Appendix — Gibson v. Federal Trade Commission

ave © be 3

Office - Supreme Court, U.S.

ILEDp

DEC 18 1982

PETITION ALEXANDER he STEVAS

CLERK

FOR a.

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDICES C, D, E, F, G, H

APPENDIX C: PETITION FOR RECON-

SIDERATION FILED WITH THE

FEDERAL TRADE COMMISSION, JUNE

6, 1980.

APPENDIX __D: OPINION OF THE

FEDERAL TRADE COMMISSION

AMENDING THE ORDER OF APRIL 30,

1980 (96 FTC 126-133).

APPENDIX E: ALJ'S OPINION AND

ORDER OF FEBRUARY 26, 1979 (95

FTC 553-721).

APPENDIX F: 5TH CIRCUIT

JUDGMENT AUGUST 13, 1982.

APPENDIX G: 5TH CIRCUIT ORDERS

DENYING REHEARING AND REHEARING

EN BANC SEPTEMBER 13, 1982 (688

F2d 840).

APPENDIX H: TESTIMONY OF JAMES

S. MILLER FEBRUARY 16, 1978.

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX C

PETITION FOR RECONSIDERATION FILED

WITH THE

FEDERAL TRADE COMMISSION

JUNE 6, 1980

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX C

PETITION FOR RECONSIDERATION FILED

WITH THE

FEDERAL TRADE COMMISSION

JUNE 6, 1980

UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

In The Matter of

HERBERT R. GIBSON, SR., et al

ee ee ee ee

PETITION OF H. R. GIBSON, SR. AND BELVA

GIBSON FOR RECONSIDERATION, AND FOR STAY

OF FINAL DECISION AND ORDER

TO: THE FEDERAL TRADE COMMISSION

DOCKET

NO. 9016

— eer ee eee

Now come the Respondents H. R. Gibson,

Sr. and his wife, Belva Gibson, and move

that the Commission reconsider its

Decision and Final Order of April 30, 1980,

granting a stay of the effective date of

the Order and Decision until 60 days after

completion of service on these Respondents

of the Order disposing of this Motion.

These Respondents would show that such

Decision and Final Order should be

reconsidered for the following reasons:

l. TO CORRECTLY REFLECT THE COMMIS-

SION DECISION, SECTION 11.2 OF THE ORDER

SHOULD BE ALTERED TO CONFORM TO I1.1 [as A

BUYER OR ACTING FOR OR _IN BEHALF OF OR

SUBJECT TO THE DIRECT OR INDIRECT CONTROL

OF A BUYER").

C-1

The Decision of the Commission makes

it clear that the restraints on the Respon-

dents H. R. Gibson, Sr. and Belva Gibson

under Count III of the Complaint have to do

with receiving commissions when these

Respondents are acting "as _a_ buyer

Is IR

acting for or in behaif of or subject

the direct or indirect control of a buyer".

In response to the argument of these

Respondents on the Appeal of the Initial

Decision, the Commission phrased Section

II.l1 of the order accordingly. However,

Section II.2 has not been so _ phrased,

possibly from oversight.

To correctly reflect the Commission's

intentions as expressed in the Final

Decision, Section II.2 of the Final Order

should be changed to read as follows:

"2. Assuming control of or

influencing any seller or sel-

ler's broker to induce such

seller or seller's broker to pay

to respondent[s], as a buyer or

acting for or in behalf of or

subject to the direct or

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indirect control of a _ buyer,

anything of value as a commis-

sion, brokerage, or other

compensation cr any allowance or

discount in lieu thereof upon

any purchase for the account of

any retailer using or licensed

to use one of respondents’ trade

names, including Gibson Discount

Center."

It is apparent that the Commission

intended for the phrase "as a buyer or

acting for or in behalf of or subject to

the direct or indirect control of a buyer"

to govern both the restraints in II.1 and

in 11.2. As an alternative form of

clarifying this in the Order, the

phraseology in paragraph II.1 could be

moved to the introductory paragraph so that

Section II. would read as follows:

es

IT IS FURTHER ORDERED that

Herbert R. Gibson Sr.,

individually and doing business

as Gibson Products Company and

The Gibson Trade Show, Belva

Gibson, Herbert R. Gibson, Jr.,

Gerald Gibson, Gibson Products

Co., Inc., Gibson's Inc.,

Gibson's Discount Centers, Inc.,

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their successors and assigns,

officers, officers, agents,

representatives and employees,

directly or through any

corporation, subsidiary,

division or other device in

connection with the purchase of

merchandise as a buyer or acting

for or in behalf of or subject to

the direct or indirect control

Of a buyer,* in “commerce” as

commerce is defined in the

Clayton Act, as amended, do

forthwith cease and desist from:

1. Receiving or accepting,

directly or indirectly, from any

seller Or seller's broker

anything of value as a

commission, brokerage, or other

compensation or any allowance or

discount in lieu thereofupon any

purchase for the account of any

retailer using or licensed to

use one of respondents’ trade

rames, including "Gibson

Discount Center."

2. Assuming control of or

influencing any seller or sel-

ler's broker to induce’ such

seller or seller's broker to pay

to respondent[s] anything of

value as a commission, broker-

age, or other compensation or

any allowance or discount in

lieu thereof upon any purchase

for the account of any retailer

using or licensed to use one of

respondents' trade names,

including Gibson Discount

Center."

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The “buyer” phrase was not in the

corresponding section of the Order accom-

panying the Initial Decision (Attachment

A). One of the points in the Appeal was

that this section should be limited to

where H. R. Gibson, Sir. (or his wife Belva)

was acting as a buyer. The Final Decision

of the Commission declined to limit it to

that extent, but did limit the Ccunt III

part of the Order as to these Respondents,

to situations where H. R. Gibson, Sr. acted

as buyer or on behalf of or subject to the

direct or indirect control of a _ buyer

(Final Decision pp. 28-29). Obviously it

was intended that this same qualification

apply to II.2.

It is requested that the Commission

add the phrase "as a buyer or acting for or

in behalf of or subject to the direct or

indirect control of a buyer” either to

II.2, or move the phrase from II.1 to the

introductory paragraph of Section II of the

Order.

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Respondents do not waive their posi-

tion that the order should be limited to

Situations in which H. R. Gibson, Sr., isa

buyer. The case was tried only upon the

theory that H. R. Gibson, Sr. was a buyer.

2. GROLIER DECISION REQUIRES DISQUALIFI-

CATION OF ALJ, FORMER ATTORNEY-ADVISOR TO

COMMISSIONER MACINTYRE IF PRIVY TO "EX

PARTE” INFORMATION OR IF HE DEVELOPED A

"WILL TO WIN".

This case was submitted on oral

argument July 11, 1979. At that time the

law was that merely because the Ad-

ministrative Law Judge was formerly an

Attorney-Advisor to a Commissioner, had

access to ex parte information, and may

have advised the Commissioner on prosecu-

torial and investigative matters before

the Commission regarding the same Respon-

dents on similar charges, it is not rele-

vant to disqualification. See Grolier Inc.

Docket No. 8879, Order of February 10,

1976, denying Motion to Disqualify ALJ.

Also, The Kroger Co., Docket No, 9102.

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Order Denying Motion to Disqualify ALJ,

February 26, 1979.

Since the submission of this case on

July 11, 1979, the Ninth Circuit has handed

down a decision holding that the Commission

is in error in this approach. Grolier Inc.

and America's People Press Inc. v. FTC (9th

Cir. 1980) 1980-1 TC §63, 153. This case

holds that where the ALJ Theodor P. von

Brand had served as Attorney-Advisor to

former Commissioner Everette MacIntyre

from 1963 through January 1971, during

which period Grolier was intermittently

investigated and charged by the FTC, that

if he had access to ex parte information,

or if he had developed by prior involvement

with the case, or matters of similar nature

involving the same respondents, a "will to

win", then Theodor P. von Brand was

precluded from serving as an ALJ over

Grolier's adjudicative proceeding by the

provisions of the Administrative Procedure

C-7

'

Act §554(d). 5 U.S.C.554(d) (1) expressly

prohibits an ALJ from acquiring ex parte

information.

The Ninth Circuit in Grolier states

that if the ALJ was sufficiently involved

with the case to be apprised of ex parte

information, that his disqualification is

mandatory. This tainting applies to a

"factually related case" as well as the

case itself.

