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FTC v. COCKRELL

March 30, 1977

FEDERAL TRADE COMMISSION, Petitioner,
v.
SID COCKRELL, Executive Director, and BEXAR COUNTY MEDICAL SOCIETY, Respondents


United States District Judge Charles R. Richey.


The opinion of the court was delivered by: RICHEY

UNITED STATES DISTRICT JUDGE CHARLES R. RICHEY

 This case is before the Court on the petition of the Federal Trade Commission for enforcement of a subpoena duces tecum issued by an FTC Administrative Law Judge to the respondents, Bexar County Medical Society and its Executive Director, Sid Cockrell. The respondents oppose enforcement of the subpoena duces tecum on the ground that the FTC does not have the authority to issue such subpoenas to "a non-profit professional society organized to promote professional excellence and to advance the public health." They also oppose enforcement on the grounds that (1) the subpoena here in issue places an "oppressive burden" on the medical society and its members, and (2) the documents sought contain "sensitive and confidential information."

 As described in this Court's opinion of March 18, 1977, wherein the Court denied respondents' motion to dismiss or in the alternative to transfer, the subpoena here in issue was issued in the course of an adjudicative proceeding concerning an FTC complaint that charges that the Commission has reason to believe that the American Medical Association, the Connecticut State Medical Society, and the New Haven County Medical Association, Inc., have violated section 5 of the FTC Act, 15 U.S.C. § 45 (1970), as amended, (Supp. V 1975), by agreeing to prevent or hinder competition among physicians. Respondents have not, and, indeed, it appears they could not, challenge the FTC's authority to conduct the adjudicative proceeding that underlies the subpoena here in issue.

 Respondents' argument that the FTC does not have the authority to issue the subpoena here in issue ultimately requires the Court to resolve one question -- whether the Federal Trade Commission Act confers authority upon the Commission to issue subpoenas for documentary evidence to a "third-party witness" which is not the focus of an FTC investigation or proceeding and which could not be the subject of such an investigation or proceeding. Respondents contend, and the Commission does not argue otherwise, that the Bexar County Medical Society could not be the subject of an FTC investigation or proceeding because the Commission's investigatory authority is limited to any "person, partnership, or corporation engaged in or whose business affects commerce." 15 U.S.C. § 46 (1970), as amended, (Supp. V 1975). *fn1"

 Section 9 of the FTC Act, 15 U.S.C. § 49 (1970), as amended, (Supp. V 1975), authorizes the issuance and enforcement of subpoenas in connection with FTC investigations and proceedings. In relevant part, it provides:

 
For the purposes of sections 41 to 46 and 47 to 58 of this title the Commission, or its duly authorized agent or agents, shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any person, partnership, or corporation being investigated or proceeded against; and the Commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation. . . .
 
. . . And in case of disobedience to a subpoena the Commission may invoke the aid of any court of the United States in requiring the attendance and testimony of witnesses and the production of documentary evidence.
 
Any of the district courts 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 person, partnership, or corporation issue an order requiring such person, partnership, or corporation to appear before the Commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question. . . .

 Respondents' argument is essentially one of statutory construction. The first paragraph of section 9 is, admittedly, somewhat ambiguous: The grant of power to the Commission to require by subpoena the production of "all such documentary evidence" arguably refers to the previous sentence and restricts the Commission's subpoena power to "any documentary evidence of any person, partnership, or corporation being investigated or proceeded against." Notwithstanding this literal ambiguity, it is well-settled that this section authorizes the Commission to subpoena documentary evidence from parties not the subject of an investigation or proceeding. See FTC v. Harrell, 313 F.2d 854 (7th Cir. 1963); FTC v. Tuttle, 244 F.2d 605, 615-16 (2d Cir. 1957), cert. denied, 354 U.S. 925, 1 L. Ed. 2d 1436, 77 S. Ct. 1379 (1957); United States v. Saks & Co., 426 F. Supp. 812, 1976-2 Trade Cases P 61,201, at 70,475 (S.D.N.Y. 1976). See also FTC v. Texaco, Inc., 555 F.2d 862, 883 n.59 (D.C. Cir. Feb. 23, 1977). Respondents do not really dispute this conclusion. However, they do make the statutory argument that the Court should infer from section 9 a distinction between subpoenas to persons, partnerships, or corporations which the Commission has the statutory authority to investigate or to proceed against and persons, partnerships, or corporations that the Commission could never investigate or proceed against. *fn2"

