Opposition — Brown & Williamson Tobacco Corp. v. Federal Trade Commission

Office - Supreme Court, U.S

FILED

FE@ 22 104

ALEXANDER L. STEVAS

No. 83-1010

In the Supreme Court of the Hnited States

OCTOBER TERM, 1983

Brow’ & WILLIAMSON TOBACCO CORPORATION,

PETITIONER

v.

FEDERAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

BRIEF FOR THE FEDERAL TRADE COMMISSION

IN OPPOSITION

Rex E. Lee

Solicitor General

Department of Justice

Washington, D.C. 20530

202) 633-2217

JOHN H. CARLEY

General Counsel

Jerotp D. CUMMINS

Deputy Assistant General Counsel

Federal Trade Commission

Washington, D.C. 20580

QUESTION PRESENTED

Whether, in an action for jnjunctive relief in which

further fact-finding is not necessary to resolve the issues, a

court of appeals may finally determine the merits of the

action on review of the district court's judgment denying a

preliminary injunction and dismissing the complaint on

jurisdictional grounds.

(1)

TABLE OF CONTENTS

Page

se ce eek abenle eke nehe s saéneenwe ne l

i Un tana eae ke beres och eeeeetenese un l

Statutory provisions involved ....... cece eee eens 2

ee aS Ae ceweah 66 im 050.04 <0 6 3 2

Dt. cee. tinds sen enceeewewewseesseeanes 9

CCC CCLE ches cas é ae es anne neend sabe ee 15

TABLE OF AUTHORITIES

Cases:

Abbot Laboratories vy. Gardner,

Ee sects Cates she weenneneee 6, 12

Aerojet-General Corp. v. American

Arbitration Ass'n, 478 F.2d 248 ......6.00 0 10

Athlone Industries v. Consumer Prod.

Safety Comm'n, 707 F.2d 1485 .........00es 11

ee OE OO EOD sc Shawesceeceescc 13

Castner v. Coffman, 178 U.S. 168 .........5.. 10

CES Publishing Corp. v. St. Regis Publications,

EE <ciccbecebeene econ (euec ne 10

Dandridge vy. Williams, 397 U.S. 471 ........4. 10

Deckert v. Independence Shares Corp.,

de irs gs sche eekeesbenawe 10

Denver v. New York Trust Co.,

i eee ch iesakahen he weee-ve 10

Dunlop v. Bachowski, 421 U.S. $60 ........... 13

(111)

IV

Cases—Continued:

Friarton Estates Corp. v. City of New York,

ke Ler reer err er eee 10

FTC v. Brown & Williamson Tobacco Co.,

1983-2 Trade Cas. (CCH) para. 65,662

(Oct. 14, 1983); Order and Judgment, Civil

Action No. 83-1940 (D.D.C. filed Oct. 25,

1983), appeal docketed No. 83-2129 (D.C.

Cir, Oct. 28, 1983); motion for stay denied

Ce Gt es Fe RE Geeceubastececes 8-9, 14

Grosso v. United States, 390 U.S. 62 .......45. 11

Harriman vy. Northern Securities Co.,

Se a aa hc dK KAAS ooh R a wees ends 10

Harron vy. United Hospital Center, Inc.,

§22 F.2d 1133, cert. denied, 424 U.S. 916..... 10

Hurwitz vy. Directors Guild of America,

Inc., 364 F.2d 67, cert. denied, 385 U.S.

3 Re Pee ny ene ae re ey eee aT 9

Independent Bankers Ass'n v. Heimann,

613 F.2d 1164, cert. denied, 449 U.S.

ee A ee ey er Pee ee eye 11

Independent Broker- Dealers’ Trade Assn v.

SEC, 442 F.2d 132, cert. denied, 404 U.S.

