Brief Amicus Curiae — Jacob Siegel Co. v. Federal Trade Commission

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[iN THE <

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Supreme Court of the United States

; ecteas TERM, 1945

No. 605

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JACOB SIEGEL COMPANY,

; tl fitiouer,

agaist

FEDERAL TRADE COMMISSION,

Re spoude ni.

BRIEF FOR AMICUS CURIAE IN SUPPORT OF

PETITIONER’S APPLICATION FOR A WRIT OF

CERTIORARI TO THE CIRCUIT.COURT OF THE.

UNITED STATES, THIRD CIRCUIT

, Seymour M. Key,

Attorney for Amicus Curiae,

150 Broadway,

New York, New York.

MarsHaut, Bratrer, Seticson & Ktery,

of Counsel.

Marvin J. Buock, —

on the Brief.

Epwarp Leven, 41 Murray St. BEekman 3- 5176

ee

-—

INDEX

PAGE

Baer vor Amicus Oenmtas soo... esc c iced ccccienes 1

Preliminary Statement ....... seh saue ne ahaeiness 3

‘ ; ¥ . a .

BO POUNMNO a vcs ctnessss: ee nes <0 di PET ee ees 1.5 3

. The Power of the Cirenit Court) over Punitive

EN 4 Ha bdaee tent saad weap ses Pune e ras 14

No Contradiction by Qualifying Language ......... 19

The Commission’s Order is not Jnstified by the

a SP ee Piccei ud cceak eta exadeeeats: 21

OE eRe ee On Ee perry eee File sen cues 24

f- Table of Cases

American Chain & Cable Co. Inc. v. Federal Trade

Commission, 142 Fed. (2nd) 909 (C, C. A. 4th 1944) 18

Ardelle Ine. v. Federal Trade Commission, 101. F.

(2d) 718 (C. C. A. 9th 1999) ........ Cptae ae ncanns 7

Bear Mill Mfg. Co. Ine. v. Federal Trade Commmis-

sion, 98 F. (2d), 67 (C. C. A. 2d 1938) J........ —

Charles of the Ritz Distributors Corp. v. Federal

Trade Comm., 143 F. (2d) 676 (C. C. A. 2d 1944) ..8, 9

Commissioner of Internal Revenue v. F. (i. Bonfils

Trust, 115 Fed. (2nd) 788, 792 (C. ©. A. 10th 1940) 2) 13

Consolidated Edison v.- National Labor Relations

Meese, 306 US: 197 (19GB) 6. Loci cc cesdccee 14

D. D. D. Corp. v. Federal Trade Commission, [25 F.

oP Pee rer: errr errr er 6

Establissements Regaud Inc. v. Federal Trade Com-

mission, 125 F. (2d) 590°(C. & A. 2d 1942) ........ 5

Federal Trade Commission v. Algoma Lumber Co.,

- fee eee errr rT? Py Ae 1)

, ‘aie ew a :

PAGE

Federal Trade Commission v. Army & Navy Trading

Co., 88 F. (2d) 776 (App. D.C. 1987) 2.2.2.2... “)

Federal. Trade Commission v. Cassoff, 38 F. (2d)

790 (C. C. A. 2nd 1930) ..... Oe ERE ENS MRL

Federal Trade Commission y. Curtis Publishing Co.,

Li Fe: ae pie Pe eee ee oe 18 fn.

Federal Trade Commission v. Eastman Kodak Co., 247

Fy © ys.) Ae ee Pere nr eee 1

Federal Trade Commission v. Good Grape Co., 45 F.

GD MOOR Ge Mi OD ROD ee cadvonsssnecaces svt OD:

Federal Trade Commission v. Hires Turner Glass Co.,

81 F. (2d) 362 (C. C. A. 3rd 1935) ...... 5, 10 fin, 13 tn.

Federal Trade Commission v. Midwest Mills Inc.,

90 F. (2d) 723 (C. C. A. 7th 1937) 2.....5, 10 fn, 13 fn.

Federal Trade Commission vy. Royal Milling Co.,

ee ls i CD pc ohne nkekinawscnad’s 9, 9, 13, 16, 20

Fluegelman & Co. v. Federal Trade Commission, 32

F. (2d) 559 (C. C. A. 2nd 1930) ...... d, 10 fn., 13 fn., 20 *

Ford Motor Co. v. National Labor Relations Board,

ee Wii We Py Ae CID noe kee kciecees ss vos 14

Gelb v. Federal Trade Commission, 144 F. (2d) 580

ee jae | er re ee

Heald v. District of Columbia, 254 U. S. 20 (1920) .... 12

Hecht’ v. Malley, 265 U. S. 144, 153 (1924) ........ 12

Herzfgld v. Federal Trade Commission, 140 F. (2d)

Pe ee A is OED Fb adds cundsaaeaes 5 fn., 6 fn., 8, 9

International Assn. of Machinists v. National Labor

- Relations Board, 311 U. S. 72 (1940) ............ 6 fn.

International Mine Workers v. Eagle Picher Mining _

& Smelting Co., 325 U. S. 3385 (1945) ............ 18

err v. Manhattan Ry. Co., 289 U. S. 479, 500

* MB) us 55s.- bak aN i Ae i Sasa se eewad re eee ee acta 2

Latimer v. U. S., 223 U. S. 541 (1912) ............ 13

ill

ie , “PAGE.

Lee Bover's nr v. Rea Trade Commission, 128

F. (2d) 261 (C. we 4} ee Ra Deer 7

Louisville Cement = v. Interstate Commeree Com-

- <—- ws. 638, 644 (1917)! PPE RR ee Date

New York Knitting Mills, Incorporated v. Gotham

Knitting Mills, Incorporated, 57 U.S. Patent Quar-

oe ee RS area aera Parra rae 19 fn.

