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Analysis of Case | Federal Trade Commission (FTC) Against Grolier

On March 13, 1978, the Federal Trade Commission (FTC) entered a final cease and desist order against Grolier, Incorporated and 14 of its wholly-owned subsidiaries (Grolier) designed to correct Grolier’s adjudged violations of 15 U.S.C. § 45. In analyzed appeal, pursuant to 15 U.S.C. § 45, Grolier asked to have that order set aside because of alleged procedural and substantive errors: In February 1975, Theodore P. von Brand, the third ALJ assigned to the case, began hearings. In January 1976, four months before completion of the hearings, ALJ von Brand informed the parties that he had served as an attorney-advisor to former FTC Commissioner A. Everett MacIntyre from 1963 through January 1971, during which period Grolier was intermittently investigated and charged by the FTC. Records available to Grolier indicated that Commissioner MacIntyre attended at least one meeting between it and representatives of the FTC. Upon learning of ALJ von Brand’s advisory responsibilities during the eight-year period, Grolier requested that the judge disqualify himself from further participation in the proceedings. The judge denied the request, stating that he did not recall working on matters involving Grolier while serving as legal advisor to the Commissioner.

As it seems , facts of 15 F. 2d 1215 – Grolier Incorporated v. Federal Trade Commission case turn around the relevant and controversial issue of functions in federal agencies separation according to Administrative procedure act.The whole dispute in case was centered around APA § 554(d), which states: “An employee or agent engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision, recommended decision, or agency review pursuant to section 557 of this title…”.

Golier’s arguments:

  • attorney-advisors come within the meaning of “investigative or prosecuting functions” because they are chargeable with knowledge of all matters that come before the FTC during their employment;
  • Congress intended to prevent adjudication by persons previously exposed to ex parte information like that developed by the FTC in its investigative and prosecutive activities.

FTC’s views:

  • Congress was principally concerned with preventing adjudication by those who have developed, through investigative or prosecutorial zeal, a “will to win” that is incompatible with objective adjudication, section 554(d) applies only to those employed in the actual investigative and prosecutive branches of the FTC.
  • Since attorney-advisors are employed in neither of those branches, the FTC contends that ALJ von Brand is not disqualified by section 554(d);
  • attorney-advisors are “precluded only from participating in the adjudication of cases in which they have actually performed such (“investigative and prosecuting”) functions, and in ‘factually related’ cases.” Au Yi Lau v. I. N. S., supra, 181 U.S.App.D.C. at 106, 555 F.2d at 1043;

The position of court was explained by next reasons:

  • First crucial reason – “The investigators, if allowed to participate (in adjudication), would be likely to interpolate facts and information discovered by them ex parte and not adduced at the hearing, where the testimony is sworn and subject to cross-examination and rebuttal” Report of the Attorney General’s Committee on Administrative Procedure 50 (1941), S.Doc. No. 8, 77th Cong., 1st Sess. 50 (1941) (footnote omitted).;
  • Second crucial reason – “A man who has buried himself in one side of an issue is disabled from bringing to its decision that dispassionate judgment which Anglo-American tradition demands of officials who decide questions.” Senate Judiciary Committee Print, 79th Cong., 1st Sess. 15 (1945), reprinted in Administrative Procedure Act-Legislative History, 79th Congress 1944-46, at 25 (1946) (hereinafter “APA Legislative History”);
  • Grolier, who has the burden of proof on the disqualification issue, was rightful and competent to be “obliged either to offer evidence contradicting the sworn statements of the (FTC), or to point out the inadequacy and inconsistency, if any, in the sworn statements” before it will be permitted to subpoena FTC records. R. A. Holman & Co. v. S. E. C., supra, 366 F.2d at 454.

The decision on analyzed case is ORDER SET ASIDE AND CAUSE REMANDED.

Work cited
615 F.2d 1215 53 A.L.R.Fed. 711, 1980-1 Trade Cases 63,153 GROLIER INCORPORATED, a corporation and American Peoples Press, etc., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. No. 78-2159. Web. 12 Oct 2011. http://openjurist.org/615/f2d/1215