# Appendix — Association of National Advertisers, Inc. v. Federal Trade Commission

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1902%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1980
- **Citation:** 447 U.S. 921

## Text

owe ROAR, LER }

Supreme Court of the KnitelP ih

October Term, 1979

No, 79-1496

ASSOCIATION OF NATIONAL ADVERTISERS, aot” Seetaarate AS-
SOCIATION OF ADVERTISING AGENCIES, INC., AMERICAN AD-
VERTISING FEDERATION, and TOY MANUFACTURERS OF
AMERICA, INC.; and KELLOGG COMPANY, INTERVENOR,

Petitioners.

=

v.

FEDERAL TRADE COMMISSION, MICHAEL PERTSCHUK, CHAIRMAN,
PAUL RAND DIXON, DAVID A. CLANTON, ROBERT PITOFSKY, and
PATRICIA BAILEY, COMMISSIONERS,

Respondents.

APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

Wet, GUTTMAN & Davis DonovaN LEISURE NEWTON & IRVINE
Gruzert H. Wei. Wa ter L. StraTTon
Jay S. Davis David S. VERSFELT
60 East 42nd Street 30 Rockefeller Plaza
New York, New York 10017 New York, New York 10020
(212) 687-8573 (212) 489-4100
Counsel for Counsel for
Association of National American Association of Advertising
Advertisers, Inc. Agencies, Inc.
WEITZMAN AND ROGAL Locker & GREENBERG
WiLutiuaM W. RocaL AARON LOCKER
1735 K. Street, N.W. THEODORE M. GREENBERG
Washington, D.C. 20006 One Penn Plaza
(202) 467-5424 New York, New York 10001
t Counsel for (212) 945-7000
: American Advertising Federation Counsel for
i Toy Manufacturers of America, Inc.
’ March 26, 1980
te
hy

TABLE OF CONTENTS

PAGE

Opinion of the United States
Court of Appeals for the
District of Columbia Circuit
of December 27, 1979. . ee 62 -A-1

Opinion of the United States
District Court for the
District of Columbia
of November 3, 1978. .... . A=100

Opinion of the Federal Trade
Commission of July 18, 1978. . A-111

Letter Response of Chairman
Pertschuk of July 13, 1978. . .A-113

Statutes Involved. « « © « « « « A-127
Proposed Trade Regulation Rule-
making and Public Hearing (16
CFR Part 461) (43 Fed. Reg.
17967, April ars 1978) i i A-141

Statements of Chairman Pertschuk:

Article, Advertising Age of
June y+ e ° * ° e . ° -A-170

FTC News Release of July 20,
1977 . > ° . . . . e . . . . A-175

Television Interview, Toda
Show of October 31, so metse

PAGE

Speech, Action for Children's
Television Research Confer-
ence of November 8, 1977 . . A-186

Memorandum to Coleman McCarthy
of November 9, 1977 oe "s « -A-198

Memorandum to Charlie Ferris,
Federal Communication
Commission, of November 9,
1977. © ° ° ° ° ° . ° . ” . -A-199

Memorandum to Senator Stevens
of November 9, 1977 .°. . . -A=-200

Interview, TV Guide of November
12, 1977 See Mae, \ete Ml, aoe Pe ee ae ee A-201

Letter to Hon. Donald Kennedy,
Food and — Administration,
of November Ss 1977 7-8-9 A-206

Article, Wall Street Journal
of December 28, 1977... . A-208

Article, Newsweek of
January 30, 1978 ee. & &€ &*@ A-216

FTC News Release of
January : 2 1980 ge Je ee ee -A-221

ii

; Notice: This opinion is subject to formal revision bef blicati
- = my ae ch sage po - U.S.App.D.C. Reports. ection
e Clerk of any formal errors i i
made before the bound volumes go to gp sarees gin

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 79-1117
ASSOCIATION OF NATIONAL ADVERTISERS, INC., ET AL.
V.

FEDERAL TRADE COMMISSION, ET AL., APPELLANTS

Appeal from the United States District Court
for the District of Columbia

(D.C. Civil No. 78-1421)

Argued May 1, 1979
Decided December 27, 1979

Neil H. Koslowe, Special Litigation Coun -
ment of Justice, with whom pein Ge eee
Assistant Attorney General, Earl J. Silbert United
States Attorney, Robert E. Kopp, Attorney, Department
of Justice, Michael N. Sohn, General Counsel, Gerald P.

Bills of costs must be filed within 14 da
; ys after en gmen
court looks with disfavor upon motions to file bills of se a out of tae

A-1

Norton, Deputy General Counsel, and David M. Fitz-

gerald, Attorney, Federal Trade Commission, were on
the brief, for appellants.

Frederick P. Furth, with whom Samuel H. Seymour
was on the brief, for appellee Kellogg Co.

Gilbert H. Weil, counsel for appellee Association of
National Advertisers, Inc., with whom William W. Rogal,
counsel for appellee American Advertising Federation,
and Walter L. Stratton, counsel for appellee American
Association of Advertising Agencies, Inc., were on the
brief, argued on behalf of appellees Association of Na-
tional Advertisers, Inc., et al.

Mark L. Evans, General Counsel, Interstate Commerce
Commission, Jerome Nelson, Associate General Counsel,
Interstate Commerce Commission, Andrew Krulwich,
General Counsel, Consumer Product Safety Commission,
and Robert R. Bruce, General Counsel, Federal Com-
munications Commission, were on the brief for amici
curiae Independent Regulatory Agencies, urging that the
judgment of the District Court on appeal herein be re-
versed in light of the alleged chilling effect that decision
can have upon agency rulemaking proceedings.

Daniel J. Popeo and Joel D. Joseph were on the brief
for amicus curiae Washington Legal Foundation, urging
affirmance. ,

David B. Lytle was on the brief for amicus curiae
Air Transport Association of America, urging that this
court reject the recommendations proffered by the several
Independent Regulatory Agencies as amici curiae herein.

Hope B. Eastman, Charles Morgan, Jr., and Paul F.
Colarulli were on the brief for amicus curiae Grocery
Manufacturers of America, Inc., urging affirmance.

Christopher S. Bond and Charles A. Blackmar were

on the brief for amicus curiae Great Plains Legal Foun-
dation, urging affirmance.

Morton Hollander, Attorney, Department of Justice,
and Ann S. DuRoss, Assistant United States Attorney,
also entered appearances for appellants.

Earl C. Dudley, Jr. also entered an appearance for
appellee Kellogg Co.

Joel J. McGrath, Jr. also entered an appearance for
appellee American Association of Advertising Agencies.

Before TAMM, LEVENTHAL,* and MACKINNON, Circuit
Judges.

Opinion for the court filed by Circuit Judge TAM.
Concurring opinion filed by Circuit Judge LEVENTHAL.

Opinion dissenting in part and concurring in part
filed by Circuit Judge MACKINNON.

TAMM, Circuit Judge: Plaintiffs, appellees here, brought
an action in the United States District Court for the
District of Columbia to prohibit Michael Pertschuk,
Chairman of the Federal Trade Commission (Commis-
sion), from participating in a pending rulemaking pro-
ceeding concerning children’s advertising. The district
court, citing this court’s decision in Cinderella Career
& Finishing Schools, Inc. v. FTC, 425 F.2d 583 (D.C.
Cir. 1970), found that Chairman Pertschuk had pre-
judged issues involved in the rulemaking and ordered him
disqualified. We hold that the Cinderella standard is not
applicable to the Commission’s rulemaking proceeding.
An agency member may be disqualified from such a pro-
ceeding only when there is a clear and convincing show-

* Judge Leventhal died after completing his opinion in
this case but before it was sent to the court’s printer for
publication.

A-3

ing that he has an unalterably closed mind on matters
critical to the disposition of the rulemaking. Because
we find that the appellees have failed to demonstrate
the requisite prejudgment, the order of the district court
is reversed. :

On April 27, 1978, the Commission issued a Notice of
Proposed Rulemaking that suggested restrictions regard-
ing television advertising directed toward children." The
decision to commence rulemaking under section 18 of the
Federal Trade Commission (FTC) Act? was accompanied
by a statement setting forth “with particularity the
reason for the proposed rule.”* The Commission ex-
plained that it had decided to propose a rule limiting
children’s advertising after consideration of a staff re-
port that discussed

1 The proposed rule would

(a) Ban all televised advertising for any product which
is directed to, or seen by, audiences composed of a sig-
nificant proportion of children who are too young to
understand the selling purpose of or otherwise compre-
hend or evaluate the advertising;

(b) Ban televised advertising for sugared food prod-
ucts directed to, or seen by, audiences composed of a sig-
nificant proportion of older children, the consumption of
which products poses the most serious dental health
risks ;

(c) Require televised advertising for sugared food
products not included in Paragraph (b), which is directed
to, or seen by, audiences composed: of a significant pro-
portion of older children, to be balanced by nutritional
and/or health disclosures funded by advertisers.

43 Fed. Reg. 17,967, 17,969 (1978).

215 U.S.C. $57a (1976). Congress enacted §18 in 1975
as part of as Magnuson-Moss Warranty—Federal Trade
Commission Improvement (Magnuson-Moss) Act, Pub. L. No.
93-637, § 202(a), 88 Stat. 2193 (1975).

* 15 U.S.C. § 57a(b) (1976).

facts which suggest that the televised advertising of
any product directed to young children who are too
young to understand the selling purpose of, or other-
wise comprehend or evaluate, commercials may be
unfair and deceptive within the meaning of Section
5 of the Federal Trade Commission Act, requiring
appropriate remedy. The Report also discloses facts
which suggest that the current televised advertising
of sugared products directed to older children may
be unfair and deceptive, again requiring appropriate
remedy.

43 Fed. Reg. 17,967, 17,969 (1978) (footnotes omitted) .4
The Commission invited interested persons to comment
upon any issue raised by the staff proposal.®

On May 8, 1978, the Association of National Adver-
tisers, Inc. (ANA), the American Association of Ad-
vertising Agencies (AAAA), the American Advertising
Federation (AAF), and the Toy Manufacturers of
America, Inc. (TMA) petitioned Chairman Pertschuk to
recuse himself from participation in the children’s ad-
vertising inquiry. The petition charged that Pertschuk
had made public statements concerning regulation of
children’s advertising that demonstrated prejudgment of
specific factual issues sufficient to preclude his ability
to serve as an impartial arbiter. See Appendix (A.) at

* Petitions received from Action for Children’s Television
(ACT) and the Center for Science in the Public Interest
prompted the Commission’s decision to begin rulemaking.
Each petition asked the Commission to promulgate rules
limiting the advertising on children’s television of certain
highly sugared products. In support of the relief requested,
each petition presented evidence on the amount of televised
advertising for sugared products directed toward children,
the limited ability of young children to recognize the com-
mercial intent of such messages, and the health risks attend-

ant to consumption by children of excess amounts of sugar.
483 Fed. Reg. at 17,968-69.

5 Id. at 17,969.

11, 15. The charges were based on a speech Pertschuk
delivered to the Action for Children’s Television (ACT)
Research Conference in November 1977, on several news-
paper and magazine articles quoting Chairman Pert-
schuk’s views on children’s television, on the transcript
of a televised interview, and on a press release issued by
the Commission during the summer of 1977.°

On July 18, 1978, Chairman Pertschuk declined to
recuse himself from the proceeding. Pertschuk stated
his belief that the disqualification standard appropriate
for administrative adjudications did not apply to ad-
ministrative rulemaking, id. at 57-58, and that, even if
adjudicative criteria were relevant, his remarks did not
warrant disqualification because they did not concern the
petitioners in particular; rather, they addressed the
“issue of advertising to children and the policy questions
raised by it,” id. at 64 (emphasis in original). Five days
later, the Commission, without Pertschuk participating,
also determined that Pertschuk need not be disqualified.
Id. at 65.

In August 1978, ANA, AAAA, AAF, and TMA pe-
titioned the district 5 ae Peggy Parysyo
Pertschuk should be disquali rom participatin
children’s television proceeding. ANA, AAAA, AAF, and
TMA also sought preliminary and permanent injunctions
barring Pertschuk’s participation and an order requiring
the remaining Commissioners to reconsider all matters
previously decided in the inquiry. The plaintiffs intro-
duced copies of three letters, sent by Chairman Pertschuk
on the day after he delivered the ACT speech, as addi-
tional evidence of his alleged prejudgment. The letters
accompanied a copy of the speech.

On September 8, 1978, the Kellogg Company ( Kellogg) ‘
a food manufacturer that advertises on television pro-

6 See note 56 infra.

grams regularly viewed by children, moved to intervene
as a plaintiff. The district court granted the motion on
October 4, 1978. Two days later, Kellogg introduced as
evidence in support of the motion for a preliminary
injunction a copy of a letter sent by Chairman Pertschuk
on November 17, 1977, to Donald Kennedy, Commissioner
of the Food and Drug Administration.

On November 8, 1978, the district court ruled on cross-
motions for summary judgment. The court, relying on
Cinderella, found that Chairman Pertschuk “has pre-
judged and has given the appearance of having pre-
judged issues of fact involved in a fair determination
of the Children’s Advertising rulemaking proceeding.”
Accordingly, the court granted the plaintiffs’ motion for
summary judgment and ordered Pertschuk enjoined from
further participation. Jd. at 110. This appeal followed."

II

Before we consider the merits of the district court’s
decision, we pause at a procedural way station. The
Commission asserts that the district court erred in con-
sidering the disqualification issue before the rulemaking
proceeding had ended. As a general matter, of course,
the exhaustion doctrine provides that challenges to agency
action should not be heard until relevant administrative
proceedings have been concluded. McKart v. United
States, 395 U.S. 185, 194-95 (1969). This permits an
administrative agency to develop a factual record, to
apply its expertise to that record, and to avoid piece-
meal appeals. Jd. at 193-94.