GE scbwectsanvacsscascvaavahse cians anns 1]

Mast, Foos & Co. v. Stover Mfg. Co.,

ioe = Sr eer rey errr a 10

Mercury Motor Express, Inc. v. Brinke,

i IRR ey a ag ee acre 9

Metropolitan Water C o. Vv. Kaw Valley

Drainage District, 223 U.S. $19 .........0 00s 10

Page

Cases—Continued:

National Automatic Laundry & Cleaning Council

V, See Me Fe OP cnuncccus canaveeuecas 1]

National Wildlife Federation v. Snow,

PEW Tue? SN cate dbasaudcceuaeeevaecusvees 11

Scarlett v. Seaboard Coast Line R.R.,

CT SUE enedecvacewavuatenaveadaeceks 9

Smith v. Vulcan Iron Works, 165 U.S.

PEE -wcducebaget es seeks sweeebiueeuentae 9-10

Tampa Suburban R.R., In re, 168 U.S. 583 ...... )

United States vy. American Railway Express

Cis See ers ME 6k oan cs.cnbs une hek Nkeaas 10

United States v. Bianchi & Co.,

SUPA PU oeeebelcusteuecuudetdasaanen 13

United States v. Stauffer Chemical Co.,

No. 82-1448 (Jan. 10, 1984)... .... ce eee eee 14

United States Fidelity Co. v. Bray,

Se Se A WEA nabs ou RRR RAG ene Reenees 10

Statutes:

Administrative Procedure Act, 5 U.S.C.

POPUP ockdeucaskcunesadicekeekesvcaees 2

FU ee cause vevecnesseuncaweeye 5, 11

FU Seen Watnudenecneeevteeuseeusen 7

Mliaes PE 6 64.0.6 k ck bdo deadlines ca uen aoe 5

DF Was FE A hace duane cucdbeanuenebeouus 5

> UBER, FRU 0c escccesinuauns 5, 11, 12

VI

Statutes—Continued:

Federal Trade Commission Act, § 5,

1S U.S.C. cccccccceccccsccccesseees

2B U.S.C. 2106 wn ccccccccccccccccceccces

Miscellaneous:

48 Fed. Reg. (1983):

9 Moore, Ward & Lucas, Moore's Federal

Braction (26 66. TGS). cccccccscccccess

16 Wright, Miller, Cooper & Gressman,

Federal Practice and Procedure

CIDTT) .cccccccccccccecccccccsceccesss

Jn the Supreme Court of the Hnited States

OCTOBER TERM, 1983

No. 83-1010

BROWN & WILLIAMSON TOBACCO CORPORATION,

PETITIONER

Vv.

FEDERAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

BRIEF FOR THE FF DERAL TRADE COMMISSION

I) OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. B1-B28) is

reported at 710 F.2d 1165. The order of the court of appeals

denying petitioner's request for rehearing (Pet. App. D!-

D3) is reported at 717 F.2d 963. The opinion of the district

court (Pet. App. C1-C6) is not reported.

JURISDICTION

The judgment of the court of appeals was entered on June

24, 1983. A petition for rehearing was denied on September

19, 1983 (Pet. App. DI-D3). The petition for a writ of

certiorari was filed on December 16, 1983. The jurisdiction

of this Court is invoked under 28 U.S.C. 1254(1).

(1)

2

STATUTORY PROVISIONS INVOLVED

Pertinent provisions of the Administrative Procedure

Act, 5 U.S.C. 551 et seg. are set forth at Pet. App. E1-E6.

STATEMENT

1. Since 1967, the Federal Trade Commission has con-

ducted a testing program to analyze and report the tar and

nicotine yield of the various brands of cigarettes sold in the

United States, The tests, which utilize a smoking machine,

are designed to determine the amount of tar and nicotine

that a hypothetical smoker would receive if that person

smoked cigarettes under specific standardized conditions.

