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FTC v. UNITED STATES PIPE & FOUNDRY CO.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


October 3, 1969

Federal Trade Commission. Petitioner,
v.
United States Pipe and Foundry Co., Respondent

Pratt, D.J.

The opinion of the court was delivered by: PRATT

Findings of Fact and Conclusions of Law

PRATT, D.J.:

 This matter having come before the Court on the petition of the Federal Trade Commission for an order requiring the respondent United States Pipe and Foundry Company to produce documents in accordance with a subpoena duces tecum issued by a hearing examiner in the course of an adjudicative matter before the Commission, and the Court having considered the petition, its attachments, and the memoranda in support and in opposition filed herein, and having heard oral argument in open court, it hereby finds the facts and states the conclusions of law as follows:

 Findings of Fact

 1. The Commission is presently conducting an inquiry upon a complaint issued by it on January 17, 1968, against the Koppers Company, Incorporated (Koppers) charging it with methods of competition and acts and practices violative of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, in connection with the production of resorcinol (an industrial chemical), including acts by Koppers to foreclose entry into the resorcinol market by the United States Pipe and Foundry Company (U.S. Pipe). According to the complaint, Koppers' actions have had the effect of causing the failure of U.S. Pipe to establish itself as an alternate producer and viable competitor in that market. Koppers filed an answer denying the charges.

 2. During prehearing discovery proceedings upon the complaint and answer, a duly appointed hearing examiner of the Commission on November 20, 1968 issued and caused to be served upon U.S. Pipe a subpoena duces tecum returnable within the jurisdiction of this Court. *fn1"

 3. As later modified by the hearing examiner, the subpoena calls for production of records and documents covering the period April 1, 1965 to March 12, 1968 (except for items 5 and 6 for which the time period is January 1, 1962 to March 12, 1968), and pertaining to U.S. Pipe's production of resorcinol, including documents showing prices, sales, production costs, profit or loss, and documents comparing these figures with past estimates or forecasts. *fn2" In requesting this subpoena Koppers pointed out to the Commission and its examiner that counsel supporting the complaint had given notice that they intended to call U.S. Pipe officials as witnesses at the hearings. Koppers argued that it needed the data in the subpoena for purposes of cross-examination and to defend against the charge in the complaint that it had prevented U.S. Pipe's entry into the resorcinol market, contending that any difficulties U.S. Pipe had were due to its own high production costs and not to anything which Koppers had done.

 4. Also sought in the subpoena are underlying documents prepared in connection with certain pre-April 1965 market entry "study" or "studies" which U.S. Pipe had returned under the previous subpoena. Koppers had contended that the return on that subpoena was incomplete, as there was only one basic "study" and that study was couched in generalized language and referred to other underlying documents and data not returned by U.S. Pipe. Although the hearing examiner declined to rule that U.S. Pipe was in default under the first subpoena, he did agree that Koppers was entitled to get such underlying material under the second subpoena.

 5. In opinions dated July 2, 1968, and November 1, 1968, the Commission upheld Koppers' right to both subpoenas. In the latter opinion, dealing with Koppers' request for the second subpoena, the Commission ruled:

 

"While we venture no opinion as to the kind or quality of evidence that would constitute a prima facie showing under this section, it would be patently improper to accept into evidence testimony of officers of U.S. Pipe, or documents from its files, in support of paragraph seven while at the same time honoring U.S. Pipe's assertion of a privilege against disclosing documents that might contradict such a showing. Moreover, without inquiry into contemporaneous business records, it would be difficult or impossible to establish whether U.S. Pipe's resorcinol venture was commercially viable and thus that it would have succeeded in the commercial resorcinol market had the alleged acts and practices of the respondent not taken place."

 6. After issuance of the subpoena on November 20, 1968, U.S. Pipe moved to quash the subpoena on several grounds. The hearing examiner denied the motion but ruled that descriptions of secret processes could be omitted by U.S. Pipe in making return on the subpoena. He also entered an order which provided that "the contents of the documents shall not be disclosed to anyone except counsel of record of the parties pending decision of a motion which may be made by United States Pipe and Foundry Company for a protective order within ten days after production of such documents." *fn3"

 7. U.S. Pipe appealed to the Commission from the hearing examiner's denial of the motion to quash, raising numerous objections, including objections to the propriety of a second subpoena, its scope, the relevance of the documents called for, and the adequacy of any protective order that could be entered by the examiner. After full briefing by both parties, the Commission issued an opinion, dated January 15, 1969, in which it found no impropriety in the examiner's rulings.