Application of the exhaustion doctrine, however, is not
inflexible. In rare circumstances, this court has con-

7 The Washington Legal Foundation and seven independent
regulatory agencies appeared as amici curiae before this
court.

sidered extraordinary prejudgment claims prior to final
agency action. See Amos Treat & Co. v. SEC, 306 F.2d
260 (D.C. Cir. 1962). See also Fitzgerald v. Hampton,
467 F.2d 755, 768 (D.C. Cir. 1972) ; Sterling Drug, Inc.
v. FTC, 450 F.2d 698, 710-11 (D.C. Cir. 1971). The
district court agreed to consider the present case prior
to exhaustion of the administrative process on the basis
of these decisions.

The exception to the exhaustion doctrine upon which
the district court relied is extremely narrow. In SEC
v. R.A. Holman & Co., 323 F.2d 284, 286-87 (D.C. Cir.
1963), for example, ‘this court refused to review a dis-
qualification contention when a commissioner whose im-
partiality was challenged denied that he had participated
in earlier administrative proceedings. This court noted
that resolution of the disqualification issue would neces-
sitate prolonged evidentiary hearings and, therefore, we
concluded that review of the due process claim should
follow final agency action. Similarly, in Associated Press
v. FCC, 448 F.2d 1095, 1106-07 (D.C. Cir. 1971), this
court refused to review, prior to final administrative ac-
tion, an insubstantial disqualification claim that involved
conflicting factual contentions.

Although the doctrine that permits review of a dis-
qualification claim prior to final agency action is restric-
tive, the present case falls within its bounds. As the
Supreme Court has emphasized, application of the ex-
haustion doctrine “requires an understanding of its
purposes and of the particular administrative scheme
involved.” McKart v. United States, 395 U.S. at 193.
For the following reasons, we find that immediate re-
view of the prejudgment claim will not thwart the pur-
poses of exhaustion.

First, the challenge to Chairman Pertschuk’s further
participation involves no disputed factual issues that

A-8

demand the creation of a better administrative record.
The agency has had an adequate opportunity to explain
why Chairman Pertschuk need not be recused.* Second,
the issue involved in this case—the prejudgment standard
required by due process for section 18 rulemaking—is a
pure question of law. The Commission can bring no
particular expertise to bear on its determination. Con-
sideration of this question of first impression will not
necessarily permit future piecemeal attacks on adminis-
trative processes.* Under the particular circumstances

* When the Commission rejected the disqualification claim,
the appellees had not yet presented as evidence of prejudg-
ment four letters later introduced before the district court.
See pp. 6-7 supra. The Commission did, however, have the
opportunity to analyze the appellees’ legal theory and to
examine the bulk of their evidence. We do not view the
presence of the letters, which merely repeat the views ex-

pressed in the ACT speech, as having decisional significance.
See note 56 infra.

*In this sense, review of the Commission’s decision not
to recuse Chairman Pertschuk is analogous to the interlocu-
tory review of a district court order permitted under 28
U.S.C. §1292(b) (1976) when the “order involves a@ con-
trolling question of law as to which there is substantial
ground for difference of opinion and . . . an immediate appeal
from the order may materially advance the ultimate termina-
tion of the litigation.” See also Kennedy, The Federal Courts
Improvement Act: a first step for Congress to take, 68

JUDICATURE 8, 12 (1979) (proposed S. 678 balances need for _

finality against desirability of hearing interlocutory appeals
by allowing “immediate appeals in cases of ‘extraordinary
importance,’ with the Court of Appeals deciding—even in the
absence of district court certification—whether or not to
entertain an appeal”).

Similarly, appellate courts reviewing claims that a district
court judge improperly refused to recuse himself, see 28
U.S.C. §§ 144, 455 (1976), have demonstrated sensitivity to
the expeditious hearing of prejudgment cases. Although a
refusal to recuse is not appealable as a final order, commen-
tators have detected a liberal trend toward use of mandamus

A-9

of this case, we therefore conclude that the appellees’
claim may be heard.

Judge Leventhal, in his concurring opinion, voices some
concern over the jurisdiction of the district court to
entertain this action. In their complaints, however, the
plaintiffs alleged a violation of their procedural rights
under the Constitution and the Administrative Procedure
Act (APA), 5 U.S.C. §§ 551-706 (1976). Thus, the dis-
trict court clearly had jurisdiction—i.e., power—to re-
solve the contrayersy under 28 U.S.C. § 1331(a) (1976)
(cases arising under the Constitution and the laws of the
United States) and 28 U.S.C. § 1337 (1976) (cases aris-
ing under statutes regulating commerce). See generally

Califano v. Sanders, 480 U.S. 99, 105 (1977). Once a

plaintiff has alleged a nonfrivolous constitutional claim,
the district court has jurisdiction under section 1331, and
dismissal for want of jurisdiction is improper even if
dismissal for failure to state a claim upon which relief
could be granted would be proper. Bell v. Hood, 327 US.
678, 682-88 (1946). See 1 MOORE’S FEDERAL PRACTICE
7 0.62[2.-2], at 664-65 (1977). Similarly, jurispruden-
tial concerns, such as those embodied in the exhaustion
doctrine, do not bear on whether a court has jurisdiction
but only on whether it should exercise that jurisdiction.

This conclusion finds support in this court’s opinion
in Wolf Corp. v. SEC, 317 F.2d 139 (D.C. Cir. 1963)
(Burger, J.). The plaintiff in that case had asked the
district court to enjoin the Securities and Exchange Com-
mission from holding a stop-order hearing. The district
court dismissed the case not for want of jurisdiction but
for failure to state a claim upon which relief could be

ider disqualification claims. See 18 C. WRIGHT & A.
aie p themes PRACTICE AND PROCEDURE: JURISDICTION
§ 8558, at 887 (1975) ; 9 Moore’s FEDERAL PRACTICE { 110.13
[10], at 187-88 (2d ed. 1975).

A-10

granted. Jd. at 141. On appeal, this court affirmed be-
cause it believed the plaintiff should have exhausted its
remedies before the agency first. In the process, the
court stated expressly that the plaintiff’s allegation of a
due process violation was sufficient to invoke the district
court’s jurisdiction under 28 U.S.C. § 1837. It then
agreed that dismissal for failure to state a valid claim,
rather than for want of jurisdiction, was appropriate. Id.
Moreover, like the case before us, Wolf arose under a
procedural regime that provided for review of final
agency decisions in the courts of appeals, not the district
courts. Compare 15 U.S.C. § 77i (1976) (review of SEC
orders), cited in Wolf Corp. v. SEC, 317 F.2d at 141
n.6, with 15 U.S.C. § 57a(e) (1) (A) (1976) (review of
FTC rules). Thus, where the final agency decision may
be reviewed does not by itself determine the court in
which a plaintiff seeking interlocutory relief may pursue
his cause of action.
It!

The Commission attacks the substance of the district
court’s decision on two grounds. First, it insists that the
standard for disqualification of an administrative deci-
sionmaker in rulemaking differs from the standard in
adjudication. The Commission’s view rests on the differ-
ent purposes of rulemaking and adjudication and on the
long-standing rule that due process requirements are not
the same in the two contexts. Second, the Commission
asserts that under any disqualification standard, Chair-
man Pertschuk cannot be found to have prejudged issues
in contravention of due process.

The appellees respond with two contentions. First,
they support the district court’s conclusion that Cinderella
Career & Finishing Schools, Inc. v. FTC, 425 F.2d 588
(D.C. Cir. 1970), applies to Commission rulemaking
under section 18 of the FTC Act. Although Cinderella
involved an adjudication, the appellees claim that the

A-1l

existence of procedures in section 18 rulemaking pro-
ceedings that are not required in informal notice-and-
comment rulemaking under section 553 of the Adminis-
trative Procedure Act, 5 U.S.C. § 553 (1976) ,’° mandates
application of the standard set out in that case. Second,
they argue that Chairman Pertschuk’s statements indi-
cate prejudgment sufficient to bar him from further par-
ticipation in the children’s advertising proceeding.

We are, therefore, called upon to resolve two ques-
tions: (1) What is the appropriate standard by which
to decide prejudgment in the context of a section 18
proceeding? (2) Has Chairman Pertschuk made state-
ments that demonstrate prejudgment under that stand-
ard? :

Before we examine either the structure of section 18
or the content of Pertschuk’s statements, we review our
decision in Cinderella Career & Finishing Schools, Inc.
v. FTC. In Cinderella, we held that the standard for
disqualifying an administrator in an adjudicatory pro-
ceeding because of prejudgment is whether “‘a disin-
terested observer may conclude that [the decisionmaker]
has in some measure adjudged the facts as well as the
law of a particular case in advance of hearing it.’” 425
F.2d at 591 (quoting Gilligan, Will & Co. v. SEC, 267
F.2d 461, 469 (2d Cir.), cert. denied, 361 U.S. 896
(1959)). See Texaco, Inc. v. FTC, 336 F.2d 754, 760
(D.C. Cir. 1964), vacated and remanded per curiam on
other grounds, 381 U.S. 789 (1965). See also Kennecott
Copper Corp. v. FTC, 467 F.2d 67, 80 (10th Cir. 1972),
cert. denied, 416 U.S. 909 (1974). This standard guar-
antees that the adjudicative hearing of a person facing
administrative prosecution for past behavior is before a

# See note 35 infra.

A-12

decisionmaker who has not prejudged facts concerning
the events under review.

The facts of the Cinderella case illustrate application
of the standard. The Commission charged that Cinderella
Career College and Finishing Schools, Inc. (Cinderella)
made false representations in its advertising and en-
gaged in deceptive practices in contravention of section
5 of the FTC Act, 15 U.S.C. § 45 (1976). For example,
the Commission alleged that Cinderella advertised
“courses of instruction which qualify students to become
airline stewardesses” and that its graduates were “quali-
fied to assume executive positions.” 425 F.2d at 584 n.1.
An administrative law judge ruled that the Commission
had failed to prove that the acts and practices violated
the FTC Act, and he dismissed the complaint. Jd. at 584
n.2. Complaint counsel appealed the administrative law
judge’s decision to the full Commission.

While the appeal was pending before the Commission,
Chairman Paul Rand Dixon spoke at the Government

Relations Workshop of the National Newspaper Associa-
tion and stated:

What kind of vigor can a reputable newspaper ex-
hibit? . .. What standards are maintained on adver-
tising acceptance? . .. What about carrying ads that
offer college educations in five weeks, . . . or becom-
ing an airline’s hostess by attending a charm school?
. . . Granted that newspapers are not in the adver-
tising policing business, their advertising managers
are savvy enough to smell deception when the odor
is strong enough.

4 Section 5(a) (1) provides that “[{u]nfair methods of com-
petition in or affecting commerce, and unfair or deceptive
acts or practices in or affecting commerce, are declared un-
lawful.” 15 U.S.C. § 45(a) (1) (1976). The Magnuson-Moss
Act amended §5 by adding the words “or affecting.” Pub.
L. No. 98-6387, § 201(a), 88 Stat. 2198 (1975).

A-13

Id. at 589-90. Six months later, the Commission, with -
Chairman Dixon participating, found that Cinderella
neither awarded nor was capable of awarding academic
degrees, and that it offered no course of instruction that
would qualify students as airline stewardesses. School
Services, Inc., 74 F.T.C. 920, 1022, 1031, 1035 (1968).
The Commission concluded that these and other repre-
sentations were false and misleading in violation of sec-
tion 5 of the FTC Act and ordered Cinderella to cease
and desist from such practices. Jd. at 1040-42.

On review, we found that Chairman Dixon’s remarks
gave “the appearance that he ha[d] already prejudged
the case and that the ultimate determination of the mer-
its [would] move in predestined grooves.” 425 F.2d at
590. Accordingly, we held that Chairman Dixon’s par-
ticipation in the proceeding required reversal and remand
of the Commission’s order.

The district court in the case now before us held that
“the standard of conduct delineated in Cinderella” gov-
erns agency decisionmakers participating in a section 18
proceeding. A. at 107. Section 18 authorizes the Com-
mission to promulgate rules designed to “define with
specificity acts or practices which are unfair or decep-
tive.” * Basically, it allows the Commission to enforce
the broad command of section 5 of the FTC Act, which
declares “unfair or deceptive acts or practices in or af-
fecting commerce . . . unlawful.” '* The district court
ruled that a section 18 proceeding, notwithstanding the
appellation rulemaking, “is neither wholly legislative nor
wholly adjudicative.” According to the district couit, the
“adjudicative aspects” of the proceeding render Cinde-
rella applicable. Id. at 106.

1215 U.S.C. § 57a(a) (1) (1976).
18 15 U.S.C. § 45 (a) (1) (1976).

A-14

The appellees urge us to uphold the district court’s
analysis of section 18. They emphasize two allegedly
“adjudicatory aspects” of a section 18 proceeding: (1)
interested persons are entitled to limited cross-examina-
tion of those who testify to disputed issues of material
fact, see 15 U.S.C. § 57a(c) (1) (B) (1976), and (2) a
reviewing court must set aside any rule not supported
by substantial evidence in the rulemaking record taken
as a whole, see 15 U.S.C. § 57a(e) (3) (A) (1976).