In Docket No. 9016 Administrative Law

Judge Theodor P. von Brand presided over

the pre-trial and trial of this matter had

previously served with the Federal Trade

Commission as Attorney-Advisor to Everette

MacIntyre from 1963 through January, 1971

(Grolier). During that period Respondent

H. R. Gibson, Sr. was’ intermittently

investigated by the Federal Trade

Commission.

On January 17, 1967, FTC investiga-

tor, Jess C. Radnor, contacted Respondent

H. R. Gibson, Sr. and required the sub-

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mission of the names and addresses of all

Gibson stores, the ownership of all stores,

the ownership of all stores owned by

relatives of H. R. Gibson, Sr. by blood or

marriage, and the selling prices’ for

gallons and one-half gallon milk in

connection with File No. 671-0062

(Attachment B).

At the time this investigation of H.

R. Gibson, Sr. was being conducted,

Everette MacIntyre was a member of the

Commission, and the Administrative Law

Judge Theodor P. von Brand was his At-

torney-Advisor.

A subpoena duces tecum was issued on

August 29, 1967, (Attachment C), by

Commissioner Reilly to the Respondent H. R.

Gibson, Sr. in care of Gibson Products

Company, Seagoville, Texas, in connection

with non-public investigation File NO.

671-0229, pursuant to Commission

Resolution dated August 29, 1967. That

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Resolution indicates that Everette Mac-

Intyre was a Commissioner voting for the

Resolution (Attachment D).

The Resolution of August 29, 1967, was

entitled "Resolution Directing an

Investigation of the Practices of Gibson

Products Company in Connection with the

Purchasing, Pricing, Distribution and Sale

of Sundry Merchandise Sold Through Retail

Outlets.”

Said Resolution recites that’ the

Commission has reason to believe that

Gibson Products Company “may have been and

may now be inducing, coercing, intimi-

dating or requiring its suppliers to sell

merchandise to it on terms which are

discriminatory or injurious to competi-

tion; may have been and may now be con-

spiring to boycott...," and that such

practices may constitute unfair methods of

competition under Section 5 of the FTC Act

and may be in violation of Robinson-Patman

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2(f).

At the time this Resolution was passed

and investigation conducted, Theodor P.

von Brand was Attorney~Advisor to

Commissioner MacIntyre.

By Resolution dated September 17,

1969 (Attachment E), the Federal Trade

Commission approved an investigation “into

the acts and practices of Gibson Products

Company and H. R. Gibson, Sr. d/b/a Gibson

Products Company, Gibson Products Co. and

Gibson Discount Centers, their franchisees

and licensees, as well as certain milk

suppliers. This was designated File NO.

691-0058. At the time this Resolution was

passed, Everette MacIntyre Commissioner

and his name is listed at the top of the

Resolution. At that time Theodor P. von

Brand was Attorney-Advisor for MacIntyre.

Under this Resolution and under this

File NO. 691-0058, the Federal Trade

Commission continuously investigated H. R.

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Gibson, SR., the Respondent herein, from

1969 until the date of the issuance of the

Compalint in Docket No, 9016, February 25,

1975. Much of this investigation was

conducted by Andre Trawick who later became

Chief Complaint Counsel in this matter. At

that time he was subject to the direct

supervision of Everette MacIntyre, a

commissioner, and Everette MacIntyre was

advised by Theodor P. von Brand, (the

Administrative Law Judge during the trial

of Docket No. 9016).

A Commission subpoena was issued to

the Respondent H. R. Gibson, Sr., on

October 2, 1970, in connection with the

Resolution in File 691-0058 dated

September 17, 1969. Both at the time the

Resolution was issued and when the subpoena

was issued to this Respondent, Everette

MacIntyre was a Commissioner for’ the

Federal Trade Commission and Theodore P,

von Brand was Attorney~-Advisor to

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Commissioner MacIntyre. (Attachment F).

Respondent H. R. Gibson, Sr. filed a

Motion To Quash And/Or Limit the subpoena

referred to above with the Commission on

October 8, 1970, and the Commission

responded with a six-page Opinion November

17, 1970, holding that the Motion to limit

Or quash the subpoena was without merit.

An Order denying the motion was issued by

the Commission the same date. At this time

Everette MacIntyre was a member of the

Commission, and his name appears on the

Order and on the Opinion. At the time this

Opinion was written, Theodor P. von Brand

was Attorney~-Advisor to Everett MacIntyre.

Whether Theodor P. von Brand had a part in

writing this Opinion is not known to this

Respondent. However, the Opinion is quite

sharp in its denial of the Motion and

critical of the Respondent H. R. Gibson,

Sr. (Attachment G).

C-13

There can be no doubt that in the

approval of this Opinion and Order of

November 17, 1970, that the Attorney

Advisor for Commissioner MacIntyre (Theo-

dore P. von Brand) would surely have

developed the “will to win" specified by

the Ninth Circuit in Grolier as precluding

von Brand's participation in the

adjudicative function. Plainly at the time

this Opinion and Order was handed down by

the Commission, the Complaint Counsel,

Andre Trawick, then the Chief

Investigating Attorney against Respondent

H. R. Gibson, Sr., was under the direct

supervision of the Commission, and in

effect of Theodor P. von Brand, Attorney-

Advisor to Commissioner MacIntyre.

On December 1, 1970, the return date

of the subpoena duces tecum directed to the

Respondent H. R. Gibson, Sr., Rafe Chloe of

the FTC presided. Bardwell D. Odum, the

undersigned attorney, appeared before

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Chloe on behalf of Respondent H. R. Gibson,

Sr., and respectfully declined compliance.

At that time, on the record, FTC employee

Rafe Chloe proceeded to "explain" Sections

9 and 10 of the FTC Act to the undersigned

attorney. When he could not get the

undersigned attorney to reverse his field

and produce the Respondent H. R. Gibson,

Sr., Chloe then proceeded to read into the

record his determination to report the

matter to the Commission and recommend that

Bardwell D. Odum, attorney for H. R.

Gibson, Sr., never again be permitted to

practice before the FTC, because of what

Chloe termed the attorney's causing the FTC

to spend money unnecessarily. (Attachment

II).

On December 1, 1970, and at the time

Mr. Chloe apparently reported this matter

to the Commission, Everette MacIntyre was a

member of the Commission, and Theodor P,

von Brand was Attorney-Advisor to

C-15

MacIntyre. Andre Trawick represented the

Commission at the "hearing" presided over

by Chloe, and spearheaded the

investigation and the subsequent

proceedings to enforce the subpoena.

Trawick later became lead Complaint

Counsel in Docket No. 9016.

During these proceedings Theodor P.

von Brand as legal advisor to Commissioner

MacIntyre must surely have had access to ex

parte information and perfected the "will

to win" syndrome.

As of December 1, 1970, Theodor P. von

Brand was unknown to these Respondents or

to undersigned attorney Bardwell D. Odum.

At the time the Complaint was filed

February 25, 1975, neither of these

Respondents nor attorney Bardwell D. Odum

was aware that Theodor P. von Brand was

Attorney Advisor to Everett MacIntyre

during the confrontation of December l,

1970.

On February 23, 1977, ALJ Theodor P.

von Brand at a Pre-Trial hearing advised

attorney Bardwell D. Odum that he had been

legal advisor to Commissioner MacIntyre

from 1963 to 1970. At this time he stated

that it was his understanding that none of

the Respondents would raise an objection to

his continuing in this case on the ground

of such employment. He elicited a

corresponding assent to this proposition

from attorney Odum, representing

Respondents H. R. Gibson, Sr. and Belva

Gibson. He did not disclose what action he

may have participated in involving these

Respondents. At that time the law was that

such employment would not disqualify an

ALJ. That was changed with Grolier Inc. v.

FTC (9th C. 1980) 1980 - 1 T.C.§63153.

