Chemical Corp., Misc. No. 78-0009, 1978 WL 1316 (D.D.C. 1978), the court cited to 16 C.F.R. § 2.7(b) and held that a challenge to the breadth of a subpoena "should have been advanced before the Commission rather than before this Court". Cf. Federal Trade Comm'n v. California Dental Ass'n, Misc. No. 78-0064, 1978 WL 1375, *1 n.1 (D.D.C. 1978) (although court ordered Administrative Law Judge to rule on respondent's objections after enforcement proceeding was brought, in spite of lack of petition to quash, court acknowledged "the well-established requirement that challenges to administrative subpoenas must be made initially and in a timely fashion to the ALJ" and noted that its order "represents a departure from the traditional application of the doctrine of exhaustion of remedies").
Respondents have advanced several arguments in support of their position that exhaustion should not bar the consideration of their objections. The Court rejects each of them.
First, respondents cite the fact that 57b-1 was fashioned on the CID procedure utilized by the Department of Justice (the "DOJ") under the Antitrust Civil Process Act, 15 U.S.C. § 1311 (the "ACPA"). See H.R. Cong. Rep. No. 917, 96th Cong., 2d Sess. 32 (1980), reprinted in 1980 U.S.C.C.A.N. 1143, 1149; S. Rep. No. 500, 96th Cong., 1st Sess. 23-25 (1979), reprinted in 1980 U.S.C.C.A.N. 1102, 1124-26. Under the DOJ procedure, the objecting party may "leapfrog" the administrative process and complain directly to the district court during an enforcement proceeding. See H.R. Rep. No. 1343, 94th Cong., 2d Sess. 13 (1976), reprinted in 1976 U.S.C.C.A.N. 2596, 2608. Thus, respondents argue that under the Act, they are entitled to the same option.
The Court finds respondents' argument in this regard disingenuous. Although it is true that the CID procedure at issue in this case was fashioned on that used by the DOJ, there is an explicit distinction between the two statutes. More specifically, the relevant provision of the ACPA specifically provides for filing a petition modifying or setting aside a demand in district court. 15 U.S.C. § 1314(b)(1)(A), (B). In contrast, the analogous provision in the Act, Section 57b-1(f)(1), provides that a petition to modify or set aside a demand be made directly to the FTC.
This distinction completely undercuts respondents' argument.
Respondents next cite 15 U.S.C. § 57b-1(c)(11) in support of their position. That section prescribes that an objection to a specific civil investigative demand can be interposed in lieu of an answer. According to respondents, that suggests that Congress contemplated that objections to CIDs could be asserted exclusively at the district court level, without first being brought to the attention of the FTC.
The Court disagrees. There is nothing in subsection (11) to indicate that objections to CID specifications at the district court level are to be made in lieu of a petition to quash or modify before the FTC. In fact, a better reading of the subsection, particularly when it is read in conjunction with Section 57b-1(f), which provides for petitions to the FTC to modify or set aside CID demands, is that the objections referred to are those made to the district court after the FTC rejects a subsection (f) petition.
Finally, the fact that subsection (f) says that a person "may file" (emphasis added) a petition with the FTC does not indicate to the Court that a respondent has a choice as to where he can make his objections. It merely offers a respondent the option of making administrative objections if he chooses not to comply with a CID. In fact, the Second Circuit has held that administrative exhaustion is required to raise objections in court even when a statute authorizing agency process provides that a process recipient "may" file an administrative petition to quash. See National Labor Relations Bd. v. Cowan, 522 F.2d 26, 28 (2d Cir. 1975) (construing 29 U.S.C. § 161).
Having found that respondents have not exhausted their administrative remedies, the next question is whether the Court should order compliance with the CIDs without considering the merits of the allegedly objectionable specifications.
In this case, respondents have not alleged that their objections could not have been addressed by the administrative process, that their efforts to seek administrative relief were frustrated, or that they were unaware of the existence of administrative relief.
See Brown v. General Services Admin., 425 U.S. 820, 833 (1976). Under these circumstances, and because to hold otherwise would be to make the administrative exhaustion requirement meaningless, the Court finds that it would be inappropriate to intervene and consider the objections. Cf. Brown, 425 U.S. at 833 ("exhaustion requirements and time limitations would be driven out of currency were immediate access to the courts . . . permissible"); Brown v. General Services Admin., 507 F.2d 1300, 1308 (2d Cir. 1974), aff'd, 425 U.S. 820 (1976) (failure to exhaust administrative remedies when they were adequate to address grievance was held bar to plaintiff's claims).
In their surreply, respondents raise for the first time the argument that the CIDs were issued unlawfully and should therefore not be enforced by this Court. Respondents' attempted justification for the untimely nature of this argument is that they did not know the scope of investigation until they received the FTC's reply papers. More specifically, they claim that initially the FTC indicated that the investigation was limited to an inquiry relating to the six Perot volunteers, but the reply papers suggest that the scope is broader. According to respondents, extending the inquiry beyond the six individuals makes the CIDs premised on such an investigation illegal.
Although the FTC's initial memorandum does indicate that the investigation was initiated after the FTC received a complaint about the acquisition and dissemination of credit information relating to these six people, the Court can find nothing in the FTC's original papers to the effect that its investigation was limited to them. To the contrary, the initial memorandum of law says specifically that the investigation relates to whether the Act and the FCRA "were violated by persons who may have obtained or provided consumer reports on consumers, including volunteers in the Perot Presidential Campaign." Memorandum at 2 (emphasis added). Such a statement certainly put the respondents on notice as to the scope of the investigation. Thus, their position about the legality of the CIDs is raised too late and without proper justification. However, even if it were timely, the Court would find it unavailing.
Respondents' argument relies on Section 20(c)(2) of the Act, which requires that the CID "state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation." According to respondents, the CIDs at issue in this litigation do not state the nature of the allegedly illegal conduct, but instead cite to a resolution giving the FTC authority to use compulsory process "to determine whether unnamed consumer reporting agencies or others are or may be engaged in acts or practices in violation of Section 5 of the Federal Trade Commission Act . . . and of the Fair Credit Reporting Act [FCRA]." Respondents argue that this resolution does not properly define the scope of the investigation for the Court.
The law is well settled that the boundaries of an FTC investigation may be drawn "quite generally", Federal Trade Comm'n v. Invention Submission Corp., 296 U.S. App. D.C. 124, 965 F.2d 1086, 1090 (D.C.Cir. 1992), cert. denied, in large part because at the investigative stage of a proceeding, the FTC need only have a "suspicion that the law is being violated in some way." Id. (emphasis added). In fact, in Invention Submission Corp., the D.C. Circuit upheld a CID for an investigation based on a broadly-worded resolution. Id. at 1088. Accordingly, the Court does not find the resolution in this case to be so broad as to make the CIDs at issue illegal. Moreover, as noted, respondents' argument in this regard is untimely.
For the foregoing reasons, the Court grants the FTC's petition for enforcement of the CIDs against respondents. Respondents are hereby ordered to comply with the CIDs at the place designated therein within ten days of receipt of this Order or at such a later date as may be designated by the FTC.
Dated: Brooklyn, New York
July 27, 1993
DENIS R. HURLEY, U.S.D.J.