The opinion of the court was delivered by: MOTLEY
Opinion on Motion for Summary Judgment
This action was instituted against defendants to recover civil penalties for alleged violations of a Federal Trade Commission (FTC) cease and desist order. Federal Trade Commission Act (F.T.C. Act), Section 5(l), 15 U.S.C. § 45(l).
The order, which was enforced by the Court of Appeals for the Sixth Circuit with modifications, see J.B. Williams Company v. Federal Trade Commission, 381 F.2d 884 (6th Cir. 1967), reads in pertinent part as follows:
It Is Ordered that respondents, The J.B. Williams Company, Inc., a corporation, and Parkson Advertising Agency, Inc., a corporation, . . . directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of the preparation designated Geritol Liquid or the preparation designated Geritol Tablets, or any other preparation of substantially similar composition or possessing substantially similar properties, under whatever name or names sold, do forthwith cease and desist from:
1. Disseminating or causing to be disseminated by means of the United States mails or by any means in commerce, as "commerce" is defined in the Federal Trade Commission Act, any advertisement
(b) which represents directly or by implication that the preparation is a generally effective remedy for tiredness, loss of strength, run-down feeling, nervousness or irritability;
(c) which represents directly or by implication that the preparation is an effective remedy for tiredness, loss of strength, run-down feeling, nervousness or irritability in more than a small minority of persons experiencing such symptoms;
(d) which represents directly or by implication that the use of such preparation will be beneficial in the treatment or relief of tiredness, loss of strength, run-down feeling, nervousness or irritability, unless such advertisement expressly limits the claim of effectiveness of the preparation to those persons whose symptoms are due to an existing deficiency of one or more of the vitamins contained in the preparation, or to an existing deficiency of iron or to iron deficiency anemia, and further, unless the advertisement also discloses clearly and conspicuously that: (1) in the great majority of persons who experience such symptoms, these symptoms are not caused by a deficiency of one or more of the vitamins contained in the preparation or by iron deficiency or iron deficiency anemia; and (2) for such persons the preparation will be of no benefit;
(e) which represents directly or by implication that tiredness, loss of strength, run-down feeling, nervousness or irritability are generally reliable indications of iron deficiency or iron deficiency anemia;
In Matter of J.B. Williams Company, Inc., Federal Trade Commission Docket No. 8547, November 24, 1967. (Modified order to cease and desist.)
This order became final by operation of law on December 24, 1967, 15 U.S.C. § 45(i), and has remained in effect since that date. The validity of the order is not subject to question in this action. See Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 54, 92 L. Ed. 1196, 68 S. Ct. 822 (1948); Piuma v. United States, 126 F.2d 601, 603 (9th Cir.), cert. denied, 317 U.S. 637, 87 L. Ed. 513, 63 S. Ct. 28 (1942); United States v. H.M. Prince Textiles, Inc., 262 F. Supp. 383, 388 (S.D.N.Y. 1966); United States v. Vitasafe Corporation, 212 F. Supp. 397, 398 (S.D.N.Y. 1962); cf. Parke, Austin & Lipscomb, Inc. v. Federal Trade Commission, 142 F.2d 437, 442 (2d Cir.), cert. denied, 323 U.S. 753, 89 L. Ed. 603, 65 S. Ct. 86 (1944).
The alleged violations of the order consist of the dissemination by defendants of eleven different television advertisements on a total of 100 separate occasions. The United States seeks the maximum penalty of $5000 for each violation, as prescribed by Section 5(l) of the F.T.C. Act, 15 U.S.C. § 45(l), or a total of $500,000 in penalties against each defendant.
Before initiation of the instant suit by the United States, the facts which gave rise to it were properly certified by the FTC to the Attorney General of the United States, as required by Section 16 of the Act, 15 U.S.C. § 56.
The United States now moves for summary judgment. For the reasons set forth below, the motion is granted.