While the full details of the access

of von Brand to ex parte information, and

his full participation in prosecutive

matters involving this case, and factually

C-17

related cases concerning these

Respondents, is not available to these

Respondents, sufficient information has

been elucidated to indicate the very strong

probability and presumption that Theodor

P. von Brand during his term as Attorney-

Advisor to Commissioner MacIntyre not only

was privy to much ex parte information but

also participated at the side of

Commissioner MacIntyre in administrative

and formal decisions of the Commission

which directed the efforts of the

Commission against H. R. Gibson, Sr.

eventually resulting in the Complaint in

Docket No. 9016. In practical effect,

Theodor P. von Brand was’ supervising

(through his insider post as aide to

Commissioner MacIntyre) the investigative

efforts of Andre Trawick who at that time

was the attorney in charge of the

investigation of H. R. Gibson, Sr. When

Trawick later advanced to Chief

Cc-18

Prosecutor, and von Brand to Judge (over

the same matter), there is no doubt that

due process was not afforded

theseRespondents, i.e., a fair and

impartial trial.

ALJ Theodor P. von Brand, at the time

the Resolutions were issued, and during the

investigation of these Respondents

pursuant to said Resolutions, was

Attorney~-Advisor to Commissioner Everette

MacIntyre and quite apparently had access

to ex parte information.

Presumably Judge von Brand advised

Commissioner MacIntyre and participated in

non-public meetings where prosecutorial

decisions were made.

Either or both of these situations is

sufficient to disqualify Theodor P. von

Brand under 5 U.S.C. 554(d). Under this

Situation, these Respondents could not,

and did not, have the due process

guaranteed by the Fifth Amendment to the

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Constitution of the United States, the

Administrative Procedure Act, and_ the

Rules of the Federal Trade Commission. They

were, and are, entitled to have the facts

judged by a fair and impartial judiciary.

This they have not had.

Under the provisions of the 9th

Circuit decision in Grolier, supra, access

to ex parte information (being prohibited

by the Administrative Procedure Act, §552)

absolutely disqualifies the ALJ from

sitting in the adjudicative matter against

this same Respondent.

In addition, it appears certain that

access to ex parte information by Theodor

P. von Brand and participation in

deliberations and non-public’ meetings

where prosecutorial decisions were made by

the Commission would have caused him to

have developed the "will to win" in the

Commission's case against this Respondent.

In view of the 1980 Ninth Circuit

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Grolier decision (subsequent to the time

this case was argued before the Commis-

sion), it is requested that the Commission

reconsider this case and dismiss same as to

these Respondents, since there has been no

trial by a fair and impartial judiciary, as

required by the Constitution of the United

States, the Administrative Procedure Act,

and the Rules of the Federal Trade

Commission.

Alternatively, the matter should be

remanded to allow these Respondents

sufficient discovery by taking a deposi-

tion of Theodor P. von Brand and obtaining

the records involving Theodore P, von

Brand's association with this case and

related cases involving these Respondents

while Theodor P. von Brand served as

Attorney~-Advisor for Everette MacIntyre.

Alternatively, this case should be

reconsidered, reversed, and remanded for a

new trial under an administrative law judge

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who does not suffer under the handicaps

outlined above for Theodor P. von Brand.

3. ANTI-DEFICIENCY ACT RENDERS ACTIONS OF

COMMISSION TAKEN DURING DEFICIENCY FUNDING

PERIODS IN ADJUDICATION OF THIS MATTER,

ILLEGAL,

Since this case was submitted to the

Commission on July 1l, 1980, the Attorney

General of the United States, the Honorable

Benjamin Civiletti, in a letter addressed

to the President of the United States,

dated April 25, 1980, advised that he

interprets the Anti-Deficiency Act 31

U.S.C. 665 (a) as prohibiting the

expenditure of any money by an agency

during a period when it is without appro-

priation authorization by Congress.

(Attachment I). Such expenditure accord-

ing to the Attorney General would be

illegal, mot authorized by Congress, and

would include the payment of salaries for

employees during said period of lapsed

appropriation, with the possible exception

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of paying salaries of employees to close

the agency down,

This opinion of the Attorney General

of the United States applies to the Federal

Trade Commission and its employees.

Therefore, the Federal Trade Commission is

violating the law by paying its employees

to perform any act during a period of

lapsed appropriation. Since the payment of

salaries to employees who may be attempting

to perform official functions is illegal,

the action of the employees, and the action

of the Commission taken on such dates is

void,

In addition to preventing the

expenditure of monies, and the contracting

for expenditure of monies by an Administra-

tive Agency during a period of lapsed

appropriation, 31 U.S.C. 665(b) also

prohibits the Commission from accepting

voluntary service. Therefore, if the FTC

does not have the authority to make

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expenditures for salaries of employees

during a period of lapsed appropriati-

ation, and it does not have authority to

exist, and it cannot accept voluntary

services from its “employees", then any

action taken by an FTC “employee” during a

time of lapsed appropriation is illegal,

and cannot constitute a lawful act of a

governmental agency.

From 1973 through March, 1980, the

Federal Trade Commission, during investi-

gation and prosecution of these Respon-

dents, has suffered the following periods

of lapsed appropriation:

From 1973 through March, 1980, the

Federal Trade Commission, during investi-

gation and prosecution of these Respon-

dents, has suffered the following periods

of lapsed appropriation:

October 1 = 3, 1973

October 12 - 15, 1973

October 1 - 16, 1974

December 21 - 30, 1974

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July 1 = Sept. 30, 1976

October 1 = 9, 1978

October 1 = ll, 1979

March 12 = 27, 1980

(Attachment J)

While the date on which actions were

taken by the Commission and its employees

is not totally within the possession of

these Respondents, undoubtedly many

actions have been taken during a _ period

when the Federal Trade Commission had no

authority to act in this matter or in any

other matter, For example, during the

adjudication of this matter, the Federal

Trade Commission took the following

actions during a lapsed appropriation

period between July 1, 1976 and September

30, 1976:

July 1, 1976 = ALJ Theodor

P. von Brand signed Order au-

thorizing the taking of deposi-

tions.

July 2, 1976 - The

Secretary of the FTC filed the

above-described Order.

C~25

July 6, 1976 - The ALJ

signed an Order granting

Complaint Counsel's Motion to

Amend Commission Witness &

Exhibits Lists and the Secretary

filed such Order.

July 6, 1976 - ALJ Theodor

P. von Brand signed and filed

with the Secretary of the Com-

mission an Order granting in

part and denying in part Motion

For Protective Order Pending

Disposal of Appeal to the FIfth

Circuit.

July 7, 1976 - Complaint

Counsel signed Answer to Motion

of Respondents Herbert R.

Gibson, Sr., and Belva Gibson to

Withdraw From Adjudication,

July 7, 1976 - ALJ Theodor

P. von Brand signed and filed

with the Secretary of the Com-

mission an Order granting in

part Motion for Protective Order

and Denying Motion to Amend

Protective Order of October 3l,

1975.

July 9, 1976 - Secretary of

the Commission filed Answer to

Motion of Respondents Herbert R.

Gibson, Sr., and Belva Gibson to

Withdraw From Adjudication.

July 15, 1976 - Complaint

Counsel signed Proposals’ for

Authenticating Underlying Docu-

ments for Commission Tabula-

tions.

July 19, 1976 - Secretary

filed above-described Proposals.

July 22, 1976 - ALJ Theodor

P. von Brand signed and filed

with the Secretary an Order

Recheduling Depositions.

July 29, 1976 - ALJ signed

and filed with Secretary Certi-

fication of Motion to Withdraw

from Adjudication of Respondents

Herbert R. Gibson, Sr., and

Belva Gibson.

August 19, 1976 - Complaint

Counsel filed a Motion

Requesting Certification of a

document to be considered by the

Commission in connection with

the Motion To Withdraw.

August 23, 1976 - Secretary

of Commission filed above-de-

scribed document.

August 23, 1976 - ALJ

Theodor P. von Brand signed and

filed Certification of document

Clarifying Complaint Counsel's

position with respect to

settlement proposals.

September 8, 1976 =- Com-

plaint Counsel signed Request

for Extension of Time to Answer

Motions.

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September 13, 1976 - Secre-

tary Filed above described

document.

September 13, 1976 - ALJ

filed Order Extending Time.

September 14, 1976 - Secre-

tary of Commission filed above-

described document.

September 21, 1976 - Com-

mission filed Order signed by

Charles A. Tobin, Secretary, on

the same date Denying Motion to

Withdraw Matter from

Adjudication.

September 30, 1976 - Com-

plaint Counsel filed Answer to

Memorandum of Herbert R.