New York Knitting Mills, Incorporated v. Rosenna

Knitted Sportswear, 37 U.S. Patent Quarterly,

EE ae ee eer nee PR Ta 19 fn.

N.L.R.B. v. Fansteel Metallurgical Corp., 306 U.S

es rk ons pee Peden cadhwds akan 15

Parke, Austin & Lipscomb v. Federal Trade Comm., |

143 &. -(3a) 437 (C..C. A. 2d WGA) 22. ce ccna. 8, 9

Phelps-Dodge Corp. v. National Labor Relations

Board, 313 U.S. 177 (1941) ......... ver ree Sia was @ fet.

Republic Steel Corp.. v. National Labor Relations —

, NGn ee 6 RROD fb cciwune vd es aakesetas 14, 15

Southern Steamship Co. v. N.L.R.B., 316 U. S. 31

2 | nee ereO PMS arse ar Sante w uate Pr re 14

Ultra Violet v. Federal Trade te cet 143 F. ( 2d)

A 0 os is so ak hc tne can) 6

U.S. v. Lexington Mill C o., 232 U. S. 399 (1913) . 13

U. S. v. Morgan,307 U. S. 183, 191 ', peer 14

Washington Market Co. v. Hoffman, 101 U. S. 112 |

SE deehawssnes van besnaeen CAR PEE PRA? OP 13

Statutes . 7

“15 U.S. C. A., Sees. 45 (a), (¢), C.) peers 4:

Be SO a Sed ba cek ben siei bee ne dba ees 1S

he Oe eee eee ae ek are ee 4

Pe a os sack whale ae cee sesneanaes 1]

S2 Slat. 111, Gee. 5(d)- .:-.....-6.- 245+: Meee 12

iv

f Authorities

: a PAGE

MeFarland, Judicial Control of the F. T. C. and the

Interstate Commerce Commission (1933) ........ IS fn.

Roscoe Pound, Administrative Law and the Courts,

24 Boston U. L. Rev. 201 (1944) ..........2... 17 fn.

Senate .Report No, 221, Vol. I, Senate Reports on

Publie Bills, ete. Serial No. l0076 .............. 10 fn.

Stern, Review of Findings of Administrators, Judges

and Juries: A Comparative Analysis, 58 Harvard

PI BE cdc ciscéghéikes Becbessscoweceedes 1S fn.

Warner, An Approach to the Extent of Judicial Su-

pervision Over Administrative Agencies, 28 Ceo.

Ris ie ET RED 065 0566 es bes dcdbonesaeses 17

IN THE

Supreme Court of the United States

OCTOBER TERM, 1945

No. 605

0-0

Jacop SreceEL Company,

Petitioner,

agaist

Feperat Trape ComMMiIssion,

Respondent.

0-0

BRIEF FOR AMICUS CURIAE IN SUPPORT OF

PETITIONER’S APPLICATION FOR A WRIT OF

CERTIORARI TO THE CIRCUIT COURT OF THE

UNITED STATES, THIRD CIRCUIT

This brief is submitte! on behalf-of a group of retail

stores which are outlets for petitioner’. topeoats and over-

coats_sold under the trade name of **Alpacuna’’, They

appeared as Amicus Curiac-in the Court below and were

represented by counsel both at the original argument and

upon the reargument. They now appear in support of the ¢

petition for a writ of certiorari upon the consent of the

parties hereto.

The stores which appear are: Arnold Constable & Com-

pany, Incérporated, New York City; A. H. Benoit & Com-

pany, Portland, Maine; T he William H. Block Company,

Indianapolis, Indiana; Gimbel Brothers, Philade Iphia, Pa.;

The Larkey Company, Inc., Newark, New Jersey; Metro-

politan Compatiy, Dayton, Ohio; Maurice L. Rothschild,

Chicago, Ill; Samter Bros. Co., Scranton, Pa.; Harry Sut-

frin, Detroit, Michigan.

—_

*

to

é

_ The interest of Amicus Curiae herein Was set-f6ril in

the opinion of the Circuit Court as follows:

‘‘A group of retail stores who handle the ‘Alpa-

cuna’ coats have filed a brief, as amicus curiae in

support of the petitioner’ s stand. Those stores sct

out that they lave a very definite interest in the

retention of the | name by reason of co-operation in

extensive advertising and selling the product over

a period of.years and that the barring of the use

of the name ‘ Alpacuna’ is a matter of serious detri-

ment and direct prejudice to them’’ (R. p. 895).

Amicus Curiae respectfully calls this Court’s attention

to the fact that over eighty retail stores throughout the

country, in addition to those specifically included as Amicus

Curiae, have indicated to us their great interest in the

preservation of the trade name of ‘*Alpacuna’’. They have

also stated that the name is of real value and that the

prohibition of its use would involve a serious loss to

them*.

Preliminary Statement

The Cireuit Court, in its original opinion, evidently

against its inclinations, stated that it felt constrained to

follow the Second Circuit’s view of the respective powers

of the: Cofhmission and the Cireuit Court.

Expressing dissatisfaction with that saa of the Com-

mission’s order which destroyed petitioner’s valuable trade

* In answer to a query these stores have stated that no customer

of theirs has ever complained of being misled by the trade name

“Alpacuna”. Cf. result of poll in a New York, Department. store

where over 200 customers chosen at random were questioned and

not one of them déclared that the name “Alpacuna” indicated vicuna

to them (See R. p. 893, Circuit Court's opinion).

name built up over a period of years and at tremendous

expense, the Court wrote:

46s * 6

ayes strongly that the order is far

4too harsh. ? (p. 898) os

Later the € ourt anand:

* * * f we were still in control of the remedy

we; would modify the order as above indicated.’