The purpose of the testing method is to provide an objective

and comparative basis for assessing the relative amounts of

tar and nicotine that cigarettes will deliver when each is

smoked in the same way (Pet. App. B1-B2). Since 1971, the

leading cigarette companies voluntarily have disclosed in

advertising the tar and nicotine data pertaining to their

cigarettes, derived either from the most recently published

FTC test results or from their own tests applying the FTC

method (Pet. App. B2).!

2. In January 1981, petitioner Brown & Williamson

Tobacco Corporation introduced a new cigarette brand—

“Barclay.” Petitioner heavily promoted Barclay as a

cigarette that contained only | mg. tar (Pet. App. C3). The

R. J. Reynolds Tobacco Company, later joined by a

number of other cigarette manufacturers, complained to

the Commission that the claim that Barclay cigarettes con-

tained only | mg. tar was inaccurate. They asserted that the

filter used in the Barclay cigarette is unlike other filters,

because when it is smoked between human lips, its air

'The Commission had commenced a rulemaking proceeding in 1970

to require disclosures in advertising of the FTC tar and nicotine figures.

The rulemaking was suspended when the companies agreed voluntarily

among themselves to disclose this information (Pet. App. B2).

3

ventilation system inevitably is obstructed, causing the

Cigarette to deliver disproportionately more tar and nico-

tine than other comparably rated cigarettes.2 The FTC's test

machine did not reproduce this obstruction. Thus, the other

cigarette manufacturers claimed, the FTC test method did

not accurately rate the Barclay (Pet. App. B3).

The Commission commenced an inquiry to determine if

the Barclay cigarette was accurately rated by the FTC test-

ing methodology. It solicited comments and evidence on

this question from all the cigarette companies. Petitioner

participated fully in the Commission’s inquiry, presenting

evidence to support its own contentions and commenting

upon studies performed by others (Pet. App. B14-B17).

To assist in evaluation of the evidence, the Commission

selected three consultants, each of whom is a respected

expert in the chemistry or use of tobacco. None was con-

nected with any cigarette company. The three experts ana-

lyzed the extensive data and tests on the Barclay that were

submitted to the Commission by petitioner and other

cigarette companies. Working independently, each scientist

arrived at the same ultimate conclusion: that the Barclay

Cigarette is not properly rated by the FTC testing methods

and that when smoked by humans, it yields substantially

?The court of appeals explained (Pet. App. B3):

Cigarette manufacturers have traditionally lowered the “tar”

content of cigarettes by allowing air to be mixed with the smoke to

dilute the intensity of the smoke. Most low “tar” cigarettes have a

filter surrounded by porous paper with one or more rows of small

ventilating holes encircling the filter which allow air into the

smoke channel. The Barclay cigarette, however, has four length-

wise channels to conduct the air from the ventilating holes directly

into the mouth. The air does not mix with the smoke until both are

in the smoker's mouth. The amount of air dilution in the Barclay

cigarette may be reduced if the smoker crushes or blocks channels

with his lips.

4

more tar than other cigarettes rated | mg. tar. Their esti-

mates of the proper tar rating for the Barclay ranged

between 3 mg. and 7 mg. (Pet. App. B15, B17-B18).

After reviewing the evidence and the reports of the three

scientists, the Commission, on June 25, 1982, issued a press

release announcing the following determinations (Pet. App.

B2):

(1) the present FTC testing methodology does not

accurately assess the tar and nicotine yields of Barclay

cigarettes, and the Commission will not accept the test

results based on the current methodology as substanti-

ation for claims made about the tar and nicotine con-

tent of Barclay cigarettes;

(2) a prior FTC report stating that the tar yield of

the Barclay cigarette is | mg. was inaccurate, and the

report would be amended to omit Barclay’s rating; and

(3) pending a revision in the test methodology to

provide for an accurate measurement of the Barclay

yield, future FTC reports would not include test results

for Barclay cigarettes.

At the same time, the Commission informed petitioner

that it intended to publish this information ina notice in the

Federal Register and to request public comment on several

issues, including how to modify the FTC testing methodol-

ogy (Pet. App. B3).