Gibson, Sr., and Belva Gibson

recommending withdrawal from

adjudication.

Undoubtedly with the proper

discovery, it will be ascertained that

numerous actions affecting the

investigation and prosecution of this

matter by the Federal Trade Commission were

taken at a time when the Commission was

without authority to act and thus these

actions are illegal.

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It is requested that on reconsidera-

tion this matter be remanded for the

purpose of allowing discovery by respon-

dents on the Commission to determine just

what acts of the Commission were performed

on the dates when the Commission had no

authority to act.

CONCLUSION

It is requested that the Commission

grant a stay of the effective date of the

Final Decision and Order until 60 days

after completion of service on these

Respondents of the Order disposing of this

Motion For Reconsideration, so that the

Motion itself can be adequately considered

and ruled upon.

It is requested that the Commission

make available to these Respondents an

opportunity for oral argument prior to the

Commission ruling on said Motion.

It is requested that the Commission

amend the wording of the Final Order to

include the phrase “as a buyer or acting

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for or in behalf of, or subject to the

direct or indirect control of a buyer” in

paragraph 2 of Section II of the Order, or

that such language be shifted from

Paragraph 1 of Section II to_ the

introductory paragraph of Section II, so

that it will apply to sub-paragraphs 1 and

2.

Alternatively it is requested that

the Commission withdraw the Final Decision

and Order and _ substitute therefor a

decision dismissing these Respondents as

to all counts in view of the fact that due

process has not been satisfied because

these Respondents have not been afforded

the opportunity to have their case heard by

an impartial, independent, and unbiased

fact-finder, and because 5 U.S.C. 552(d)

prohibits ALJ Theodor P. von Brand from

acting in an adjudicatory role where he has

received ex parte information regarding

these Respondents in factually related

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matters and/or has been involved with

prosecution and/or investigation of these

Respondents to the extent that he has

formed within his mind the "desire to win"

the case for Federal Trade Commission.

Alternatively these Respondents

request the Commission to withdraw the

Final Decision and Order and substitute

therefor an order remanding this matter for

further proceedings to another ad-

ministrative law judge for the purpose of

determining the extent to which Theodo P,

von Brand was privy to ex parte information

and the extent to which he participated in

investigatory and prosecutorial matters of

this case and the related investigations of

these Respondents predating the Complaint

in Docket 9016, while Theodor P. von Brand

was Attorney-Advisor for Commissioner

Everette MacIntyre.

Alternatively Respondents H. R.

Gibson, Sr., and Belva Gibson request the

C-31

Commission to withdraw the Final Decision

and Order and remand this case to another

administrative law judge for the purpose of

a new trial on the entire matter.

Alternatively these Respondents

request the Commission to withdraw the

Final Decision and Order and to substitute

therefor a new order dismissing the case as

to these Respondents because actions of the

Commission taken during "lapsed

appropriation" periods are illegal actions

not authorized by the Congress of the

United States. Since the investigation of

these Respondents and the trial of this

matter cover several periods of "lapsed

appropriation" the entire matter is

rendered an illegal proceeding by the void

actions taken during such pericds by the

Commission and their employees.

Alternatively these Respondents

request that the Commission withdraw the

Final Decision and Order and substitute

C=-32

therefor an order remanding this matter to

an administrative law judge for

determination through discovery of the

Commission's internal records by these

Respondents as to what actions were taken

by the Commission during periods of "lapsed

appropriation”.

These Respondents further request the

Commission to take such other and further

action either at law or in equity to afford

these Respondents the remedial rights to

which they have shown themselves entitled.

Sard ly submitted,

ardwell D. Odu

Attorney at Law

A Professional Service Corporation

P. O. Box 38529

Dallas, Texas 75238

214/371-9155

Attorney for Respondents,

H. R. Gibson, Sr. and Belva Gibson

June 6, 1980

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX D

OPINION OF THE

FEDERAL TRADE COMMISSION

AMENDING THE

ORDER OF APRIL 30, 1980

96 FTC 126-133

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX D

OPINION OF THE

FEDERAL TRADE COMMISSION

AMENDING THE

ORDER OF APRIL 30, 1980

96 FTC 126-133

FEDERAL TRADE COMMISSION DECISION

Opinion

IN THE MATTER OF

HERBERT R. GIBSON, SR., ET AL

MODIFYING ORDER AND OPINION IN REGARD

TO ALLEGED VIOLATION OF SEC.2 OF THE

CLAYTON ACT AND THE FEDERAL TRADE

COMMISSION ACT

Docket 916, Final Order, April 30, 1980—

Modifying Order, Aug. 8, 1980.

This order, granting in part, and denying

in part, and denying in part respondents

petitions for reconsideration, modifies

the order issued on April 30, 1980, 45 FR

38352,95 F.T.C. 564, by inserting the word

"while" before the word “acting,” in

paragraph 1, line 2 of Section 1]; and by

inserting a comma and the phrase “while

acting as a buyer or acting for in behalf

of or subject to the direct or indirect

control of a buyer," after the word

"“respondent([s]," in paragraph 2, line 3 of

Section ll.

ORDER GRANTING IN PART, AND DENYING IN

PART, RESPONDENTS' PETITIONS FOR

RECONSIDERATION

An opinion and final order in this

matter having been issued on April 30,

1980; respondents having been served by

mail with the said opinion and order on May

20, 1980 and May 21, 1980; respondents

D-1

having petitioned for reconsideration of

said opinion and order on June 12, 1980;

and the Commission, for the reasons stated

in the accompanying opinion, having

determined to grant in part, and deny in

part, respondents’ petitions for

reconsideration;

It is ordered, That the final order to

cease and desist be, and hereby is modified

as follows:

In paragraph 1 of Section II of the

Order, line 2, insert the word "while" in

front of the word "acting"; and

In paragraph 2 of Section II of the

Order, line 3, after the word “respon-

dents(s]," insert a comma and the phrase

"while acting as a buyer or acting for or

in behalf of or subject to the direct or

indirect control of a buyer,".

OPINION OF THE COMMISSION

BY CLANTON, Commissioner:

Respondents have filed two petitions

D-2

for reconsideration of our recent opinion

and order. Each petition asserts: (1) that

the language and coverage of Section II of

the Final Order should be changed; (2) that

application of the opinion of the Court of

Appeals in Grolier, Inc. v. FTC, 615 F. 2d

1215 (9th Cir.1980), requires

disqualification of the administrative law

judge ("ALJ"), Theodor P. von Brand, and

hence dismissal or remand of the case; and

(3) that certain actions taken by the

Commission during periods of allegedly

lapsed appropriations, including actions

taken in the investigation and

adjudication of this case, violated the

Antideficiency Act, 31 U.S.C. 665(a)

(1976), and hence require dismissal or

remand of the case,

Section 3.55 of the Commission's

Rules of Practice limits the scope of a

petition for reconsideration to "new

questions raised by the decision or final

D-3

order and upon which the petitioner had no

opportunity to argue before the Com-

mission." While certain of respondents’

objections are appropriate for disposition

by reconsideration, other contentions are

not new or are untimely. We consider each

of the objections raised seriatim.

A.

The petition filed by Herbert R,

Gibson, Jr., Gerald P. Gibson and others

objects to the inclusion of any respondent

other than Herbert R. Gibson, Sr. in the

provisions of Section II of the Final

Order, which essentially enjoins

respondents from violating Section 2(c) of

the Clayton Act, 15 U.S.C. 13(c) (1976), as

amended. This issue of order coverage is

not new and these respondents had ample

opportunity, which they exercised, to

address this question during the course of

trial and on appeal to the Commission,

See, e.g., Answering Brief of Herbert R.

D-4

Gibson, Jr., filed May 29, 1979, at 9. The

instant request is, therefore,

inappropriate, cf. Interstate Builders,

Inc., 72 F.T.C.1009, 1010 (1967); Lester S.

Cotherman, 77 F.T.C.1621, 1622 (1970), and

is denied.

The petition filed by Herbert R,.

Gibson, Sr. and Belva Gibson notes that the

language of paragraphs 1 and 2 of Section

II of the Final Order are at variance, in

that only the former includes the phrase

“as a buyer or acting for or in behalf of

or subject to the direct or indirect

control of a buyer." The petition requests

that the latter paragraph be altered to

conform to the former. As the petitioners

surmise, it was the Commission's intention

that this phrase appear in both paragraphs,

and an appropriate order correcting this

typographical omission is annexed. To sum

up, all Gibson respondents, except

dissolved corporations, are bound by

D-5

Section II of the Final Order not to

receive or induce payments which would

violate Section 2(c) of the Clayton Act.

