formality to be cast aside unilaterally by II party to II Commission proceeding. There are many rC;lmns for such II requirement An affdavit provides an exact, sworn recitation of facta, collecte in one place; II disqualification motion must not be made by a party, nor taken by the Commission, lightly. "Such a charge, unfairly made, not only impugns without warrant the integrity of the government offcial entruste with responsibility for deciding a given dispute, hut it also unnecessarily tarnishes our beneficent traditions of legal due procee., Marcus v. Dired!'r, Office of Wkr: Comp. Pmg., .548 F2d 1044, 1050 (D.C. Cir, 1976) (per curiam). Accordingly, the affdavit requirement serves not only to f(Xus the facts underlying the charge, but to foster an atmosphere of solemnity commensurate with the gmvity of the claim. Respondeots' failure to submit affdavits is thus an independently suffcient basis to deoy their petitioos in this respect g., 126 Opinion with the investigation of respondents (e. the Commission voted on two investigational resolutions and ruled on a motion to quash three subpoenas).

In a pretrial conference on February 23, 1977 (about one year after issuance of the Commission s interlocutory opinion affrming Judge von Brand's participation in Grolier, supra, and almost ten months before the start of trial in this case), Judge von Brand, apparently acting out of candor and an abundance of caution, disclosed to the parties on the record the fact of his prior service to Commissioner MacIntyre, and recited his "understanding that none of the respondents ' . . would raise an objection to (his) continuing in the case on that ground. " (Tr. at 242.) All counsel, including counsel for the instant petitioners, responded unequivocally that there would be no such objection. (Id. at 242-43.) The case proceeded through trial, and consistent with their statements, respondents did not object to Judge von Brand's participation. Neither did respondents object in their appeal papers before the Commission, or at oral argument in July, 1979.

The Ninth Circuit' s opinion in Grolier was issued on January 24 1980; respondents did not attempt to present a Grolier-type challenge to Judge von Brand in this case before the Commission s decision and order issued on April 30, 1980.

Respondents now urge, for the first time, that the Ninth Circuit' decision in Grolier requires the Commission, under the Constitution the Administrative Procedure Act, and the Commission s Rules of Practice' either (1) to disqualify Judge von Brand and (a) dismiss the case or (b) vacate its decision and remand for a new trial;' or (2) to inter alia, of a deposition from Judgegrant discovery in the form . The transcript reveals that Judge von Brand dislos his prior service off the record as well. (Tr. at 242. . The Court of Appeals' decision in Grol involved only an interpretation of Section 5(c) of the Administrative Procedure Act, 5 U. c. 554(d) (1976), and did not purport to interpret the C.-ostitution or the Commission s Rules of Practice; accordingly, it offer! nO basis for relief on thos grounds. Repondents. very general asrtion of their right to trial by a "fair and impartial judiciary" is ba. upon the due proces clause ufthe Fifth Amendment. While we are and must be sensitive to such considerations. neither will we substitute OUr judgment for that of the federal judiciary or the Congress. ABuming argundo that Judge von Brand poss some f!lmiliarity with the facts of the cas gained through his servce to Commi!'ioner MacIntyre (notwithstanding that Judge von Brand's tenure as an attorney-advioor ended four years before issuance of the complaint), his presiding over the trial would not constitute a due proces violation "Mere familiarity with the facts of a cas gained by an agency in the performance of its statutory role does not. . . disqualify a decisionmaker. Hortonuille .Joint &ho(J1 District No.1 v. Horton Education Ass n, 426 U.S. 482, 493 (1976); accord Withrow v. Larkin 421 U.S. 35, 47:.59 (1975) (contention that combination of inv$!tigative and adjudicative functions violates due prOCeB carries diffcult burden ofpcrsuasion);Pangburn v- CAB. 311 F.2d 349, 358 Gir- 1962) Moreover, under the exception contained in the fourth sentence to Section 5(c) of the APA, agency members may participate in investigative and adjudicative decisions in the Bame cas. To hold that Judge von Brand' participation violate the Constitution would thus be to declare that thu Administrative Procedure Act is constitutionally deficient.Cf Withrowv. Larkin. supm, 421lJ's. at 56 (APA not unconstitutional). AI to the rCfpondents' reference to the Commission s Rules, they cite none, and we are aware of none, that might be relevant . Even if fully applicable,Grolier at most would require reconsideration by the Commission The Ninth Circuit' s opinion, by its terms, requires neither retrial nor dismisaal. 615 F.2d at 1222 ), ), Opinion 96 F.

yon Brand and access to Commission records. In our view, even apart from estoppel due to respondents' waiver, there is an important element-timeliness-present in Grolier but lacking here, which makes the cases altogether different; indeed, respondents' lack of timeliness bars them from any relief.

