argument. See § 1(A), supra. The corporate parties certainly have received the notice a summons is designed to provide under the petition-show cause order procedure.
A more difficult issue is posed by the corporate parties' second argument. The FTC effected service in these enforcement actions by two methods: personal service by a United States Marshal outside of the District of Columbia and service on the D.C. Recorder of Deeds to be mailed to the named respondents. Rule 4(f) of the Federal Rules of Civil Procedure provides that service of process may occur beyond the territorial limits of a state "when authorized by a statute of the United States or by these rules. . . ." Rule 4(e) authorizes extraterritorial service where "a statute or rule of court of the state in which the district court is held" so provides. The FTC does not argue that a federal statute permits extraterritorial service in the circumstances of this case; the court therefore will focus on state statutes purporting to allow such service here.
The parties agree that the potentially applicable statutes are 13 D.C. Code § 334 and 29 D.C. Code § 933i. The parties further agree that the relevant portions of these two statutes require that a corporation be "doing business" in the District of Columbia before it is amenable to service.
The parties, unsurprisingly, have differing interpretations of what constitutes doing business, however.
The corporate parties argue that the FTC must show that each moving company has "fairly extensive" contacts with D.C. in order to sustain jurisdiction for a cause of action not arising out of the company's activity in D.C. A somewhat higher standard should exist for such an unconnected cause of action than for one arising directly from the company's contacts with the forum district.
The corporate parties go on to contend that the companies must maintain a permanent office in D.C. in order to be subject to service. Corporate Parties' Memorandum, at 50 n. 76. The court finds this argument to be without merit; foreign corporations often have been found to be doing business in D.C. despite the lack of a permanent office. E.g., Washington v. Hospital Service Plan, 120 U.S. App. D.C. 211, 345 F.2d 105 (D.C. Cir. 1965); Frene v. Louisville Cement Co., 77 U.S. App. D.C. 129, 134 F.2d 511 (D.C. Cir. 1943); Stevens v. American Service Mutual Ins. Co., 234 A.2d 305 (D.C. Ct. App. 1967); Key v. S.C. Johnson & Son, Inc., 189 A.2d 361 (D.C. Ct. App. 1963). The corporate parties also contend that many of the contacts the moving parties might have with the District are maintained for the purpose of interacting with the federal government. They claim the "government contacts" principle protects them from the court's consideration of these activities in determining amenability to service.
The FTC contends that the court should address the business purpose being served by the moving parties' presence in D.C. It suggests that the marketing or products in the District, through either solicitation of sales or shipment or products, can constitute doing business. See Frene v. Louisville Cement Co., 77 U.S. App. D.C. 129, 134 F.2d 511 (D.C. Cir. 1943); Key v. S.C. Johnson & Son, Inc., 189 A.2d 361 (D.C. Ct. App. 1963). Advertising within the District can be considered as a factor. Payton v. Summit Loans, Inc., 253 A.2d 459 (D.C. Ct. App. 1969). The FTC distinguishes two cases relied on by the moving corporate parties
as hinging on the plaintiffs' complete lack of contacts with the forum state in those cases.
Here, it notes that the FTC has obvious contacts with the District.
The court is faced with a somewhat difficult task in attempting to sort out the various claims of the parties. It appears that solicitation of sales or shipment of goods potentially can qualify as doing business. The necessary showing should be at least somewhat higher for an unconnected cause of action than for a cause of action arising directly out of a defendant's activities in the forum district. The government contacts exception potentially applies, depending on the purposes and functions served by those contacts. Within this framework the court can examine the situations of the moving companies to resolve what is essentially a factual question about sufficiency of the contacts of each company.
The moving corporate parties have submitted affidavits concerning the extent of their contacts with the District of Columbia. On the basis of these, they ask the court to conclude that no basis for personal jurisdiction over them exists. The court finds these affidavits insufficient. Some neglect to identify the dollar value of goods shipped to the District, some fail to state whether D.C. shipments are a substantial contribution to total sales, some are vague on the question of distributors, detail men, or salesmen and where they are located, and some fail to state conclusively whether any goods are sold in the District at all. From the information now before the court by way of these affidavits, the court preliminarily believes that at least some of these companies have sufficient contacts with the District to qualify as transacting business under 29 D.C. Code § 933i(c). The court nevertheless feels that additional discovery would be quite helpful to the court in making these determinations, and it is advised that the FTC has propounded certain interrogatories that could help to resolve this question.