3. After the Commission's announcement, petitioner

immediately commenced this action in the United States

District Court for the Western District of Kentucky to

enjoin the Commission, temporarily and permanently,

from: (1) amending its most recent tar and nicotine report

to delete Barclay’s | mg. tar rating; (2) refusing to continue

to test Barclay by its present test methodology or to publish

the results of such tests in future reports; and (3) prohibiting

5

petitioner from relying on the Commission's present test

methodology to substantiate tiie claim that Barclay is a |

mg. tar cigarette. The complaint alleged that the Commis-

sion’s determinations of June 25, 1982, amounted to sub-

stantive rulemaking and were in violation of the rulemaking

requirements of the Administrative Procedure Act (APA),

5 U.S.C. 553, because the Commission had not provided

notice and an opportunity for comment. The complaint

also alleged that the Commission’s actions were arbitrary,

capricious, an abuse of agency discretion, and not sup-

ported by the evidence before the Commission at the time of

its action, and therefore should be set aside under 5 U.S.C.

706(2)(A) (Pet. App. F12). The district court issued a tem-

porary restraining order to maintain the status quo until it

ruled on petitioner's application for a preliminary injunc-

tion (Pet. App. B3-B4).

Petitioner’s motion for preliminary injunction and the

Commission's opposition were submitted to the district

court, after oral argument, on the basis of affidavits and

exhibits. Included in the documents before the court was

the entire administrative record — the written submissions

to the Commission from the cigarette companies (including

petitioner), the test data and studies that were before the

Commission, and the reports of the Commission's consul-

tants.

The district court held that the Commission’s determina-

tions were not “final agency action” and for this reason were

not reviewable under 5 U.S.C. 702 and 704. The court

The district court, over Commission objections, placed the exhibits

constituting the administrative record under seal (Pet. App. B4).

6

therefore denied preliminary relief and dismissed the com-

plaint (Pet. App. C1-C6).4

4. a. Thecourt of appeals held that the district court had

erred in dismissing the complaint on jurisdictional grounds,

and it entered judgment for the Commission on the merits

(Pet. App. BI-B19).5 The court of appeals ruled that under

the principles of ripeness enunciated in Abbott Laborato-

ries v. Gardner, 387 U.S. 136 (1967), the Commission's

June 25, 1982 announcement constituted final agency

action appropriate for judicial review. In reaching that

conclusion, the court noted, inter alia, that petitioner's

challenges raised legal issues that could be determined

without further fact-finding proceedings before the agency

(Pet. App. B10), that petitioner would suffer substantial

hardship if judicial resolution of its complaint were delayed

until the Commission instituted an enforcement proceeding

(id. at B10-B11), and that the public interest would be

served by a resolution of the dispute Without further delay

(id. at B11).

After concluding that the matter was ripe for judicial

review and concluding that a remand “would entail further

delay,” the court decided “in the interest of judicial

‘The district court did issue an irjunction pending appeal, the effect

of which was to prevent the Commission from publishing its proposed

notice in the Federal Register and from taking any enforcement action

against the | mg. tar claim made in petitioner's advertising for Barclay

cigarettes. Shortly after oral argument before the court of appeals, that

court, on April |, 1983, dissolved the injunction, ruling that even if the

Commission's determinations constituted reviewable agency action,

petitioner had not shown that it was likely to succeed on the merits of its

complaint (Pet. App. B4).

‘The court also vacated the district court's orders sealing the record

(Pet. App. B19-B28). See note 3, supra.

:

economy to reach the merits of this case” (Pet. App. B12)

(footnote omitted). On the merits, the court rejected peti-

tioner’s claims under the APA because, even if it is assumed

that the Commission’s actions amounted to substantive

rulemaking subject to notice and comment requirements,

petitioner had received ample notice and opportunity to

comment on the Commission's proposed action (Pet. App.