A basic requirement for any disqualification motion is, of course that it be presented either at the outset of the proceeding or immediately after ascertainment of the circumstances that prompt its fiing. Kroger Co., Dkt. 9102 (Order fied June 5, 1980, at 2) (quoting 5 U. c. 556(b)). See Rules of Practice Section 3.42(g)(2) (motion to be fied "(wJhenever" a party deems ALJ disqualified; also provides for expedited Commission determination). In this respect, the Commission s requirements are consistent with the "general rule governing disqualification, normally applicable to the federal judiciary and the administrative agencies alike " that disqualification claims must be raised "as soon as practicable after a party has reasonable cause to believe that grounds for disqualification exist. Marcus v. Director, Office of Wkrs. Camp. Prog., 548 F.2d 1044, 1051 (D.C. Cir. 1976) (per curiam) (footnotes omitted); accord, Capitol Transp., Inc. v. United States, 612 F. 2d 1312, 1325 (1st Cir. 1979); Duffield v. Charleston Area Medical Center, Inc., 503 F.2d 512, 515- 16 (4th Cir. 1974) (collecting cases); Safeway Stores, Inc. v. FTC, 366 2d 795, 802-03 (9th Cir. 1966), cert. denied, 386 U. S. 932 (1967); A. Holman Co. v. SEC, 366 F.2d 446, 454-55 (2d Cir. 1966), cert. denied, 389 U.s. 991 (1967); Marquette Cement Mfg. Co. v. FTC 147 2d 589, 592 (7th Cir. affd, 333 U. S. 683 (1945). See also United States v. L. A. Tucker Truck Lines, 344 U.s. 33, 38 (1952). The rule of timeliness requires that a party act as soon as possible after the facts have become known. Satterfield v. Edenton-Chowan Bd. of Ed. , 530 2d 567, 574 (4th Cir. 1975) (citing cases); and inaction may waive a separation-of-functions disqualification claim International Paper Co. v. FPC, 438 F. 2d 1349, 1357 (2d Cir. cert. denied, 404 U.S. 827 (1971); Democrat Printing Co. v. FPC, 202 F.2d 298 (D. C. Cir. 1952); see Satterfield v. Edenton-Chowan Bd. of Ed. , supra; Duffield Charleston Area Medical Center, supra. Under Section 3.42(g)(2) of the Commission s Rules of Practice, a party "may" choose to present a disqualification challenge; it need not do so. However, if it chooses to do so, it must do so promptly after the facts supporting the charge are known to it. A disqualification challenge to an ALJ' s participation subsequent to the Commission s final decision based on circumstances known to a party before the Commission s final decision is not timely. Capitol Transp. , Inc. v. United States, supra; International Paper Co. v. FPC. supra; Safeway Stores, Inc. v. FTC, supra. HERBERT R. GIBSON. SR., ET AL. 131 126 Opinion The reasons supporting such a rule are manifold. A contrary holding, inter alia, would allow a party the possibility of invalidating the proceedings retroactively, unilaterally, and at wil, if it feared or received an unfavorable ruling, or merely wished to delay the proceedings; might cause substantial delays, and, if retrial were required, significant unnecessary duplication of effort and expenditure of resources; and might make determinations of disqualification more diffcult and less certain because of the passage of time. See generally Marcus v. Director, Office of Wkrs. ' Camp. Prog., supra, 548 2d at 1050-51; Duffield v. Charleston Areas Medical Center, supra. Applying these principles to this case, it is clear that the facts are substantially different from those in Grolier. In Grolier the respondents in the Commission s adjudicative proceedings raised the issue promptly after Judge von Brand' s record announcement of his prior service as attorney-advisor to Commissioner MacIntyre; both the AW and the Commission considered the claims promptly, during trial and before the closing of the record. Despite the AW' s and the Commission s interlocutory rulings, the Grolier respondents pressed their claim-as was their right-on appeal of the initial decision to the Commission and on appeal of the Commission s decision to the Ninth Circuit. Moreover, the Grolier respondents never agreed not to present their disqualification claims.

In this case, Judge von Brand formally notified the parties on February 23 1977, of his prior service to Commissioner MacIntyre. is thus clear that, in the event that respondents did not know of Judge von Brand's service to Commissioner MacIntyre as of the time of Judge von Brand's appointment as an AW or as of the time the Commission issued its interlocutory order in Grolier in 1976, they did know of it at least nine months before trial began. Respondents agreed to put forward no objection, and, indeed, honored that agreement throughout the administrative trial and appeal of this case. Consistent with the above-cited authorities, which require timeliness in a disqualification application, respondents may not now for the first time raise this issue.