(p..902)

The Co urt’ ‘turther oheerved:

e

‘The infraction, as the case now stands is slight

_and could be cured by simple and qualifying Jan-

guage.’’ (p. 898)

And again, as though weighing possible injury to tlie

‘‘substantial portion of the purchasing public’’ as against

“estruction of this valuable trade name of the petitioner,

the Court stated:

(ls

“It destroys a widely favorable known trade

name in existence for 14 years. It causes seideiaey

injury to the petitioner and its retail outlets.’

(p. 898)

Notwithstanding its expressed disagreement with Te

order and the rule, the Court affirmed the Cemmission’s

-order without modification and, upon rehearing, felt con-

strained to abide by that decision,

v The Statute

The relevant portions of the Act here involved are:

‘‘(a) Unfair methods of competition in com-

merce, and unfair or deceptive acts or. practices in

commerce, are hereby declared unlawful.

* * * e*- ©

circuit court of appeals of the United States,

‘*‘The Commission is hereby empowered and di-

rected to prevent persons * * * or corporations

* * * from using unfair methods of competition in

commerce and nares and deceptive acts or prac.

tices “in commerce.’

15 U.S. C. A. See. 45 (a);

D2 Stat. 111, See. 5. 2

“‘(e) Any person, * * * or corporation required

by an order of the Commission to cease and de-

sist from using any method of competition or act or

practice may obtain a review of such ordey in thie

ees

by filing in the court, * * * a written petition pray-

ing that the order of the Commission be set aside

* * * | Upon such filing of the petition and tran-

script the court shall have jurisdiction of the pro-

~eeeding and of the question determined therein, and

shall have power to make and enter upon \the plead-.

ings, evidence, and proceedings set forth in such

transcript a decree affirming, modifying or setting

aside the order of the Commission, and enforcing

the same to the extent that such order is affirmed,

= * *” (Italies ours.)

15 U.S. C. A. See. 45 (ce);

92.Stat. 111, See. 5.

**(d) The jurisdiction of the cireuit court of ap-

peals of the United States to affirm, enforce, modi-

fy, or - aside orders of the Commission shall be

exclusive.

15 U.S. C. A. Sec. 45 (d):

"59 Stat. 111, Sec. 5. °

It is respectfully submitted that the Cireuit Court had

the power under the Federal Trade Commission <Act to

enter the modification sought herein.

The last and leading case in this Court dealing with

the power of a court to modify-a Federal Trade Commis-

sion order is Federal Trade Commission vy. Royal Milling

Co., 288 U.S. 212 (1933). Since that decision, no Federal

Trade Commission case has been decided in the Supreme

Court which deviates in any way from the rule enunciated

therein. Furthermore, a study of the cases in the Supreme”

Court since that time reveals no opinion which has even

distinguished or mentioned the Royal Milling case with

disfavor.

Federal Trade Commission vy. Royal Milling Co., supra,

cited with approval cases arising in various Cireuits in

which orders of he Commission had been modified Flue-

gelman & Co. v. Federal Trade Commission, 32 F. (2d)

09 (C. C. A. 2nd 1930); Fede . Trade ( ae v. Cass-

off, 38 F. (2d). 790 (C. C. A. 2nd 1930); Federal Trade

Commission v. Good Grape og 5 F. (2d) 70 (C. C. A.

6th 1930). =

Thereafter, courts in every Circuit wherein similar

cases “ose applied the rule of modification established

by the Royal Milling Co. case: Federal Trade Commis-

sion v. Hires Turner Glass Co., 81 F. (2d) 362 (C. C. A.

3rd 1935) ; Establisse ments Regaud, Ine. v. Federal Trade

Commission, 125 F. (2d) 590 (C. C. A. 2d, 1942); Bear Mill

Mfg. Co. Inc. v. Federal Trade Commission, 98 F. (2d),

67 (C. C. A. 2d 1938); Fede ral Trade Commission v. hae

west Mills, Inc., 90 F. (2d), 723 (C. C. A. 7th 1937).

Suddenly and without any previous indication, in 1944,

one Cireuit*® considered ifself powerless to follow the

Royal Milling case any longer despite the fact that this

court had never. itself taken that position. This unwar-

ranted and unwise departure has not been followed in other

Cireuits in Federal Trade Commission cases. !

* Exemplified by Herz cfeld v. Federal Trade Commission, 140

F. (2d) 207 (C. C. A. 2d 1944).

Thus, in the Ninth -Cireuit, in Ultra Violet v. Federal

Trade Commission, 143 F. (2d) 814 (C. C. A. 9th 1944), the

court, although finding that the Commission’s order was

based on substantial evidence, refused to enforce a por-

tion of it on the ground that.it was too broad and unfair

to the petitioner. It further modified the order as_ re-

quested to eliminate the over-reaching effect of the pro-

hibition on petitioner’s advertising in .one particular. It

is signi note e Feder: rade Commission ~~

is significant to note that the Federal Trade Com |

failed to apply for a writ of certiorari in that case but

now maintains, in the case at bar, that there is no power

in this court to modify.

The rule of the Second Circuit as to ‘‘no power’’ ap-

parently was based on certain decisions under ‘the Na-

tional Labor Relations Act.* This rule in labor cases. be-

came clear in 1940.** However, in 1942, two years later,

the Seventh Circuit in a Federal Trade Commission case

modified an order of the Commission on the ground that

it was unreasonable and ‘‘would serve no purpose in tlie

protection of the public, but might limit petitioner ‘in

truthfully representing its product.’’ The dissenting opin-

ion in the case particularly demonstrates that the deeision

is one where the court disagrees with the Commission as

toythe nature and extent of the order required to remedy

the evil complained of. Yet the majority feels free to

modify iff accordance with its own views.