This proscription applies irrespective of

whether the respondent acts as a buyer, or

on behalf of or subject to the control of a

buyer.

B.

All respondents petition for recon-

sideration of the Commission's opinion and

order in light of Grolier, Inc. v. FIC,

615 F.2d 1215 (9th Cir.1980). In that

case, the Commission issued a complaint

charging Grolier with violating Section 5

of the Federal Trade Commission Act.

During the course of the _ hearings,

Administrative Law Judge von Brand advised

the parties that he had previously served

as an attorney-advisor to former

Commissioner Everette MacIntyre from 1963

to January 1971, during which time the

D-6

Commission was investigating Grolier and

its subsidiaries. “upon learning of ALJ

von Brand's advisory responsibility during

the eight-year period, Grolier requested

that the judge disqualify himself from

further participation in the proceedings."

615 F.2d at 1217. Judge von Brand declined

to recuse himself, and the Commission

affirmed Judge von Brand's decision in an

interlocutory order, 87 F.T.C. 179, 179-81

(1976), and again in its final order and

opinion, 91 F.T.C. 315, 485-86 (1978). On

appeal, the Ninth Circuit concluded that

the Commission had incorrectly interpreted

Section 5(c) of the ADministrative

Procedure Act, 5 U.S.C. 554(d) (1976), in

ruling on Grolier's disqualification

challenge, and remanded the case to the

Commission. |

Although respondents in this case

have not submitted a motion and affidavits

as required by Rules of Practice Section

D-7

3.42(g) (2) ,+ we understand the facts to be

essentially as follows. Beginning in 1967,

the Commission and its staff investigated

respondents; the investigation culminated

in a complaint issued in 1975. Judge von

Brand presided over the proceedings from

the issuance of the complaint, through

trial (which began on December 19, 1977),

and until his issuance of the initial deci-

sion in early 1979.

1 In relevant part, Rules of Practice

Section 3.42(g), 16 C.F R. 3.42(g),

provides: "Whenever any party shall deem

the ADministrative Law Judge for any reason

to be disqualified to preside, or to

continue to preside, in a particular

proceeding, such party may file with the

Secretary, a motion addressed to the

Administrative Law Judge * * * to be

supported by affidavits setting forth the

alleged grounds for disqualification" The

requirement of affidavits, grounded in 5

U.S.C. 556 (1976), is not an empty

formality to be cast aside unilaterally by

a party to a Commission proceeding. There

are many reasons for such a requirement.

An affidavit provides an exact, sworn

recitation of facts, collected in one

place, a disqualification motion must not

be made by a party, nor taken by the

Commission, lightly. "Such a_ charge,

D-8

Judge von Brand had previously served

with the Commission as an attorney-advisor

to Commissioner MacIntyre from 1963 until

1974. During Judge von Brand's tenure as

attorney-advisor to Commissioner

MacIntyre, participated in certain

decisions connected with the investigation

of respondents (e.g., the Commission voted

on two investigational resolutions and

ruled on a motion to auash_ three

subpoenas).

In a pretrial conference on February

23, 1977 (about one year after issuance of

(footnote 1 cont'd.)

unfairly made, not only impugns without

warrant the integrity of the government

official entrusted with responsibility for

deciding a given dispute, but it also

unnecessarily tarnishes our beneficent

traditions of legal due process." Marcus

v. Director, Office of Wkrs' Comp. Prog.

548 Fad 1044, 1050 (D.C. Cir. 1976) (per

curiam). Accordingly, the affidavit

requirement serves not only to focus the

facts underlying the charge, but to foster

an atmosphere or solemnity commensurate

with the gravity of the claim.

Respondents’ failure to submit affidavits

is thus an independently sufficient basis

to deny their petitions in this respect.

D-9

the Commission's interlocutory opinion

affirming Judge von Brand's participation

in Grolier, supra, and almost ten months

before the start of trial in this case),

Judge von Brand, apparently acting out of

candor and an abundance of cauticn,

disclosed to the parties on the record” the

fact of his prior service to Commissioner

MacIntyre, and recited his "understanding

that none of the respondents * * * would

raise an objection to [his] continuing in

the case on that ground." (Tr. at 242.)

All counsel, including counsel for the

instant petitioners, responded unequivo-

cally that there would be no such objec-

tion. (Id. at 242-43.) The case proceeded

through trial, and, consistent with their

2 The transcript reveals that Judge

von Brand disclosed his prior service off

the record as well. (Tr. at 242).

D-10

statements, respondents did not object to

Judge von Brand's participation. Neither

did respondents object in their appeal

papers before the Commission, or at oral

argument in July, 1979.

The Ninth Circuit's opinion in

Grolier was issued on January 24, 1980;

responddents did not attempt to present a

Grolier-type challenge to Judge von Brand

in this case before the Commission's

decision and order issued on April 30,

1980.

Respondents now urge, for the first

time, that the Ninth Circuit's decision in

Grolier requires the Commission, under the

Constitution, the Administrative Procedure

Act, and the Commission's Rules of

3

Practice” either (1) to disqualify Judge

3 The Court of Appeals' decision in

Grolier involved only an interpretation of

Section 5 (c) of the Administrative

Procedure Act, 5 U.S.C. 554(d) (1976) and

did not purport: to interpret the

Constitution or the Commission's Rules of

D-11

(footnote 3 cont'd.)

Practice; accordingly, it offers no basis

for relief on those grounds.

Respondents' very general assertion

of their right to trial by a “fair and

impartial judiciary" is based upon the due

process clause of the Fifth Amendment.

While we are and must be sensitive to such

considerations, neither will we substitute

our judgment for that of the federal

seeeaaeey noe a Saggy tee Sree

arguendo that Judge von Bran ssesse

some familiarity with the facts of the case

gained through his service to Commissioner

MacIntyre (notwithstanding that Judge von

Brand's tenure as an attorney-advisor

ended four years before issuance of the

complaint), his presiding over the trial

would not constitute a due process

violation. "Mere familiarity with the

facts of a case gained by an agency in the

performance of its statutory role does not

* .* disqualify a decisionmaker."

Bie dedint 2 be Joint School District No. 1 v.

Horton Education Ass'n. 426 U.S. 482, 493

(1976); accord, Withrow v. Larkin, 421 U.S.

35, 47-59 (1975) (contention that combina-

tion of investigative and adjudicative

functions violates due process carries

difficult burden of persuasion); Pangburn

v. CAB, 311 F.2d 349, 358 Cir. 1963)

participate in investigative and adjudi-

cative decisions in the same case. To hold

that Judge von Brand's’ participation

violated the Constitution would thus be to

declare that the Administrative Procedure

Act is constitutionally deficient. Cs.

Withrow _v. Larkin, supra, 421 U.S. at 56

(APA not unconstitutional).

As to the respondents' reference to

the Commission's Rules, they cite none, and

we are aware of none, that might be

relevant.

D-12

von Brand and (a) dismiss the case or (b)

vacate its decision and remand for a new

trial; or (2) to grant discovery in the

form, inter alia, of a deposition from

Judge von Brand and access to Commission

records. In our view, even apart from

estoppel due to respondents’ waiver, there

is an important element—timeliness—pre-

sent in Grolier, but lacking here, which

makes the cases altogether different;

indeed, respondents’ lack of timeliness

bars them from any relief.

"A basic requirement for any dis-

qualification motion is, of course, that it

be presented either at the outset of the

proceeding or immediately after

4 Even if fully applicable, Grolier at

most would require reconsideration by the

Commission. The Ninth Circuit's opinion,

by its terms, requires neither retrial nor

dismissal]. 615 F.2d at 1222.

D-13

ascertainment of the circumstances that

prompt its filing." Xroger Co., Dkt. 9102

(Order filed June 5, 1980, at 2) (quoting 5

U.S.C. 556(b)). See Rules of Practice

Section 3.42(g)(2) (Motion to be filed

"[w] henever" a party deems ALJ

disqualified; also provides for expedited

Commission determination). In this

respect, the Commission's requirements are

consistent with the "general rule

governing disqualification, normally

applicable to the federal judiciary and the

administrative agencies alike," that

disqualification claims must be raised "as

soon as practicable after a party has

reasonable cause to believe that grounds

for disqualification exist." Marcus v.