B12-B17). See 5 U.S.C. 553(b). In addition, the court of

appeals found that the Commission's June 25, 1982 deter-

minations were fully supported by “overwhelming evidence

[before the Commission] that Barclay was inaccurately

being reported as a | mg. ‘tar’ cigarette” (Pet. App. B18).

The court of appeals also concluded that the Commission’s

actions based on this evidence were not arbitrary and capri-

cious, observing that “the FTC appropriately took action to

halt the dissemination of misleading and incorrect statistics

to the public” and that the Commission appropriately

treated Barclay cigarettes differently “for legitimate and

well-documented reasons” stemming from the cigarettes’

“unique filter construction” (id. at B18-B19).

b. Petitioner then moved for reconsideration, arguing

that the panel had exceeded the scope of appropriate appel-

late review by deciding the merits of the case rather than

simply reversing the district court’s dismissal on jurisdic-

tional grounds and remanding for further proceedings. The

court of appeals denied the petition for reconsideration

(Pet. App. D1I-D3). It pointed out that an appeal from a

denial of injunctive relief brings the whole record before the

appellate court and that the scope of review may extend to

all matters appropriately raised by the record, including

*The court's decision to reach the merits was consistent with the

positions of the parties below. Both the Commission and petitioner had

argued that further fact-finding proceedings before the district court

were unnecessary to decide the issues presented. See, e.g., Pet. App.

F19-F21; Appellee Br. 29 n.17.

8

entry of final judgment. The court also noted that petition-

er’s argument that it lacked such power in this case because

further fact-finding procedures were necessary was in

“striking inconsistency” with the position that petitioner’s

counsel had taken in their briefs and in oral argument (Pet.

App. D2-D3).

5. After the court of appeals vacated the district court’s

injunction pending appeal on April 1, 1983, the Commis-

sion published a notice in the Federal Register deleting the

values listed for Barclay cigarettes in past reports. 48 Fed.

Reg. 15953 (Apr. 13, 1983), clarified, 48 Fed. Reg. 22992

(May 23, 1983). The Commission also notified petitioner

that it would consider continued advertising claims that

Barclay contained | mg. tar to be a deceptive practice under

Section 5 of the Federal Trade Commission Act, 15 U.S.C.

45. Petitioner nevertheless continued to state in its advertis-

ing that Barclay cigarettes contain only | mg. tar. The

Commission therefore filed suit for injunctive relief on July

7, 1983 in the United States District Court for the District of

Columbia. After expedited discovery and a six-day trial, the

district court found the “I mg. tar” claim deceptive and

permanently enjoined petitioner from promoting Barclay

cigarettes with any claim of a specific milligram tar rating

unless that rating is approved by the Commission or is

established using a testing methodology approved by the

Commission. The district court did, however, permit peti-

tioner to represent in advertising that Barclay is “99% tar

free” or “ultra low tar.” FTC v. Brown & Williamson

Tobacco Co., 1983-2 Trade Cas. (CCH) para. 65,662 (Oct.

14, 1983); Order and Judgment, Civil Action No. 83-1049

(D.D.C. filed Oct. 25, 1983), appeal docketed, No. 83-2129

(D.C. Cir. Oct. 28, 1983). On November 7, 1983, the United

States Court of Appeals for the District of Columbia Cir-

cuit denied petitioner's request for a stay pending appeal,

9

concluding that petitioner “ha[d] utterly failed to demon-

strate any likelihood of ultimately succeeding on the merits

of its appeal.” Slip. op. 2.

ARGUMENT

The court of appeals’ decision to enter final judgment on

the merits of petitioner's substantive claims was a valid and

proper exercise of its appellate jurisdiction. The administra-

tive record was before the court, and, as petitioner had

acknowledged, further fact-finding was unnecessary to

decide the merits. In these circumstances, the decision pre-

sents no conflict with any decision of this Court or another

court of appeals. Nor is there any other reason for further

review, especially in light of the six-day trial petitioner

received on matters pertaining to its Barclay cigarette in the

separate action filed by the Commission in the District of

Columbia.