I. Propriety of the Motion for Summary Judgment
A. Defendants Do Not Have the Right to Trial by Jury.
At the outset, the court must consider defendants' claim that summary judgment would be improper in this action because "the Sixth Amendment requires a jury trial in this case." Defendants' Memorandum 32. To support this argument defendants cite the Supreme Court decision in Bloom v. Illinois, 391 U.S. 194, 20 L. Ed. 2d 522, 88 S. Ct. 1477 (1968), which held that serious criminal contempts must be tried to a jury. Defendants argue that the instant action, seeking penalties of $1,000,000, is "inherently criminal in nature" and "so similar to a criminal contempt proceeding, [that] defendants must be extended exactly the same right to a jury trial as they would have enjoyed had the Commission sought to impose the identical fines in a criminal contempt proceeding." Defendants' Memorandum 32, 34-35.
Plaintiff simply responds in its reply brief that "this action, as well as all prior civil penalty actions involving violations of Federal Trade Commission orders to cease and desist, is clearly civil in nature." Reply Memorandum 14. Plaintiff also points out that no court has ever held that a civil penalty action involving violations of a FTC order was criminal rather than civil in nature.
The court does not believe that defendants' contention can be dismissed so easily. However, the court reads two lines of Supreme Court cases as clearly establishing that the Sixth Amendment right to jury trial does not apply to suits brought by the United States pursuant to Section 5(l).
The first line of cases culminating in Kennedy v. Mendoza-Martinez, 372 U.S. 144, 9 L. Ed. 2d 644, 83 S. Ct. 554 (1963), considers the question of whether a sanction imposed by a particular legislative enactment is penal or regulatory in character. The Court in Kennedy set forth the relevant criteria for answering this question in a specific case. Absent conclusive evidence of congressional intent as to the penal nature of a statute, the Court noted, in dictum, that " various factors must be considered in relation to the statute on its face."
Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishment -- retribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned are all relevant to the inquiry . . . Kennedy, supra, 372 U.S. at 168-169.
On their face the statutory provisions under which this action has been brought, Sections 5(l), 12 and 16 of the F.T.C. Act, 15 U.S.C. §§ 45, 52 and 56, are regulatory in character. There is no doubt that, taken together, one of their objects is to control false or misleading advertising of drugs in order to shield the typical consumer against deception and misinformation resulting from dissemination of such advertising and to give him an opportunity to make an intelligent choice about drug products. See, e.g., J.B. Williams, supra, 381 F.2d at 890; Federal Trade Commission v. Sterling Drug, Inc., 317 F.2d 669, 674 (2d Cir. 1963). In this way, too, the provisions promote the basic policy of the F.T.C. Act of curtailing unfair competition. See, e.g., Federal Trade Commission v. Texaco, 393 U.S. 223, 225-226, 21 L. Ed. 2d 394, 89 S. Ct. 429 (1968). In the regulatory scheme, the civil penalty provision of Section 5(l) serves the distinct function of compelling compliance with FTC cease and desist orders which have been issued to protect the consuming public and the business community in the manner just described. See United States v. St. Regis Paper Company, 355 F.2d 688, 692-695 (2d Cir. 1966).
Section 5(l) itself specifically provides that the fines imposed are a "civil penalty" to be recovered in a "civil action ". While this characterization by Congress does not conclusively establish that the statutory provision is non-criminal in nature, see United States v. Constantine, 296 U.S. 287, 294, 80 L. Ed. 233, 56 S. Ct. 223 (1935), cf. Kennedy, supra, 372 U.S. at 163-184, it does furnish very strong evidence that Congress did not intend the provision to be punitive. Indeed, when Congress wished to make the dissemination of certain types of false advertising a criminal offense, it did exactly that. See 15 U.S.C. § 54(a). See also 15 U.S.C. § 50. A comparison of Section 12 with Section 14(a) of the F.T.C. Act strongly suggests that Congress viewed the sanction in Section 5(l) of the Act, as applied to the dissemination of false advertising, to be regulatory rather than penal in character. See also St. Regis Paper, supra, 355 F.2d at 692-699. (Held: Certification of facts by FTC to Attorney General pursuant to Section 16 of the Act is jurisdictional prerequisite to civil penalty suit under Section 5(l) of the Act.)