Of course, respondents do not contend that their failure to objectindeed, their agreement not to object-was predicated upon the Commission s 1976 Grolier ruling. Rather, they only suggest, in an indirect manner, that their failure to raise the issue at oral argument in July, 1979 was based on their reliance on Grolier. Yet after the Ninth Circuit' s decision in Grolier, they waited months before presenting any objection. During this time, the Commission issued its final order and opinion. Accordingly, even assuming that Opinion 96 F.

an objection might have been timely after the Ninth Circuit' decision in GraZier it is untimely now. Finally, we note that respondents have not demonstrated or even asserted that they were prejudiced by any bias or reliance on extrarecord materials by Judge von Brand; our review of the record convinces us that Judge von Brand was impartial in every respect, that his decision was thoroughly researched, and that his meticulous findings and conclusions were firmly and exclusively based on the record evidence. Of course, to the extent respondents challenged Judge von Brand's findings, conclusions, and proposed order, we undertook an exhaustive, independent review. In that review, we did not find that issues of demeanor or discretion were especially important in the determination of the case; thus, even if it were to be determined that Judge von Brand was disqualified, our decision of April 30, 1980, would not be void, as respondents have neither demonstrated nor suggested actual prejudice from his presiding, and we perceive none.' See Attorney General' s Manual on the Administrative Procedure Act at 73-74 (1974).

For the foregoing reasons, respondents' motion for reconsideration based upon Judge von Brand' s participation is denied. Finally, respondents assert that the Commission took various actions in this adjudication and in the investigation preceding it at times when the Commission was without authority and without appropriated funds, and, consequently, that the Commission violated the Antideficiency Act. Respondents assert that the Commission should either declare the entire adjudicatory proceeding void or remand the proceeding to the Administrative Law Judge to allow discovery by respondents as to the Commission acts performed during periods of lapsed appropriations.

The Antideficiency Act, 31 U. c. 655(a) (1976), prohibits any government offcer or employee, unless expressly authorized by statute, from incurring any obligation on the part of the United States to pay money in advance of appropriations for that purpose. . Ironically enough, at another point in this proceeding, Judge von Brand suggcste to the parties that it might be necessry or adviblt! to have another ALJ assigned to this cas beus of hib heavy ca load. Wlke for his reliction to this ibility. counool for Herbert R. Gibsn, Sr., and Herbert R. Gibsn, Jr., told Jud vo Brrmd " d iike to keep you." Tr. at 2'6 HERBERT R. GIBSON. SR., ET AL. 133 126 Opir;ion Although the Commission s funding did lapse during several of the periods listed by respondents in their petitions for reconsideration,' the legal validity of the Commission s actions is unaffected by the temporary lapse of appropriations for the following reasons. First, actions by Commission employees completed prior to the expiration of appropriations do not create an unfunded obligation and, therefore, do not result in a violation of the Antideficiency Act. Second, even if a Commission action on the Gibson matter was not completed prior to the expiration of appropriations and, therefore, were to be interpreted as incurring a Commission obligation, such action was ratified by Congress when the Commission s funding was made retroactive either explicitly or implicitly to the start of the period of lapsed appropriations.' As noted in the recent opinion letter of the Attorney General, on which respondents rely, such a ratification has the effect of providing legal authority for agency actions, even where there was none before. Letter from Attorney General Benjamin Civiletti to President Jimmy Carter (April 25 1980). Thus, even assuming that respondents have standing to challenge the Commission actions,'1 none of the Commission activities has been invalidated by the Antideficiency Act. In this respect, too, therefore, the petitions for reconsideration are denied.

. Contrary to respondents' asrlion, the Commjssion funding did not lapse during the period July 1- September 30 1976, and March 12-March 15, 19!!O. Se Public L.'lws 94- 121 and 96-123, respectively. The former period, in particular, relate not to a laps in funding, but to a change in the Unite State Government's fiscal year.

, .s Public Laws 93-118, 93-124 93448 93-563 95-431, 96- , and 9fi-219. . Neither the Antidcflcip.ncy Act itslf nor its legislative history or scheme suggr:ts that private persons are to be afforded Ii remedy under the Act. The langu e of the statute s jfies that a government offcer or employee who violates Setions 665(a) or (b) of the Act wi!! be 9uhjecte to admini.'trative and/or criminal penalties . 31 c. 665(i)(J). Moreover, the legislative history clearly indicate that the in!.nded beneficiary of the regulatory IIherne was Congres; the statutory scheme was designed to require the careful apportionment hy Federal agencies of the funds distribute by Congres and thereby ensure the effcient administration of the government's bUllineo. , Complaint 96 F.