The opinion of the court was delivered by: PARKER
Plaintiff Sydney N. Floersheim, doing business as Floersheim Sales Company and National Research Company, seeks a declaratory judgment that certain forms revised in alleged compliance with an order of the Federal Trade Commission (FTC or Commission) are not unfair or deceptive in violation of the Federal Trade Commission Act,
15 U.S.C. § 41, et seq. and, therefore, not subject to suppression by the Commission. These forms are sold by the plaintiff to third parties who in turn use them in the collection of delinquent debts and to obtain information about delinquent debtors. The plaintiff also seeks a similar determination as to certain forms intended to be used in plaintiff's own proposed debt collection business. He further seeks a preliminary stay of the penalty provisions of 15 U.S.C. § 45(l) during the pendency of this litigation. The defendants are the individual commissioners of the FTC and the United States of America (Government).
Defendants have moved to dismiss the complaint for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted, or, in the alternative for summary judgment. Opposition has been filed by the plaintiff to the motion to dismiss together with a cross-motion for summary judgment.
Plaintiff's business, conceded to be virtually nationwide,
"is that of selling to creditors and to debt collection agencies certain forms -- cards and envelopes -- for the use of the purchaser in either (1) attempting to trace allegedly delinquent debtors (commonly called 'skip-tracer' forms) or (2) attempting to induce allegedly delinquent debtors to pay their debts . . . "
On February 5, 1968, the Commission issued an Opinion and a Cease and Desist Order against Floersheim in Docket No. 8721. Floersheim was found to have used and sold forms demanding the payments of debts as well as forms to secure information concerning delinquent debtors, that were deceptive and misleading in appearance "creating the impression that they came from the Government or some other official source or third-party, rather than from the creditor." Envelopes used and sent to debtors were found to simulate those used for official purposes by the United States Government. Skip-tracer forms were found to be deceptive because of their general appearance and similarity to Government checks. The features of other forms used by Floersheim, all set out in the opinion, were regarded as concealing their true nature and were misleading and deceptive.
On review the United States Court of Appeals upheld the Commission's findings, concluding that there was substantial evidence to support the findings that the materials were deceptive. Floersheim's contentions that the Cease and Desist Order was unreasonable, arbitrary, and capricious, amounting to a denial of due process and extending beyond what was reasonably necessary to prevent the deceptions, were rejected. The Court held that the sanctions were justified in view of the past and immediate activities of Floersheim. Judgment was entered affirming the action of the Commission and Floersheim was required to obey and comply with the Cease and Desist Order. Floersheim v. Federal Trade Commission, 411 F.2d 874, 876-878 (9th Cir. 1969), cert. denied 396 U.S. 1002, 24 L. Ed. 2d 494, 90 S. Ct. 551 (1970).
Two related series of incidents give rise to the present litigation. The genesis of the first occurred when the plaintiff, pursuant to 16 C.F.R. § 3.61(a), filed a Report of Compliance alleging in detail the manner and form of his compliance with the Commission's Final Order of February 5, 1968. The cards, forms and envelopes described in and enclosed with the Report of Compliance (the revised forms) were intended to be used in plaintiff's existing business.
The FTC's Division of Compliance, Bureau of Deceptive Practices responded to the Report of Compliance with critical comments. Following an exchange of correspondence the FTC on April 10, 1970 formally rejected the Report of Compliance, based primarily on the objections noted by its Division of Compliance, and also for failure of the plaintiff to sign the report in accordance with the requirements of the Commission's regulations.
A Commission letter of April 16, 1970 expressly warned that
The second problem arises from the plaintiff's October 23, 1969 request,
pursuant to 16 C.F.R. § 3.61(c), for an advisory opinion concerning whether certain forms (the proposed forms)
intended to be used in the plaintiff's own proposed debt collection business would comply with the Order in Docket No. 8721. On March 9, 1970, following several contacts regarding this request, the Commission, through its Secretary, formally and with particularity advised plaintiff that the proposed forms failed to comply with the order in numerous respects. . . ."
Plaintiff then further modified these proposed forms and requested reconsideration of the FTC advisory comments. But, significantly, the revisions were merely descriptive; true copies of the samples were not supplied to the Commission. The Commission therefore declined to comment indicating it had "insufficient information on which to base any change in its views of the forms respondent proposes to use as those views are ...