Furthermore, since here "the source of legislative concern can be thought to be the activity . . . from which the individual is barred," i.e. the dissemination of false advertising, the sanction imposed "is not punishment even though it may bear harshly upon one affected." Flemming v. Nestor, 363 U.S. 603, 614, 4 L. Ed. 2d 1435, 80 S. Ct. 1367 (1960). See id. at 616 and 616 n.9, approved in dictum in Kennedy, supra, 372 U.S. at 169 n.28. The sanction prescribed by Section 5(l) remains an integral part of the regulatory scheme and is not punishment in the criminal law sense, even though its imposition may have severe effects on violators of FTC cease and desist orders. Cf. Flemming, supra, 363 U.S. at 616 and 616 n.9.
Moreover, the civil penalty provision does not come into play only on a finding of scienter. See United States v. H.M. Prince Textiles, Inc., 262 F. Supp. 383, 388 (S.D.N.Y. 1966) and cases cited therein; cf. Federal Trade Commission v. Algoma Lumber Company, 291 U.S. 67, 81, 78 L. Ed. 655, 54 S. Ct. 315 (1934). Nor is dissemination of the challenged advertisements punishable as a crime either under the F.T.C. Act or any other act of Congress.
Finally, Section 5(l) has not historically been regarded as a punishment, as evidenced by the fact that not a single decision which has been brought to the attention of the court has even hinted that the provision is penal in character. Cf. St. Regis Paper, supra, 355 F.2d at 693 (". . . the 'Federal Trade Commission Act is not a revenue-raising or penal measure. '") See also Federal Trade Commission v. Ruberoid Company, 343 U.S. 470, 96 L. Ed. 1081, 72 S. Ct. 800 (1952) ("Orders of the Federal Trade Commission are not intended to impose criminal punishment . . ., but to prevent illegal practices in the future." At 473); United States v. Vitasafe Corporation, 234 F. Supp. 710 (S.D.N.Y. 1964), aff'd per curiam, 352 F.2d 62 (2d Cir. 1965). Nor can the court say that the penalty provided in Section 5(l) is in any sense excessive in relation to the clear prophylactic purpose of the statute.
On the other hand, the court does think that the sanction prescribed by Section 5(l) may involve an affirmative disability or restraint
and may serve the incidental function of deterrence and retribution, once a cease and desist order takes effect. However, these factors are far outweighed by the significance of the other factors discussed above, particularly when all the factors are viewed in relation to the statute on its face. Moreover, although the absence of an affirmative disability and of deterrent effects as a result of a sanction generally establishes its non-criminal nature, see Flemming, supra, 363 U.S. at 617, the inverse of this proposition is not true. See Rex Trailer Company v. United States, 350 U.S. 148, 100 L. Ed. 149, 76 S. Ct. 219 (1956) and arguments of counsel in that case at 100 L. Ed. at 150-152. Cf. pages 529-531 infra.
Therefore, applying the Kennedy criteria set forth above to the face of the statute, the court holds that the statutory provisions in question can only be interpreted as regulatory in nature and that the Sixth Amendment right to trial by jury is not applicable to defendants in this action.
This conclusion is buttressed by a second line of Supreme Court cases which consider the distinction between proceedings for civil contempt and those for criminal contempt. While serious criminal contempts must be tried to a jury, see Bloom v. Illinois, supra, the Supreme Court has held that a jury trial is not constitutionally required in civil contempt proceedings. See Shillitani v. United States, 384 U.S. 364, 365, 371, 16 L. Ed. 2d 622, 86 S. Ct. 1531 (1966).
Defendants argue that the instant action should be likened to a criminal contempt proceeding, both because of "the enormous size of the fines sought" and "because plaintiff is seeking to recover a penalty, not compensatory damages." Defendants' Memorandum 33. The argument is untenable. Indeed precedents in both the Supreme Court and the Court of Appeals for this circuit convince the court that the instant action is so analogous to a civil contempt proceeding that no jury trial can or should be required here.
First, defendants' contention ignores the fact that civil contempt proceedings may be compensatory or coercive in nature. See Shillitani, supra, at 368-371; Backo v. Local 281, United Brotherhood of Carpenters and Joiners of America, 438 F.2d 176, 182 (2d Cir. 1970), cert. denied, 404 U.S. 858, 30 L. Ed. 2d 99, 92 S. Ct. 110 (1971). The statutory provision underlying the present action, Section 5(l) of the F.T.C. Act, is coercive in the same way that the conditional imprisonment imposed in Shillitani was coercive. It serves the same coercive function as does the liability to a fine for violating an injunction.