Director, Office of Wkrs.' Comp. Prog., 548

F.2d 1044, 1051 (D.C. Cir. 1976) (per

curiam) (footnotes omitted) ; accord,

Capitol Transp., Inc. v. United States, 612

F.2d 1312, 1325 (lst Cir. 1979); Duffield

D-14

Vv. Charleston Area Medical Center, Inc.,

503 F.2d 512, 515 16 (4th Cir. 1974)

(collecting cases); Safeway Stores, Inc.

v. FTC, 366 F.2d 795, 802-03 (9th Cir.

1966), cert. denied, 386 U.S. 932 (1967);

R. A. Holman & Co. v. SEC, 366 F.2d 446,

454-55 (2d Cir. 1966), cert. denied, 389

U.S. 991 (1967); Marquette Cement Mfg. Co.

v. FTC, 147 F.2d 589, 592 (7th Cir.),

aff'd, 333 U.S. 683 (1945). See also

United States v. L. A. Tucker Truck Lines,

344 U.S. 33, 38 (1952). The rule of

timeliness requires that a party act as

soon as possible after the facts have

become known. Satterfield v. Edenton-

Chowan Bd. of Ed., 530 F.2d 567, 574 (4th

Cir. 1975) (citing cases); and inaction may

waive a separation-of-functions

disqualification claim, International

Paper Co. v. FPC, 438 F.2d 1349, 1357 (2d

Cir.), cert. denied, 404 U.S.827 (1971);

Democrat Printing Co. v. FPC, 202 F.2d 298

D-15

(D.C. Cir. 1952); see Satterfield v.

Edenton-Chowan Bd. of Ed., Supra; Duffield

v. Charleston Area Medical Center, supra.

Under Section 3.42 (g) (2) of the

Commission's Rules of Practice, a party

"may" choose to present a disqualification

challenge; it need not do so. However, if

it chooses to do so, it must do so promptly

after the facts supporting the charge are

known to it. A disqualification challenge

to an ALJ's participation subsequent to the

Commission's final decision based on

circumstances known to a Party before the

Commission's final decision is not timely.

Capitol Transp., Inc. v. United States,

Supra; International Paper Co. v. FPC,

Supra; Safeway Stores, Inc. vy. FTC, supra.

The reasons supporting such a rule are

manifold. A contrary holding, inter alia,

would allow a party the possibility of

invalidating the proceedings retro-

actively, unilaterally, and at will, if it

D-16

feared or received an unfavorable ruling,

or merely wished to delay the proceedings;

might cause substantial delays, and, if

retrial were required, significant

unnecessary duplication of effort and

expenditure of resources; and might make

determinations of disqualification more

difficult and less certain because of the

passage of time. See generally Marcus v.

Director, Office of Wkrs.* Comp. Prog.,

supra, 548 F.2d at 1050-51; Duffield v.

Charleston Areas Medical Center, supra.

Applying these principles to this

case, it is clear that the facts are

substantially different from those in

Grolier. In Grolier, the respondents in

the Commission's adjudicative proceedings

raised the issue promptly after Judge von

Brand's record announcement of his prior

service as attorney-advisor to

Commissioner MacIntyre; both the ALJ and

the Commission considered the claims

D-17

promptly, during trial and before’ the

closing of the record. Despite the ALJ's

and the Commission's interlocutory rul-

ings, the Grolier repondents pressed their

claim—as was their right—on appeal of the

initial decision to the Commission and on

appeal of the Commission's decision to the

Ninth Circuit. Moreover, the Grolier

respondents never agreed not to present

their disqualification claims.

In this case, Judge von Brand formally

notified the parties on February 23, 1977,

of his prior service to Commissioner

MacIntyre. It is thus clear that, in the

event that respondents did not know of

Judge von Brand's service to Commissioner

MacIntyre as of the time of Judge von

Brand's appointment as an ALJ or as of the

time the Commission issued its

interlocutory order in Grolier in 1976,

they did know of it at least nine months

before trial began. Respondents agreed to

D-18

put forward no objection, and, indeed,

honored that agreement throughout’ the

administrative trial and appeal of this

case. Consistent with the above-cited

authorities, which require timeliness in a

disqualification application, respondents

may not now for the first time raise this

issue.

Of course, respondents do not contend

that their faiiure to object—indeed,

their agreement not to object—was

predicated upon the Commission's 1976

Grolier ruling. Rather, they only suggest,

in an indirect manner, that their failure

to raise the issue at oral argument in

culy, 1979 was based on their reliance on

Grolier. Yet, after the Ninth Circuit's

decision in Grolier, they waited months

before presenting any objection. During

this time, the Commission issued its final

order and opinion. Accordingly, even

assuming that an objection might have been

D-19

timely after the Ninth Circuit's decision

in Grolier, it is untimely now.

Finally, we note that respondents

have not demonstrated or even asserted that

they were prejudiced by any bias or

reliance on extra-record materials by

Judge von Brand; our review of the record

convinces us that Judge von Brand was was

impartial in every respect, that his

decision was thoroughly researched, and

that his meticulous findings and

conclusions were firmly and exclusively

based on the record evidence. Of course,

to the extent respondents challenged Judge

von Brand's’ findings, conclusions, and

proposed order, we undertook an ex-

haustive, independent review. In that

review, we did not find that issues of

demeanor or discretion were especially

important in the determination of the case;

thus, even if it were to be determined that

Judge von Brand was disqualified, our

D-20

decision of April 30, 1980, would not be

void, as respondents have neither

demonstrated nor suggested actual

prejudice from his presiding, and we

5 See Attorney General's

perceive none.

Manual on the Administrative Procedure Act

at 73-74 (1974).

For the foregoing reasons, respon-

dents' motion for reconsideration based

upon Judge von Brand's participation is

denied.

5 Ironically enough, at another point

in this proceeding, Judge von’ Brand

suggested to the parties that it might be

necessary or advisable to have another ALJ

assigned to this case because of his heavy

case load. When asked for his reaction to

this possibility, counsel for Herbert R.

Gibson, Sr., and Herbert R. Gibson, Jr.,

told Judge von Brand "We'd like to keep

you." Tr. at 276.

D-21

Cc.

Finally, respondents assert that the

Commission took various actions in this

adjudication and in the investigation

preceding it at times when the Commission

was without authority and without

appropriated funds, and, consequently,

that the Commission violated the Antide-

ficiency Act. Respondents assert that the

Commission should either declare’ the

entire adjudicatory proceeding void or

remand the proceeding to the Adminis-

trative Law Judge to allow discovery by

respondents as to the Commission acts

performed during periods of lapsed appro-

priations.

The Antideficiency Act, 31 U.S.C.

655(a) (1976), prohibits any government

officer or employee, unless’ expressly

authorized by statute, from incurring any

obligation on the part of the United States

D-22

to pay money in advance of appropriations

for that purpose. Although the

Commission's funding did lapse during

several of the periods listed by

respondents in their petitions for re-

consideration, ° the legal validity of the

Commission's actions is unaffected by the

temporary lapse of appropriations for the

following reasons.

First, actions by Commission emp-

ployees completed prior to the expiration

of appropriations do not create an unfunded

obligation and, therefore, do not result in

a violation of the Antideficiency Act.

6 Contrary to respondents' assertion,

the Commission's funding did not lapse

during the periods July 1-September 30,

1976, and March 12-March 15, 1980. See

Public Laws 94-121 and 96-123,

respectively. The former period, in

particular, related not to a lapse in

funding, but to a change in the United

States Government's fiscal year.

D-23

Second, even if a Commission action on

the Gibson matter was not completed prior

to the expiration of appropriations and,

therefore, were to be interpreted as

incurring a Commission obligation, such

action was ratified by Congress when the

Commission's funding was made retroactive

either explicitly or implicitly to the

start of the period of lapsed

7 As noted in the recent

appropriations.

opinion letter of the Attorney General, on

which respondents rely, such a

ratification has the effect of providing

legal authority for agency actions, even

where there was none before. Letter from

Attorney General Benjamin Civiletti to

President Jimmy Carter (April 25, 1980).