1. Although a reviewing court usually will decide only

those issues which were decided by the lower court and

which are necessary to dispose of an appeal, it long has been

recognized that this rule is not jurisdictional. Jn re Tampa

Suburban R.R., 168 U.S. 583, 588 (1897); Scarlett v. Sea-

board Coast Line R. R., 676 F.2d 1043, 1052 (Sth Cir. 1982);

Mercury Motor Express, Inc. v. Brinke, 475 F.2d 1086,

1091 (Sth Cir. 1973); Hurwitz v. Directors Guild of Amer-

ica, Inc., 364 F.2d 67, 70 (2d Cir.), cert. denied, 385 U.S. 971

(1966); 9 Moore, Ward & Lucas, Moore's Federal Practice

para. 110.25[{1], at 273 (2d ed. 1983) (“{[O]nce a case is

lawfully before a court of appeals, it does not lack power to

do what plainly ought to be done.”).’ And it has been clear

"See also 28 U.S.C. 2106 (emphasis added):

The Supreme Court or any other court of appellate jurisdiction

may affirm, modify, vacate, set aside or reverse any judgment,

decree, or order of a court lawfully brought before it for review,

and may remand the cause and direct the entry of such approp-

riate judgment, decree, or order, or require such further proceed-

ings to be had as may be just under the circumstances.

10

since Smith v. Vulcan Iron Works, 165 U.S. 518, 524-525

(1897), that, as stated in Metropolitan Water Co. v. Kaw

Valley Drainage District, 223 U.S. 519, 523 (1912), “on

appeal from a mere interlocutory order the Circuit Court of

Appeals might direct the bill to be dismissed if it appeared

that the complainant was not entitled to maintain its suit.” ®

See also Deckert v. Independence Shares Corp., 311 U.S.

282, 287 (1940); Denver v. New York Trust Co., 229 U.S.

123, 136 (1913); United States Fidelity Co. v. Bray, 225

U.S. 205, 214(1912); Harriman v. Northern Securities Co™;

197 U.S. 244, 287 (1905); Castner v. Coffman, 178 U.S.

168, 183-184(1900); Mast, Foos & Co. v. Stover Mfg. Co.,

177 U.S. 485, 494-495 (1900); Friarton Estates Corp. v.

City of New York, 681 F.2d 150, 160-161 (2d Cir. 1982);

CES Publishing Corp. v. St. Regis Publications, Inc., 531

F.2d 11, 15 (2d Cir. 1975); Harron v. United Hospital

Center, Inc., 522 F.2d 1133 (4th Cir. 1975), cert. denied, 424

U.S. 916 (1976); Aerojet-General Corp. v. American Arbi-

tration Ass'n, 478 F.2d 248, 252-253 (9th Cir. 1973); 16

Wright, Miller, Cooper & Gressman, Federal Practice and

Procedure § 3921, at 17 (1977).

The decisions of other courts of appeals cited by peti-

tioner (Pet. 8-9) are consistent with these principles. They

simply represent instances in which the appellate court

deemed it inappropriate to reach the merits of the case,

usually because further trial proceedings were contem-

plated. On the other hand, where agency action has been

*Moreover, petitioner appealed not only ‘rom an “interlocutory

order” — i.e., the district court's denial of a preliminary injunction —

but also from the final judgment of the district court dismissing the

complaint. It is well settled that a reviewing court may consider “any

ground” in support of the judgment, “whether or not that ground was

relied upon or even considered by the trial court.” Dandridge v. Willi-

ams, 397 U.S. 471, 475 n.6(1970); United States vy. American Railway

Express Co., 265 U.S. 425, 435 (1924).