In each case, the question to be asked is: what does the sanction seek to accomplish? See Shillitani, supra, 384 U.S. at 370. Where the sanction seeks to compel the person subject to it to do what he is legally required to do, the sanction is neither punitive nor criminal, but simply remedial in purpose. The penalty prescribed by Section 5(l) in the context of this action is "intended to be remedial by coercing the [defendants] to do what he had refused to do," i.e. to cease and desist from disseminating advertisements of a type which the Commission has found to be misleading. See Penfield Company of California v. Securities and Exchange Commission, 330 U.S. 585, 590, 91 L. Ed. 1117, 67 S. Ct. 918 (1947); Gompers v. Bucks Stove & Range Company, 221 U.S. 418, 442, 55 L. Ed. 797, 31 S. Ct. 492 (1911). Cf. L.G. Balfour Co. v. Federal Trade Commission, 442 F.2d 1, 24 (7th Cir. 1971).
Second, defendants' contention that the size of the fines sought in this action turns the action into a criminal proceeding is erroneous. The Supreme Court has upheld the power of courts to imprison witnesses who refuse to testify before a grand jury under a civil contempt order, even though the imprisonment may continue for a lengthy period and may depend upon "fortuitous circumstances, such as the life of the grand jury and when a witness appears." Shillitani, supra, 384 U.S. at 371-372. Similarly, the imposition of a fine of $5000 for each separate violation of a FTC cease and desist order while it is in effect remains a civil penalty, so long as it was within the power of the violator to have abided by the order and thereby to have avoided the sanction. See Shillitani, supra, 368-370. See also 8A J. Moore, Federal Practice P42.02 (2d Ed. 1972).
In other respects as well, Section 5(l) resembles a civil contempt sanction. Liability to a civil contempt penalty does not require that violation of a court order be wilful. See McComb v. Jacksonville Paper Company, 336 U.S. 187, 191, 93 L. Ed. 599, 69 S. Ct. 497 (1947); National Labor Relations Board v. Local 282, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, 428 F.2d 994, 1001 (2d Cir. 1970). Nor does a civil contempt proceeding open to reconsideration the factual or legal basis of the underlying court order. See Maggio v. Zeitz, 333 U.S. 56, 69, 92 L. Ed. 476, 68 S. Ct. 401 (1948). These attributes of a civil contempt proceeding apply equally to actions under Section 5(l). See pages 528 and 529 supra.
Finally, defendants' argument that the FTC could have petitioned the Court of Appeals for the Sixth Circuit to bring criminal contempt proceedings against defendants for precisely the same alleged violations and asking for the same fines as are involved here (Defendants' Memorandum 33-34) is of no avail to defendants. Indeed, it simply points up the fact that Congress intended Section 5(l) to provide a non-criminal means for the FTC to enforce valid cease and desist orders. The statutory provision bolsters the regulatory goals of the entire Federal Trade Commission Act. In contrast, a criminal contempt proceeding to enforce a Commission order would have to be brought under the United States Criminal Code, 18 U.S.C. § 401, which is designed to vindicate the authority of the courts of the United States, a purpose wholly separate from that of the regulatory statute. See, e.g., Cheff v. Schnackenberg, 384 U.S. 373, 377-378, 16 L. Ed. 2d 629, 86 S. Ct. 1523 (1966); United States v. Schine, 260 F.2d 552, 557 (2d Cir. 1958), cert. denied, 358 U.S. 934, 79 S. Ct. 318, 3 L. Ed. 2d 306 (1959); 8A J. Moore, Federal Practice P42.02 (2d Ed. 1972). Furthermore, the same conduct can amount to both civil and criminal contempt. See United States v. United Mine Workers, 330 U.S. 258, 298-299, 91 L. Ed. 884, 67 S. Ct. 677 (1947); Gompers, supra, 221 U.S. at 441-42; 5 J. Moore, Federal Practice P38.33 (2d Ed. 1971). Therefore, the observation of defendants does not support its claim that this action has the character of a criminal proceeding.