Thus, even assuming that respondents have

7 See Public Laws 93-118, 93-124, 93-

448, 93-563, 95-431, 96-86, and 96-219.

D-24

standing to challenge the Commission

8 none of the Commissions's ac-

actions.

tivities has been invalidated by the

Antideficiency Act.

In this respect, too, therefore, the

petitions for reconsideration are denied.

8 Neither the Antideficiency Act

itself nor its legislative history or

scheme suggests that private persons are to

be afforded a remedy under the Act. The

language of the statute specifies that a

government officer or employee who

violates Sections 665(a) or (b) of the Act

will be subjected to administrative and/or

criminal penalties. 31 U.S.C. 665(i) (1).

Moreover, the legislative history clearly

indicates that the intended beneficiary of

the regulatory scheme was Ccngress; the

statutory scheme was designed to require

the careful apportionment by Federal

agencies of the funds distributed by

Congress and thereby ensure the efficient

administration of the government's

business.

D~25

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX E

ALJ'S OPINION AND

ORDER OF

FEBRUARY 26, 1979

95 FTC 553-721

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX E

ALJ'S OPINION AND

ORDER OF

FEBRUARY 26, 1979

95 FTC 553-721

ALJ'S OPINION AND ORDER OF

FEBRUARY 26, 1979

95 FTC 553-721

[ID, pp. 164-165]

420. On a number of occasions, H. R.

Gibson, Sr. visited the office of Jim

Miller in connection with Ray-O-Vac

(Miller 3132). On such visits, Gibson, Sr.

negotiated deals with Miller and Barshell

to pay Gibson or the Gibson Trade Show

promotional allowances based on sales and

the activities Gibson performed to sell

Ray-O-Vac products to the Gibson stores

(Miller 3132). 96/

96/

Q. Now, when you are referring

to Gibson, who are you

speaking of?

A. Well, that would be Mr.

Gibson, SE.» or Gibson

Trade Show. Because it

was, you know,’ kind of

interwoven there. We

really never knew who we

were dealing with (Miller

3132).

E-1

The basis of such payments to

Gibson, Sr. by Barshell, pertaining to Ray-

O-Vac (Miller 3132-33), varied:

Well, it would just depend.

Mr. Gibson, was never consistent

with that. It would depend on

what he felt like he did for you.

If he had written a general

order, where he had _ insisted

that the stores, or suggested

that the stores buy a certain

quantity of merchandise, and if

this order amounted to a hundred

thousand dollars, he would

expect more from the agency than

he would if you had solicited the

business yourself from’ those

stores (Miller 3133).

421. Ray-O-Vac automatically sent

commission statements to Barshell (Miller

3134). The commission statements recorded

all of Ray-O-Vac's shipments to the

individual Gibson stores, showing the

dollar volume figures, such statements

showed the commission which Barshell had

earned through those sales (Miller 3134).

Gibson, Sr. checked Barshell's commission

Statements received from Ray-O-Vac_ in

E-2

connection with his visits to Miller

concerning Barshell's activities for that

supplier (Miller 3132-33).

422. After Gibson, Sr. had checked

Ray-O-Vac's commission statements, Bar-

shell made payments to Gibson, Sr., termed

promotional allowances, on the basis of

Ray-O-Vac sales recorded in such

commission statements (Miller 3132-35).

CX 192, a Barshell check in the amount of

$13,173.43, dated September 23, 1972, is

one such payment (Miller 3134-35). 97/

97/ The check is made out to H, R. Gibson,

and endorsed "H. R. Gibson dba Gibson

Products Company" (CX 192). The witness

testified:

JUDGE von_ BRAND: All

right. Where did the commission

statement originate?

THE WITNESS: They would

Originate with the Ray-O-Vac

Company. They would be sent to

us automatically.

JUDGE von BRAND: Proceed:

(A paper was marked for

identification as Commission's

Exhibit No. 192.)

E-3

423. CX 192 is a check transmitting

brokerage fees by Barshell, received from

Ray-O-Vac, to H. R. Gibson, Sr. (Miller

3132-35, 3140, 3147-48) 98/ at a time when

Gibson, Sr. was owner and operator of

various retail stores or, in short, a buyer

from Ray-O-Vac (Findings 5, 6).

(footnote 97 cont'd)

By Mr. Brookshire:

Q. Mr. Miller, I hand you what

has been marked as CX-192

for identification. And I

ask if you can identify

that document, please, sir?

A. Yes. This is a check drawn

on North Central State Bank

on Barshell, Incorporated,

dated 9-23-1972, in the

amount of $13,173.43.

Q. What was the purpose of

that check?

A. This would have been pro-

motional allowance given to

Gibson for whatever group

of commission statements or

activity covered for a

period of time with Gibson

(Tr.3134-35).

Q. Mr. Miller, referring to a

document which has_ been

identified, or been

E-4

7

(footnote 98 Gont

EF inte evidence as

CX-192, were there ever any

other checks issued under

the same or similar

circumstances by Barshell?

Yes.

To who?

To Gibson. Mr. Gibson, Sr.

Do you recall wh.ther or

not such checks were issued

in 1971?

I would have to assume that

they were, Offhand, I

don't recall. I would have

to assume, yes, depending

upon what time of the year

that Barshell took over the

representation of Ray-O-

Vac.

How often were these checks

payable?

Well, most of the time, it

would depend upon when Mr.

Gibson came by and sat down

to negotiate with us. And

that could be anywhere

from, usually every other

month, to three or four

months (Tr. 3140).

{ID, p. 199]

Respondents urge that the payments in

question fall within the “except for

services rendered" proviso of Section 2(c)

and that a showing of price discrimination

is prerequisite to finding a violation of

this section (RPF Sr. pp. 139, 142).

These contentions require analysis’ in

light of FTC v. Henry Broch & Co., 363 U.S.

166 (1966), and succeeding cases.

Respondents’ reliance on the "except for

services rendered" proviso is misplaced.

Gibson, Sr. received such payment in 1972

from Barshell as a buyer, before he had di-

vested himself of his retail assets. The

services he rendered in connection with the

trade show were, in effect, rendered for

himself and, thus, not cognizable under the

exception. The fact that the supplier may

also have benefited is immaterial.

Southgate, 150 F.2d at 610.

E-6

[ID, pp. 201-202]

In summary, developments under Sec-

tion 2(c) since Broch do not warrant an

exception to the rule of Southgate in this

proceeding.

Even if the “except for services

rendered" proviso were available under

these circumstances, the burden would

still be on respondents to establish it.

The provision would become a sham unless

those seeking to take advantage of it

established the value in concrete terms of

the services rendered in relation to the

commission payments received. In addition

to a claim that brokerage was paid for

services rendered, there must be a showing

that the distribution costs saved

justified the amount of the allowance. No

such showing has been made here and

respondents' reliance on the provision is

rejected. 124/

24/

Implicit in the Broch dicta concern-

E-7

(footnote 124 cont'd.)

ing the “except for services rendered"

proviso is a requirement that the party

asserting the defense demonstrate that the

services in question gave rise _ to

sufficient cost savings to warrant the

reduction in brokerage. In this connec-

tion, the Court stated in pertinent part:

We are asked to distinguish

these precedents on the ground

that there is no claim by the

present buyer that the price

reduction, concededly based in

part on a saving to the seller of

part of his regular brokerage

cost on the particular sale, was

justified by the elimination of

services normally performed by

the seller or his broker. There

is no evidence that the buyer

rendered any services to_the

seller or to the respondent nor

that anything in its method of

dealing justified its getting a

scriminatory price by means of

a reduced brokerage charge. We

would have quite a aiitecent

case if there were such evidence

and we need not explore the

applicability of § 2(c) to such

circumstances. One thin is

clear -- the absence of such

evidence and the absence of a

Claim that the rendition of

services or savings in_ dis-

tribution costs justified the

allowznce does not support the

view Ejat § 2 {c) has not been

lolated (emphasis added).

