Petition for Writ of Certiorari — Cheff v. Schnackenberg

APR 8 1965

JOHN F. DAVIS, Ci

In THE .

Supreme Court of the Anited States

Ocroser Term, 1964

No. ma 6%

In re PAUL THEODORE CHEFF, PETITIONER

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Ricnarp M. Keox

Tuomas W. JoHNSTON

Josern V. Giri

135 South LaSalle Street

Chicago, Illinois 60603

Coumsel for Petitioner

Of Counsel:

CHapWELL, Keck, Kayser,

Ruaeitzs & McLaren

135 South LaSalle Street

Chicago, Illinois 60603

April 1965

TWENTI* TH CENTURY PRESS, INC., CHICAGO 60606

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PAGE

i 1

NE) © 3 0k so A ics ain cess Cah b kn wha Revie Rie 0 1

gE REPENS TIS RN ERD 2

Constitutional and Statutory Provisions Involved .... 3

Btatememtiel the Cane cin occ cciisies dicdvcbeccvocvs 3

Reasons For Granting Writ ...............00eeeeee: 5

ORIIIAGD shad Edond seb Cain pahenaide cd 4nd Ke'es 16

Appendix A—Constitutional and Statutory

Provisions Involved ............... 17

B—Opinion of the Court of Appeals ...... 18

C—Judgment Order of the Court of Appeais 29

D—Court of Appeals’ Order of August 5,

1959, and FTC Order of July 7, 1958 33

CITATIONS

CAsEs:

Bowie v. City of Columbia, 378 U.S. 347 (1964) ...... 10

Connally v. General Const. Co., 269 U.S. 385 (1926) ... 10

Floersheim, In re, 316 F.2d 423 (9th Cir. 1963) .... 6,9,11

FTC v. National Lead Co., 352 U.S. 419 (1957) ....... i)

Gompers v. Bucks Stove & Range Co., 221 U.S. 418

CES Fi in wicks Saas Sneha OREN ER iN di 11

Green vy. United States, 356 U.S. 165 (1958) .......... 16

Harris v. United States, cert. granted, 379 U.S. 944

CET TUNED hoo 5 pi cat Ee CONT Oe dec coos nia vases 15

Holland Furnace Co., 55 F.T.C. 55 (1958) ............ 34

Holland Furnace Co. v. FTC, 295 F.2d 302 (7th Cir.

1961) .. beeen teen eeeeeeeeeeee eee teneeeeeeeeeees 4, 20

Levine v. United States, 362 U.S. 610 (1960) ......... 10

__ REE are

PAGE

Michaelson v. United States, 266 U.S. 42 (1924) ...... ll

Pierce v. United States, 314 U.S. 306 (1941) .......... 10

Schware v. Board of Bar Examiners, 353 U.S. 232

(IOS) Se iA CCIE CWE CA RSS 13

Thompson v. City of Louisville, 362 U.S. 199 (1960) .. 11

United States v. Barnett, 376 U.S. 681 (1964) ...... 15, 18

United States v. Harriss, 347 U.S. 612 (1954) ........ 10

Untrep Stares ConstiruTion:

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EE SD. dic a wath neaeiaces civesansec 2, 3, 10, 17

EE IES & CRncke ve cddvedech eavin ands 3, 15, 17

STaTures:

Be SE ED 1005 Vasa cneksss conenns odeue 3, 4,17

Bh SEA: DUET Nh hansen ch cccietdeeisntaccsines 2

FeperaL Ruwes or Cima PRocepuRe:

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In THE

Supreme Court of the Anited States

Octoser ‘l'erm, 1964

In re PAUL THEODORE CHEFF, PETITIONER

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioner, Paul Theodore Cheff, prays that a writ of

certiorari issue to review the judgment of the United States

Court of Appeals for the Seventh Cirenit, entered on Janu-

ary 27, 1965, finding petitioner guilty of criminal contempt

and imposing upon him a sentence of imprisonment of

six months.