The district court’s characterization of section 18 rule-
making as a “hybrid” or quasi-adjudicative proceeding,
A. at 106, ignores the clear scheme of the APA. Admin-
istrative action pursuant to the APA is either adjudica-
tion or rulemaking. The two processes differ funda-
mentally in purpose and focus:

14 The appellees also argue that

the principal characteristic of adjudicative proceedings
which necessitates the Cinderella prejudgment standard
is the requirement (which traditionally has applied to
judges but not to legislators) that the ultimate decision
be based upon record evidence. This, of course, is one of
the most significant characteristics which the Commis-
sion’s adjudicative proceedings and its Section 18 trade
regulation rulemaking proceedings have in common.
Brief of Intervening Plaintiff-Appellee Kellogg Company at
38. The appellees’ attempt to equate rulemaking with adju-
dication on the basis of a record requirement would have
more force, however, if §18 demanded rulemaking deci-
sions to be based on a closed record, as are adjudicatory
determinations. See 5 U.S.C. §556(e) (1976). Section 18, in
fact, provides that for purposes of judicial review the “rule-
making record” includes “any .. . information which the
Commission considers relevant to such rule.” 15 U.S.C.
§ 57a(e)(1)(B) (1976). Section 18 thus does not prohibit
reliance on material not adduced during the rulemaking pro-

cedures; it simply requires the Commission to acknowl
that reliance. =

A-15

The object of the rule making proceeding is the im-
plementation or prescription of law or policy for the
future, rather than the evaluation of a respondent’s
past conduct. Typically, the issues relate not to the
evidentiary facts, as to which the veracity and de-
meanor of witnesses would often be important, but
rather to the policy-making conclusions to be drawn
from the facts. . . . Conversely, adjudication is con-
cerned with the determination of past and present
rights and liabilities. Normally, there is involved a
decision as to whether past conduct was unlawful,
so that the proceeding is characterized by an accusa-
tory flavor and may result in disciplinary action.

ATTORNEY GENERAL’S MANUAL ON THE ADMINISTRATIVE
PROCEDURE ACT 14 (1947). See United States v. Flor-
ida East Coast Railway, 410 U.S. 224, 244-46 (1973).

Adjudication and rulemaking may be conducted pur-
suant to either informal or formal procedures.’* Informal
rulemaking requires the administrative agency to provide
“interested persons an opportunity to participate in the
rule making through submission of written data, views,
or arguments.” 5 U.S.C. §553(c). Under section 706
(2) (A), reviewing courts are required to uphold in-
formal rulemaking decisions unless those decisions are
“arbitrary, capricious, an abuse of discretion, or other-
wise not in accordance with law.” 5 U.S.C. § 706(2) (A)
(1976).

18 The ATTORNEY GENERAL’S MANUAL ON THE ADMINISTRA-
TIVE PROCEDURE ACT is a contemporaneous interpretation of
the Administrative Procedure Act. Because of “the role
played by the Department of Justice in drafting the legisla-
tion,” it deserves some deference. Vermont Yankee Nuclear
Power Corp. v. NRDC, 435 U.S. 519, 546 (1978) (footnote
omitted).

16 See Pedersen, Formal Records and Informal Rulemaking,
85 YALE L.J. 38, 40 n.14 (1975).

A-16

Formal rulemaking is invoked when “rules are required
by statute to be made on the record after opportunity
for an agency hearing.” 5 U.S.C. § 553(c). Under sec-
tions 556 and 557 of the APA, 5 U.S.C. $§ 556-557
(1976), formal rulemaking must include a trial-type
hearing at which a “party is entitled to present his case
or defense or oral or documentary evidence, to submit
rebuttal evidence, and to conduct such cross-examination
as may be required for a full and true disclosure of the
facts.” 5 U.S.C. § 556(d). Section 706(2)(E) governs
judicial review of formal rulemaking and requires a
court to set aside a rule that is “unsupported by substan-
tial evidence.” 5 U.S.C. § 706(2) (E).

Formal adjudication is governed by section 554 of the
APA and arises in “every case of adjudication required
by statute to be determined on the record after oppor-
tunity for an agency hearing.” 5 U.S.C. § 554(a)
(1976). Section 554 incorporates the procedural require-
ments of sections 556 and 557 and affords parties to a
formal adjudication the right to present evidence and to
conduct cross-examination. 5 U.S.C. § 554(c)-(d). Judi-
cial review of formal adjudication, like that of formal
rulemaking, is governed by the substantial evidence
standard.”

The foregoing descriptions merely outline the basic
parameters of administrative action. Congress has, in
the Magnuson-Moss Warranty—Federal Trade Commis-
sion Improvement (Magnuson-Moss) Act § 202(a), 15

17 To complete the symmetry, informal adjudication occurs
when an agency determines the rights or liabilities of a party
in a proceeding to which §554 does not apply. See, e.g.,
Camp v. Pitts, 411 U.S. 188 (1973) (per curiam) ; Aircraft
Owners & Pilots Ass’n v. FAA, 600 F.2d 965, 969-70 (D.C.
Cir. 1979).

A-17

U.S.C. § 57a (1976), and elsewhere,'* enacted specific
statutory rulemaking provisions that require more proce-
dures than those of section 553 but less than the full
procedures required under sections 556 and 557.° The
presence of procedures not mandated by section 553, how-
ever, does not, as the appellees urge, convert rulemaking
into quasi-adjudication. The appellees err by focusing
on the details of administrative process rather than the
nature of administrative action.

Our decision in Hercules, Inc. v. EPA, 598 F.2d 91
(D.C. Cir. 1978), illustrates that the difference between
rulemaking and adjudication is not affected by varying
procedural practices. In that case, although we reviewed
decisions of the Environmental Protection Agency under
the substantial evidence standard, id. at 106; see Envi-
ronmental Defense Fund v. EPA (PCBs), 598 F.2d 62,
82-83 (D.C. Cir. 1978), we refused to find that the
agency proceeding was adjudicatory. The Environmental
Protection Agency was promulgating policy-based stand-
ards of general import and, thus, was engaged in rule-
making. Similarly, the Commission’s children’s advertis-
ing inquiry is designed to determine whether certain acts
or practices will, in the future, be considered to contra-
vene the FTC Act. The proceeding is not adjudication
or quasi-adjudication. It is a clear exercise of the Com-
mission’s rulemaking authority.

18 See, e.g., Consumer Product Safety Act §9, 15 U.S.C.
§ 2058 (1976) ; Toxic Substances Control Act § 6, 15 U.S.C.
§ 2605 (1976) ; Occupational Safety and Health Act of 1970,
§ 6, 29 U.S.C. § 655 (1976) ; Department of Energy Organi-
zation Act § 501, 42 U.S.C. § 7191 (Supp. I 1977) ; Clean Air
Act Amendments of 1977, § 305, 42 U.S.C. § 7607 (Supp. I
1977). See also 1 K. DAVIS, ADMINISTRATIVE LAW TREATISE
§6:9 (2d ed. 1978).

19 Section 18, for example, affords a more limited right of
cross-examination than § 556. Compare 15 U.S.C. § 57a(c)
with 5 U.S.C. §556(d). See H.R. Rzp. No. 98-1606, 93d
Cong., 2d Sess. 38 (1974) (Conference Report).

A-18

C

The appellees also argue that we must apply Cinde-
rella because it involves a factual prejudgment similar
to the one now before us. In Cinderella, Chairman Dixon
made statements that reflected prejudgment that Cinde-
rella Career & Finishing School, Inc. had engaged in
certain acts. In this case, the appellees accuse Chairman
Pertschuk of prejudging issues of material fact in the
children’s television proceeding. We find that the appel-

lees’ argument belies a misunderstanding of the factual
basis of rules.

The factual predicate of a rulemaking decision sub-
stantially differs in nature and in use from the factual
predicate of an adjudicatory decision. The factual predi-
cate of adjudication depends on ascertainment of “facts
concerning the immediate parties—who did what, where,
when, how, and with what motive or intent.” 2 K. DAVIS,
ADMINISTRATIVE LAW TREATISE § 15.08, at 353 (1958).
By contrast, the nature of legislative fact is ordinarily
general, without reference to specific parties. Adjudica-
tive and legislative facts are also used differently :

[A] djudicative facts are those to which the law is
applied in the process of adjudication. They are the
facts that normally go to the jury in a jury case.
. . . Legislative facts are the facts which help the
tribunal determine the content of law and of policy
and help the tribunal to exercise its judgment or

re in determining what course of action to
e.

Id.® Thus, legislative facts are crucial to the prediction

* See Davis, Judicial Notice, 55 CoLum. L. REV. 945, 952-
59 (1955) ; Davis, An Approach to Problems of Evidence in
ri “wo Process, 55 Harv. L. REV. 364, 404-07

The distinction between legislative and adjudicative facts
has been widely accepted both within and without this cir-

A-19

of future events and to the evaluation of certain risks,
both of which are inherent in administrative policymak-
ing.

The case law demonstrates that the factual component
of generalized rulemaking cannot be severed from the
pure policy aspects of the rule.** FCC v. National Citi-
zens Committee for Broadcasting, 436 U.S. 775 (1978),
is illustrative. There, the Supreme Court reviewed the
Federal Communication Commission’s decision to order
prospective divestiture in cases of newspaper-television
cross-ownership. The agency had based its decision on
an assessment of the relevant market conditions. The
Court, upholding the administrative action, stated that
“complete factual support in the record for the [Federal
Communication] Commission’s judgment or prediction is
not possible or required; ‘a forecast of the direction in
which future public interest lies necessarily involves de-
ductions based on the expert knowledge of the agency.’ ”
Id. at 814 (quoting FPC v. Transcontinental Gas Pipe

cuit. See, e.g., Drummond v. Fulton County Dep’t of Family
& Children’s Servs., 563 F.2d 1200, 1210 (5th Cir. 1977) (en
banc) ; Alaska Airlines, Inc. v. CAB, 545 F.2d 194, 200 (D.C.
Cir. 1976) ; Zamora v. Immigration & Naturalization Serv.,
534 F.2d 1055, 1062 & n4 (2d Cir. 1976); Independent
Bankers Ass’n v. Federal Reserve Sys., 516 F.2d 1206, 1219-
22 (D.C. Cir. 1975) ; Washington Util. & Transp. Comm’n v.
FCC, 518 F.2d 1142, 1165 (9th Cir.), cert. denied, 423 U.S.
886 (1975); American Bancorporation v. Federal Reserve
Sys., 509 F.2d 29, 36-87 (8th Cir. 1974) ; Thompson v. Wash-
ington, 497 F.2d 626, 688 n.4 (D.C. Cir. 1973) ; SEC v. Frank,
888 F.2d 486, 491-92 (2d Cir. 1968) ; Marshall v. Sawyer, 365
F.2d 105, 111 (9th Cir. 1966) ; Dayco Corp. v. FTC, 362 F.2d
180, 186 (6th Cir. 1966); American Airlines, Inc. v. CAB,
859 F.2d 624, 688 (D.C. Cir. 1966) (en banc).

21 See also Ethyl Corp. v. EPA, 541 F.2d 1, 37-38, 51 n.112
(D.C. Cir.) (en banc), cert. denied, 426 U.S. 941 (1976) ;
Industrial Union Dep’t, AFL-CIO v. Hodgson, 499 F.2d 467,
475 (D.C. Cir. 1974).

A-20

Line Corp., 365 U.S. 1, 29 (1961)). See American Air-
lines, Inc. v. CAB, 359 F.2d 624 (D.C. Cir. 1966) (en
banc) .”

Because legislative facts combine empirical observation
with application of administrative expertise to reach gen-
eralized conclusions, they need not be developed through
evidentiary hearings. See American Airlines, Inc. v.
CAB, 359 F.2d at 632-33.% To the contrary, however,
“(where adjudicative, rather than legislative, facts are
involved, the parties must be afforded a hearing to allow
them an opportunity to meet and to present evidence.”
Alaska Airlines, Inc. v. CAB, 545 F.2d 194, 200 (D.C.
Cir. 1976) (footnote omitted). This distinction has been
established in judicial, as well as administrative, proc-
esses,

22In American Airlines, we reviewed a Civil Aeronautics
Board (Board) decision that allowed all-cargo airlines—
but not passenger airlines—to offer reserved cargo space at
reduced rates. The Board had designed the reserved space
service in an effort to increase the commercial use of air-
lines. The Board feared that the success of the program would
be threatened, and the financial strength of all-cargo airlines
weakened, if passenger airlines were to offer the service as
well. Further, the Board assumed that the financial effect of
the new program on all-passenger airlines would not be sig-
nificant. 359 F.2d at 626-27. The court deemed this last
finding a “ ‘legislative’” fact and rejected an attack on the
Board’s position explaining: “It is the kind of issue involving
expert opinions and forecasts, which cannot be decisively
resolved by testimony. It is the kind of issue where a month
of experience will be worth a year of hearings.” Jd. at 633.

23 See also Independent Bankers Ass’n v. Federal Reserve
Sys., 516 F.2d 1206, 1219-22 (D.C. Cir. 1975). See generally
Zamora v. Immigration & Naturalization Serv., 534 F.2d
1055, 1062 (2d Cir. 1976).

*% The Advisory Committee for the Federal Rules of Evi-
dence embraced the general rule that legislative facts need
not be developed through evidentiary hearings. Rule 201

A-21

Evidentiary hearings, although nof necessary to deter-
mine legislative facts, nevertheless may be helpful in
certain circumstances. For example, Congress, when it
enacted the Magnuson-Moss Act, recognized that special
circumstances might warrant the use of evidentiary pro-
ceedings in determining legislative facts. Under section

of the Federal Rules of Evidence governs judicial notice of
adjudicative facts. No evidentiary rule refers to judicial
notice of legislative facts because, as the Advisory Com-
mittee noted, “any limitation in the form of indisputability,
any formal requirements of notice other than those already
inherent in affording opportunity to hear and be heard and
exchanging briefs, and any requirement of formal findings
at any level” are inappropriate to judicial access to legislative
facts. Fep. R. Evi. 201 note.

