# Petitioners Reply Brief — Exxon Corp. v. Federal Trade Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petitioners Reply Brief
- **Published:** January 1, 1981
- **Citation:** 454 U.S. 816

## Text

Office -Supreme Gourt, U.S.
＋ 1 D

FIL
No. 80-1895 JUL 28 1981
ALEXANGER CC STEVAS,
CLERK
IN THE
Supreme Cuurt of the United States

OCTOBER TERM, 1980

EXXON CORPORATION,

Petitioner,
v.
FEDERAL TRADE COMMISSION,
Respondent.

REPLY BRIEF OF PETITIONER IN SUPPORT OF
ITS PETITION FOR A WRIT OF CERTIORARI

J. WALLACE ADAIR
Counsel of Record

Of Counsel: RoGer C. SIMMONS
LANCE P. OLINDE, Esq. ABIGAIL A. SHAINE
MARSHALL DEUTSCH, Esq. Howrey & SIMON
D. JosEPH Potvin, Esq. 1730 Pennsylvania Ave., N.W.
EXXON CORPORATION Washington, D.C. 20006
P.O. Box 2180 (202) 783-0800
Houston, Texas 77001 Counsel for Petitioner
Attorneys for
Exxon Corporation
July 28, 1981

WILGON - EPES PRINTING Co., ING. - 769-0096 - WASHINGTON, D.C. 20001

I,

II.

III.

TABLE OF CONTENTS

SINCE PETITIONER’S ORIGINAL FILING,
THIS COURT IN FEDERATED DEPARTMENT
STORES, INC. v. MOITIE HAS CONFIRMED
THAT THERE EXIST SERIOUS DOUBTS
ABOUT WHETHER PETITIONER CAN EX-
PECT ANY FURTHER RELIEF FROM THE
NINTH CIRCUIT DESPITE THE TERMS OF
0

THIS CASE HAS SIGNIFICANT IMPLICA-
TIONS AS TO THE ABILITY OF THE JUDICI-
ARY TO EFFECTIVELY REVIEW AGENCY
%%% —A—A—A—A

A PARTIAL AND NON-BINDING OPINION
DOES NOT RENDER PETITONER’S CHAL-
LENGE TO THE VALIDITY OF THE FRAN-
.

CONCLUSION j ů j c —

Page

ii

TABLE OF AUTHORITIES
CASES

Abbott Laboratories v. Gardner, 387 U.S. 186
a REI Sie ERR DR MAES SER oy 2
Ciudadanos Unidos de San Juan v. Hidalgo County
Grand Jury Commissioners, 622 F.2d 807 (5th
Cir. 1980), cert. denied, 101 S. Ct. 1479 (1981)..
County of Los Angeles v. Davis, 440 U.S. 625
% STIRS DR A A
Crossen v. Breckenridge, 446 F.2d 833 (6th Cir.
1971) CCTV
Federated Department Stores, Inc. v. Moitie, 49
U.S.L.W. 4687 (U.S. June 15, 1981)
Grubb v. Oliver Enterprises, Inc., 858 F. Supp.
D cc snnthibhsnstigtentdisabancsucboccowevecscce
Linda R. S. v. Richard D., 410 U.S. 614 (1978) ......
McCoy-Elkhorn Coal Corp. v. EPA, 622 F.2d 260
le AC eR
Pierce v. Society of Sisters, 268 U.S. 510 (1925)
Powell v. McCormack, 395 U.S. 486 (1969) ...........
Regional Rail Reorganization Act Cases, 419 U.S.
r Sonat Tove Ears? Oe See
Southern Pacific Terminal Co. v. ICC, 219 U.S. 498
D saedieiehinssineiinitinnse
Trafficante v. Metropolitan Life Insurance Co., 409
r 7
United States v. W. T. Grant Co., 345 U.S. 629
.
Warth v. Seldin, 422 U.S. 490 (1975) q
Weinstein v. Bradford, 423 U.S. 147 (1975)

STATUTES
Administrative Procedure Act
5 U.S.C. § 553 (1976 & Supp. III 197999
5 U.S.C. 8 556 (1976 & Supp. III 197997
Federal Trade Commission Act
15 U.S.C. § 57a (e) (1) (A) (1976 & Supp. III
D .

MISCELLANEOUS AUTHORITIES
FTC Organization, Procedures, Rules of Practice,
and Standards of Conduct §1.8(b) (rev. Feb.
20, 1979)

Page

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980
No. 80-1895

EXXON CORPORATION,
Petitioner,
v.