 8. Subsequent to the ruling of the Commission, the hearing examiner issued an order scheduling the return date on the subpoena, setting it for January 31, 1969.

 9. On January 31, 1969, respondent U.S. Pipe, appeared but refused to produce records and documents in accordance with the subpoena.

 10. On June 4, 1969, the Federal Trade Commission, with the authorization of the Attorney General of the United States, filed a petition in this Court for an order requiring respondent U.S. Pipe to produce documentary evidence in compliance with the Commission's subpoena. On June 5, 1969, Judge Howard F. Corcoran of this Court ordered respondent to appear and show cause why the Court should not grant the petition.

 11. Prior to such appearance, respondent filed a motion to quash this Court's show cause order because of lack of personal jurisdiction over respondent. Hearings on that motion were held before Judge Corcoran on July 14, 1969, at the conclusion of which Judge Corcoran denied the motion to quash.

 12. The date upon which respondent was to appear and show cause why the Commission's petition should not be granted was extended by subsequent amendments until September 11, 1969, when the matter came on for hearing.

 Conclusions of Law

 1. Jurisdiction of this cause and of respondent, and power to issue the order hereafter prayed for, are conferred upon this Court by Section 9 of the Federal Trade Commission Act, 15 U.S.C. § 49, which provides that any District Court of the United States "within the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued to any corporation or other person, issue an order requiring such corporation or other person to appear before the commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question * * *." The inquiry, in the course of which petitioner's subpoena was issued and served, is being conducted by petitioner within the jurisdiction of this Court.

 2. The subpoena should be enforced by this Court if the agency's proceeding is within its statutory authority, and if the documents demanded by the subpoena are reasonably relevant to the proceeding and are described with sufficient particularity. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 208-209, 66 S. Ct. 494, 90 L. Ed. 614 (1946); Civil Aeronautics Board v. Hermann, 353 U.S. 322, 1 L. Ed. 2d 852, 77 S. Ct. 804 (1957); Adams v. Federal Trade Commission, 296 F.2d 861, 866 (8th Cir. 1961), cert. denied, 369 U.S. 864, 82 S. Ct. 1029, 8 L. Ed. 2d 83 (1962). Under the standards enumerated in the above cases, our determination is limited to the question whether the petitioner abused its discretion in issuing the subpoena.

 3. The inquiry by the Commission into alleged unfair acts and practices of the Koppers Company, during which inquiry the subpoena was issued, is clearly within the statutory authority of the Commission. Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.

 4. In an adjudicative matter before the Commission, Koppers as the party named in the Commission's complaint has the right to prehearing discovery processes, including subpoenas duces tecum, on a showing of general relevance and reasonable scope of the evidence sought. 5 U.S.C. § 555(d) (Supp. III, 1965-67); Commission's Rules of Practice, Section 3.42, 16 C.F.R. 3.42 (1969).

 5. The documents called for are reasonably relevant to the proceeding. Both the hearing examiner and the Commission have considered carefully the relevancy of the documents in question. In the Matter of Koppers Co., Inc., Docket No. 8755 (Jan. 15, 1969). The subpoena now at issue was in fact prompted by respondent's response to the first subpoena and the Commission in upholding the instant subpoena specifically noted the care with which the hearing examiner observed the Commission precedents in analyzing this subpoena. This court is reluctant to substitute its judgment for the well informed judgments of the examiner and the Commission.

 Respondent argues that since the Commission's complaint alleges that Koppers, by unlawful methods of competition, attempted to maintain a monopoly by preventing respondent from entering the resorcinol market, the subpoenaed documents are not relevant to any defense which Koppers might have. It appears that at least two possible defenses exist to the charge of monopolization: the "thrust upon" defense and the "superior product and knowledge" defense. United States v. Grinnell Corp., 384 U.S. 563, 570-571, 16 L. Ed. 2d 778, 86 S. Ct. 1698 (1965). Evidence tending to show that respondent was an inferior competitor is relevant to these defenses. In actions brought under Section 2 of the Sherman Act involving similar charges of monopolization and exclusion of competitors, defendants have been allowed pretrial discovery under appropriate protective orders, of competitor's costs, profits, and other data, over the objection that such information was irrelevant and confidential. See United States v. American Optical Co., 39 F.R.D. 580 (N.D. Cal. 1966); see also Covey Oil Co. v. Continental Oil Co., 340 F.2d 993 (10th Cir. 1965).