D. D. DCorp. v. Federal Trade Commission, 125

F. (2d) 679 (C. C. A. 7th 1942).

*The Herzfeld case cited as its first two authorities: /nter-

gee dssn. of Machinists v. National Labor Relations Board, 311

U. 2 (1940) and PRhelps-Dodge Corp. v. National Labor Re la-

sia Su, 313 U. S. 177 (1941).

** The International Assn. of Machinists v. National Labor kv-

lations Board, supra, was decided November 12, 1940.

Again, the Commission failed to apply for a writ of

~ certiorari to this court.

Also in 1942, two vears after the labor case rule was

established, the Ninth Cireuit in Lee Boyer’s Candy v.

Federal Trade Commission, 128 F. (2d) 261 (CL C. A. 9th

1942), modified an order of the Federal Trade Commis-

sion. The Commission’s order forbade petitioner -from

distributing merchandise so packed and assembled that

1s of it to the public ‘tare to be made or may be made

by means of chance, gift enterprise or lottery

scheme.’? The court expunged the words ‘*may-be made”’

on the ground that the order thus written was too broad.

It is interesting to note that the Commission, on ee

11 of its brief, argued:

“The Commission is entitled to enter an order

broad enough to prevent evasion.’’

Further, on page 15 of its brief, it. protested:

‘Such an opinion will in every sense afford

petitioner as much protection as would a modified

order to cease and desist at the same time avoiding

a modification which will-have ‘the effect of leaving

a loop-hele for evasion which is certainly closed

and no more than closed by the use of the words in

controversy.’ ”’

Yet the court, following its previous decision in Ardelle

Inc. vy. Federal) Trade Commission, 101 F. (2d) 718

(CC. AL 9th 19: 39) and rejecting decisions of other courts

which affirmed identical orders of the Commission with-

out modification, modified the order as indicated above.

Despite its strong protest in the Circuit Court the ‘Fed-

eral Trade Commission failed to petition this court for a

writ of certiorari.

It thus appears that the Seventh and Ninth Cirenits

still feel free to modify Federal Trade Commission or-

ders when the occasion warrants. Moreover, even in the

Second Circuit where the rule has been laid down which

in effect/makes the Federal Trade Commision the final

authority as to remedy there is a good deal of confusion,

if not outright disagreement, among the judges them-

selves, |

For instance, in Gelb. v. Federal Trade Commission,

144 F. (2d) 580 (C. C. A. 2nd 1944), the Commission had

issued a cease and desist order-part: of which prohibited

petitioner from representing that his preparation recon-

ditioned the hair. The court stated that the Commission

had found that the preparation in question was incapable

of performing this function. Nevertheless, the court

modified the order so as to permit the petitioner to em-.

ploy the phrase ‘‘recondition the hair.’? The majority at-

tempted to make it appear that the modification was based

upon a lack-of substantial evidence with regard to the

particular in question. - However, a reading of the most

vigorous dissent by Judge Clark in that ¢ase reveals a.

that he regards the majority opinion as being in contra-

vention of the ‘‘no power”’’ rule adopted in 1944. Judge

Clark’s precise, emphatic words were:

‘ Henee,, even if we had control over the Com-

mission’s choice of remédy,.I should think it quite a

“mistake to exercise | it here. “But we have protested

most strongly and steadily recently that we have no

such control. Herzfeld! v. Federal Trade Commis-

sion, 2 Cir., 140 F.2d, 207; Parke, Austin & Lips-

comb v.-Federal Trade Comm., 2 Cir. 142 F. 2d,

437; Charles of the Ritz Distributors Corp, v. Fed-

eral Trade Comm., supra.”’

9

_ It is significant to note that Judge Clark wrote the

majority opinion in the Charles of the Ritz ease* and

concurred in the Parke, Austin & Lipscomb case,°° both.

of which followed the Herzfeld rule.

Thus, it becomes clear that in this one Cireuit, which

has refused in Federal Trade Commission cases to follow

the Royal Milling decision, there is confusion and even

disagreement in the court itself.

A fair analysis of the Gelb decision leads to the con-

clusion that the Second Cireuit which has in words enun-

ciated the Herzfeld doctrine, in action will modify an

order of the Commission when it disagrees strongly

enough with it.

Statutory Construction

When recourse is had to the statute itself which gov- ©

erns the relationship between Court and Commission, the

right of the court to modify Commission’s orders would

appear clear.

Section 5 of the Federal Trade Commission Act states

that the jurisdiction of the Circuit Court of Appeals to

modify orders of the Commission shall be exclusive and

that the Court shall have the power to make and enter

upon the pleadings a decree modifying the order of the

Commission.

‘““To modify’’ has been defined in Funk & Wagnall’s

Standard Dictionary as:

‘1, To make somewhat different; change more

or less in character, properties, form or applica-

ee tion; limit or restrict; vary; as to modify the de-

*143 F. (2d) 676 (C. C. A. 2d 1944). Be,

** 142 F. (2d) 437 (C. C. A. 2d 1944). .

10

ne

tails of a plan. 2 2. To make more moderate 0 OF. Tess. 2

—~sweeping; reduce in degree or extent; qualify ; ais

to modify a punishment.’’