FEDERAL TRADE COMMISSION,
Respondent.

REPLY BRIEF OF PETITIONER IN SUPPORT OF
ITS PETITION FOR A WRIT OF CERTIORARI

This reply brief addresses new matters occurring since
Petitioner’s original filing, as well as the arguments
raised in the Federal Trade Commission’s (“FTC”)
brief in opposition.

I. SINCE PETITIONER’S ORIGINAL FILING, THIS
COURT IN FEDERATED DEPARTMENT STORES,
INC. v. MOITIE HAS CONFIRMED THAT THERE
EXIST SERIOUS DOUBTS ABOUT WHETHER
PETITIONER CAN EXPECT ANY FURTHER RE-
LIEF FROM THE NINTH CIRCUIT DESPITE THE
TERMS OF ITS ORDER

When the Ninth Circuit dismissed Petitioner’s appeal
from the Franchise Rule, it did so with the comment:
“The petitions for review. . . are dismissed, without
prejudice to the right of the petitioners to contest the
validity of the rule on its application in any future

2

proceeding.” (Appendix A to Petition.) As indicated in
Petitioner’s initial brief, there exists substantial doubt
as to the authority of the Ninth Circuit to render a dis-
missal of this case on appeal on the merits “without
prejudice.”

Subsequent to the filing of this petition for a writ
of certiorari, this Court decided Federated Department
Stores, Inc. v. Moitie, 49 U.S.L.W. 4687 (U.S. June 15,
1981), a case arising out of the Ninth Circuit involving
a specific application of that court’s questionable ap-
proach toward the final effect of a dismissal. In Fed-
erated, the Ninth Circuit applied a “simple justice”
concept to permit an otherwise dead appeal to possess
continuing vitality, similar to the objective the Ninth
Circuit sought to accomplish with its order here. Of
major significance to the instant proceeding, this Court
in Federated overruled the Ninth Circuit in light of the
basic rule of res judicata which precludes a party or its
privy from relitigating issues that were or could have
been raised in the original action, stating:

A final judgment on the merits of an action pre-
cludes the parties or their privies from relitigating
issues that were or could have been raised in that
action. Nor are the res judicata consequences
of a final, unappealed judgment on the merits al-
tered by the fact that the judgment may have been
wrong or rested on a legal principle subsequently
overruled in another case.
49 U.S.L.W. at 4689. Similarly here, the Magnuson-
Moss Act, which provided the statutory basis for Peti-
tioner’s appeal from the Franchise Rule, provides that
an appeal must be filed within 60 days and that certain
procedural and evidentiary aspects of a rule “may be re-
viewed only in [such] a proceeding.” (See Appendix E
at 15a-17a of the Petition.)

The Court’s holding in Federated may create an irrec-
oncilable conflict with the Ninth Circuit’s statement in

its Order that the validity of the Franchise Rule could
be “litigated anew” if another case or controversy arises
concerning the sale of franchises other than service sta-
tions. Unless the Court hears this petition and instructs
the Court of Appeals for the Ninth Circuit to correct its
erroneous dismissal of this litigation, later courts facing
the issue of the validity of the Franchise Rule in “any
future proceeding” may be powerless to correct the mani-
fest injustice caused by the Ninth Circuit’s dismissal.

II. THIS CASE HAS SIGNIFICANT IMPLICATIONS
AS TO THE ABILITY OF THE JUDICIARY TO
EFFECTIVELY REVIEW AGENCY ACTION

The FTC has not challenged, nor can it challenge,
Petitioner’s assertion that the Franchise Rule was il-
legally promulgated.' Nor does it deny that it has sys-
tematically tried to evade judicial review. In the course
of formulating the Rule, the FTC accumulated more than
10,000 pages of secret comments from franchisors whose
economic interests differ from Petitioner’s interests re-
garding the merits of the Franchise Rule. Petitioner
was never provided an opportunity to comment on the
substance of any of these ex parte contacts prior to
the promulgation of the Franchise Rule. If the FTC’s
strategy of systematically evading judicial review pre-
vails, and the Ninth Circuit’s Order remains unreviewed,
it is possible that no court will ever have the opportunity
to review an illegal substantive rule governing a sig-
nificant segment of the economy.

The FTC persists in its evasionary tactics, character-
izing its July 17, 1980 Exemption Order as “permanent
and unqualified.” (Brief for the FTC in Opposition at
7 n.6.) But the FTC glosses over the fact that the ex-

1 For purposes of determining whether this litigation is moot,
the court should accept as true all of Petitioner’s material allega-
tions. See Warth v. Seldin, 422 U.S. 490, 501 (1975).