1]

challenged and the record of the agency proceeding is

before the court, it is not unusual for the appellate court to

proceed to dispose of the case on the merits after reversing

the district court's dismissal of the case for want of jurisdic-

tion, if no further fact-finding proceedings are warranted.

See, e.g., Athlone Industries v. Consumer Prod. Safety

Comm n, 707 F.2d 1485, 1487-1488, 1490 (D.C. Cir. 1983);

Independent Bankers Ass'n vy. Heimann, 613 F.2d 1164,

1167 (D.C. Cir. 1979), cert. denied, 449 U.S. 823 (1980);

National Wildlife Federation v. Snow, 561 F.2d 227 (D.C.

Cir. 1976); National Automatic Laundry & Cleaning Coun-

cil v. Shultz, 443 F.2d 689 (D.C. Cir. 1971); Independent

Broker- Dealers’ Trade Ass'n v. SEC, 442 F.2d 132 (D.C.

Cir.), cert. denied, 404 U.S. 828 (1971). See also Grosso v.

United States, 390 U.S. 62, 71-72 (1968). In sum, there is no

conflict among the circuits on the question of the propriety

of a court of appeals’ disposing of the case on the merits in

circumstances such as those presented here.

2. The court of appeals’ decision to resolve the merits

was entirely appropriate in the circumstances of this case.

Petitioner had asserted two bases for relief in its underlying

action. The first was that the Commission's determinations

of June 25, 1982 constituted substantive rules issued with-

out following the notice-and-comment rulemaking proce-

dures required by 5 U.S.C. 553 (Pet. App. F12, G12-G16).

The second was that the Commission's actions were arbi-

trary and capricious under 5 U.S.C. 706(2)(A) because they

were illegally discriminatory, vague, and unsupported by

the evidence before the Commission (Pet. App. F12,

G16-G21).

Once the court of appeals determined that the challenged

Commission determinations constituted final agency action

subject to judicial review, the court of appeals was in as

good a position as the district court to review the merits of

petitioner's contentions. The entire administrative record

12

had been filed in the district court by the Commission when

it opposed petitioner's motion for a preliminary injunction.

Further proceedings to develop the record before the dis-

trict court therefore were unnecessary. Indeed, petitioner

had essentially conceded as much in its brief in the court of

appeals, in which it argued that the matter was ripe for

review under Abbott Laboratories because its challenges to

the legality of the Commission’s conduct “raise purely legal

issues” (Pet. App. F3) and that further fact finding was

unnecessary to resolve the issues presented (Pet. App. F19-

F21).° Petitioner — having prevailed on these points in the

court of appeals and thereby persuaded that court that the

matter was ripe for judicial review — cannot fairly turn

about and claim in this Court that the court of appeals erred

in accepting the same arguments for the purpose of dispos-

ing of the merits.

Moreover, there could be no occasion for the sort of

evidentiary proceedings in district court for which peti-

tioner now says the court of appeals should have provided.

It is well established that under the arbitrary and capricious

standard of review in 5 U.S.C. 706(2)(A), “the focal point

for judicial review should be the administrative record

already in existence, not some new record made initially in

9Petitioner now claims (Pet. 14) that the court of appeals was mis-

taken in concluding that it had agreed that the entire case could be

resolved by the district court on the record then before it, asserting that

it had agreed only that its motion for a preliminary injunction could be

resolved by the district court without a further evidentiary hearing.

However, petitioner's statements in the court of appeals regarding the

lack of any need for further fact-finding procedures before the district

court were unqualified and were made in the context of arguing that its

case for permanent injunctive relief raised purely “legal” issues of

administrative law that were ripe for judicial review. It stated, for

example, that “the FTC has claimed that it has submitted to the district

court the entire record upon which its actions were based. To resolve

[petitioner's] substantive challenge, the district court need only apply

the law to the facts already before it” (Pet. App. F20-F21)

13

the [district] court.” Camp v. Pitts, 411 U.S. 138, 142

(1973). Where, as here, the agency has issued a written

statement sufficiently setting forth its finding and evalua-

tion of the evidence,'° the “validity of [the agency’s] action

must * * * stand or fall on the propriety of [its findings and

statement, ] judged, of course, by the appropriate standard

of review,” without recourse to further fact-finding proce-

dures. /d. at 143. See also Dunlop v. Bachowski, 421 U.S.