OPINION BELOW

The opinion of the Court of Appeals issued January 27,

1965, is unreported, as yet, and is printed in Appendix B,

infra, pp. 18-28. The judgment order of the Court of Appeals

entered January 27, 1965, is printed in Appendix C, infra,

pp. 29-32. The order of the Court of Appeals entered August

5, 1959, and the cease and desist order of the Federal Trade

Commission (hereinafter called FTC) issued July 7, 1958,

are printed in Appendix D, “— at p. 33 and pp. 34-35,

respectively.

JURISDICTION

The judgment of the Court of Appeals was entered on

January 27, 1965 (Appendix C, infra, pp. 29-32). Peti-

2

tioner’s timely motion, requesting that this judgment be

vacated and that either a judgment of acquittal be entered

or a new trial be ordered (Env. 7, Item 230),' was denied

by the Court of Appeals on February 11, 1965 (Env. 7,

Item 235). This Court, on February 15, 1965, extended the

time for filing a petition for writ of certiorari to and in-

eluding April 12, 1965. ;

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

QUESTIONS PRESENTED

1. Whether convicting petitioner of criminal contempt.

based on his failure, as a corporate officer, to take certain

affirmative actions neither expressly ner impliedly required

by a narrowly-drawn, prohibitory court order is in violation

of the right of fair warning guaranteed by the Due Process

Clause of the Fifth Amendment.

2. Whether petitioner’s conviction of criminal contempt

1 All record documents, including the transcript of testimony,

have been placed in envelopes numbered 1 through 12 in order

according to the item number assigned by the Clerk of the Court

of Appeals which appears on the cover page of each document.

All original exhibits received in evidence, except for certain

stipulated exhibits which are attached to the pleadings of the

prosecution and the Holland Furnace Company, are in two addi-

tional envelopes numbered 13 and 14.

The following abbreviations are used herein in citing to the

record :

Ge. FTN ec dacee Envelope

Te. FH ss evectn ceed Transcript Volume

GRR cede sdowcercchete Exhibit of Petitioner Cheff

ab. iWin caeens oévenien Prosecution Exhibit

H.A., Att.....(SX).... Holland Furnace Company An-

swer, Attachment ..... (Stipu-

lated Exhibit)

3

was an abuse of i:.2 Court of Appeals’ contempt power since

based upon a record devoid of substantial evidence from

which petitioner could be found guilty beyond a reasonable

doubt.

3. Whether, after denial of a demand for jury trial, the

sentence of imprisonment of six months imposed upon

petitioner is constitutionally permissible under Article ITI

and the Sixth Amendment.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The provisions of the United States Constitution in-

volved are Article ITI and the Fifth and Sixth Amendments.

The statutory provision involved is 18 U.S.C. § 401(3).

The pertinent parts of these provisions are set forth in

Appendix A, infra, p. 17.

STATEMENT OF THE CASE

In this case, petitioner was found guilty of criminal con-

tempt and sentenced to imprisonment for a period of six

months by the Court of Appeals for the Seventh Circuit

for wilfully causing violations of a pendente lite order of

that court enforcing a cease and desist order of the FTC.

On July 7, 1958, in an administrative proceeding en-

titled “In the Matter of Holland Furnace Company, a cor-

poration, Docket No. 6203,” the FTC entered an order com-

manding said corporation “and its officers, agents, repre-

sentatives, and employees,” in connection with the sale of

furnaces and heating equipment in commerce, to cease and

desist from eight specified practices found to constitute

unfair methods of competition under the Federal Trade

Commission Act (Appendix D, infra, pp. 34-35).

4

Thereafter, in the course of a proceeding initiated by

the Holland Furnace Company (hereinafter sometimes

called Holland) to review the FTC cease and desist order,

the Court of Appeals for the Seventh Circuit, on applica-

tion of the FTC, entered a pendente lite order on August

5, 1959, commanding the Holland Furnace Company to

comply with the cease and desist order “until and unless

said order .. . be set aside .. . or until further order eee

[the] Court” (Appendix D, infra, p. 33).2 Petitioner was

not a party to the FTC proceedings or to the review pro-

ceedings in the Court of Appeals nor was he named in the

court’s pendente lite enforcement order. Both the FC

cease and desist order and the court’s order enforcing the

same were limited to prohibiting eight deceptive sales

practices and neither contained any provision specifying

what steps or affirmative actions were required to be taken

by the company or its executives to prevent violations (Ap-

pendix D, infra, pp. 34-39).