 6. The subpoena is limited to a reasonable period of time. It describes the documents to be produced with sufficient particularity to satisfy any Fourth Amendment objections. Oklahoma Press Pub. Co. v. Walling, supra. Respondent has not demonstrated that these materials are so voluminous that production would be unduly burdensome. Any such objection should be directed to the hearing examiner.

 7. On the basis of the foregoing, we conclude that there had been no abuse by the petitioner in the issuance of the subpoena.

 8. The type of protective order to be entered against disclosure or misuse of confidential information must be determined in the first instance by the hearing examiner and the Commission. Federal Communications Commission v. Schreiber, 381 U.S. 279, 14 L. Ed. 2d 383, 85 S. Ct. 1459 (1965). Here the Commission and examiner have not as yet determined the details of such protective order since the exact nature of the documents will not be known until they are produced. Further, the protective order entered by the examiner pursuant to the first subpoena was adequate and no reason exists to prompt suspicion that a less adequate order will be entered as to this subpoena. Respondent's contention that protective orders entered in adjudicatory proceedings are distinguishable from those in rule-making proceedings is not well taken. The Schreiber doctrine applies to both types of proceedings, where an administrative rule governs the protective order. 16 C.F.R. 3.45 (1969); see Gellhorn, The Treatment of Confidential Information by the FTC: Pretrial Practices, 36 U. Chi. L. Rev. 113, 179 n. 289 (1968); cf. Federal Trade Commission v. Continental Can Co., 267 F. Supp. 713 (S.D.N.Y. 1967).

 9. There has been no abuse of discretion in the treatment to be accorded the documents to be produced in response to the subpoena. The hearing examiner has entered an order which provides that the contents of the documents shall not be disclosed to anyone, except counsel of record, pending a motion which may be made by U.S. Pipe for a more permanent type of protection within ten days after production of the documents. This ruling is in accord with Rule 3.45 of the Commission's Rules of Practice, 16 C.F.R. 3.45 (1969) similar to the administrative rule upheld in Federal Communications Commission v. Schreiber, supra, 381 U.S. at 293.

 10. It is within the power of this Court to direct (1) that the original inspection of the documents produced be in camera and (2) that since Thomas C. Cochran, Jr., one of counsel of record, is also Secretary of Koppers, any protective order to be entered by petitioner's hearing examiner or by the petitioner shall provide that none of the documents produced in response to the subpoena shall be disclosed or made available to said Thomas C. Cochran, Jr.

 11. The subpoena in question having been issued and served in accordance with law, the relief prayed for by the petitioner should be granted.

 Order

 In accordance with the findings of fact and conclusions of law entered herein, it is by the Court this 2nd day of October, 1969,

 Ordered, that respondent United States Pipe and Foundry Company be, and hereby is, commanded to appear by an authorized representative before Walter K. Bennett, Hearing Examiner of the Federal Trade Commission, or such other duly appointed examiner of the Commission, at Room 7314, 1100 Pennsylvania Avenue, Northwest, Washington, D.C., within ten days from the date of this order, or at such later time as the Hearing Examiner shall designate, and then and there produce documentary evidence called for by the aforesaid Hearing Examiner's subpoena served on respondent on November 20, 1968, and as later modified by order of the Examiner of December 3, 1968; and

 Ordered, that said Hearing Examiner shall conduct an exparte in camera examination of said documentary evidence for the purpose of excising any unnecessary portions thereof before disclosure is made to counsel for Koppers; and

 Further ordered, that, in the event said hearing examiner or the Commission is requested by respondent U.S. Pipe to enter a protective order concerning the treatment to be accorded the documents produced in response to the subpoena, said protective order shall provide that none of said documents shall be disclosed or made available to Thomas C. Cochran, Jr., counsel of record and Secretary of Koppers Company.


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