FemIron is another iron preparation sold by defendant J.B. Williams Company. Counts ten and eleven of the complaint relate to the dissemination by defendants of FemIron advertisements. In their answer to the complaint, defendants deny that FemIron is a drug preparation within the meaning of Section 15 of the F.T.C. Act. Moreover, defendants contend that whether FemIron is covered by the FTC order presents a genuine issue of fact which cannot be determined on this motion for summary judgment. Both contentions are rejected.
Section 15(c) of the F.T.C. Act states that the term "drug" means, inter alia, "articles intended for use in the . . . prevention of disease in man . . . " 15 U.S.C. § 55 (c) (2). In paragraphs 46 and 50 of their answer, defendants aver that "FemIron is a product for the prevention of . . . iron deficiency anemia." Consequently, it is clear that FemIron is a "drug" and that FemIron advertisements are a proper subject of the FTC order. See 15 U.S.C. § 52.
The FTC order applies by its terms not only to advertisements of Geritol Liquid or Geritol Tablets, but also to advertisements of "any other preparation . . . possessing substantially similar properties, under whatever name or names sold." Defendants argue that FemIron does not possess properties substantially similar to those of Geritol. They support this argument with numerous affidavits of recognized experts in the fields of iron deficiency anemia and nutrition. Thus, defendants assert, there is a dispute as to this substantial issue of fact and the motion for summary judgment, at least as to counts ten and eleven, should not be granted. See Defendants' Memorandum 47-48.
The court rejects this argument for two reasons. First, it is undisputed that both Geritol and FemIron are iron preparations. They are also both indicated for use as a dietary supplement. The Geritol Tablet label states that it is "A HIGH POTENCY IRON AND VITAMIN TONIC" and that it may be used "As a dietary supplement: One (1) tablet daily." See, e.g., Beutler Affidavit, Exhibit B, submitted by defendants. The FemIron label indicates that it is a "DAILY IRON SUPPLEMENT FOR WOMEN . . . DIRECTIONS: One tablet every day with any meal." Id. The labels in themselves establish that the preparations possess substantially similar properties within the meaning of the FTC order.
Second, the FTC order was designed to prohibit representations by defendants with respect to the benefit to be derived from the iron contained in Geritol. The phrase "possessing substantially similar properties" must be interpreted in this light. It is undisputed that FemIron contains only one nutritive ingredient, iron, and that it is less effective than Geritol, which contains more iron per tablet as well as seven vitamins. Therefore, FemIron's single chemical property is the very same property which distinguishes Geritol from other drug preparations and for which Geritol is advertised. In this sense, FemIron possesses properties substantially similar to those of Geritol. Indeed, FemIron's only nutritive property is identical to the most significant nutritive property of a Geritol tablet or a tablespoon of Geritol Liquid.
The thrust of all the expert affidavits submitted by defendants is that FemIron and Geritol differ in their properties, because FemIron contains less iron than does Geritol and is, therefore, less effective when taken as directed as a remedy for iron deficiency anemia. These observations are undoubtedly correct. However, it is disingenuous for defendants to argue that FemIron is exempt from the order because it is a less effective preparation than Geritol. To the extent that the representations prohibited by the order with respect to Geritol are deceptive, they are also deceptive with respect to FemIron. The court concludes that the dissemination of FemIron advertising is covered by the FTC order.
C. No Other Genuine Issues of Fact Remain to be Tried.
Defendants contend that this is not a proper case for summary judgment because there are material issues of fact in dispute, including:
1) The proper interpretation of the FTC order;
2) Whether defendants had been given notice and a reasonable opportunity to discontinue the challenged advertisements; and
3) The meaning of each of the advertisements challenged in the complaint. Memorandum 24. See id. at 24-32, 36-46, 49-64. The court will consider each of these contentions in succession.
Interpretation of the FTC order is undoubtedly a question of law for the court to determine. In upholding the order with modifications on appeal, the Sixth Circuit necessarily decided that the modified order here in issue was not vague and fairly apprised defendants of what was expected of them. See J. B. Williams, supra, 381 F.2d at 891. Defendants cannot relitigate that issue in this action. See ...