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Borden Inc. v. Federal Trade Commission

decided: May 1, 1974.

BORDEN, INC., A CORPORATION, PLAINTIFF-APPELLANT,
v.
FEDERAL TRADE COMMISSION, DEFENDANT-APPELLEE



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 73 C 1187 RICHARD W. MCLAREN, Judge.

Kiley, Senior Circuit Judge, Sprecher, Circuit Judge, and Jameson, Senior District Judge.*fn*

Author: Jameson

JAMESON, Senior District Judge.

Borden appeals from an order dismissing Count I of its two-count complaint seeking declaratory and injunctive relief to restrain the Federal Trade Commission (Commission) "from any further proceedings" upon Count III of an administrative complaint issued against Borden on October 8, 1971.*fn1

In November, 1965 Borden began selling private label fluid milk products in the Chicago area to stores of The Great Atlantic & Pacific Tea Company (A & P). On March 13, 1967 Borden was notified by the Commission that it was investigating whether these sales involved illegal price discriminations in violation of Section 2 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(f), or sales at unreasonably low prices or at prices below cost for the purpose of eliminating or lessening competition, in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.*fn2 Pursuant to requests by the Commission, Borden furnished information and documentary evidence regarding its milk sales to A & P.

On June 1, 1971 Borden received a copy of a proposed Commission complaint, charging in Counts I and II that A & P had wrongfully induced discriminatory prices and in Count III that Borden and A & P had combined to effect price stabilization.*fn3 A formal complaint containing the same charges was filed on October 8, 1971. Borden was not charged with illegal price discrimination.

On October 26, 1972 Borden filed with the administrative law judge a motion to dismiss Count III of the Commission complaint for alleged violation of Commission Rule 2.6, 16 C.F.R. § 2.6, which provides:

"Any person under investigation compelled or requested to furnish information or documentary evidence shall be advised with respect to the purpose and scope of the investigation."

The administrative law judge denied this motion on February 13, 1973, and on April 24, 1973 denied Borden's motion for reconsideration or in the alternative for certification of the denial to the Commission pursuant to Rule 3.23, 16 C.F.R. § 3.23.

Borden commenced this action on May 8, 1973, alleging in Count I of its complaint that the "failure to provide the required notice and opportunity to submit information during the investigation was a clear and substantial breach of the requirements of the Commission's own Rule 2.6, and its unpublished rules and directives". Borden applied for a preliminary injunction. The Commission filed a motion to dismiss Count I for failure to exhaust administrative remedies.

In a well-reasoned opinion entered June 7, 1973 the district court denied the application for a preliminary injunction and granted the motion to dismiss, holding that "it is deprived of jurisdiction of Count I by the doctrine of exhaustion of administrative remedies".*fn4 On this appeal Borden challenges only the ruling on the motion to dismiss. We affirm.

It is well settled that ordinarily courts will not interfere with an agency until it has completed its action*fn5 and that administrative remedies may be bypassed only if (1) the agency has clearly violated a right secured by statute or agency regulation, Leedom v. Kyne, 358 U.S. 184, 188-189, 79 S. Ct. 180, 3 L. Ed. 2d 210 (1958); Elmo Division of Drive-X Company v. Dixon, 121 U.S. App. D.C. 113, 348 F.2d 342, 346-347 (1965); (2) the issue involved is a strictly legal one not involving the agency's expertise or any factual determinations, Jewel Companies, Inc. v. F.T.C., 432 F.2d 1155, 1159 (7 Cir. 1970); McKart v. United States, 395 U.S. 185, 197-199, 89 S. Ct. 1657, 23 L. Ed. 2d 194 (1969); or (3) the issue cannot be raised upon judicial review of a later order of the agency, Jewel, supra at 1159. We agree with the district court that none of these exceptions are applicable here.

Borden argues that under Rule 2.6 it was entitled to notice that it was being investigated for illegal price stabilization and "to submit exculpatory or explanatory information" during the investigative stages of the Commission's proceedings. In support of this contention Borden relies upon an unpublished directive implementing Rule 2.6, which reads:

"As a matter of standard operating procedure, in any matter in which a recommendation for a complaint is contemplated the proposed respondent should be * * * afforded an opportunity to furnish information respecting the acts or practices involved prior to ...


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