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ALCOA, ARMCO STEEL CORP. v. FTC

February 5, 1975

Aluminum Co. Of America, Armco Steel Corp., The Coca-Cola Co., E. I. DuPont DeNemours and Co., General Electric Co., General Motors Corp., The B. F. Goodrich Co., International Harvester Co., International Paper Co., Kraftco Corp., Owens-Illinois, Inc., and Union Carbide Corp., on behalf of themselves and all other companies similarly situated
v.
Federal Trade Commission, Lewis A. Engman, Paul Rand Dixon, Mayo J. Thompson, M. Elizabeth Hanford, Stephen Nye, and Elmer B. Staats, Comptroller General of the United States


Weinfeld, D.J.


The opinion of the court was delivered by: WEINFELD

WEINFELD, D.J.

Plaintiffs, twelve corporations, commenced this class action on behalf of themselves and all other corporations similarly situated against the Federal Trade Commission and its members ("Commission") and the Comptroller General of the United States. The plaintiffs' claims, among others, are that the Commission, in adopting an information gathering program ("LB Program") requiring Annual Line of Business Reports ("LB Forms") from corporations, *fn1" and in implementing and attempting to implement the program, exceeded its authority under the Federal Trade Commission Act, *fn2" and violated the Fourth and Fifth Amendments to the Federal Constitution; the Federal Reports Act; *fn3" the Administrative Procedure Act; *fn4" section 1905 of the United States Criminal Code; *fn5" section 103 of the Budget and Accounting Procedure Act of 1950; *fn6" and section 9 of the Census Act. *fn7" Plaintiffs seek, in addition to other relief, a judgment enjoining the Commission from implementing the LB Program.

 The purpose of the LB Program is to enable the Commission to publish aggregate financial data for various industries derived from information contained in the LB Forms to be submitted by leading manufacturing firms for each of their "lines of business" as defined by the Commission. The Commission's objectives, as stated by it, are (1) to effectuate and foster resource allocation by competitors and potential competitors, investors, labor groups and others; and (2) to enable the Commission to pinpoint non-competitive markets for law enforcement purposes.

 The twelve named plaintiffs and the companies on whose behalf the action is asserted to be brought are 345 of the leading manufacturing companies of the United States, each of whom the Commission served with an Order to File Special Report ("Order") requiring the submission of certain financial data. The matter now before the court is a motion by the twelve plaintiffs for preliminary injunctive relief pending the decision of a motion for class action determination, which motion has yet to be argued. The motion for injunctive relief, the plaintiffs explain, is addressed only to so much of the complaint as alleges that the Commission has violated and has unlawfully modified its Confidentiality Rules governing the LB Program, *fn8" and has misrepresented its legal authority to limit disclosure of information obtained from plaintiff corporations.

 In substance, the sought-for relief would:

 (1) enjoin the Commission and all its employees from disclosing to any person not expressly authorized to have access thereto under the Commission's Confidentiality Rules any information received from the companies in connection with the LB Program, and from publishing any such information in any manner or form;

 (2) direct the Commission to notify all companies required to file reports that, notwithstanding the Commission's representation that access to all information submitted by the companies in connection with the LB Program could and would be limited to certain specified Commission employees, the Commission may lack the authority to prevent the public disclosure of, and so limit access to, all such information, by virtue of the Freedom of Information Act *fn9" and other provisions of law;

 (3) enjoin the Commission from serving a notice of default *fn10" upon any company prior to ten days after this court's determination as to whether this action may be maintained as a class action; and

 (4) authorize the deposit with the Clerk of this Court of LB Forms by companies which elect to file them, subject to disclosure only upon order of this court.

 The broad sweep of the proposed relief upon its face is such that it would, pending a trial, effectively halt the LB Program in its tracks. The plaintiffs, under the frequently enunciated rule in this circuit, have the burden of clearly demonstrating either (1) probable success on the merits and the possibility of irreparable damages, or (2) the existence of serious questions going to the merits and the tipping of the balance of hardship sharply in their favor. *fn11" We therefore turn to the essential facts to decide if plaintiffs have made a sufficient case for such drastic relief.

 The LB Program had its genesis in the Commission's view that the data sought from the companies was required in order to carry out two distinct aspects of its statutory responsibility: first, its duty to investigate the extent of competition in the United States economy in general and in specific industries, and to report its findings to the Congress and the public; second, its responsibility to develop rational policy planning procedures for the enforcement of the antitrust laws. In addition, the Commission considered that the data was needed to encourage favorable decisions by potential investors in particular industries. Accordingly, the Commission, pursuant to 44 U.S.C., section 3512, submitted its proposed LB Form to the Comptroller General for his approval, which was granted on May 13, 1974. *fn12" The Comptroller General found that the information sought in the Commission's LB Form was not presently available from another source within the federal government.

 Thereafter, on August 2, 1974, the Commission passed a "Resolution Requiring Annual Line of Business Reports from Corporations," in which it resolved to proceed to collect the information called for in the LB Form. The resolution further provided that the data submitted by an individual company would be afforded confidential status in accordance with rules which were incorporated by reference in the resolution. In pertinent part these Confidentiality Rules provide:

 
"The names of companies, financial data and all other information which are obtained from respondent companies in connection with the Federal Trade Commission's Line of Business Reporting Program are confidential, and persons authorized to have access to this information may not release, discuss or in any way provide access to such information to anyone not authorized to have access. Further, all such Line of Business data are considered to be exempt from the disclosure provisions of the Freedom of Information Act."

 On or about August 19, 1974, the Commission served its Order on 345 companies, comprising the purported class in this case, directing them to file completed LB Forms within 150 days. The following day, on August 20, 1974, eight of the named plaintiffs herein *fn13" filed with the Commission a joint motion to quash the Order to file the LB Forms and for ancillary relief. *fn14" The movants advanced, among other contentions, (1) that the order was in excess of the Commission's authority and in violation of the movants' constitutional rights in that it was excessively burdensome, broad, vague, arbitrary and capricious, and (2) that the order was unlawful because it failed to provide adequate protection against disclosure of confidential data to be filed by individual reporting companies, and because aggregate LB data to be published by the Commission could be broken down to disclose the confidential financial data of individual reporting companies. Simultaneously the movants themselves publicized their motions, and their counsel consented ...


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