On petition of the FTC filed pursuant to 18 U.S.C. §$

401(3) and in conformity with Rule 42(b) of the Federal

Rules of Criminal Procedure, the Court of Appeals, on

April 26, 1963, issued a rule to show cause against peti-

tioner (who, during the relevant period, had been a di-

rector, president and chief executive officer of Holland) and

against six other directors and four other Holland execu-

tives; each of these persons was required to show cause

why he should not be held in crimina! contempt

“by reason of having knowingly, wilfully and inten-

tionally caused, and aided and abetted in causing, re-

spondent Holland Furnace Company to violate and

disobey, and fail and refuse io coinply with .. . [the

2,On November 7, 1961, the pendente lite order was made

permenent by the Court of Appeals’ affirmance of the FTC order.

Holland Furnace Co. v. FTC, 295 F.2d 302 (7th Cir. 1961).

— ae oa

5

pendente lite order of the court] entered on August

5, 1959 . . .” (Env. 5, Item 27)8

Also on April 26, 1963, an order was entered appointing

counsel for the FTC as attorneys to prosecute the proceed-

ing on behalf of the court (Env. 5, Item 28).

Petitioner filed a verified answer to the rule to show

cause denying that he had knowingly, wilfully or inten-

tionally caused and aided and abetted in causing Holland

Furnace Company to violate and fail and refuse to comply

with the court’s order of August 5, 1959 (Env. 5, Item 93).

Petitioner also filed a demand for trial by jury (Env. 6,

Item 156), which demand was denied by order of the court

entered on May 27, 1964 (Env. 6, Item 157).

The proceeding was tried by the Court of Appeals which

heard evidence. On January 27,1965, the court rendered an

opinion (Appendix B, imfra, pp. 18-28), and entered a

judyment order: (1) finding that petitioner “knowingly,

wilfully and intentionally caused, and aided and abetted in

causing . . . violations by Holland Furnace Company” of

the court’s order of August 5, 1959; (2) adjudging him

guilty of criminal contempt; and (3) sentencing him “to

imprisonm ‘at for a period of six months... .” (Appendix

C, infra, pp. 31-32).*

REASONS FOR GRANTING WRIT

This case raises important questions concerning the

exercise by federal courts of the power to prosecute and

3 On petition of the FTC, the Court of Appeals had previously

issued a rule to show cause against Holland Furnace Company on

March 19, 1962 (Env. 2, Item 2).

* All other individual respondents were found not guilty except

two former sales managers who were fined $500 each. Holland

Furnace Company was found guilty and fined $100,000 and is

seeking review in this Court by petition for certiorari filed March

10, 1965, No. 972.

a

an a

6

punish for criminal contempt. The decision of the court

below is in conflict with the decision of the Court of Ap-

peals for the Ninth Circuit in In re Floersheim, 316 F.2d

423 (9th Cir. 1963) and contravenes the first essential of

due process—the right of fair warning. Additional impor-

tant questions are raised by the absence of any substantial

evidence from which the Court of Appeals could find peti-

tioner guilty beyond a reasonable doubt, and the length of

the prison sentence imposed without a trial by jury. All

of these questions deserve review by this Court in the exer-

cise of its supervisory power over the administration of

criminal justice in the federal courts.®

I.