Courts consistently have considered legislative facts that
were not the product of trial-type proceedings. In Muller v.
Oregon, 208 U.S. 412, 421-22 (1908), for example, the Su-
preme Court took “judicial cognizance of all matters of gen-
eral knowledge” in upholding a state law that prohibited
women from working more than ten hours a day in a laundry.
The Court principally relied upon a brief, filed by Louis
Brandeis, that set forth support for the propor'tion that long
working hours were physically dangerous .. women. For
other examples of judicial notice of legislative fact, see Paris
Adult Theatre I v. Slaton, 413 U.S. 49, 68 (1978) (“a sensi-
tive, key relationship of human existence, central to family
life, community welfare, and the development of the human
personality, can be debased and distorted by crass commercial
exploitation of sex”) ; Frontiero v. Richardson, 411 U.S. 677,
686 (1973) (“women still face pervasive, although at times .
more subtle, discrimination in our educational institutions, in
the job market and, perhaps most conspicuously, in the politi-
cal arena’’) ; Javins v. First Nat’] Realty Corp., 428 F.2d 1071,
1078-80 (D.C. Cir.) (“Tenants have very little leverage to
enforce demands for better housing. . . . The increasingly
severe shortage of adequate housing further increases the
landlord’s bargaining power and escalates the need for main-
taining and improving the existing stock.”) (footnote
omitted), cert. denied, 400 U.S. 925 (1970).

A-22

18(c) (1) (B)** and section 18(c) (2) (B),** the Commis-
sion must conduct a hearing, with a limited right of
cross-examination, when it resolves disputed issues of
material fact. The legislative history of the Magnuson-
Moss Act states that “(t]he only disputed issues of mate-
rial fact to be determined for resolution by the Commis-
sion are those issues characterized as issues of specific
fact in contrast to legislative fact.” H.R. REP. No. 93-
1606, 98d Cong., 2d Sess. 33 (1974) (Conference Report).

Although neither the Conference Report nor subsequent
congressional debate amplify the term “specific fact,” its
genesis can be traced to a recommendation of the Admin-
istrative Conference of the United States (ACUS).?

*5 Section 18(c) (1) (B) provides that

an interested person is entitled . . . if the Commission
determines that there are disputed issues of material fact
it is necessary to resolve, to present rebuttal submissions
and to conduct (or have conducted under paragraph
(2) (B)) such cross-examination of persons as the Com-
mission determines (i) to be appropriate, and (ii) to be
required for a full and true disclosure with respect to
such issues.

15 U.S.C. § 57a(c) (1) (B).

6 Section 18(c) (2) (B) provides that the Commission may
prescribe rules that include

requirements that any cross-examination to which a per-

son may be entitled under paragraph (1) be conducted

by the Commission on behalf of that person in such

manner as the Commission determines (i) to be ap-

propriate, and (ii) to be required for a full and true

disclosure with respect to disputed issues of material fact.
15 U.S.C. § 57a(c) (2) (B).

** The Administrative Conference of the United States
(ACUS) is empowere! to study administrative procedure
and to make recommendations about administrative pro-
cedure to the President, the Congress, or the Judicial Confer-
ence of the United States. 5 U.S.C. §574(1) (1976). Congress
specifically asked ACUS to study and to evaluate the pro-

A-23

rior to congressional action on the Magnuson-Moss Act,
ACUS alan ta Recommendation No. 72-5, which sug-
gested that Congress should not require _trial-type pro-
cedures “for making rules of general applicability, except
that it may sometimes appropriately require such pro-
cedures for resolving issues of specific fact.” 1 C.F.R.
§ 305.72-5 (1974). In a letter dated July 27, 1973, then-
ACUS Chairman Antonin Scalia answered Congressman
Moss’s request for a definition of the term “specific fact”:

Conference Recommendation 72-5 is addressed ex-
clusively to agency rulemaking of general applica-
bility. In such a proceeding, almost by definition,
adjudicative facts are not at issue, and the agency
should ordinarily be free to, and ordinarily would,
proceed by the route of written comments, supple-
mented, perhaps, by a legislative-type hearing. Yet
there may arise occasionally in such rulemaking pro-
ceedings factual issues which, though not adjudica-
tive, nevertheless justify exploration in a trial-type
format—because they are sufficiently narrow in focus
and sufficiently material to the outcome of the pro-
ceeding to make it reasonable and useful for the
agency to resort to trial-type procedure to resolve
them. These are what the Recommendation refers
to as issues of specific fact.”

A review of this and subsequent ACUS correspondence
demonstrates that the term “specific fact” refers to a
category of legislative fact, the resolution of which may
be aided by the type of adversarial procedures inherent
in an evidentiary proceeding with limited cross-examina-
tion. See Citizens for Allegan County v. FPC, 414 F.2d

edures of § 18. See Magnuson-Moss Act, Pub. L. No. 93-637,
§ 202(d), A Stat. 2198 (1975), as amended by Act of Nov. 1,
1978, Pub. L. No. 95-558, 92 Stat. 2130, reprinted in 15
‘U.S.C.A. § 57a note (West Supp. 1979).

28 Appellants’ Supplemental Memorandum, Attachment 8,
2.

A-24

1125, 1129 (D.C. Cir. 1969). Nothing in the legislative
history or background of section 18 suggests, however,
that Congress believed that the use of evidentiary hear-
ings transformed the nature of the proceedings from
rulemaking to adjudication or altered the factual predi-
cate of rulemaking from legislative to adjudicative fact.

29 While the House version of the Magnuson-Moss Act was
pending, Chairman Scalia commented upon the bill, which
at that time allowed cross-examination “as may be required
for a full and true disclosure of all disputed issues of material
fact.” See H.R. REP. No. 93-1107, 98d Cong., 2d Sess. 18
(1974). Scalia suggested that the proposed House provision
would be unworkable because it would routinely require use
of “a procedural technique designed for the resolution of
particularized factual disputes” in the formulation of gen-
erally applicable rulemaking. Appellants’ Supplemental Memo-
randum, Attachment 9, at 1. Scalia noted, however, that evi-
dentiary proceedings might be appropriate for the resolution
of “specific facts.” Jd. at 2. Chairman Scalia’s successor,
Robert Anthony, repeated these views in a subsequent letter
to Congressman Staggers, a member of the Conference Com-
Te Appellants’ Supplemental Memorandum, Attachment

The Conference Committee changed §18 to allow cross-
examination if there “are disputed issues of material fact,
and ... it is necessary to resolve such issues.” See H.R.
REP. No. 93-1606, supra note 19, at 33. As we previously
noted, the Conference Report defined material issues of dis-
puted fact as specific fact. See pp. 23-24 supra. After the final
version of the Magnuson-Moss Act passed both houses of
Congress, but prior to presidential action, the Office of
Management and Budget requested ACUS’s comments on
the bill. ACUS Executive Secretary Richard K. Berg stated:

If the courts look to the Conference report as an authori-
tative interpretation of the statutory phrase “disputed
issues of fact,” the problem. of the Commission bogging
down in excessive trial-type procedures is greatly reduced.
Since consideration of many, if not most proposed rules
of general applicability involve exclusively questions
of legislative fact, the Commission would often be able to
dispense with cross-examination entirely.

Appellants’ Supplemental Memorandum, Attachment 11, at 2.

A-25

Accordingly, the appellees’ contention that the Cinderella
standard must be applied to section 18 rulemaking be-
cause it invokes the same type of factual judgments as
Commission adjudication is simply incorrect.

D

Our conclusion that neither the procedures nor the
factual predicate of section 18 rulemaking converts it
into adjudication is supported by United States v. Florida
East Coast Railway, 410 U.S. 224 (1973). In that
case, the Supreme Court held, over the protests of two
dissenting Justices, that an Interstate Commerce Com-
mission ratemaking proceeding was rulemaking. The
dissent maintained that the rate order was “ad)udicatory
in the sense that [it] determine[d] the measure of finan-
cial responsibility of one road for its use of the rolling
stock of another road.” Id. at 252 (Douglas, J., joined
by Stewart, J., dissenting). The dissent emphasized that
the agency decision was based on “evidential facts,” id.
at 254, and that it could “have devastating effects on a
particular [railroad] line,” id. at 256. Nevertheless, the
Court found that the proceeding was rulemaking because
the agency final order was applicable to all common car-
riers rather than any particular railroad. The Court
explained that the agency had predicated its decision on
“factual inferences . . . used in the formulation of a
basically legislative-type judgment, for prospective appli-
cation only, rather than in adjudicating a particular
set of facts.” Id. at 246.

The same analysis applies to section 18 rulemaking.
A section 18 proceeding is directed to all members of an
affected industry and is based on legislative fact. Even
when evidentiary procedures are employed in the formu-
lation of specific fact, the product of those procedures is
“used in the formulation of a basically legislative-type
judgment.” Jd. Although we recognize that the line

A-26

between rulemaking and adjudication “may not always
be a bright one,” id. at 245, we have no doubt that sec-
tion 18 proceedings fall clearly on the rulemaking side
of the “recognized distinction in administrative law be-
tween proceedings for the purpose of promulgating policy-
type rules . . . on one hand, and proceedings designed to
adjudicate disputed facts in particular cases on the
other.” Jd. Accordingly, we now decide the standard of
disqualification applicable in a section 18 rulemaking
proceeding.
IV

A

Had Congress amended section 5 of the FTC Act to
declare certain types of children’s advertising unfair or
deceptive, we would barely pause to consider a due
process challenge. No court to our knowledge has im-
posed procedural requirements upon a legislature before
it may act. Indeed, any suggestion that congressmen may
not prejudge factual and policy issues is fanciful. A
legislator must have the ability to exchange views with
constituents and to suggest public policy that is depend:
ent upon factual assumptions. Individual interests im-
pinged upon by the legislative process are protected, as
Justice Holmes wrote, “in the only way that they can
be in a complex society, by [the individual’s] power,
immediate or remote, over those who make the rule.”
Bi-Metallic Investment Co. v. State Board of Equaliza-
tion, 239 U.S. 441, 445 (1915).

Congress chose, however, to delegate its power to pro-
scribe unfair or deceptive acts or practices to the Com-
mission because “there were too many unfair practices
for it to define.” S. REP. No. 597, 63d Cong., 2d Sess.
13 (1914). In determining the due process standards

%© Rulemaking under the APA similarly embodies the dele-

gation of legislative authority to administrative agencies.
During debate preceding passage of the APA, Representative

A-27

applicable in a section 18 proceeding, we are guided by
its nature as rulemaking." When a proceeding is classi-
fied as rulemaking, due process ordinarily does not de-
mand procedures more rigorous than those provided by
Congress. See Vermont Yankee Nuclear Power Corp. v.
NRDC, 435 U.S. 519, 524 & n.1, 542 & n.16 (1978).
Congress is under no requirement to hold an evidentiary
hearing prior to its adoption of legislation, and “Con-
gress need not make that requirement when it delegates
the task to an administrative agency.” Bowles v. Willing-
ham, 321 U.S. 503, 519 (1944) (citing Bi-Metallic In-
vestment Co. v. State Board of Equalization, 239 US.
441 (1915)). Accordingly, we must apply a disqualifica-
tion standard that is consistent with the structure and
purposes of section 18.

Congress regarded the authority to promulgate rules
pursuant to section 18 as an “important power by which
the Commission can fairly and efficiently pursue its im-
portant statutory mission.” H.R. Rep. No. 93-1606,

Walters, chairman of the subcommittee that reported ; the
APA to the House, see 92 Conc. REc. 5655 (1946), explained

that rulemaking encompasses

the legislative functions of administrative agencies, where
they issue general or particular regulations which in
form or effect are like the statutes of the Congress. tee
Congress—if it had the time, the staff, and the organiza-
tion—might itself prescribe these things. Because Con-
gress does not do so itself and yet desires that these things
be done, the legislative power to do them has been con-
ferred upon administrative officers or agencies.

Id. at 5648.
31 See Cafeteria & Restaurant Workers Local 478 v. Mc-
Elroy, 367 U.S. 886, 895 (1961) (“[t]he very nature of due

process negates any concept of inflexible procedures uni-
versally applicable to every imaginable situation”).

A-28

supra at 31. Through rulemaking, the Commission may
allocate resources more efficiently, act with greater speed,
and give specific notice to industries of the scope of sec-
tion 5. See National Petroleum Refiners Association v.
FTC, 482 F.2d 672, 690-91 (D.C. Cir. 1973), cert. denied,
415 U.S. 951 (1974).% More important, rulemaking

*2 The Conference Report explained that “ [b]ecause the
prohibition of section 5 of the Act is so broad, trade regula-
tion rules are needed to define with specificity conduct that
violates the statute and to establish requirements to prevent

unlawful conduct.” H.R. REP. No. 93-1606, supra note 19, at
31.

’* Two commentators have explained the practical signifi-
cance of the Commission’s power to adopt legislative rules:

Ordinarily, when the FTC encounters a business practice
it considers deceptive, it issues a complaint against the
responsible company. If the recipient is not prepared to
change its practices, the matter is set for a trial-type
hearing at wl ich the Commission bears the burden of
showing that the respondent’s practices have deceived,
or are likely to deceive, a substantial number of pur-
chasers. Counsel for the Commission customarily must
introduce evidence sufficient to support the complaint’s
theory of deception. In the Petroleum Refiners context,
this would mean that Commission counsel would attempt
to show the wide range of octane levels among marketed
gasolines, general consumer ignorance of the ratings of
specific brands, the waste of purchasing more octane
than one’s car engine requires, and, probably, the ten-
dency of consumers, in the absence of information, to
purchase more octane than their cars require. On each
of these issues the respondent would be entitled to pre-
sent evidence and cross-examine witnesses. Following
the evidentiary hearing the Commission would make find-
ings of fact and decide whether the facts found demon-
strated a violation. If the Commission concluded that
they did, its decision would be subject to limited court
review. Probably the most important feature of this
process, from the respondent’s viewpoint, is the assur-
ance of an opportunity to present his own evidence and

\

A-29

i nati i that
allows an agency to gather information and views
might be irrelevant to the narrowly focused concerns of
adjudication:

ilizing rule-making procedures opens up the
eee sntter teaaiatled to a broad range
of criticisms, advice and data that is ordinarily less
likely to be forthcoming in adjudication. Moreover,
the availability of notice before promulgation and
wide public participation in rule-making avoids the
problem of singling out a single defendant among a
group of competitors for initial imposition of a new
and inevitably costly legal obligation.