560, 572-573 (1975); United States v. Bianchi & Co., 373

U.S. 709, 715 (1963).

Thus, in deciding to consider the ultimate merits of peti-

tioner’s case, the court of appeals not only acted within the

limits of its authority, but also sensibly utilized that author-

ity to conserve over-taxed judicial resources. Remanding

the matter to the district court would not have served the

goal that petitioner itself advocated — to “expedite final

resolution of the issues” (Pet. App. F23 (emphasis in origi-

nal)) — but instead would inevitably have delayed that

resolution. Such a remand would have served no purpose

other than to “require wasted litigation without any offset-

ting advantage in economy of appellate effort or uninter-

rupted trial court proceedings.” 16 Wright, Miller, Cooper

& Gressman, Federal Practice and Procedure § 3921, at 17

(1977). There was no reason for that course here, especially

in view of the strong public interest in preventing mislead-

ing advertising.

3. In any event, this case would not be a suitable vehicle

for this Court’s consideration of the questions petitioner

seeks to raise. Subsequent events have rendered academic

petitioner’s contention that it should have been afforded an

Shortly after the Commission's June 25 determinations were

announced, it issued a 23-page statement setting forth in detail the

issues, its evaluation of the evidence, and the conclusions it reached

(Def. Exh. 147).

14

evidentiary hearing before the district court on the Com-

mission’s June 25th determinations. As explained above

(see pages 8-9, supra), following the court of appeals’ deci-

sion in this case, the Commission brought an enforcement

proceeding against petitioner in the United States District

Court for the District of Columbia, alleging that the com-

pany’s advertising claim that Barclay cigarettes yield | mg.

of tar was a deceptive practice under the FTC Act. After a

full trial on the merits, during which petitioner obtained

extensive discovery from the Commission, its competitors,

and the expert consultants whose reports were relied upon

by the Commission in its June 25th action, the district court

issued a permanent injunction ordering the company to

cease promoting its Barclay cigarettes with any claim of a

specific milligram tar content rating unless that rating is

approved by the Commission. On a record independent of

that before the court below, the enforcement court con-

cluded, inter alia, that the studies relied upon by the Com-

mission —

provide strong evidence that Barclay is improperly

rated as | mg. because its vent system is “comprised”

under actual smoking conditions, unlike the vent sys-

tems of other low-tar cigarettes. The evidence pre-

sented by [petitioner] failed to refute the ventilation

studies and did not provide significant contrary

evidence.

FTC v. Brown & Williamson Tobacco Corp., 1983-2 Trade

Cas. (CCH) para. 65,662, at 69299-90 to 69299-91 (D.C.

— ph.

@® Oct. 14, 1983), appeal docketed, No. 83-2129 (D.C. Cir.

Oct. 28, 1983). Since the merits of the Barclay filter claims

have thus been fully litigated in the enforcement action and

resolved in a manner that will bind the parties under princi-

ples of collateral estoppel (cf. United States v. Stauffer

Chemical Co., No. 82-1448 (Jan. 10, 1984)), there is no need

for this Court to review petitioner’s unsuccessful effort

1S

to delay resolution of the matter by challenges to the admi-

nistrative action that preceded the enforcement action or its

belated efforts to supplement the administrative record

through duplicative proceedings in another district court.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

Rex E. Lee

Solicitor General

JOHN H. CARLEY

General Counsel

JEROLD D. CUMMINS

Deputy Assistant General Counsel

Federal Trade Commission

FEBRUARY 1984

DO})-198402