The Decision of the Court Below Is In Conflict With a

Decision of the Court of Appeals For the Ninth Circuit,

and Petitioner’s Conviction Is In Violation of the Right

of Fair Warning

The order of August 5, 1959, on which this contempt pro-

ceeding was based did no more than enforce the provisions

of the FTC cease and desist order, review of which was

then pending in the Court of Appeals. The FTC order

specified absolutely no affirmative action to be taken by

5 This is particularly so since the trial court disregarded speci-

fically guaranteed procedural safeguards, and petitioner has no

right of appellate review. Thus, the court below declined to make

special findings of fact as petitioner had requested in a motion

filed pursuant to Rule 23(c) of the Federal Rules of Criminal

Procedure (Appendix B, infra, p. 20; Env. 7, Item 203). More-

over, petitioner was not afforded an opportunity to make a state-

ment in his own behalf before sentence was imposed as is re-

quired by Criminal Rule 32(a) (Env. 11, Tr. Vol. 22, p. 2620).

Petitioner has no right of appeal since this proceeding originated

in the Court of Appeals.

7

Holland or any of its executives but instead was limited to

prohibiting eight specific deceptive sales practices (Appen-

dix D, infra, pp. 34-35).

Petitioner’s conviction was not based upon a charge or

evidence that he personally engaged in any of the eight

deceptive practices. Rather, the alleged direct violations

of the eight prohibitions covered by the order arose out

of actions by subordinate sales employees. These alleged

violations involved but a few of Holland’s thousands of

employees in connection with some 66 out of millions of

house calls made throughout the United States during the

period of approximately 28 months that the pendente lite

order was in effect (Env. 2, Item 14, H.A., Att. 55 (SX);

Env. 10, Tr. Vol. 13, pp. 1519-20).

Further, petitioner was not convicted for having taken

no action whatsoever to prevent violations by these sub-

ordinate sales employes. Indeed, the abundance of undis-

puted record evidence establishing the creation and execu-

tion of a program to bring about compliance and to control

the practices of subordinate employees precluded any such

contention. Th« following are some of the affirmative ac-

tions that were taken by petitioner and other Holland

executives :

A special department, the Product Service Depart-

ment, was set up to police sales practices (Env. 10,

Tr. Vol. 14, pp. 1574-83; Env. 14, CX 8, 9, 23).

Numerous bulletins and directives were issued com-

manding compliance (Env. 2, Item 14, H.A., Att. 31, 32,

34, 35, 36, 37 (SX); Env. 10, Tr. Vol. 14, pp. 1606-08,

1641-54; Env. 14, CX 8, 10-B, 11, 12, 16, 17, 25, 26, 34,

35, 36).

Monthly meetings were held with division sales per-

sonnel at which the necessity for compliance was con-

tinually stressed (Env. 10, Tr. Vol. 14, pp. 1623-40,

1659-60; Tr. Vol. 15, pp. 1667-75; Tr. Vol. 16, pp. 1833.

38; Env. 14, CX 20, 23, 24, 40, 41).

Many salesmen were discharged or demoted for en-

gaging in the prohibited practices (Env. 2, Item 14,

H.A., Att. 33 (SX); Env. 10, Tr. Vol. 16, pp. 1806-09,

1901; Envy. 13, PX 87, 90; Env. 14, OX 5, & 7, 14, 16,

31, 32, 33).

Meetings were held with officials of various Better

Business Bureaus both at the local and national level

(Env. 10, Tr. Vol. 14, pp. 1569-70; Env. 14, CX 23).

Meetings were held with attorneys from the FTC at

which compliance suggestions and information con-

cerning complaints were requested but not provided

(Env. 8, Tr. Vol. 1, pp. 100-01, 104-06; Tr. Vol. 2, pp.

162-64; Env. 10, Tr. Vol. 14, pp. 1568-69; Env. 14,

CX 23).

The Court of Appeals, however, dismissed these actions

as a “facade” and as “apparent” rather than real efforts to

comply (conclusions which we shall show are totally unsup-

ported by the evidence, see pp. 12-13, infra) and _ pro-

ceeded to find petitioner guilty of knowingly, wilfully and

intentionally causing violations by subordinate employees

by reason of his failure to change certain sales policies of

Holland. But the unchanged policies upon which the court

below relied involve such matters as selling products in the

replacement market, compensating salesmen on a commis-

sion basis, the pricing of equipment, repairs and services,

and Holland’s corporate marketing structure,® and are en-

tirely separate, distinct and different from the deceptive

sales practices inhibited by the court order. The FTC

order as enforced by the court in no way touched upon or

required any change in these policies. Had the FTC or the

* The court below catalogued these unchanged policies in para-

graph 3 of Section II of its opinion (Appendix B, infra, p. 25.)