4

emption is not all encompassing. The illusion of a com-
plete exemption created in the FTC’s brief equates the
FTC’s exemption proceeding (which is not part of this
appeal) with the appeal here which involved all of Peti-
tioner’s business operations. As to the non-service sta-
tion operations of Petitioner, the FTC asserts only that
“it knows of no other businesses of Exxon that might
be covered by the Rule. (Brief for the FTC in
Opposition at 5 n.2.)

Such qualified assurances simply cannot moot an ap-
peal under longstanding precedent in this Court and in
the lower courts. Under the Commission’s own proce-
dural rules, informal advice given by the FTC is not
final, but is “without prejudice to the right of the Com-
mission to reconsider the questions involved. FTC
Organization, Procedures, Rules of Practice, and Stand-
ards of Conduct §1.3(b) (rev. Feb. 20, 1979).? See
Grubb v. Oliver Enterprises, Inc., 358 F. Supp. 970 (N.D.
Ga. 1972). If the FTC is successful in blocking judicial
review of the Franchise Rule on the basis of a qualified
and non-binding opinion, there will be nothing to bar the
agency from deciding that the Rule is applicable to Peti-
tioner at a later point in time when the 60-day statu-
tory period for direct appeals has run.

2 The rule provides in pertinent part:

Any advice given by the Commission is without prejudice to
the right of the Commission to reconsider the questions in-
volved and, where the public interest requires, to rescind or
revoke the action.

Id. (emphasis added).

One such shift in views has already occurred here. On October
5, 1979, the FTC issued an informal advisory opinion to Marathon
Oil Company concluding that rental payments made by Marathon’s
branded independent service station dealers and jobbers pursuant
to Service Station Leases and Jobber Leases would be considered
“required payments” as that term is used in the Franchise Rule.

5

The FTC does not dispute that the judicial review
provisions of the Magnuson-Moss Act were considered
by Congress to be crucial. (See Petition at 8-13.) Under
the Ninth Circuit’s Order, the FTC has thus far wholly
frustrated a serious challenge to the validity of the
Franchise Rule simply by offering non-binding advice.
The Ninth Circuit’s opinion provides the FTC with the
same type of “powerful weapon against public law en-
forcement” condemned by the Court in United States
v. W. T. Grant Co., 345 U.S. 629, 632 (1953).

III. A PARTIAL AND NON-BINDING OPINION DOES
NOT RENDER PETITIONER’S CHALLENGE TO
THE VALIDITY OF THE FRANCHISE RULE
MOOT

The purpose of Petitioner’s suit was to challenge the
serious procedural violations engaged in by the FTC in
promulgating the Franchise Rule and the total lack of
any evidentiary support for it. Petitioner argued, inter
alia, that the Rule was invalidly promulgated, and that
Petitioner was illegally denied participation in certain
crucial meetings pertaining to the contents of the Rule.
To date, the only relief which Petitioner has received
is a partial exemption and some qualified advice. It
cannot be said that because of such limited relief, “the
issues presented are no longer ‘live’ or [that] the parties
lack a legally cognizable interest in the outcome.” Powell
v. McCormack, 395 U.S. 486, 496 (1969).* Such advice

Less than one year later, on September 30, 1979, the FTC con-
cluded that such payments, to the ‘extent they had not been ex-
empted by virtue of the July 17, 1980 Exemption Order, did not
constitute “required payments.”

* The numerous standing cases cited by the FTC do not suggest
a contrary conclusion. A party has standing whenever it “has

clearly fits within the doctrine of conduct which is “ca-
pable of repetition yet evading review.” Southern Pacific
Terminal Co. v. ICC, 219 U.S. 498, 515 (1911); Wein-
stein v. Bradford, 423 U.S. 147, 149 (1975). Voluntary
cessation of the challenged conduct does not render a

suffered ‘some threatened or actual injury resulting from the
putatively illegal action Warth v. Seldin, 422 U.S. 490, 499
(1975), quoting Linda R.S. v. Richard D., 410 U.S. 614, 617 (1973).
The impact of the Rule on Petitioner’s daily business operations
and the inevitable impact on new business opportunities alone is
sufficient injury to give Petitioner standing. Trafficante v. Metro-
politan Life Ins. Co., 409 U.S. 205 (1972).