The court therefore will permit this additional discovery and defer decision on this aspect of the corporate parties' motion to dismiss.
With respect to one moving party, Fairmont Foods, there is no need to defer decision. Fairmont admits that it is authorized to do business in the District, has appointed a registered agent, and received service of process through that registered agent. This service is sufficient to bring Fairmont before the court. 29 D.C. Code § 933i(a). Fairmont contends, however, that section 933i(a) relates solely to manner of service, not amenability to service. In support of that proposition, Fairmont relies on one D.C. case
which held that the absence of a license to do business does not mean that a company is not in fact doing business, and on one Fourth Circuit case
not purporting to apply any laws of the District. The court does not find these compelling precedents for Fairmont's position. The language of section 933i(a) tracks closely that of section 933i(c), but no claim has been made that section 933i(c) does not relate to amenability to service. Accordingly, Fairmont's motion to dismiss on this ground will be denied.
II. FTC's Motion To Dismiss
The FTC parties move to dismiss the preenforcement actions concerning the LB and CPR programs. The court has identified four basic arguments advanced by the FTC in favor of this motion: (1) judicial review of the FTC's exercise of its powers of compulsory process is unavailable by way of preenforcement action where no notice of default has been issued; (2) even if judicial review potentially is available, the corporate parties have failed to meet the standards of the Abbott Labs trilogy; (3) the FTC itself must be dismissed because it has not waived sovereign immunity in this instance; and (4) sound reasons exist for the court to dismiss the preenforcement actions as a matter of discretion. For the reasons stated below, the court rejects the first three arguments and wishes to defer a decision on discretionary dismissal.
A. Availability of Preenforcement Review
The FTC contends that judicial review of the validity of the Commission's exercise of its powers of compulsory process can be had only in an enforcement proceeding brought under section 9 or 10 of the FTC Act where no notice of default has been issued. See St. Regis Paper Co. v. United States, 368 U.S. 208, 226, 82 S. Ct. 289, 7 L. Ed. 2d 240 (1961); Federal Trade Commission v. Claire Furnace Co., 274 U.S. 160, 174, 47 S. Ct. 553, 71 L. Ed. 978 (1927). The court will not deal extensively with this argument, as it was persuasively rejected by the Third Circuit in A.O. Smith v. Federal Trade Commission.28 This court fully concurs with the reasoning of that decision on this issue. St. Regis and Claire Furnace must be considered in the context of the more recent Supreme Court decisions in the Abbott Labs trilogy.
As the Third Circuit noted:
The fundamental jural lesson flowing from Abbott Laboratories is this: a person aggrieved by final agency action may come to federal court for judicial review "so long as [a] no statute precludes such relief or [b] the action is not one committed by law to agency discretion." * * * We have examined the FTC Act and find no clear and convincing evidence of a congressional intent to bar judicial review of final FTC orders under Section 6(b).
530 F.2d at 521. For these reasons the court concludes that preenforcement review potentially is available to the corporate parties in this situation.
B. Application of Abbott Labs
The FTC also appears to argue that, even if judicial review potentially is available, the corporate parties no longer, if they ever did, meet the standards set forth in the Abbott Labs trilogy for a court's exercise of preenforcement jurisdiction.
Justice Harlan focused on two questions in Abbott Labs : the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration. 387 U.S. at 148-49. The FTC notes that the hardship to the parties in awaiting judicial determination of their claims in an enforcement proceeding now is minimal. Since no notice of default has been issued, the corporate parties face no civil or criminal penalties for noncompliance. Indeed, the corporate parties no longer are on the horns of a dilemma in attempting to decide whether to comply or face stiff penalties; the risks of noncompliance are ephemeral.
The problem with this approach is that Abbott Labs essentially involves a ripeness inquiry. See 387 U.S. at 148-49. There no longer exists serious doubt as to whether these preenforcement actions are ripe in the Abbott Labs sense. Enforcement actions have been commenced; the issues have been concretely framed. This court's subject matter jurisdiction is established by 28 U.S.C. §§ 1331, 1337. For these reasons there is no point in the court reconsidering the hardship issue under the Abbott Labs analysis, and no reason to dismiss on this ground.