The original Act creating the Federal Trade Commis-

sion was adopted in 1914. That Act was not substantially

amended or changed in any respect until 1938 when, after

careful consideration of various decisions which had been

handed down by this Court and Circuit Courts in the

intervening period, and upon request of the Federal

Trade Commission, the Act was substantially amended to

strengthen and enlarge the jurisdiction of the Federal”

Trade Commission and to include provisions relating to

the finality of the Federal Trade Commission orders, The

amending statute, introduced in the United States Senate,

was reported by the Committee on Interstate Commerce

to the 75th Congress, First Session.* That report con-

taiped a letter from the Acting Chairman of the Federa!

Trade Commission, dated February 11, 1936, discussing

at length the proposed amendments and particularly the

amendments to Section 5 of the Federal Trade Commis-

sion Act. Reference is therein madé to many decisions of

this Court and of the Circuit Courts, but no reference

whatsodver was therein made, nor any exception taken,

to the existing decisions whereunder it had been held that

the Cireuit Court did have the power to modify orders

of the Federal Trade Commission.**

* Senate Report No. 221, Vol. I, Senate Reports on Public

Bills, etc. Serial No. 10076.

** Federal Trade Commission v. Hires Turner Glass Co., 81 Fed.

(2nd) 362 (C. C. A. 3rd, 1935); Federal Trade Commission v.

Midwest Mills, Inc., 90 Fed. (2nd) 723 (C. C. A. 7th, 1%.

Fluegelman v. Federal Trade Commission, 32 Fed. (2nd)

(C. C. A. 2nd, 1930).

~

————

—~

11

The Act, as finally adopted after conference report of

the two Houses of Congress, is of exceptional significance

in that C ongress spe cifically retained the power in the Cir-

cuit Court to modify orders of the Federal Trade Com-

mission. In columtiar form, we set forth below excerpts

from the Act, more particularly portions of Section 5

thereof, as the same existed prior to the amendment in

1938 statute.

1938 and as the same read after the

3S Stat. 719

720)

See. 5 (p.

sce * * Any ‘part re-

quired by such ‘order of:

the commission to cease

and desist from using

such method -of competi-

tion may obtain a re-

view of such order in

said Circuit court of ap-

peals by filing in the

court a written .petition

praying ‘that the order

of the commission be set

aside. A copy of such

petition shall be forth-

with served upon the

commission, and there-

upon the commission

forthwith shall certify

and file in the court a

transcript of the record

as hereinbefore __ pro-

vided? Upon the filing of

the transcript the court

shall have the same jur-

‘ 52 Stat. 111

See. 5(e).

‘“*(ec) Any person,

* * * ar corporation re-

quired by an order of

the Commission to cease

and desist from using

any method of conrmeti-

tion or act or practice

may obtain a review of

such order in the circuit

court of appeals of the

United States, * * * by

filing in the court, * *~* -

a written petition pray-

ing that tle order of the

Commission be set aside

* * *. Upon such filing

of the petition and tran-

script the court shall

have jurisdiction of the

proceeding and of the

question determined

therein, and shall have

power to make and en-

fer upon the pleadings,

evidence, and proceed-

12

isdiction to affirm, set

aside, or modify the. or-

der of the commission

~-as in the case of ari ap-

plication by the commis-

sion for the enforcement

of its order, and the

findings of the commis-

sion as to the facts, if

supported by testimony,

~shall in like manner be

conclusive.

‘‘The’ jurisdiction of

the circuit court of ap-

peals of the United

States to enforce, set

aside, or modify orders

of the commissian shall .

be exclusive.’’

ings set forth in such

transcript a decree af-

firming,

setting aside the order

of the Commission, and

enforcing the same to

the extent that such or-

der 1s affirmed, * * *."’

““(d) The jurisdiction

of the circuit court of ~

appeals of .the United

. States to affirm, enforce,

modify, or set aside or-

ders of the Commission

shall be exclusive.’’

modifying or —

Here, then, is an amendment to the Act expressly recog-

nizing and reenacting the Court’s. power of modification.

I¥is a well-reeognized rule of statutory construction

that where a legislature enacts a statute amending an

existing law, it is presumed to have been cognizant of

Court interpretations of that law. Any attempted altera-

tion of judicial construction of the prior law must be ex-

pressed in clear and appropriate language, otherwise the

statute will continue to be interpreted as theretofore by

ow

. the Courts.

Johnson. v. Manhattan Ry. Co., 289 U. S. 479, 500

(1923) ; es

Hecht v. Malley, 265 U. S. 144, 153 (1924);

Heald v. District of Columbia, 254 U. S. 20

_ (1920);

13 7

r

Loutsvdle Cement Co. x. luterstate Commerce

Commission, 246 U.S. G38, 644 (1917);

Latimer v. US 223 USS. OAL (1912);

Commisstoucr-of Internal Rerenne vo FB. OG. Bou-

fils Trust, 115 Fed. (2nd) 788, 792 (CL CLA,

10th, 1940).

Morgover, it is a basic rule of statutory construction

that each word in a statute must be given its full sig-

nificance. '

U.S. v. Lexington Mill Co., 232 U.S. 399 (1913);

Washington Market Co, v./ Hoffman, 101 U. S.

112 (1879). /

The Royal Milling case was fhe | law of the

land at the time of the enactmgnt of the 1938 Wheeler-

Lea Amendment\to the Federal Trade Commission Act.

Its doctrine Was being followed by the various circuits."

Had the eubisilen intended to cireumscribe the power

of the court to modify orders of the Commission, it would

have used appropriate language to that end. It is -pre-

‘sumed to have acted with knowledge of those decisions

and their effect. However, rather than limiting the powers

of the Court the legislature utilized language which clearly /

comprehended the Court’s powers and manifestly.extended

them for future application.