Id. at 683.

In determining the type of rulemaking procedures to
be employed by the Commission, Congress sought ‘to
avoid rigid or cumbersome procedures that could involve
undue costs and delay.” H.R. REP. No. 93-1606, supra

cross-examine adverse witnesses on the central factual
issues in the case.

What procedure may the Commission follow now that
its aotharke to adopt the octane-posting rule has been
upheld? The basic procedural steps remain —
unchanged, but the issues to be litigated are narrow
significantly. If any gasoline distributors fail to comply
with the rule, the Commission must initiate the com-
plaint, hearing, decision, ned court Scrat gues pre-
ivously outlined against one. How L
the Commission’s rule is valid, it need only show that the
respondent has failed to comply with the rule—not that
his omission of octane ratings is deceptive under § 5.
The Commission will have established the necessary fac-
tual predicate for its judgment—that such omission is
deceptive—in the original rulemaking proceeding. The
respondent may of course present evidence and cross-
examine on the issue of whether the required postings
were made, but he will not be allowed to relitigate the
factual premises underlying the Commission’s rule.

. MasHaw & R. Meret, THE AMERICAN PuBLIC LAW
E..- 247-48 (1975). See United States v. Storer Broadcast-
ing Co., 851 U.S. 192, 201-08 (1956).

A-30

at 33. To this end, Congress gave the Commission auth-
ority to limit rebuttal and cross-examination. In so
acting, Congress heeded the advice of ACUS, which, when
asked to comment upon the House proposal, warned that
requiring “trial-type procedures ... [in] rulemaking of
general applicability [may] produce a virtual paralysis
of the administrative process.” *

Although Congress refused to subject section 18 proceed-
ings to formal rulemaking requirements, it did order use
of procedures not required in informal rulemaking under
the APA.* Congress intended these additional proceed-

* Appellants’ Supplemental Memorandum, Attachment 11,
at 2. Then-Chairman Robert Anthony, in a letter to Congress-
man Staggers, explained:

The Food and Drug Administration is required to use
trial-type techniques for much of its general rulemaking
pertaining to standards for food products. No proceeding
subject to this requirement has been completed in less
than two years; two have taken more than ten years;
a hearing transcript of over 7,700 pages has been devoted
exclusively to the question whether peanut butter should
consist of 8714 percent or 90 percent peanuts.
Id.

Many recent commentators have echoed ACUS’s view that
full use of formal rulemaking provisions unnecessarily hamp-
ers the administrative process. See, e.g., 1 K. DAVIS, supra
note 18, §6:8; G. ROBINSON & E. GELLHORN, THE ADMINIS-
TRATIVE PROCESS 542 n.47 (1974) ; Hamilton, Rulemaking on
a Record by the Food and Drug Administration, 50 Tex. L.
REV. 1132, 1153-56 (1972).

35 The requirements imposed by § 18 that are not mandated
by § 553 of the APA include the following:

(1) The Commission must publish a “notice of proposed
rulemaking stating with particularity the reason for the
proposed rule.” 15 U.S.C. §57a(b) (1). Section 553(b) re-
quires issuance of a “[g]eneral notice of proposed rule mak-
ing” with certain exceptions. 5 U.S.C. § 553(b).

(2) The Commission must allow public comment and must

A-31

“make all such submissions publicly available.” 15 U.S.C.
§ 57(a) (2). Section 553 does not have an analogous publica-
tion requirement. 5 U.S.C. § 553(b).

(3) The Commission must conduct an informal hearing at
which at interested person is entitled “to present his position
orally or by documentary submissions (or both).” 15 U.S.C.
§57a(c)(1)(A). If the Commission determines disputed
issues of material fact exist, then such persons have such a
right to rebuttal and cross-examination as is (i) appropriate
and (ii) “required for a full and true disclosure with respect
to such issues.” 15 U.S.C. § 57a(ve) (1) (B). The Commission
is given the explicit, additional authority to “prescribe such
rules and make such rulings . . . as may tend to avoid unneces-
sary costs or delay,” including “reasonable time limits on each
interested person’s oral presentations.” 15 U.S.C. § 57a(c) (2).
Under appropriate conditions, the Commission may also limit
the representation of a group of persons who “have the same
or similar interests ... .” 15 U.S.C. § 57a(c) (8) (A).

Section 553(c) merely requires that “the agency shall give
interested persons an opportunity to participate in the rule
making through submission of written data, views, or argu-
ments with or without opportunity for oral presentation.” 5
U.S.C. § 553(c).

(4) The Commission must include in its statement of basis
and purpose that accompanies a rule:

(A) a statement as to the prevalence of the acts or
practices treated by the rule; (B) a statement as to
the manner and context in which such acts or practices
are unfair or deceptive; and (C) a statement as to the
economic effect of the rule, taking into account the effect
on small business and consumers.

15 U.S.C. §57a(d) (1). Section 553(c) requires an agency
only to issue a statement of basis and purpose. 5 U.S.C.
§ 553 (c).

(5) A reviewing court must set aside a Commission de-
cision “not suppoxted by substantial evidence in the rulemak-
ing record .. . taken as a whole.” 15 U.S.C. § 57a(e) (8) (A).
The rulemaking record consists of the rule, the statement of
basis and purpose, the transcript of the hearing, any written
submissions, and “any other information which the Commis-
sion considers relevant to [the] rule.” 15 U.S.C. § 57a(e)
(1) (B). A reviewing court must also set aside a rule when

A-32

ures “to improve the quality of information available to
the Commission,” H.R. Rep. No. 93-1606, supra at 33,
and to compel reexamination of the proposed rule in light
of the arguments adduced during the comment period.
Incorporation of this information into a rulemaking rec-
ord also allows a reviewing court to exercise meaningfu!
supervision over the Commission’s decision.

B

We never intended the Cinderella rule to apply to a
rulemaking procedure such as the one under review. The
Cinderella rule disqualifies a decisionmaker if “‘a dis-
interested observer may conclude that [he] has in some
measure adjudged the facts as well as the law of a parti-
cular case in advance of hearing it.’” 425 F.2d at 591
(quoting Gilligan, Will & Co. v. SEC, 267 F.2d at 469).
As we already have noted,” legislative facts adduced in
rulemaking partake of agency expertise, prediction, and
risk assessment. In Cinderella, the court was able to
cleave fact from law in deciding whether Chairman Dixon
had prejudged particular factual issues. In the rulemak-
ing context, however, the factual component of the policy
decision is not easily assessed in terms of an empirically
verifiable condition. Rulemaking involves the kind of

‘issues “where a month of experience will be worth a year
of hearings.” * Application of Cinderelia’s strict law-fact

the Commission’s rulings on rebuttal and cross-examination
have “precluded disclosure of disputed material facts...
necessary for fair determination by the Commission of the
rulemaking proceeding taken as a whole.” 15 U.S.C. § 57a(e)
(3). A court reviewing rulemaking conducted pursuant to
§ 553 will set aside an agency decision that is arbitrary
or capricious or “without observance of procedure required
by law.” 5 U.S.C. § 702(2) (A), (D).

36 See pp. 19-21 supra.

** American Airlines, Inc. v. CAB, 359 F.2d 624, 683 (D.C.
Cir. 1966) (en banc).

A-33

dichotomy would necessarily limit the ability of adminis-
trators to discuss policy questions.

The legitimate functions of a policymaker, unlike an
adjudicator, demand interchange and discussion about
important issues. We must not impose judicial roles upon
administrators when they perform functions very dif-
ferent from those of judges. As Professor Glen O. Robin-
son, a former member of the Federal Communications
Commission, has commented:

Although members of agencies such as the FCC cer-
tainly do perform significant judicial functions in
deciding individual cases, they perform even more
tasks of a legislative or an executive character. When
the FCC, for example, promulgated regulations bar-
ring common ownership of local newspapers and
broadcast stations, it performed a legislative task,
pure and simple. In reaching the decision, the Com-
mission was neither bound by, nor expected to con-
form to, the confining procedures or standards of a
court. Why then should the decisionmakers be
stamped from a judicial cast? Insofar as the agency
is delegated broad legislative powers and responsi-
bilities, would it not be at least as appropriate to
measure agency members against standards used to
evaluate legislators? Such standards would place
agency members on a better standing with respect
to judges and would create an entirely new frame
of reference for assessing agency performance. The
supremacy of carefully reasoned principle—the sup-
posed ideal of judicial decision—necessarily would
yield to the dictates of political compromise and
expediency, which are the accepted hallmarks of
legislative action. Correspondingly, the standard for
evaluating the composition of the agencies would
shift from an emphasis on professional training to
an emphasis on representativeness.

A-34

Robinson, The Federal Communications Commission: An
Essay on Regulatory Watchdogs, 64 Va. L. REv. 169,
185-86 (1978) (footnotes omitted) .*

The Cinderella view of a neutral and detached adjudi-
cator is simply an inapposite role model for an adminis-
trator who must translate broad statutory commands
into concrete social policies. If an agency official is to

88 See 1 SENATE COMM. ON Gov’T OPERATIONS, 95TH
CONG., 1sT SESs., STUDY ON FEDERAL REGULATIONS 156-61
(1978) (recommending that regulatory philosophy be a prin-
cipal factor in selection of administrators). As one commen-
tator has observed in a slightly different context:

Agencies are created to maintain or to restructure cer-
tain areas of private activity in light of expressed statu-
tory policies. Thus, unlike courts, agencies should be
positive actors, not passive adjudicators.

. . . [A]n agency should not apologize for being pre-
disposed to implementing the goals that Congress has set
for it. To call such an attitude “bias” . . . misses this
central point.

Pedersen, The Decline of Separation of Functions in Regula-
tory Agencies, 64 Va. L. REV. 991, 994 (1978).

*° The APA provisions governing adjudication accordingly
impose limitations on administrators not placed on rule-
makers. Section 554(d) prohibits ex parte contacts between
prosecutors and administrators within the same agency. 5
U.S.C. § 554(d). This separation-of-functions provision does
not apply in either informal or formal rulemaking. See Her-
cules, Inc. v. EPA, 598 F.2d 91, 124-25 (D.C. Cir. 1978). The
ATTORNEY GENERAL’S MANUAL ON THE ADMINISTRATIVE PRO-
CEDURE ACT 15 (1947) attributes this distinction to the dif-
ference between the roles of rulemakers and adjudicators:

Even in formal rule making proceedings subject to sec-
tions [556 and 557], the Act leaves the hearing officer
entirely free to consult with any other member of the
agency’s staff. In fact, the intermediate decision may be
made by the agency itself or by a responsible officer other
than the hearing officer. This reflects the fact that the
purpose of the rule making proceeding is to determine

A-35

be effective he must engage in debate and discussion
about the policy matters before him. As this court has
recognized before, “informal contacts between agencies
and the public are the ‘bread and butter’ of the process
of administration.” Home Box Office, Inc. v. FCC, 567
F.2d 9, 57 (D.C. Cir.) (per curiam), cert. denied, 434
U.S. 829 (1977).”

licy. Policy is not made in Federal agencies by indi-
vidual elcid examiners; rather it is formulated by the
agency heads relying heavily upon the expert staffs which
have been hired for that purpose. And so the Act recog-
nizes that in rule making the intermediate decisions will
be more useful to the parties in advising them of the real
issues in the case if such decisions reflect the views of
the agency heads or of their responsible officers who
assist them in determining policy. In sharp contrast is
the procedure required in cases of adjudication subject to
section [554(d)]. There the hearing officer who presides
at the hearing and observes the witnesses must personally
prepare the initial or recommended decision required by
section [557]. Also, in such adjudicatory cases, the agency
officers who performed investigative or prosecuting func-
tions in that or a factually related case may not partici-
pate in the making of decisions. These requirements re-
flect the characteristics of adjudication ....

- See generally Pedersen, supra note 38, at 996-1001.

“In Home Box Office, a panel of this court ruled that
“communications which are received [by an agency] prior to
issuance of a formal notice of rulemaking do not, in general,
have to be put in a public file,” although discussions following
publication of a notice of rulemaking must be so filed. 567
F.2d at 57. Later, another panel questioned the wisdom of
even this restriction on ex parte contacts in rulemaking. See
Action for Children’s Television v. FCC, 646 F.2d 458 (D.C.
Cir. 1977). Two other cases have faced similar situations and
reached differing conclusions. Compare United States Lines,
Inc. v. FMC,. 584 F.2d 619, 5686-48 (D.C. Civ. 1978), with
Hercules, Inc. v. EPA, 598 F.2d 91, 128-28 (1).C. Cir. 1978).
We need not reach the question of whether /Jome Box Office

A-36

Our view is consistent with two Supreme Court opinions
that detail prejudgment standards for administrators who
speak out on public policy matters. In Hortonville Joint
School District No. 1 v. Hortonville Education Associa-
tion, 426 U.S. 482 (1976), the Court held that the due
process clause did not bar a local school board, which was
negotiating renewal of a collective-bargaining agreement
with teachers, from dismissing teachers who were en-
gaged in an illegal strike following failure of the contract
negotiations.** The Court stated that a decisionmaker
need not be disqualified “simply because he has taken a
position, even in public, on a policy issue related to the
dispute, in the absence of a showing that he is not ‘cap-
able of judging a particular controversy fairly on the
basis of its own circumstances,’” Id. at 498 (quoting
United States v. Morgan, 318 U.S. 409, 421 (1941) ).

is indeed the law of this circuit, for in this case, Chairman
Pertschuk’s remarks preceded the Commission’s notice of
proposed rulemaking, see pp. 5-6 supra, 44 in;ra, and, as just

noted, Home Boz Office by its own terms does not apply to
this situatioz.