C. Sovereign Immunity
The FTC has moved to dismiss itself as a defendant in the preenforcement actions on the ground that sovereign immunity bars a suit against a federal agency eo nomine unless Congress has granted such a right against the agency. The FTC claims that here no such authorization has occurred. While the FTC may be correct in its statement of the law,
it is incorrect in asserting that no Congressional authorization for such a suit exists. In Scanwell Laboratories, Inc. v. Shaffer,33 the District of Columbia Circuit held that the judicial review provisions of the Administrative Procedure Act serve to waive sovereign immunity:
It seems axiomatic to us that one must imply, from a statement by the Congress that judicial review of agency action will be granted, an intention on the part of Congress to waive the right of sovereign immunity; any other construction would make the review provisions illusory.
While the APA should not be interpreted to constitute a waiver of sovereign immunity in suits seeking money damages against the United States,
in the context of this case the court is convinced that the judicial review provisions of the APA have waived the FTC's sovereign immunity claim, and the court accordingly rejects that argument.
D. Discretionary Dismissal
Finally, the FTC suggests that the court should exercise its discretion to dismiss the preenforcement actions. It asserts that the pending enforcement actions present a wholly adequate forum for the corporate parties to raise any defenses and claims they might have concerning the LB and CPR programs.
It views the preenforcement actions as unnecessary baggage for the court to carry in light of the statutory enforcement actions. The FTC assures the court that no prejudice to the corporate parties will flow from a dismissal.
The corporate parties oppose on several grounds. First, since all the enforcement and preenforcement actions have now been consolidated before this court, no risk of duplicative judicial efforts exist. Second, they prefer consideration of the issues raised by the LB and CPR programs within the context of a normal civil action, in which no doubts exist as to discovery or judicial review. Finally, the corporate parties suggest that there simply is no need to dismiss at this point of the proceedings, and that the court should avoid needless rulings.
In light of the fact that both the preenforcement and enforcement actions have been consolidated, and in light of the fact that counsel for the FTC stated in oral argument that the Commission does not seek an immediate decision on this motion, the court will defer consideration of the motion to dismiss.
At a later time the court may be in a better position to determine this issue, and later rulings by this court on other issues may render the court's task simple indeed. By deferring consideration of this motion, the court will be able to consider both summary judgment motions pending in these actions -- and all arguments on the merits contained therein. Thus the court will deny the FTC's motion to dismiss on the three legal grounds asserted and defer consideration of a discretionary dismissal.
III. Comptroller General's Motion to Dismiss
The Comptroller General moves to dismiss the preenforcement actions on the ground that the actions of the Comptroller General pursuant to the Federal Reports Act, 44 U.S.C. § 3512, are not judicially reviewable.
The Comptroller General presents two primary arguments in support of that conclusion: (1) Congress intended to preclude judicial review of the Comptroller's decisions under the Act; and (2) the corporate party plaintiffs have an adequate alternative remedy in court. Because the court rejects both these arguments for the reasons stated below, the Comptroller's motion to dismiss will be denied.
A. Congressional Intent to Preclude Review
The Comptroller notes that the corporate parties claim a right to judicial review of the LB and CPR program orders under the applicable provisions of the Administrative Procedure Act. 5 U.S.C. § 701-06. He contends that the legislative history of the Federal Reports Act demonstrates a Congressional intent that judicial review of his actions under the statute be precluded.
The Comptroller bases his conclusion that Congress took the unusual step of precluding judicial review on two major grounds. First, he notes that the purpose of the Act was to prevent the "delay and obstruction" that occurred when the Office of Management and Budget, advised by the industry-oriented Business Advisory Council, held the clearance function for independent regulatory agencies' special reports. Congress transferred this clearance power to the General Accounting Office to prevent the undue impairment of independent regulatory agencies' data collection efforts. Although the Comptroller correctly discerns the motivation stirring Congress to passage of this statute,
he fails to draw a viable link between this policy goal and a statutory preclusion of judicial review. Second, the Comptroller argues that since the GAO has only 45 days in which to perform the review function, after which the agency may proceed,
the conclusion that Congress intended to preclude judicial review is further enhanced.