It is, therefore, respectfully submitted that an analysis

of the Royal Milling case and the decisions in the vari-

ous Circuits following thereupon, as well as the Federal

Trade Commission Act itself, and as amended, establishes

the proposition that this Court has the power to modify

the instant order in the manner contended for herein.

* Federal Trade Commission v. Hires Turner Glass Co., 81 Fed.

(2nd) 362 (C. C. A. 3rd, 1935); Federal Trade Commission v.

Midwest Mills, Inc., 90 Fed.. (2nd) 723 (C. C. A. 7th, 1937);

Flueqgelman vy. Federal Trade Commission, 32. Fed. (2nd) 59

(C. C. A. 2nd, 1930). > |

14

J

-

The Power of the Circuit Court Over Punitive Orders

It is not inappropriate at this point to eonsider in con-

nection with the problem of the Cireuit Court's power of

modification of the Commission's order the power resident

in that Court.

An enforcement proceeding of the type sought herein

by the Commission is comparable to a proceeding in. equity

aad in which the principles of equity must be applied.

U. S. v. Morgan, 307 U. S. 183, 191 (1939); s

Ford Motor Co. v. National Labor Relations

Board, 305 U. S. 364, 373 (1938).

It has been uniformly stated that the functions of ad. ,

ministrative orders is remedial and not punitive. /

Republic Steel Corp. v. National Labor, Relatious

* Board, 311 U. 8. 7 (1940) ;~

Consolidated Edison v. National Labor Relatiousy /

Board, 305 U. S. 197. (1938). 7 :

It is noteworthy that despite the apparent hard and

fastZrule in National Labor Relations cases with respect

to the court’s power of review over administrative rem-

edies, this Court has applied the above principles t labor

eases. Modification of National Labor Relations Board

orders has ‘been effected by tke courts in two outstand.

ing types of cases. These cases involved (1) re-instate-

ment of employees, (2) back-pay to employees. In “both in-

stances the court has stressed the principle that affirma-

tive action ordered by the Board must be, designed to

effectuate the purposes of the Act, and that its orders

must be remedial rather than punitive. Recent decisions ot

this Court on this ie in which orders were moditic«

are: ‘\

Southern "Stdemship Co. v. NLRB, 316 U.

: (1942); ‘\

\

_

Go

ae to)

Republie Steel Corp. vo NLRB, 311 U.S. 7

(1940) ;

NLRB vy. Fausteel Metallurgical Corp., 306 U.S

240, 257 (1950).

The dissents in the above-eited labor cases pointedly

decried the majority’s unjustifiable interference with the

‘““diseretion’? Congress had vested in the administrative

agency. The rationale of these. decisions must lie in the

rule that while the court may be restricted in its control

over the orders of the Labor Board, vet the Board itself ~

is circumscribed in that its Orders must effectuate the

purposes of the Act and be remedial rather than punitive

in nature.

The stated purposes of the Federal Trade Commission

Act ‘are to prevent unfair competition and deceptive

acts in commerce. These are not accomplished by the

destruction. of the business or property ‘of an alleged

violator. Its purposes would be effectuated by the femoval

of the misimpression or deception to the public. The re-

sult sought t6-be~actomplished should be to-protect the

‘publie to the utmost while, at the same time, injuring the

charged patty only. insofar as absolutely necessary. Any.

other result would be punitive rather than remedial It

might well be that the deception, in the instant case,

could be removed by a cease and desist 6rder against the

petitioner continuing in business. ‘This would, of course,

protect the publi¢ fully. On the other hand, the purposes

of the Act would not be effectuated. The Act does not en-

courage the destruction of a business, trade name or other

property right. It does demand the outlawing of unfair |

trade practices and deception to the public.

In Federal Trade Commission vy, Eastman Kodak Co.,

274 U. S. 619 (1927), we find this Court declaring itself on

the limits of effectuating the -purposes of the Federal

Trade Commission Act by refusing to affirm an order of

if

16

the Federal Trade Commission ordering defendant to dis-

pose of two plants which were .employed as. part of a

scheme to monopolize the film trade.

In the case at bar, with the removal of any possible

_misinterpretation by the public as to ,‘‘Alpacuna’’ signi-

fying a vicuna content, the further elimination of the

trade name itself could serve no useful purpose at all to

the public. Examination of the order of the Federal Trade

Commission in the instant case demonstrates that. the

Commission has ied at a punitive rather than a reme-

dial ‘result, warranting the court’s review and modifica

tion. Petitioner desires to clarify.any misimpression on

the part of purchasing public regarding vicuna as one

of the ingredient fibres in its coats. To do this it has

volunteered to add the phrase ‘‘Contains No Vieuna’”’ in

a prominent manner and sub-jeining the trade name ‘‘Al-

pacuna’’, As a matter of fact, petitioner has already put

this into effect and this court’s attention is respectfully

called to the labels which are affixed to the petitioner's

brief. )

Here, then, is a method for destroying the misimpres-

siongand at the same time preserving the trade name.

A method which remedies the wrong without needles

punishment. Here is a method which effectuates the pur.

poses of the Act by removing -the sole alleged deception

without depriving the petitioner and Amicus Curiae of the

good will in this valuable trade name, built up over a

period of years and at great expense.

The power of the court to modify the Commission's

order, to deal equitably and effectively with the infraction

in the instant case, stems from judicial decision and lezis-

-lative enactment. The Royal Milling case is clear, Tlie

Act gives the court power to modify. ‘‘To modify’? in the

Act must mean more than innocuous modification, more

than a° mere grammatical or semantic alteration or re:r-

17

rangement of the Commission’s orders. There is no need

for the institution of judicial review to fall into disrepute.

