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Reuben H. Donnelley Corp. v. Federal Trade Commission and Michael Pertschuk

decided: August 2, 1978.

REUBEN H. DONNELLEY CORPORATION, PLAINTIFF-APPELLANT, CROSS-APPELLEE,
v.
FEDERAL TRADE COMMISSION AND MICHAEL PERTSCHUK, PAUL RAND DIXON, ELIZABETH HANFORD DOLE, CALVIN J. COLLIER AND DAVID CLANTON, INDIVIDUALLY AND AS MEMBERS OF THE COMMISSION, DEFENDANTS-APPELLEES, CROSS-APPELLANTS



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 77-C-2218 - Bernard M. Decker, Judge.

Swygert and Tone, Circuit Judges, and Jameson, Senior District Judge.*fn*

Author: Swygert

SWYGERT, Circuit Judge.

The threshold and dispositive issue presented in this appeal relates to the venue provision covering suits against federal officers and agencies.

I

On April 13, 1976 the Federal Trade Commission issued an administrative complaint against the Reuben H. Donnelley Corporation, a publishing company incorporated in Delaware with its principal place of business in New York. In its complaint the Commission charged that Donnelley's publishing policies for the Official Airline Guide, a bi-monthly publication which combines in one directory the passenger flight schedules and fares of all scheduled air lines in North America, violated section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1). More specifically, the Commission alleged that the manner in which the Guide displays the schedules and fares of the various classes of air carriers acts to the disadvantage of the smaller carriers and stifles competition within the airline industry.

Donnelley subsequently filed with the administrative law judge a motion to dismiss for want of subject matter jurisdiction. Donnelley asserted that because the Commission has no jurisdiction over air carriers under 15 U.S.C. § 45(a)(2), it also has no jurisdiction over the business of air carriers, the only commerce alleged by the Commission to be affected by Donnelley's publishing policies. On March 30, 1977, the administrative law judge issued an order denying the motion to dismiss, noting that Donnelley is not an air carrier and that the statutory exemption of the Federal Trade Commission Act applies only to air carriers.

On June 20, 1977 Donnelley filed this action in the United States District Court for the Northern District of Illinois against the Commission and each of its five individual commissioners. Donnelley sought to prevent the administrative hearings from commencing as scheduled, again asserting that the Commission lacked jurisdiction over its proceedings against it. The Commission moved to dismiss or, in the alternative, for summary judgment. It argued that venue was improperly laid in the Northern District of Illinois, that the district court lacked subject matter jurisdiction because Donnelley had failed to exhaust its administrative remedies before the Commission, and that, since Donnelley is not an air carrier, it and its activities are not statutorily exempt from the Federal Trade Commission Act.

The district court on October 31, 1977 rejected all of the Commission's contentions. The court held that venue in the Northern District of Illinois was proper under 28 U.S.C. § 1391(e)(1) because, in its opinion, the Commission is a resident of Chicago through its regional office.*fn1 The court also found that the Commission had exceeded its statutory authority in proceeding against Donnelley, and that Donnelley was therefore not required to exhaust its administrative remedies. Accordingly the court enjoined the Commission from pursuing its proceedings.*fn2

The Commission thereafter moved for reconsideration of the October order, advising the court of our then recent opinion in Squillacote v. International Brotherhood of Teamsters, 561 F.2d 31 (7th Cir. 1977). Upon reconsideration, the district court on December 20, 1977 issued a second order in which it concluded that its original decision -- holding Donnelley's action within an exception to the exhaustion doctrine -- was erroneous in light of Squillacote. Accordingly the court vacated its October order and dismissed Donnelley's complaint for failure to exhaust administrative remedies. (In view of its holding, the court deemed it unnecessary to reconsider its prior ruling that venue was proper.) From that ruling Donnelley appealed and the Commission cross-appealed.

II

At oral argument the parties agreed that venue is the threshold question. Venue in civil actions against federal officers and agencies is governed by 28 U.S.C. § 1391(e). That section provides that an action may be brought in any judicial district in which:

(1) a defendant in the action ...


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