3

court considered changes in these policies to be essential

to effect compliance, provisions requiring such action

could have been incorporated in the orders. FTC v. Na-

tional Lead Co., 352 U.S. 419, 430 (1957). But such was

not done,

The holding of the court below, since bottomed upon a

failure by petitioner to change sales policies not within the

ambit of the order, is squarely in conflict with the decision

of the Court of Appeals for the Ninth Circuit in In re

Floersheim, 316 F.2d. 423 (9th Cir. 1963). That was a pro-

ceeding for criminal contempt of an order of the Court of

Appeals enforcing an FTC cease and desist order pro-

hibiting the use of certain deceptive types of skip trace

forms. It was contended by the FTC that the forms used

by the respondent were too “official looking” or “too de-

manding,” that the color of paper used resembled that of

checks and that the use of a Washington, D.C. address

implied government involvement. The court rejected such

contentions as a basis for a contempt conviction saying:

“The short answer to these complaints is that the cease

and desist order, as drawn, does not forbid such acts

or use.” 316 2d at 428.

Furthermore, petitioner has been convicted for failing

to take affirmative action not even impliedly required by

the prohibitions of the court order. Petitioner does not con-

tend that a prohibitory order places no affirmative duties

on corporate officers or that a criminal contempt conviction

may not be based upon a failure of such officers to take

action designed to prevent violations by subordinates. How-

ever, where, as here, a contempt conviction is based upon

inaction so far removed from the provisions of the pro-

hibitory order that the officer has no reason even to suspect

that such action is required, it flies in the face of the right to

10

fair warning guaranteed by the Due Process Clause of the

Fifth Amendment.

It is fundamental that no man should be held criminally

responsible for conduct which he could not understand to

be proscribed or required. United States v. Harriss, 347

U.S. 612, 617 (1954). Based on this principle, criminal

statutes so vague and indefinite that men of ordinary intelli-

gence must guess at their meaning and differ as to their

application have been struck down as violative of “the first

essential of due process of law.” Connally v. General Const.

Co., 269 U.S. 385, 391 (1926). And the right of fair notice

is violated to an even greater extent where a statute precise

on its face “has been unforeseeably and retroactively ex-

panded by judicial construction. . . .” Bouie v. City of

Columbia, 378 U.S. 347, 352 (1964); accord, Pierce v.

United States, 314 U.S. 306, 310-11 (1941).

Petitioner’s conviction was based on just such an un-

foreseen and retroactive expansion by judicial construction,

not of a statute but of a court order.’ This is not a case

where the order in question was merely vague. Rather, the

order on its face was specific. It was limited to prohibiting

eight deceptive sales practices. But the court below has

read into it requirements of affirmative action relating to

matters which no business executive could be expected to

understand were within its scope. For example, we submit

that petitioner could not reasonably have been expected to

construe the order as requiring a change in a long-standing

7 The requirements of due process, of which fair warning is one,

are clearly applicable to a proceeding for criminal contempt.

Levine v. United States, 362 U.S. 610, 616 (1960). Accordingly,

the principle laid down in the Bowie and Pierce cases, swpra, with

respect to construing a criminal statute applies with equal force

to proseribe an unforeseeable and retroactive expansion by judicial

construction of a court order.

er

11

practice of paying salesmen on a commission basis or as

ealling for a reduction in the selling prices of heating

equipment.

It is respectfully submitted that petitioner’s conviction,

since squarely in conflict with the Floersheim case, supra,

and since predicated upon an unforeseeble and ex post

facto expansion of the narrow requirements of the court

order in violation of the constitutional right of fair warning,

warrants review by certiorari.

II.