E-8

The Supreme Court's Broch decision

does not stand for the proposition that

price discrimination is prerequisite to a

finding of violation in each Section 2(c)

case. The prior Supreme Court decision in

FTC v. Simplicity Pattern Co., 360 U.S. 55

(1959), distinguishing Sections 2(c), (d)

and (e) from the pricing provisions of the

Act, indicates that Broch imposed no

universal requirement that price

discrimination must be proven in each 2(c)

case. As the Court stated, while holding

Section 2(b) inapplicable in a 2(e)

proceeding:

Subsections (c d and

(e), on the other hand,

ungualifiedl make unlawful

certain business practices other

than price discriminations. * *

*'In terms, the proscriptions of

these three subsections are

absolute. Unlike § 2(a), none of

them requires, as proof of a

prima facie violation, a showing

that the illicit practice has

had an injurious or destructive

effect on competition (emphasis

added).

360 U.S. at 65.

Neither the text of Section 2(c) nor

the statutory context of that section

requires that it be limited to instances of

price discrimination. Rangen Inc., 351

F.2d at 856. In light of Broch, the

element of price discrimination may be

helpful under certain circumstances in

determining whether a payment was made in

"lieu of brokerage." However, the holding

on this point does not apply to cases, such

as the instant proceeding, involving the

outright payments of unearned brokerage by

a seller's broker to a buyer. As the Ninth

Circuit held in Rangen:

There has been some

speculation that the Broch case

may have super imposed a

requirement of price

discrimination on section 2(c).

Rowe, Price Discrimination Under

the Robinson-Patman Act 344-45

(962); Federal Trade Comm'n v.

Henry Broch & Co., 363 U.S. 166,

189, 80 S. Ct. 1158 (dissenting

opinion). However, discrimina-

tion was used in Broch to deter-

mine if the price arrangement

was an “in lieu" of brokerage

E-10

transaction;and, although dis-

crimination would appear now to

be relevant in reduced-com-

mission cases, it does not

follow that it is now an essen-

tial element in cases involving

the outright payment of unearned

brokerage.

351 F.2d at 858.

E-11

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX F

5TH CIRCUIT JUDGMENT

AUGUST 13, 1982

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX F

5TH CIRCUIT JUDGMENT

AUGUST 13, 1982

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 80-1743

FTC Docket No. 9015

HERBERT R. GIBSON, JR., ET AL.,

Petitioners

versus

FEDERAL TRADE COMMISSION,

Respondent.

No. 80-1746

H. R. GIBSON, SR., ET AL.,

Petitioners,

versus

FEDERAL TRADE COMMISSION,

Respondent.

Petitions for Review of a Final Order of

the Federal Trade Commission

Before BROWN, COLEMAN and RUBIN, Circuit

Judges.

JUDGMENT

These causes came on to be heard

on the petitions of Herbert R. Gibson,

Jr., et al. and H. R. Gibson, Sr., et

al. for review of a final order of the

F-1

Federal Trade Commission of the United

States, and were argued by counsel;

ON CONSIDERATION WHEREOF, It is now

here ordered and adjudged by this Court

that the final order of the Federal Trade

Commission in these causes be and the same

is hereby, affirmed and enforced;

IT IS FURTHER ORDERED that peti-

tioners pay to respondent the costs on

appeal, to be taxed by the Clerk of this

Court.

AUGUST 13, 1982

ISSUED AS MANDATE: SEP 23 1982

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX G

5TH CIRCUIT ORDERS

DENYING REHEARING AND

REHEARING EN BANC

SEPTEMBER 13, 1982

688 F2d 840

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX G

5TH CIRCUIT ORDERS

DENYING REHEARING AND

REHEARING EN BANC

SEPTEMBER 13, 1982

688 F2d 840

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO, 80-1746

H. R. GIBSON, SR., ET AL.,

Petitioners,

versus

FEDERAL TRADE COMMISSION,

Respondent.

Petition for Review of an Order of the

Federal Trade Commission.

ON PETITION FOR REHEARING AND SUGGESTION

FOR REHEARING EN BANC —

(Opinion August 13, 5 Cir.,1982, F.2d__)

(SEPTEMBER 13, 1982)

Before BROWN, COLEMAN and RUBIN, Circuit

Judges.

PER CURIAM:

The Petition for Rehearing is DENIED and no

member of this panel nor Judge in regular

active service on the Court’ having

requested that the Court be polled on

rehearing en banc, (Rule 35 Federal Rules

G-1

of Appellate Procedure; Local Fifth

Circuit Rule 16) the Suggestion for Re-

hearing En Banc is DENIED.

ENTERED FOR THE COURT: CLERK'S NOTE:

SEE RULE 41 ~

/s/ JOHN R. BROWN FRAP AND

UNITED STATES CIRCUIT LOCAL RULE 17

JUDGE FOR STAY OF

MANDATE

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX H

TESTIMONY

OF

JAMES S. MILLER

FEBRUARY 16, 1978

PETITION

FOR

CERTIORARI

H. R. GIBSON, SR. AND BELVA GIBSON

V.

FEDERAL TRADE COMMISSION

APPENDIX H

TESTIMONY

OF

JAMES S. MILLER

FEBRUARY 16, 1978

TESTIMONY OF JAMES S. MILLER BEFORE ALJ

THEODORE P. VON BRAND—FEB. 16, 1978

(TR-3132)

Q. Were there any visits made by Mr.

Gibson concerning Ray-O-Vac?

A. Yes.

Q. What were those visits concerning?

A. Most of the time, it would be to

negotiate a deal with me--I mean, with

Barshell--to pay Gibson for activities

concerning the Gibson stores.

Q. When you say, "to pay Gibson for

activities concerning the Gibson stores,"

what do you mean?

A. Well, we were required by Gibson to

pay him promotional allowances, based on

sales and the amount of activity that he

would perform, in order to sell Gibson

stores.

Q. Now, when you are referring to Gibson,

who are you speaking of?

A. Well, that would be Mr. Gibson, Sr.,

or Gibson Trade Show. Because it was, you

know, kind of interwoven there. We really

never knew who we were dealing with.

Q. You indicated that you, on occasions,

paid Mr. Gibson in connection with your

activities with Ray-O-Vac.

(TR-3133)

A. Correct.

Q. What were these payments based on?

A. Well, it would just depend. Mr.

Gibson was never consistent with that. It

would depend on what he felt like he did

for you.

If he had written a general order,

where he had insisted that the stores, or

suggested that the stores buy a certain

quantity of merchandise, and if this order

amounted to a hundred thousand dollars, he

would expect more from the agency than he

would if you had solicited the business

yourself from those stores.

Q. Was there any method by which he made

a determination as to how much he might

feel was right?

A. Well, that ranted all the way from

zero to the top.

Q. Did you keep any records that might

indicate any amounts that you had sold?

A. Well, we always had those records

available because we had, of course, a

monthly commission statement from the

factory. So, we always had those avail-

able.

Q. Were they ever checked by Mr. Gibson?

A. Yes, they were.

Q. After Mr. Gibson had checked these

commission statements that you have indi-

cated, were there any payments made?

A. Yes.

Q. How were the payments made?

(TR-3134]

A. By check.

JUDGE von BRAND: All right.

Would you just tell me, what is a

commission statement?

THE WITNESS: Yes. A commission

statement is usually an IBM computation,

recording all of the factories’ shipments

to the individual Gibson stores, whereby it

shows the dollar volume that was shipped to

those stores. And then, along the size

that dollar volume, it would reflect the

commission which we had earned through

those sales.

JUDGE von BRAND: All right.

Where did the commission statement

originate?

THE WITNESS: They would origi-

nate with the Ray-O-Vac Company. They

would be sent to us automatically.

JUDGE von BRAND: Proceed.

(A paper was marked for identi-

fication as Commission's Exhibit No. 192.)

By Mr. Brookshire:

Q. Mr. Miller, I hand you what has been

marked as CX-192 for identification. And I

ask if you can identify that document,

please, sir?

A. Yes. This is a check drawn on North

Central State Bank on Barshell, Incor-

porated, dated 9-23-1972, in the amount of

$13,173.43.

Q. What was the purpose of that check?

(TR-3135)

A. This would have been promotional

allowance given to Gibson for whatever

group of commission statements or activity

covered for a period of time with Gibson,

MR. BROOKSHIRE: Your Honor, I

request CX Exhibit 192 for identification

be admitted into evidence.

MR. STEELE: No objection.

JUDGE von’ BRAND: Cx-192 is

received.

(The document previously marked

as Commission Exhibit 192 was received in

evidence.)