Appellate judges need not confine themselves to ‘‘passive

obedience’? to administrative dictates.* The exercise of

conscience and. intelligence in any given situation requires

the court to do more than merely stamp its blanket im-

-primatur upon any administrative order which comes be-

fore it for review. ™

Moreover, there is no reason automatically to apply the

restraining rule of the National Labor Relations Board

cases to Federal Trade Commission cases. One prominent

writer concluding a thesis on judicial supervision over

‘administrative agencies has stated:

‘The approach suggested is a flexible doctrine

of judicial review, the extent of which will vary

from one agency to another dependent upon the

function, exercise and the character of the = in-

dividual and social interest involved, and will

change in respect to a particular agency as the

circumstances change.’

Warner, An Approach to the Extent of Judicial ‘

Supervision Over Administrative Agencies, 28

Geo. L. J. 1042, 1073 (1940).

‘

-

One difference between the effect of NLRB orders ban-

ning unfair labor practices dnd FTC orders banning ‘the

use of trade names is evident. An ‘‘unfair labor practice’’—

is an excrescence. It is not part atid parcel of a business.

Its employment may lead to additional profits or may

satisfy the inexorable whims or prejudices of an employer.

But it is not that factor upon which a business is based.

It can, therefore, be done away with without affecting

the continuation of the business.

* See. Roscoe Pound, Administrative Law and the Courts, 24

Boston U. L. Rev. 201 (1944).

: | 18

On the other hand, ‘‘Alpacuna’’, the trade name, is a

vital part. of the business itself. The two are almost in-

separable. It is without economic realization to argue that

petitioner’s goods could be sold under another name. The

same argument could be offered if the business were con-

fiseated and the petitioner told that he still had the name

and could therefore start a new business, The banning of

a trade name assumes much more of a punitive aspect

than would the barring of an unfair labor practice or the

ordering of a defendant to deal with a particular union.

Consequently, prohibiting the use of.a trade name ini

mediately poses the question of ‘‘effectuation of the policy

of the Act’’ just as would destruction of the business itself.

The court has the right, the duty in fact, to remove the

punitive effect of an order and to modify it so that ‘it be-

comes remedial. This can be done in the instant case by

modifying the order so as to permit the petitioner to use

the trade name ‘‘Alpacuna’’ with the qualifying phrase

‘Contains No Vicuna”’

The difference between the two agencies and the stat

utes creating them has in other circumstances been recog-

nized.

‘International Mine Workers v. Eagle Picher Min.

ing & Smelting Co., 325 U.S. 335 (1945);

; American Chain & Cable Co. Inc. vy. Fede -

Trade Commission, 142 Fed. (2nd) 909 (C.

4th, 1944).

Nor is the difference in court approach to different

executive agencies and their powers unusual ,or novel,

although it may be the trend of decision, without any spe-

cific legislative authority therefor,-to draw all agenc iex

into the same circle or orbit.*

* See: Stern, Review of Findings of Administrators, Judges am!

Juries: A Comparative’ Analysis, 58 Harvard Law Review 70);

McFarland, Judicial. Control of the F. T. C. and the Interstate

Commerce Commission (1933); F. 7. C. v. Curtis Publishing C:

260 U. S. 568 (1923).

Ry ee

19

In view of the vast difference between the two agen-

cies and their legislative history and the judicial treat-

ment between the policies giving rise to their establish-

menf, and the possible effects of their decrees upon busi-

ness, and in view of the previous recognition by this and

other courts of such distinctions, there exists no reason

to:contlude that, because the Cireuit Court may be with-

out power to modify an order of the National Labor Rela-

tions Board which is supported by substantial evidence, no

such power exists with respect to orders of the Federal

Trade Commission. In fact, it is clear and the Circuit

Court so states, that the findings of faet made by the

Commission can be translated effectively and equitably

through a modified order giving consideration to the busi-

ness interests of the respondent without in any sense being

in derogation of the public interest.

No Contradiction by Qualifying Language

The Commission's argument that qualifying language

cannot be used to contradict a trade name) has no merit

here.’ The word ‘* Alpacuna’’ being meaningless* its con-

*It is the contention of the Commission that the “cuna” por-

tion of “Alpacuna” signifies a vicuna content. As a matter of fact,

the tincontradicted evidence as to the derivation of the name “Alpa-

_cuna” shows that the proper suffix is “una” and not “cuna’. Even

assuming the Commission's theory, “cuna” has no English mean-

ing except to indicate a member of an obscure Indian tribe (Trial

Examiner’s Report, lla). At the most it creates the impression of

a soft fibre (R. 377a, 378a, 425a, 426a, 433a, 558a). It has been

administratively declared that the “cuna” type trade name is “ar-.

bitrary and“meaningless.” (See remarks of Ass’t. Commissioner of

Patents in New York Knitting Mills, Incorporation v. Gotham Kuit-

ting Mills, Incorporated, 37 U. S. Patent Quarterly, p. 459 (1938) ;

New York Kuitting. Mills, Incorporated v. Rosenna Knitted Sports-

wear, 37 U. S. Patent Quarterly, p. 460 (1938).) Cf. remarks of

witness Richardson (R. 472a) who said that “una” in “Alpacuna”™

Was as meaningless as “ena” in Wheatena.

ry }

wv

20

tradiction would have to be meaningless. Herein lies: the

distinction between the case at bar and Federal Trad.

Commission v. Algoma Lumber Co., 291 U. S. 67 (1954).

In the latter case, the word at issue was ‘‘white’’, a word

of definite meaning. In our ease, ** Alpacuna’’, lacking any

meaning cannot be contradicted by a phrase which does

have meaning.

Further, even if there were to be attributed some mean-

ing to the name ‘‘Alpacuna’’ as a combination of alpaca

and vicuna, the explanatory phrase would still be proper.