There is No Substantial Evidence From Which to Find

Petitioner Guilty Beyond Reasonable Doubt

The evidence in this record is manifestly insufficient to

support the Court of Appeals’ finding that petitioner know-

ingly, wilfully and intentionally caused and aided and

abetted in causing violations of its pendente lite enforce-

ment order. Indeed, we believe the record is so devoid of

proof as to make petitioner’s conviction a denial of due

process under the teaching of Thompson v. City of Louis-

ville, 362 U.S. 199 (1960). In any event, the record evidence

falls far short of proving guilt beyond a reasonable doubt,

the standard applicable in a criminal contempt proceeding.

Michaelson v. United States, 266 U.S. 42, 66 (1924);

Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 444

(1911).

Under the contempt charges brought against petitioner,

it was incumbent upon the prosecution to introduce evi-

dence sufficient to prove beyond a reasonable doubt:

(1) That there were violations of the court’s order

by subordinate employees of Holland Furnace

Company ;

(2) That petitioner acted “knowingly, wilfully and

intentionally,” i.e. with a specific intent to cause

violations of the order; and

I ————

Me Ene chee ee

12

(3) That petitioner’s knowing, wilfull and intentional

conduct actually caused violations of the court

order by subordinate sales employees.

Assuming there is some evidence to prove that subordinate

sales employees did violate the order, there is simply no

evidence whatsoever that petitioner acted with the re.

quisite specific intent, or that his conduct was the cause in

fact of such violations.

Specific Intent—The Court of Appeals, in the first para-

graph of Section IT of its opinion, reached the ultimate

conclusion that petitioner was guilty of knowingly, wilfully

and imtentionally causing violations of the order, based

upon a pyramid of subordinate conclusions contained in the

second paragraph of Section IT (Appendix B, infra, pp. 23-

25). The net of these subordinate conclusions is that peti-

tioner’s actions to set up and carry out a compliance pro-

gram were not bona fide but were designed to construct “an

apparent compliance” and a “facade behind which to con-

tinue the condemned sales practices” (Appendix B, infra,

pp. 23, 24). Since the record is wholly barren of any evi-

dence showing that petitioner’s actions were not undertake»

and carried out in entire good faith, the ultimate conclu-

sion respecting wilfulness (specific intent) is totally un-

founded.

There is no direct evidence that petitioner’s compliance

efforts were part of a plan to erect a “facade” behind which

violations could occur; moreover, the circumstances re-

ferred to by the court provide no basis for inferring the

existence of any such scheme for two reasons.

First, many of the specified circumstances are them-

selves completely lacking in evidentiary support, and, in-

deed, some are precisely contrary to the record evidence.

For example, the court’s findings that petitioner, in the

Holland house organ, the “Firepot,” “complained of recom-

mendations to discharge salesmen,” and that with peti-

13

tioner’s “knowledge and approval . . . salesmen whom

Wabeke had recommended discharging were praised in the

publication” (Appendix B, infra, p. 24) are completely un-

supported.

Seconl, the remaining circumstances cited by the

court are not rationally related to the conclusion sought

to be inferred. For instance, the fact that petitioner per-

sonally did not meet with Better Business Bureaus to

adjust complaints, or travel into the field to discuss com-

pliance with company personnel, but, instead, delegated

these duties to others (Appendix B, infra, p. 24), certainly

does not permit an inference that he had a plan to con-

struct a mere apparent compliance with the order. And

since there is no basis for inferring the existence of a sham

compliance plan, such a normal business policy as dele-

gating to other executives the responsibility for effectuat-

ing a compliance program certainly cannot be labeled as a

lawful act done pursuant to an unlawful purpose.

It thus appears that the ultimate holding that petitioner

knowingly, wilfully and intentionally caused violations of

the order was based both upon subordinate conclusions

having no evidentiary basis and which the court apparently

fashioned entirely out of whole cloth, and upon inferences

“so dogmatic . . . as to be wholly unwarranted.” Schware

v. Board of Bar Examiners, 353 U.S. 232, 251 (1957) (con-

curring opinion of Frankfurter, J.). Accordingly, there is

a complete absence of any evidentiary predicate sufficient

to establish the requisite specific intent.