*! The Court gave three reasons why the school board could
not be disqualified from deciding whether teachers partici-
pating in a strike prohibited by law should be discharged:
(1) the school board did not have a financial or personal
stake in the decision, see, e.g., Ward v. Village of Monroe-
ville, 409 U.S. 57 (1972); Mayberry v. Pennsylvania, 400
U.S. 455 (1971); (2) in the absence of a showing that a
decisionmaker is incapable of judging a particular contro-
versy fairly, he will not be disqualified because of “[m]ere
familiarity with the facts of a case” or his having taken a
position on a policy issue; and (3) the legitimate government
interest in preserving the school board as the creator of local
policy would be thwarted if familiarity with the factual cir-

cumstances of the contract negotiations forced disqualifica-
tion. 426 U.S. at 491-96.

A-37

The Court’s decision in FTC v. Cement Institute, 333
U.S. 688 (1948), is likewise instructive. There, a trade
association urged that the Commission be disqualified
from deciding whether a trade practice violated the anti-
trust laws because its membeis previously had endorsed
the view before both the Congress and the President that
the practice was the equivalent of illegal price-fixing.
The Court rejected the trade association’s claim because,
inter alia, the earlier statements “did not necessarily
mean that the minds of [Commission] members were
irrevocably closed.” Jd. at 701.“

A similar standard is applicable to section 18 rule-
making. Section 18 outlines a process by which the Com-
mission must form a preliminary view on a proposed
rule, must hear comment from concerned parties, and in
some cases, must hold trial-type proceedings before de-
ciding whether to promulgate a rule. There is no doubt
that the purpose of section 18 would be frustrated if a
Commission member had reached an irrevocable decision
on whether a rule should be issued prior to the Commis-
sion’s final action. At the same time, the Commission
could not exercise its broad policymaking power under
section 18 if administrators were unable to discuss the
wisdom of various regulatory positions. That discussion
necessarily involves the broad, general characterizations
of reality that we label legislative fact.

Accordingly, a Commissioner should be disqualified
only when there has been a clear and convincing showing
that the agency member has an unalterably closed mind
on matters critical to the disposition of the proceeding.
The “clear and convincing” test is necessary to rebut the

*2 As a separate ground, the Court noted that disqualifi-
cation of the entire Commission would “immunize” the trade
association from regulation under the Federal Trade Commis-
sion Act. 883 U.S. at 701-02.

A-38

presumption of administrative regularity. See, e.g., With-
row v. Larkin, 421 U.S. 35, 55 (1975) ; Hercules, Inc. v.
EPA, 598 F.2d 91, 128 (D.C. Cir. 1978). The “unalter-
ably closed mind” test is necessary to permit rulemakers
to carry out their proper policy-based functions while
disqualifying those unable to consider meaningfully a
section 18 hearing.*
V

We view the statements offered as grounds for dis-
qualification as a whole to discern whether they evidence
a clear and convincing showing that Chairman Pertschuk
has an unalterably closed mind on matters critical to the
children’s television proceeding. The most important evi-
dence submitted by the appellees is a speech Chairman
Pertschuk delivered in November 1977 to the ACT Re-

search Conference. The other materials generally derive
from this speech.“

The speech focused on whether section 5 of the FTC
Act, which prohibits “unfair or deceptive acts or prac-
tices,” may be applicable to children’s advertising. Perts-
chuk first asserted that children have only a minimal
understanding of the nature of television commercials
and are unable to distinguish between advertising and
other forms of information. He quoted a finding by the
Federal Communications Commission that “many chil-
dren do not have the sophistication or experience needed

“8 See generally Carolina Environmental Study Group v.
United States, 510 F.2d 796, 801 (D.C. Cir. 1975) (due process
challenge to Atomic Energy Commission’s order allowing
construction of nuclear power plants on basis of agency’s
“promotional bias” favoring use of atomic energy rejected
because “[a]gencies are required to consider in good faith,
and objectively evaluate arguments presented to them ; agency
officials, however, need not be subjectively impartial”).

See note 56 infra.

A-39

to understand that advertising is not just another form
of informational programming.” “

Pertschuk then set out relevant legal principles. He
quoted a Supreme Court opinion that gave the Commis-
sion wide-ranging discretion to declare a trade practice
unfair.“* He noted the legal recognition of children’s lack
of evaluative capacity and the concomitant protection for
children built into commercial and tort law. Among the
doctrines he mentioned were the unenforceability of a
contract signed by a child, the prohibition against selling
children otherwise legal goods, such as liquor and ciga-
rettes, the bar against children leaving school or driving
a car, and the “attractive nuisance” rule of liability,
which holds persons who maintain conditions on their
property that are likely to entice small children responsible
for harm to those children.

Pertschuk continued by discussing the effects of adver-
tising on children. He explained that “children are not
adults in miniature. Instead, they bring to advertising
a special perspective and sensibility—a credulousness
that comes from inexperience—which advertisers ex-
ploit.” ** He stated that sugared foods may be harmful
to children and that children may not understand the
health problems, like tooth decay, that can result from
excessive consumption of sugared products: “Children
lack the judgment and experience to see that something
that looks good to them in the short run can hurt them
in the long run.” ** He suggested that children’s adver-
tising might be deceptive because it highlights the gen-

45 A. at 89.

«©FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244
(1972).

“7 A. at 44.
48 Id. at 42.

A-40

eral desirability of sugared foods without providing
material information on the health risks.

Finally, Pertschuk noted that any action taken against
children’s advertising would bring opposition from af-
fected economic interests. He said that “[i]f the Com-
mission is to reach sound and reasoned judgments, it
must also hear from the parents, the teachers, the pedia-
tricians, the dentists, those health and education special-
ists on whom we rely for the advocacy of our children’s
best interest.” *® Pertschuk concluded by stating: “[Wle

must be rigorous and operi-minded in our analysis of both
law and fact.” ©

Chairman Pertschuk’s remarks, considered as a whole,
represent discussion, and perhaps advocacy, of the legal
theory that might support exercise of the Commission’s
jurisdiction over children’s advertising. The mere dis-
cussion of policy or advocacy on a legal question, how-
ever, is not sufficient to disqualify an administrator.

49 Td. at 46.
60 Id.

51 Even judges are free to decide cases involving policy
questions on which they previously have expressed a view.
Laird v. Tatum, 408 U.S. 1 (1972), is particularly illustrative.
In that case, the petitioners attacked on first amendment
grounds the constitutionality of the Army’s collection of in-
formation about public activities thought to have some po-.
tential for civil disorder. The Supreme Court held, by a 5-4
vote, that the jurisdiction of a federal court could not be in-
voked by “a complainant who alleges that the exercise of
his First Amnedment rights is being chilled by the mere
existence of a governmental investigative and data-gathering
activity that is alleged to be broader in scope than is reason-
ably necessary for the accomplishment of a valid govern-
mental purpose.” Jd. at 10.

Following the Court’s decision, the petitioners asked Justice
Rehnquist, who was a member of the majority, to recuse
himself, nunc pro tunc, on the basis of earlier statements he

A-41

had made on the constitutionality of governmental surveil-
lance. Justice Rehnquist, before his nomination and con-
firmation as an Associate Justice of the Supreme Court, had
testified before a Senate subcommittee as a representative
of the Justice Department. The hearings were called to
consider, inter alia, authority of the Executive Branch
to gather information. In the course of his testimony, Justice
Rehnquist concluded that domestic surveillance was consti-
tutional.

In a separate memorandum, Justice Rehnquist dismissed
the contention that he should disqualify himself because he
had expressed views contrary to the legal position of the
petitioner in Laird v. Tatum. He surveyed the actions of
Justices in this century and concluded that “none of the
former Justices of this Court since [enactment of the judicial
disqualification statute] have followed a practice of dis-
qualifying themselves in cases involving points of law with
respect to which they had expressed an opinion or formulated
policy prior to ascending to the bench.” Laird v. Tatum, 409
U.S. 824, 831 (1972) (memorandum of Rehnquist, J.). In-
deed, Justice Rehnquist suggested that

[i]t would not be merely unusual, but extraordinary, if
[Justices] had not at least given opinions as to con-
stitutional issues in their previous legal careers. Proof
that a Justice’s mind at the time he joined the Court was
a complete tabula rasa in the area of constitutional ad-
judication would be evidence of lack of qualification, not
lack of bias.
Id. at 835.

Justice Rehnquist’s opinion is in full accord with the
general principle that a federal judge will not be disquali-
fied pursuant to 28 U.S.C. § 147 or § 455 (1976) because of
prior expression of views on a legal question. See, ¢.g.,
Antonello v. Wunsch, 500 F.2d 1260, 1262 (10th Cir. 1974) ;

v. TVA, 484 F.2d 760, 765 (6th Cir. 1970) ; Knoll
v. Socony Mobil Oil Co., 369 F.2d 425, 430 (10th Cir. 1966) ;
Knapp v. Kinsey, 232 F.2d 458, 466 (6th Cir.), cert. denied,

A-42

To present legal and policy arguments, Pertschuk not
unnaturally employed the factual assumptions that under-
lie the rationale for Commission action. The simple fact
that the Chairman explored issues based on legal and
factual assumptions, however, did not necessarily bind
him to them forever. Rather, he remained free, both in
theory and in reality, to change his mind upon considera-
tion of the presentations made by those who would be
affected.

In outlining his legal theory of “unfairness,” Perts-
chuk suggested that children might be harmed by over-
consumption of sugared products and that they might
not be able to comprehend the purpose of advertising.
Insofar as these conclusions are ones of fact, they are
certainly of legislative facts. Neither conclusion bears
on the particular activities of any specific advertiser or
food manufacturer or makes reference to the health or
comprehension of any particular child. These conclusions
are broad and general, far removed from the narrow,

detailed facts that were at the heart of the Cinderella
case.°?

Together, the two conclusions tend to show that chil-
dren may be “injured” by the advertising of highly
sugared products. The Commission has stated that it
will consider three factors in deciding whether a trade
practice is unfair: whether the action is (1) offensive
to public policy as established by some legal doctrine,
(2) immoral, and (3) substantially injurious to con-

discuss policy questions and to take judicial notice of legis-
lative fact. See note 24 supra. Due process, which recog-
nizes a distinction between judges and rulemakers, allows
rulemakers greater freedom. See pp. 20-21, 27-80 supra.

52 In Cinderella, Chairman Dixon had referred specifically
to the adjudication pending before the Commission and had
prejudged precise factual issues. See pp. 138-14 supra.

A-43

sumers.** Chairman Pertschuk scarcely could have dis-
cussed the “unfairness” doctrine without assuming for
the purpose of discussion that some injury might result
from the trade practice in question.

We also note that Chairman Pertschuk made the chal-
lenged comments before the Commission adopted its notice
of proposed rulemaking. This court has never suggested
that the interchange between rulemaker and the public
should be limited prior to the initiation of agency action.™
The period before the Commission first decides to take
action on a perceived problem is, in fact, the best time
for a rulemaker to engage in dialogue with concerned
citizens. Discussion would be futile, of course, if the
administrator could not test his own views on different
audiences. Moreover, as we stated earlier,*> an expres-
sion of opinion prior to the issuance of a proposed rule-
making does not, without more, show that an agency
member cannot maintain an open mind during the hear-
ing stage of the proceeding.

Indeed, section 18 in effect requires the Commission
to formulate tentative judgments on suggested rules.
Before the Commission initiatec rulemaking proceedings,
it must “publish a notice of proposed rulemaking stating
with particularity the reason for the proposed rule prior
to the comment stage of the proceeding.” 15 U.S.C.
§ 57a(b). The Conference Committee on the Magnuson-

53 Statement of Basis and Purpose of Trade Regulation Rule
408, Unfair or Deceptive Advertising and Labeling of Ciga-
rettes in Relation to the Health Hazards of Smoking, 29 Fed.
Reg. 8355 (1964), quoted in FTC v. Sperry & Hutchinson
Co., 405 U.S. 288, 245 n.5 (1972). See Pitofsky, Beyond
Nader: Consumer Protection and the Regulation of Advertis-
ing, 90 Harv. L. REv. 661, 681-87 (1977).

5 See note 40 supra.
55 See pp. 41-48 supra.

A-44

Moss Act referred to the period following this notice as
one during which affected parties could “challenge the
factual assumptions on which the Commission is proceed-
ing and to show in what respect these assumptions are
erroneous.” H.R. REP. No. 93-1606, supra at 38. Con-
gress intended for the Commission to develop proposals
that subsequently would be published and discussed
openly. To perform this task intelligently necessarily
involves making tentative conclusions of fact, even if they
later are open to public challenge.

In sum, we hold that the materials adduced by the
appellees are insufficient to rebut the strong presumption
of administrative regularity.** The materials, as a whole,

°° A review of other materials relied upon by the appellees
supports our conclusion. As a group, they demonstrate only

that Chairman Pertschuk articulated the legal theory put
forth in the ACT speech:

(1) A Commission press release, dated J uly 20, 1977, stated
that Chairman Pertschuk had met with ACT representatives
and had suggested that children’s advertising might be unfair
without being deceptive because children “are a vulnerable
population that may require special protection from adver-
tisers.” A. at 33.

(2) Chairman Pertschuk was quoted, in a newspaper
column, as stating that “a 4 to 5-year-old child .. . may not
understand what advertising is about.” Jd. at 47.

(3) In an article published in Newsweek magazine, Chair-
man Pertschuk was quoted as saying that he was committed
to taking action on the problem of commercialization of
children and that “[a]dvertisers seize on the child’s trust
and exploit it as a weakness for their gain.” A. at 48.

(4) In an interview published in TV Guide, Chairman
Pertschuk stated that children are not sophisticated con-
sumers, noted that the Commission might have the power to
limit certain children’s advertising, and predicted that “[a]s
soon as the Commission proposes action” it will be involved
in a long fight with advertisers. A. at 50.