It has been established in Federal Trade Commission

cases that if the trade name is not \per se false, but is

rather partially true and partially deceptive, qualifying

language may be used to erase any possible deception.

Royal Mailing Company vy. Federal Trade Cowm-

mission, 288 U. S. 212 (1933);

Federal Trade Commission vy. Army & Navy

Trading Co., 88 F. (2d) 776 (App. D. C. 1937).

In Federal Trade Commission v. Army & Navy Trad-

ing Co., supra, the court, distinguishing such cases as the

Royal Miliing Co., Good Grape, Casoff and Fluegelman

cases from the matter at issue in that case, pointed out that

iw the former group of cases the selection of qualifying

words effective to eliminate deception was feasible because

the names involved made separate and distinet representa-

tions in respect of the origin and characteristics of sing!

products, some of which-were true and some untrue.

The court stated:

‘‘Therefore, qualifying words could be chosen

which would eliminate any deceptive represents

tions and leave standing the truthful ones alone.”

In the instant case, the sole portion of the name ‘* Alpa-

euna’’ which-is allegedly deceptive is the ‘‘cuna’’. suffix:

s

Certainly, any possibie misinpression can quickly be elim-

inated by proper qualifying words, removing the alleged

- deceptive portion and leaying that which is admittedly

truthful.

The Commission’s Order is Not Justified by the

Evidence

Entirely apart from any question of control over the

remedy by the court, as such, sfaieus Curiae respectfully

submits that the order in the instant case should have been

modified beeause it goes’ beyond the findings of tact and

substantial evidence in the case. |

— Paragraph Nine of the Commission’s findings contains

the basis for the Commission's present order;

‘*The Commission, therefore, find that the name

‘Alpacuna’ is misleading and deceptive to a: sub-

stantial portion of the purchasing publie i that it

represents or implies to such persons that respond-

ent’s coats contain material which they ‘do not in

fact contain.’’ (Italics ours.) (R. 652a.)

That portion of the Commission’s order which is in

issue on this rehearing prohibits:

“Using the word ‘Alpacuna’ or any other word |

which in whole or in part is indicative of ‘vicuna’

to designate or describe respondent's coats; * * .°""

(R. 655a).

The order transcends the findings of fact and the sub-

stantial evidence in the record in that it completely bars

the use of ‘‘ Alpacuna’’, whereas the evidence below mere-

ly shows that ‘‘Alpacuna’”’ standing alone is allegedly de-

ceptive to a substantial portion of the purchasing public.

In facet, the record is even more narrowly restrictive and

8

affirmatively demonstrates through the Commission’s own

witnesses that a statement or explanation to the public

that ‘‘vicuna’’ is not contained in the garments completely

remove’ any possible misapprehension. ‘An order pro-

hibiting the use of ‘‘Alpacuna’’ unless accompanied by

qualifying phrase clearly indicating a lack of vicuna cou-

tent would thus conform both to the findings: of fact and

to the evidence in the case.

A striking example of the type of evidence adduced at

the hearing sustaining the above contention appears in

the testimony of Robert L. Cohen, a Commission witness,

on cross-examination :

‘*A. And I would judge from that that it is al-

paca and vicuna hair, with a cotton backing.

Q. Until you read the next sentence. Read tha‘

' sentence. A. ‘Alpacuna’ is a registered trade nanie

and is composed of alpaca, wool, and mohair pile on

cotton backing. .

Q. That is a perfectly clear destription of what

is in the coat? A. That is right.

Q. And it does not contain vicuna? A. That is

right.

-Q. So that no one reading that phieataninet

would have any doult as to What was in that over:

coat. A. That is trup.’’ (R7 214a.)

With regard to the record affirmatively showing no de.

ception if proper qualification is made, we also respect-

fully refer the court to the testimony of Commission’<

witnesses Muchmore (R. 170a), Ballenger (R. 173a), Wes!

(R. 18la), Hardy (R. 184a), Ford (R. 255-6a), Test UR.

266-267a). |

It is clear that the evidence below rested at the point

that ‘‘Alpacuna”’ if wnerplained was allegedly deceptiv:

25

to a substantial portion of the purchasing public. It is

also evident that the record is without substantial evi-

dence, in fact without any evidence at all, that ‘‘Alpa-

cuna’’, when properly modified, is not deceptive. It is

equally clear that the qualifying language ‘Contains No

Vicuna’’, as offered herein, would completely eradicate

guy misapprehension of the consumer and any deception

to the public.

It is, therefore, respectfully submitted that entirely

apart from any considerations as to the power of the

court over the remedy, as such, the order in this case

should. have been modified in order to.conform to the

findings of fact and the substantial evidence in the record.

As it stands now that order is not based in substantial

evidence.

The order should, at the very least have been modified

so that it reads that the petitioner is prohibited from:

“Using the word ‘Alpacuna’ or any other word

which in whole or in part is indicative of the word

‘vieuna’, without proper qualification indicating the

absence of vicuna.”’

Accompanying the trade.name with the phrase **Con-

tains No Vicuna”’ would clearly dispel any possible in-

ference of vicuna content. In this manner, due regard for

the public, on the one hand, and consideration for the

preservation of a valuable property right, on the other

hand, would both be satisfied. This, we submit, is the only

type of order which could be properly entered in -this

case in view of the present state of the record.

8 24

eo

0

a

CONCLUSION

The Petition for the Writ of Certiorari should be

granted.

Respectfully submitted,

Seymour M. KL tery,

Atttorney for Amicus Curiar.

MarsHALL, Bratrer, Setigson & KLery,.

‘of Counsel.

Marvin J. Buiock,

on the Brief.

(8073)

a