 In support of their argument, respondents rely on the recent decision by the Seventh Circuit in FTC v. Miller, 549 F.2d 452, 1977-1 Trade Cases P 61,265 (1977). In that case, the court reversed the district court's order enforcing FTC subpoenas against respondent Morgan Drive Away, Inc., a common carrier engaged in the business of transporting mobile homes and subject to regulation by the Interstate Commerce Commission. The court held that Morgan was exempted from investigation or proceedings by the FTC as a result of the "common carrier exemptions" in sections 5 and 6 of the FTC Act. Respondents read Miller as holding that the FTC does not have the authority to subpoena documentary evidence from common carriers because they are exempted from the Commission's investigative and proceeding authority. Miller, however, does not hold that at all. In Miller, respondent Morgan was not subpoenaed as a "third party witness;" rather, the investigation being conducted by the Commission, pursuant to which the subpoena was issued, itself focused on Morgan. The court merely held that the underlying investigation exceeded the Commission's authority because of the "common carrier exemption," and therefore any subpoenas issued pursuant thereto should not be enforced because they did not seek evidence "relating to [a] matter under investigation." 15 U.S.C. § 49. See 549 F.2d at 456, 1977-1 Trade Cases at 70,833-34. Since the proceeding underlying the subpoenas here at issue is conceded to be within the Commission's authority, Miller does not support respondents' argument.

 Respondents do not proffer, and the Court is unaware of, other authority for their interpretation of section 9. *fn3" The only cases that have considered such a limited reading of section 9 have involved subpoenas issued by the Secretary of Agriculture pursuant to section 10(h) of the Agricultural Marketing Agreement Act, 7 U.S.C. § 610(h) (1970), Freeman v. Brown Brothers Harriman and Co., 250 F. Supp. 32 (S.D.N.Y. 1966), aff'd 357 F.2d 741 (2d Cir.), cert. denied, 384 U.S. 933, 86 S. Ct. 1446, 16 L. Ed. 2d 532 (1966), and section 402 of the Packers and Stockyards Act, 7 U.S.C. § 222 (1970), United States v. Marshall Durbin & Co., 363 F.2d 1 (5th Cir. 1966). Both of these statutes expressly incorporate the scope of section 9 of the FTC Act, and both courts concluded that the scope of that subpoena power extended to parties that were not subject to the regulatory authority of the agency issuing the subpoena. These cases counsel a similarly expansive reading of the FTC's subpoena authority pursuant to section 9. Moreover, a contrary reading of section 9 would undermine the clear intent of Congress "that the Commission should have adequate subpoena power to perform its duties." FTC v. Lonning, 176 U.S. App. D.C. 200, 539 F.2d 202, 209 (D.C. Cir. 1976); FTC v. Tuttle, 244 F.2d at 614. Accordingly, the Court rejects respondents' narrow interpretation of section 9, and holds that respondents are subject to the Commission's subpoena power.

 Respondents also oppose enforcement of the subpoena on the ground that it "places an oppressive burden on the medical society effectively halting or harming the society's services to the community." The appropriate standard of review of subpoenas challenged as burdensome was recently articulated by the Court of Appeals for this Circuit:

 
[The] question is whether the demand is unduly burdensome or unreasonably broad. Some burden on subpoenaed parties is to be expected and is necessary in furtherance of the agency's legitimate inquiry and the public interest. The burden of showing that the request is unreasonable is on the subpoenaed party. Further, that burden is not easily met where, as here, the agency inquiry is pursuant to a lawful purpose and the requested documents are relevant to that purpose. Broadness alone is not sufficient justification to refuse enforcement of a subpoena. Thus courts ...

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