The Comptroller admits, however, as he must, that there exists a presumption in favor of judicial review. This strong presumption can be overcome only "upon a showing of 'clear and convincing evidence' of a contrary legislative intent . . . ."
The Comptroller has failed to meet this heavy burden in this instance. At best, a court could indirectly imply from Congress' obvious desire to prevent undue delays an intent to protect the Comptroller's actions from judicial scrutiny. This tenuous link, however, does not constitute clear and convincing evidence of Congressional intent to preclude judicial review; Congress was silent on the matter, and the presumption of reviewability must apply.
B. Adequate Alternative Remedy
The Comptroller also contends that the corporate parties have an adequate alternative remedy in court against the FTC. Agency action is made reviewable under the APA when "there is no other adequate remedy in a court . . . ."
This argument relies on the Comptroller's conception of the goals the corporate parties seek in pursuing this litigation. Since the corporate parties seek to prevent implementation of the LB and CPR programs and raise many of the same issues against the FTC that they raise against the GAO, the Comptroller reasons that a remedy against the FTC would be sufficient. He suggests that the ultimate relief sought by the corporate parties, a prohibition on the use of the LB and CPR forms, can be obtained from the FTC alone.
The court is not much impressed by this argument. The Comptroller makes no claim that there is another adequate proceeding in court by which the corporate parties can obtain direct review of the Comptroller's actions. Only indirectly could the corporate parties challenge the actions of the Comptroller if he is dismissed from the preenforcement actions. Nothing in the APA precludes review of the actions of two agencies that acted in concert merely because relief may be available against one of them.
Additionally, it makes sense for the court to have before it the agency whose actions are challenged so that its views may be fully presented.
Moreover, relief against the FTC certainly does not necessarily mean relief against the Comptroller General; for example, if the court should decide that the corporate parties should prevail on an issue unrelated to the Federal Reports Act, then the court would need make no determination on the question of the Comptroller's actions. In all, the Comptroller has not presented a convincing case for dismissal on the ground that an adequate alternative remedy in court exists.
IV. FTC's Motion for More Definite Statement of Counterclaims
The FTC moves the court to require a more definite statement of the counterclaims asserted by the corporate parties in the enforcement actions. The corporate parties, in their answer to the Commission's enforcement petition, have incorporated as counterclaims all claims asserted by all parties in the preenforcement actions.
The FTC objects to this shotgun approach
to pleading counterclaims on several grounds, and desires a more definite statement before framing a responsive pleading.
First, the FTC argues that it is unclear whether the corporate parties intend to do more than assert affirmatively their claims concerning the validity of the actions taken by the FTC and the GAO. If not, the Commission reasons, these are simply improperly denominated defenses and require no reply; if so, the FTC will have to respond. There is little doubt in the court's mind that the corporate parties' counterclaims seek affirmative relief against the FTC and GAO in the form of declaratory judgments and permanent injunctions.
Second, the FTC contends that the counterclaims resurrect dead issues, insofar as they seek to assert claims not addressed by the corporate parties in their pleadings before this court. Although the FTC believes that claims not raised in the partial summary judgment motion or discovery outline have been waived, the court has decided to the contrary. Order of November 4, 1976.
Finally, the FTC argues that the counterclaims are vague and ambiguous. Many of the corporate parties were not involved in the preenforcement actions, and wide differences in those complaints exist. Many could not have joined in all the claims because of factual differences, failure to exhaust administrative remedies, and other reasons. The FTC's objection to the validity of the counterclaims, however, should not be an important factor in a motion for a more definite statement. If some parties cannot sustain certain claims for the reasons mentioned by the Commission, those arguments can be raised by the FTC in its responsive pleading.
The court is of the opinion, however, that in some respects the counterclaims fail as "short and plain [statements]" of the claims asserted.
Where such a large number of preenforcement complaints and motions to intervene have been filed, at the least the corporate parties should present a single list of all the claims they wish to assert as counterclaims, rather than put the burden of finding and answering each of the preenforcement complaints on the Commission. The court would itself prefer to work with a single listing of all counterclaims. The court hopes that the corporate parties will exercise judgment in compiling this single list, so that identical claims are consolidated and obviously unmeritorious or moot claims (such as those concerning only the 1973 LB orders) are eliminated.