: (Continued]

A-45

86 [Continued]

In an article in the Wall Street Journal, two passages
Pi Chairman Pertschuk’s ACT speech were quoted. A. at
49. :
uring interview televised on the “Today Show,
conseee Pertechuk engaged in the following colloquy with a
viewer and interviewer Bob Abernathy: ae
AN LOVETT: Mr. Pertschuk, I'd like to know
dem being done about advertising on TV for children
and all the garbage that’s advertised for the kiddies.
PERTSCHUK: Well, I’m glad you asked the question.
It’s an area of prime concern to me and to the Commis-
sion itself. There’s a very basic question in our ao
and that is the question to which—the extent to whic
children are to be treated as commercial objects. One
advertiser in New York described advertising directed
to children as guided missiles, turning the g-vambee
into guided missiles through the heart of the paren
aan = Is it personal opinion that no

ABERNATHY: it your
television advertising, for instance, should be directed
at children?

PERTSCHUK: I have some serious doubt as to
whether any television advertising should be directed vat
a three or four or five year old, a preschooler. They’re
not competent to understand the nature of the message.
We've never treated children as commercial objects in
our society. And of course, print advertising only reaches
those who can read. But television advertising in the
home, directed to children, is a new phenomenon in our
society, and I think a troublesome one.

ABERNATHY: Would you like to see the FTC ban it
altogether?

PERTSCHUK: Not necessarily. But we've not ex-
cluded the possibility of bans on certain advertising _of
certain products to children.

The Trade Commission has not, as a body—you know,
there are four other commissioners who must address
this issue for the Commission to act—has not, as a body,
yet approached the question of the remedy for the evils

A-46

merely demonstrate that Pertschuk discussed a legal
theory by which the Commission could adopt a rule, if
circumstances warranted. The statements do not demon-
strate that Chairman Pertschuk is unwilling or unable
to consider rationally argument that a final rule is un-
necessary because children are either unharmed by
sugared products or are abie to understand advertising.
The appellees have failed to make a clear and convincing
showing that Chairman Pertschuk has an unalterably
closed mind on matters critical to the children’s television
proceeding.
VI

The appellees have a right to a fair and open proceed-
ing; that right includes access to an impartial decision-
maker. Impartial, however, does not mean uninformed,
unthinking, or inarticulate. The requirements of due
process clearly recognize the necessity for rulemakers to
formulate policy in a manner similar to legislative action.
The standard enunciated today will protect the purposes
of a section 18 proceeding, and, in so doing, will guaran-
tee the appellees a fair hearing.

we see in children’s advertising. We’ll do that next month.
A. at 31.

(7) In three letters dated the day after delivery of the ACT
speech, Chairman Pertschuk said that the speech set forth the

legal underpinings for Commission action against children’s
advertising. A. at 71-73.

(8) In a letter to Food and Drug Commissioner Donald
Kennedy, Chairman Pertschuk outlined the logical steps un-
derlying the legal theory that children’s advertising is unfair.
In particular, he noted that the Commission would have to
be able to demonstrate “that there is a substantial health

controversy regarding the health consequences of sugar.”
A. at 95.

None of these materials significantly adds to the legal
theory presented in the ACT speech, nor do they raise issues
of legislative fact not addressed therein.

A-47

We would eviscerate the proper evolution of policy-
making were we to disqualify every administrator who
has opinions on the correct course of his agency's future
action. Administrators, and even judges, may hold policy
views on questions of law prior to participating in a
proceeding. The factual basis for a rulemaking is so
closely intertwined with policy judgments that we would
obliterate rulemaking were we to equate a statement on
an issue of legislative fact with unconstitutional pre-
judgment. The importance and legitimacy of rulemaking
procedures are too well estabished to deny administrators
such a fundamental tool.

Finally, we eschew formulation of a disqualification
standard that impinges upon the political process. An
administrator’s presence within an agency reflects the
political judgment of the President and Senate. As Judge
Prettyman of this court aptly noted, a “Commission’s
view of what is best in the public interest may change
from time to time. Commissions themselves change, un-
derlying philosophies differ, and experience often dictates
changes.” Pinellas Broadcasting Co. v. FCC, 230 F.2d
204, 206 (D.C. Cir.), cert. denied, 350 U.S. 1007 (1956).
We are concerned that implementation of the Cinderella
standard in the rulemaking context would plunge courts
into the midst of political battles concerning the proper
formulation of administrative policy. We serve as guar-
antors of statutory and constitutional rights, but not as
arbiters of the political process. Accordingly, we will not
order the disqualification of a rulemaker absent the most
compelling proof that he is unable to carry out his duties
in a constitutionally permissible manner.

Reversed.

A-48

LEVENTHAL, Circuit Judge, concurring: I concur in
Judge Tamm’s opinion for the court. It makes important
contributions to our understanding of the issues. My
comments on the merits are to add the perspective that a
concurring opinion sometimes permits. On the jurisdic-
tional issues, I have additional views which in the end
I do not present for this case but set forth to govern
future proceedings.

A.

The ultimate test announced by Judge Tamm as to the
merits is that disqualification from a rulemaking pro-
ceeding results “only when there has been a clear and
convincing showing that the agency member has an un-
alterably closed mind on matters critical to the disposition
of the proceeding.” The test reflects a Supreme Court
ruling as to administrative agencies.’

It is not far removed from the test used in considering
challenges to those considered for the duty as jurors
quintessentially engaged in specific fact-finding. It is
similar to a standard articulated as to recusal of judges.*

The application of this test to agencies must take into
account important differences in function and functioning
between the agencies and court systems. In fulfilling the

1 FTC v. Cement Institute, 383 U.S. 683, 701 (1948) (Com-
mission’s expression of views).

* The test is whether “the juror can lay aside his impression
or opinion and render a verdict based on the evidence pre-
sented in court.” Dobbert v. Florida, 482 U.S. 292, 302
(1977) ; Murphy v. Florida, 421 U.S. 794, 800 (1975) ; Irvin
v. Dowd, 366 U.S. 717, 722-23 (1961); United States v.

Haldeman, 181 U.S.App.D.C. 254, 288, 559 F.2d 31, 60 (1977)
(en banc).

* United States v. Grinnell Corp., 384 U.S. 568, 588 (1966)

(“manifesting a closed mind on the merits,” as applied to
views expressed after hearing some evidence).

A-49

functions of applying or considering the validity of a
statute, or a government program, the judge endeavors to
put aside personal views as to the desirability of the law
or program, and he is not disqualified because he per-
sonally deems the program laudable‘ or objectionable.’
In the case of agency rulemaking, however, the decision-
making officials are appointed precisely to implement
statutory programs, and with the expectation that they
have a personal disposition to enforce them vigilantly
and effectively. They work with a combination rather
than a separation of functions, in legislative modes, and
take action on the basis of information coming from
many sources, even though that provides a mindset before
a proceeding is begun, subject to reconsideration in the
light of the proceeding.

Judge Tamm’s opinion for the court ventilates im-
portant distinctions between rulemaking and adjudication
and their consequences in terms of standards of dis-
qualification, and the differences between adjudicative
facts pertinent to specific parties and generalized legis-
lative facts, including predictions and underlying views
oa policy. As Judge Tamm notes, the differences gener-
ally identify differences in procedure required for their
determination.* The difference in nature of issues per-
sists, as Judge Tamm points out, even though some of
the tasks of rulemaking are carried out with adaptations
of adjudicative forms, whether this additional procedure

_ is adopted voluntarily by the agency, as has sometimes

been the case, or is required by court or legislation.

‘Eisler v. United States, 170 F.2d 278, 278 (D.C. Cir.
1948).

5 Idaho v. Freeman, No. 79-1097 (D. Idaho, Oct. 4, 1979)
(48 L.W. 2296).

¢ American Airlines, Inc. v. CAB, 359 F.2d 624 (D.C. Cir.
1966) (en banc).

A-50

The provisions of the Moss-Magnuson Act have been
widely recognized as in effect incorporating into statutory
law the approach identified in a number of decisions,
primarily decisions of this court. Those decisions set
forth the proposition that although rulemaking generally
proceeds merely upon the basis of written comment on a
proposal, some specific issues are of such a nature that
meaningful opportunity for comment requires additional
scope for presentation, perhaps by oral submission in the
form of a legislative hearing, perhaps by cross-examina-
tion in matters involving a specific factual issue where
meaningful comment requires a predicate of probing the
basis for the contrary views. The train of opinions in
this circuit runs from American Airlines, through Halm
v. Hardin, to International Harvester, which had the

highest visibility and became the focal point of discus-
sion.”

It is fair to say that in all of our opinions the assump-
tion was that particuar issues might require additional
procedures, if they were contested, but that the basic
framework of the rulemaking proceeding as one primarily
dependent on general policy formulation was unaffected
by the particular procedures. Of course, there remains
a requirement of fairness for those with authority to act
by rulemaking but the standards are not identical with
those pertinent for judicial-type decisionmaking in ad-
judicatory actions.

Consider, for example, the assertions of an agency
head that he discerns abuses that may require corrective
regulation. One can hypothesize beginning an adjudica-

7 American Airlines, Inc. v. CAB, 359 F.2d 624 (D.C. Cir.
1966) (en banc); Walter Holm & Co. v. Hardin, 449 F.2d
1009 (D.C. Cir. 1971) (Judges McGowan, Leventhal and

Van Pelt) ; International Harvester Co. v. Ruckelshaus, 478

F.2d 615 (D.C. Cir. 1973) (Judges Bazelon, Tamm and
Leventhal).

A-51

roceeding with an open mind, indeed a blank mind,
. ie rasa vdeeale of any previous knowledge of the
matter. In sharp contrast, one cannot even conceive of
an agency conducting a rulemaking proceeding unless it
had delved into the subject sufficiently to become con-
cerned that there was an evil or abuse that required
regulatory response. It would be the height of absurdity,
even a kind of abuse of administrative process, for an
agency to embroil interested parties in a rulemaking
proceeding, without some initial concern that there was
an abuse that needed remedying, a concern that would be
set forth in the accompanying statement of the purpose
of the proposed rule.

In its administrative setting an agency’s effort is not
limited to one type of activity. Investigation and policy-
making are integral to the total function just as much
as decisionmaking. It is appropriate and indeed manda-
tory for agency heads and staff to maintain contacts
with industry and consumer groups, trade associations
and press, congressmen of various persuasions, and to
present views in interviews, speeches, meetings, conven-
tions, and testimony. The agency gathers information
and perceptions in a myriad of ways and must use it for
a myriad of purposes.* With capacity and willingness to
reconsider there is no basis for disqualification.

8 Ash Grove Cement Co. v. FTC, 577 F.2d 1868, 1375-1376
(9th Cir. 1978) :

Information gathered by the Commission under its
broad investigatory powers can be used for a variety of
purposes, including promulgation of new rules, reporting
to Congress, disseminating economic knowledge to the

ublic, or, as here, to prepare an economic survey or re-
sole to enable the Commission to better administer the
statutes over which it has jurisdiction. In addition, fac-
tual material compiled by the agency may call its atten-
tion to situations which warrant an adjudicative enforce-
ment proceeding. . . . Indeed, one of the purposes of

A-52

The tests of disqualification cannot be applied iden-
tically for judges and agency heads, for reasons already
identified. Yet even judges are not disqualified merely
because they have previously announced their positions on
legal issues,® even as to announcements outside the course
of written decisions.’° Judicial disqualification cannot be
based on general frame of reference, attitudes or assump-
tions as to the processes of society.‘' And even a judge’s

industry investigations is to provide the agency with in-
creased expertise in administering the law by exposing it
to the factual background of relevant industries against
which to judge individual mergers and acquisitions.

Likewise, the fact that some of the Commissioners’
conclusions expressed in the Enforcement Policy were
mirrored in the complaint does not prove prejudgment.
The Enforcement Policy was openly cautious to phrase
its conclusions tentatively.

® FTC v. Cement Institute, 333 U.S. 688, 701 (1948) (Court
used judicial analogy in the course of holding that Commis-
sion’s expression of opinion on legality of a particular trade
practice did not disqualify it from passing upon the lawful-
ness of the practice in an adjudicatory proceeding).

0 Laird v. Tatum, 409 U.S. 824 (1972).

“The great tides and currents which engulf the rest of
men do not turn aside in their course, and pass the judges
by.” B. N. Cardozo, The Nature of the Judicial Process 167-
68 (1921). “[A] judge is not prevented from sitting because
he comes into every case with a background of general per-
sonal experiences and beliefs.” Jn re Union Leader Corp.,
292 F.2d 381, 388 (1st Cir. 1961). See In re J. P. Linahan,
Inc., 138 F.2d 650 (2d Cir. 1943), for Judge Frank’s wide-
ranging discussion, distinguishing between the need for dis-
interestedness in courts, as essential to democracy, and the
presence of preconceptions and attitudes which are inevitable.
The opinion urges self-scouting as to uniquely personal
prejudices. It concludes that a referee is not disqualified from

conducting a trial because he earlier came to a j
that was reversed. sa en's

[Continued]

A-53

public comment giving a general impression of a state
of facts does not present a rigidity against refinement
and reflection that disqualifies him from sitting in judg-
men on a particular fact issue.”

B.

I now turn to what I consider a jurisdictional problem.
In part it is addressed in part II of Judge Tamm’s
opinion, dealing with the doctrine of exhaustion of ad-
ministrative remedies. I concur in many of Judge Tamm’s
observations, and the court’s result. But my analysis is
somewhat different.

The jurisdictional problems that concern me are first,
whether, and under what circumstances, a Federal court
has jurisdiction of an action to halt ongoing proceedings
before an “agency” of the United States on the ground
that they reflect impermissible bias or prejudice, and
second, whether this can ever be done by a district court
that has no jurisdiction to review the agency’s final
actions.

The doctrine of exhaustion of administrative remedies,
which Judge Tamm discusses, is a judge-made prudential

11 [Continued]

See also Price v. Johnston, 125 F.2d 806, 811 (9th Cir.),
cert. denied, 316 U.S. 677 (1942), rejecting disqualification
under 28 U.S.C. § 25, when the allegations “do not indicate
a ‘personal’ prejudice or bias against the accused, but charge
an impersonal prejudice, and go to the judge’s background

_and associations rather than his appraisal of the defend-

ant personally.”