Standing can also be established when a legal interest created
by a statute is invaded, even if there would be no injury without
such a statute. Warth v. Seldin, supra, at 500; Linda R.S. v. Richard
D., supra, at 617 n.3; Trafficante v. Metropolitan Life Ins. Co.,
supra, at 212. In this case Petitioner has alleged injury from a
violation of certain provisions of the Administrative Procedure
Act which has in no way been remedied by the FTC’s Exemption
Order. The Exemption has done nothing to repair the deprivation
of Petitioner’s right to participate fully in any presentation of
evidence concerning the contents of the rule being promulgated by
the FTC. 5 U.S.C. §§ 553, 556 (1976 & Supp. III 1979).

Further, the FTC’s argument that Petitioner does not have
standing is in direct conflict with the basic principle that a party
should not have to subject itself to the risk of an enforcement
proceeding in order to obtain judicial review. Abbott Laboratories
v. Gardner, 387 U.S. 186 (1967). See also Regional Rail Reorgani-
zation Act Cases, 419 U.S. 102, 143 (1974) (a party can challenge
a statute prior to its effective date when it is inevitable that the
party will be affected by the statute) ; Pierce v. Society of Sisters,
268 U.S. 510 (1925) (suit to challenge statute was not premature,
although it was brought before the statute’s effective date) ;
McCoy-Elkhorn Coal Corp. v. EPA, 622 F.2d 260 (6th Cir. 1980)
(suit challenging certain proceedings under the Clean Air Act was
proper before the termination of the proceedings because their
very existence was impairing business opportunities); Crossen v.
Breckenridge, 446 F.2d 833, 838 (6th Cir. 1971) (litigants need
not subject themselves to the possible harm of a criminal prose-
cution before seeking relief from an allegedly unconstitutional
statute).

7

controversy moot. United States v. W. T. Grant Co.,
supra. The burden of establishing that the challenged
wrong will not be repeated is a heavy one, Ciudadanos
Unidos de San Juan v. Hidalgo County Grand Jury
Commissioners, 622 F.2d 807, 825 (5th Cir. 1980), cert.
denied, 101 S. Ct. 1479 (1981), and the FTC has failed
to meet that burden. The FTC repeatedly refused to
stipulate with Petitioner that it will not apply the Fran-
chise Rule to any of Petitioner’s businesses. Nowhere
in its brief does the FTC state unqualifiedly that the
Franchise Rule will never be applied to Petitioner’s busi-
ness. If the party claiming mootness fails to establish
that there is no “reasonable expectation” that the alleged
violation will recur, the case is not moot. County of
Los Angeles v. Davis, 440 U.S. 625, 631 (1979).

Despite the limited exemption and the FTC’s tenta-
tive advice as to Petitioner’s other business endeavors,
Petitioner must make business decisions daily in struc-
turing its various operations which the FTC may later
claim are significantly impacted by the Rule. Under Sec-
tion 18(e) (1) (A) of the Federal Trade Commission Act,
15 U.S.C. S 57a(e) (1) (A) (1976 & Supp. III 1979),
“any interested person (including a consumer or con-
sumer organization)” has a right to challenge the validity
of a rule promulgated by the FTC. (Emphasis added).
Certainly Petitioner, who operates many businesses
which may be challenged under the Rule, cannot have
less of a “legally cognizable interest” in the validity of
the Rule than a consumer or an organization of con
sumers.°

5 Indeed, even if the Ninth Circuit determined that the Franchise
Rule was moot as to its businesses, Petitioner would still retain
the right to challenge the validity of the Rule as a consumer since
it purchases many services from franchises, e.g., rental cars, tempo-
rary employees. Although the FTC cavalierly dismisses this idea
(FTC Brief in Opposition at 6 n.3), it ought to be beyond dispute
that a corporation the size of Exxon would have standing either
as an “interested” person or as a consumer under this statutory
provision. 15 U.S.C. § 57a (e) (1) (A) (1976 & Supp. III 1979).

CONCLUSION

The petition for a writ of certiorari should be granted.
In the alternative, Petitioner seeks a summary remand
to the Court of Appeals for the Ninth Circuit for further
consideration in light of the Court’s decision in Federated
Department Stores, Inc. v. Moitie, supra.

Respectfully submitted,

J. WALLACE ADAIR
Counsel of Record

Rocer C. SIMMONS

ABIGAIL A. SHAINE
Howrey & SIMON
1730 Pennsylvania Ave., N. W.
Washington, D.C. 20006
(202) 783-0800

Counsel for Petitioner

July 23, 1981

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_2088%3A7. Public record. Not legal advice.