12 United States v. Haldeman, 559 F.2d 31, 135ff. (D.C. Cir.
1976) (Judge Sirica’s statement in a television interview, at
the time of the 1974 Judicial Conference, that defendants “can
get just as fair a trial in the District of Columbia as any
federal court,” did not reflect “inability or indisposition on
the judge’s part to objectively weigh and act upon a request to
relocate the place of trial should it develop that an unbiased
jury could not be assembled in the District of Columbia.”

A-54

doctrine—a “rule of judicial administration that no one
is entitled to judicial relief for a supposed or threatened
injury until the prescribed administrative remedy has
been exhausted.” Myers v. Bethlehem Shipbuilding Corp.,
303 U.S. 41,50-51 (1938). The Court gave little weight
to the claim “that the mere holding of the prescribed
administrative hearing would result in irreparable dam-
age.” 303 U.S. at 51.

The jurisdictional difficulty arises out of the require-
ment of finality, a related doctrine which also comes into
play in this case, and which overlaps the requirement of
exhaustion of administrative remedies but is analytically
distinct. One requirement may be applicable even when
the other is not.

The Administrative Procedure Act provides, § 10(c),
now 5 U.S.C. § 704: “Agency action made reviewable by
statute and final agency action for which there is no
other adequate remedy in a court are subject to judicial
review. A preliminary, procedural, or intermediate
agency action or ruling not directly reviewable is subject
to review on the review of the final agency action.”
Statutes with special provisions for judicial review re-
flect the same basic approach, of limiting review to final
actions, and that is the case for the Moss-Magnuson Act’s
provision for judicial review (in the court of appeals)
of FTC rulemaking.”

13 See 15 U.S.C. §57a(e) providing that an interested per-
son may file a petition “for judicial review” of a rule, not
later than 60 days after a rule is promulgated by the Federal
Trade Commission. Section 57a(e) (5) (B) provides:

The United States Court of Appeals shall have exclu-
sive jurisdiction of any action to obtain judicial review
(other than in an enforcement proceeding) of a rule
prescribed under subsection (a) (1)(B) of this section,
if any district court of the United States would have
jurisdiction of such action but for this subparagraph.

A-55

Section 10(c) of the APA is a generalized provision
for judicial review by the district court where no other
form of judicial review is prescribed by Congress. But it
requires more than exhaustion of administrative reme-
dies, it also requires a final agency action. Association
of National Advertisers, Inc. v. FTC, 565 F.2d 237 (2nd
Cir. 1977). It is elementary that the mere conduct of
proceedings on a proposal of a rule, which may never be
adopted or enforced, is not final action, and a court will
not enjoin a rulemaking proceeding on a claim that the
agency had no statutory or constitutional authority to
promulgate the proposed rule. Bristol-Myers Co. v. FTC,
138 U.S.App.D.C. 22, 27, 424 F.2d 935, 940, cert. denied,
400 U.S. 824 (1970).

If a proceeding should eventuate in a rule that a party
opposes, the party may challenge the final action adopt-
ing the rule on the ground that the rule is defective for
reasons of disqualification of a member. Accordingly, this
is not a case of agency action (other than final action)
“for which there is no other adequate remedy in a court.”
Only in rare instances is a non-final agency action re-
viewed in tne teeth of a general denial of jurisdiction.
In Leedom v. Kyne, 358 U.S. 184 (1958) the Court was
willing to bypess a general jurisdictional barrier when an
agency clearly violated an express statutory prohibition.
But the Leedom exception “is a narrow one.”™ It is
reserved for the kind of clear case that identified the
original doctrine of mandamus.

A court must disclaim jurisdiction notwithstanding the
claim that action already taken realistically means that
the ongoing proceeding will be waste motion and will have

14 Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964) (no
jurisdiction to enjoin a representation election) ; In Switch-
men’s Union v. National Mediation Board, 320 U.S. 297
(1943), the Court held Congress precluded review of a rep-
resentation decision of the National Mediation Board.

A-56

to be done over again. This is “part of the price we pay
for the advantages of an administrative process” and
preferable to having the process “clogged if there were
interlocutory appeals to the courts.” Thermal Ecology
Must Be Preserved v. Atomic Energy Comm., 139 U.S.
App.D.C. 366, 368, 433 F.2d 524, 526 (1970). That opin-
ion noted the possibility of an exception “in extreme
instances where the action is held to constitute an effec-
tive deprivation of appellant’s rights.” Id. See also Ster-
ling Drug, Inc. v. FTC, 146 U.S.App.D.C. 237, 250, 450
F.2d 698, 711 (1971).

Given these strong walls of jurisdictional barriers, and
narrow gates of entrance, it is time to turn to the situa-
tion of a claim of prejudice or bias alleged to infect
an agency proceeding at its core.

When a claim of bias is filed against a trial judge, his
refusal to recuse himself is not appealable, there being
no final order. However, there has been some tendency of
the appellate courts to accept jurisdiction of the claim,
notwithstanding their general confinement to review of
final orders, of district courts, by reference to consider
the matter on application for a writ of mandamus, at
least in unusual cases, with jurisdiction predicated on the
All-Writs Act, 28 U.S.C. § 1651.5 That jurisdiction is
not routinely invoked, and rulings are generally phrased
in terms of “exceptional circumstances.” ** Mandamus
was denied in Mitchell v. Sirica, 163 U.S.App.D.C. 373,
502 F.2d 375, cert. denied, 418 U.S. 955 (1974), not-
withstanding the view of the dissent that the case was one
of the “really extraordinary cases” that warrant man-

15°C. Wright & A. Miller, Federal Practice and Procedure:
Jurisdiction § 3553 at 387 (1975); 9 Moore’s Federal Prac-
tice {/110.13[10] at 187-188 (2d ed. 1975), cited in Judge
Tamm’s opinion at note 10.

*® Action Realty Co. v. Will, 427 F.2d 843 (7th Cir. 1970) ;
Green v. Murphy, 259 F.2d 591 (8d Cir. 1958).

A-57

damus, and that mandamus was appropriate under the
All-Writs Act in cases “which are subject to our eventual
appellate jurisdiction.” (502 F.2d at 387).

Even assuming arguendo that the case is one which this
court would consider at an interlocutory stage as to a
request for disqualification of a judge, it by no means
follows that a court has jurisdiction to intervene in an
ongoing administrative process. The courts have a limited
supervisory province as to agencies,’’ but it is not as
direct as the supervision of appellate courts over trial
courts, and there are distinct limitations on available
judicial remedies. Vermont Yankee Nuclear Power Corp.
v. National Resources Defense Fund, 435 U.S. 519
(1978) ; FCC v. Pottsville Broadcasting & Co., 309 U.S.
134 (1940) ; Greater Boston TV Corp. v. FCC (II), 149
U.S.App.D.C. 322, 335, 463 F.2d 268, 281 (1971).

If there is to be an analogy to an expansion of man-
damus of district judges, based on the existence of the
appellate court’s prospective jurisdiction, the jurisdic-
tion would not lie in the district court, but in the court
of appeals, which is where Congress has lodged general
jurisdiction to review FTC orders and rules, 15 U.S.C.
§ 57a. To the extent that the All Writs Act has been
used in connection with FTC matters, it is the court of
appeals that has been found to have the power to grant
relief. FTC v. Dean Foods Co., 384 U.S. 597 (1966).
On this thesis I posit a total lack of jurisdiction in the
district court to consider the merits of plaintiff’s case in
any way or to any extert. Thus, even if this case fell
within an exception to the finality requirement, juris-
diction to consider the interlocutory action would lie in
this court and not the district court. But I recognize that
this thesis has not previously been identified by the court

17 Greater Boston TV Corp. v. FCC (I), 143 U.S.App.D.C.
383, 444 F.2d 841 (1970).

A-58

and was not perceived in the 1962 Amos Treat decision,
to be discussed below. Amos Treat issued prior to the
Supreme Court’s Dean Foods decision and is subject to
reconsideration on this point.* But since this point is

novel, and was not argued, I agree that it should not be
given effect retrospectively.

Reverting to issues of bias or prejudice, this court has
basically exercised its supervision in the context of re-
view of final orders, Cinderella Career & Finishing
Schools, Inc. v. FTC, 188 U.S.App.D.C. 152, 425 F.2d
583 (1970) ; Texaco, Inc. v. FTC, 118 U.S.App.D.C. 366,
336 F.2d 754 (1964), vacated and remanded on other
grounds, 381 U.S. 739 (1965).

To the extent that there is any judicial jurisdiction to
halt an ongoing agency proceeding—or what is the equiva-
lent, to enter a declaratory judgment that it cannot
result in a valid final action—that jurisdiction, whether
exercised by this court or (let it be assumed) by a dis-
trict court, is available only in a limited class of cases,
not including the case at bar. There is always some prob-
lem of analysis when a court’s determination of whether
it has jurisdiction requires it to take a “peek at the

merits.” ** But I think the doctrine can be etched fairly
clearly.

The precedent primarily relied on by plaintiffs is
Amos Treat & Co. v. SEC, 118 U.S.App.D.C. 100, 306
F.2d 260 (1962). The court enjoined an adjudicatory
proceeding because one of the commissioners who had
participated in certain rulings had previously, as a mem-
ber of the staff, participated in the investigation. That

18 The 1972 decision in Fitzgerald is not pertinent because
the “final” agency order in that case would have been review-
able in the district court.

1° Internat’l Bro. of Teamsters v. Bro. of Railway, Airline
and Steamship Clerks, 131 U.S.App.D.C. 55, 64, 402 F.2d
196, 205, cert. denied, 393 U.S. 848 (1968).

A-59

decision was a ruling of a structural incapacity, which
was necessary for a “fair trial” (306 F.2d at 263). The
next year another panel, Judges Bazelon, Bastian and
Burger, described it as an “exceptional” case, SEC v.
R. A. Holman & Co., 116 U.S.App.D.C. 279, 323 F.2d
284, cert. denied, 875 U.S. 943 (1963). In Holman the
court refused to halt an SEC adjudicatory proceeding on
the ground that one of the commissioners had headed a
division with responsibility over the registration state-
ment involved. In Associated Press v. FCC, 145 U.S.App.
D.C. 172, 448 F.2d 1095 (1971), the court followed Hol-
man, not Amos Treat. And in Sterling Drug, Inc. v.
FTC, 146 U.S.App.D.C. 237, 450 F.2d 698 (1971), the
court followed Holman and referred to Amos Treat as a
case “where the agency has very clearly violated an im-
portant cons ‘tutional or statutory right.” (450 F.2d at
710) (emphasis added).

The only instance where Amos Treat was followed, in
terms of judicial intercession at a non-final stage, was
Fitzgerald v. Hampton, 152 U.S.App.D.C. 1, 467 F.2d
755 (1972), and that, too, was a structural violation—
the denial of a public hearing.

If a federal court, district or appellate, is to take
jurisdiction before final agency action, it can only be
in a case of “clear right” such as outright violation of a
clear statutory provision (Leedom) or violation of basic
rights established by a structural flaw, and not requiring
in any way a consideration of interrelated aspects of the
merits—which can only be done appropriately on review
of a final order. This statement of the doctrine of the
exceptions to finality is etched more sharply here than
in some of our previous opinions, though it is offered as
an accurate statement of what the opinions as a whole
were driving at. However, this sharpening of doctrine
has aspects of novelty, since earlier expressions referred
to denial of basic rights and did not articulate the qualifi-
cations of structural flaw, or defiance of an outright

A-60

prohibition. On that basis, as will be indicated below,
I am prepared to agree that the district court’s accept-
ance of jurisdiction not be rescinded retroactively, and
to acquiesce in its taking jurisdiction. That still leaves
us, however, with the necessity to determine whether the
judicial ruling (of disqualification) was proper on the
merits. And it was not proper, in my view, for reasons
developed in Judge Tamm’s opinion for the court.

A strict logician might have ground to attack this
concept of a jurisdictional ruling announced for the fu-
ture. In the same way, a strict logician could assail the
doctrine whereby courts deliberately decide, on prudential
grounds, to pass over jurisdictional questions and to
dispose of a case on the merits. But that doctrine is
alive, and fortified by pragmatic considerations involved
in sound judicial administration.”

The case at bar is one where the very inquiry posed
by plaintiff obviously requires some analysis of the views
expressed by Chairman Pertschuk, and comparison with
the issues as they will actually be focused in the ongoing
proceeding. The Government puts forward substantial
considerations in justification of Chairman Pertschuk’s
remarks—the proper purpose of calling the public’s atten-
tion to possible abuses and to factors enhancing public
understanding, the propriety of a hortatory role on a
wide range of issues, the breadth of the underlying policy
issues, as contrasted with the quality of rulings on
specific, adjudicative effects (with the corollary likelihood
of specific condemnation and stigma). But even if one
pretermits all such considerations, the actual conduct of
the proceeding may bear significantly on the relationship
of the remarks to ultimate issues, let alone dispositions,

* The doctrine is established by a number of precedents.
See Secretary of the Navy v. Avrech, 418 U.S. 676, 677-78
(1974) ; United States v. Augenblick, 393 U.S. 848, 351-52
(1969); Ripon Society v. National Republican Party, 178
U.S.App.D.C. 350, 361 n.28, 525 F.2d 567, 578 n.28 (1975)
(en banc), cert. denied, 424 U.S. 983 (1976).

A-61

which are necessary aspects of any claim of prejudicial
bias. |

These factors make it clear to me that any residue of
the Amos Treat doctrine is inapplicable to this case.

C.

If this matter were to arise subsequent to the instant
decision, it would in my view have been obligatory of the
district court to deny

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1902%3A2. Public record. Not legal advice.