Causation—The findings of the Court of Appeals on the

element of causation are contained in the third paragraph

8 Petitioner, the chief executive officer of Holland, was respon-

sible for all aspects of the operations of a company with some 400

branches in 41 states, with annual sales of 25 to 30 million dol-

lars, and with some 7,000-8,000 employees, and hence obviously

had to delegate many compliance duties to others.

14

of Section II of the opinion (Appendix B, infra, p. 25). The

substance of the court’s holding is that petitioner’s failure

to make substantial changes in Holland’s sales policies

and sales organization “contributed to a condition which

lent itself to undisciplined sales practices,” and that his

unbending attitude toward the FTC cease and desist order

and his confidence in eventually setting it aside constituted

“an obstruction to change and to compliance with the

court’s order” (Appendix B, infra, p. 25). From the fore-

going, the Court of Appeals inferred the ultimate conclu-

sion that petitioner knowingly, wilfully and intentionally

caused violations of the order.

The record is equally deficient on this essential element.

Again, the findings with respect to many of the circum-

stances referred to in the opinion are themselves entirely

unsupported. Thus, the court’s ambiguous reference to

petitioner’s “unbending attitude toward the . . . cease and

desist order” (Appendix B, infra, p. 25) has no evidentiary

basis, and the reference to his confidence “in eventually

setting ... [the order] aside ” (ibid.) is precisely contrary

to the testimony and documentary exhibits (Env. 11, Tr.

Vol. 18, pp. 2114-15; Env. 14, CX 7).

Further, there is not one word of testimony or one docu-

ment in this record to support directly or inferentially that

any failure by petitioner to make policy changes or his

attutude toward the order caused a single proven violation

of the order. Of equal importance is the fact that none of

the sales policies and other matters relied upon by the

Court of Appeals were required to be changed or were

covered in any way by the FTC order as enforced by the

court’s order, and the same cannot constitutionally be con-

strued by judicial ruling to be within the ambit of such

orders for the reasons discussed at pp. 6-11, supra.

Neither due process nor the requirement of proof be-

yond a reasonable doubt is satisfied when a conviction is

—

15

based on a record so totally lacking in evidence to estab-

lish the essential elements of specific intent and causation.

We respectfully submit that petitioner’s conviction on this

record constitutes a clear abuse of the contempt power and

calls for review on certiorari by this Court.

Ii.

The Sentence of Imprisonment Imposed Upon Petitioner

Raises a Constitutional Question Similar to One Now

Pending Before This Court

A further question presented by this case is whether a

sentence of imprisonment of six months may constitution-

ally be imposed upon petitioner in view of the fact that

his demand for a jury trial was denied (Env. 6, Item 157).

The majority opinion in United States v. Barnett, 376 U.S.

681 (1964) indicated that absent a trial by jury, the pun-

ishment that may be imposed for criminal contempt “would

be constitutionally limited to that penalty provided for

petty offenses.” 376 U.S. at 695 n.12. In a dissenting

opinion, the punishment limitations were equated to

“trivial penalties.” 376 U.S. at 751, 757 & n.44 (opinion

of Goldberg, J.). The question of whether a six month

prison sentence is within this undefined limitation remains

open.

A similar issue is pending before this Court in Harris v.

Umited States, cert. granted, 379 U.S. 944 (1964) (No. 526).

Question 3 in Harris involves whether a “sentence of one

year’s imprisonment imposed ... in a summary contempt

proceeding is constitutionally permissible.” Brief for

Petitioner, p. 2.

We respectfully submit that the sentence imposed upon

petitioner, absent a jury trial, raises a constitutional ques-

tion under Article III and the Sixth Amendment which is

equal in importance to the one in Harris. Accordingly, this

Court should grant certiorari to resolve such question.

nm

16

CONCLUSION

It is undisputed that the contempt power is peculiarly

subject to abuse. The offense not only has “the most ili-

defined and elastic contours in our law” but in addition is

punished by judges who have concentrated in themselves

“the responsibilities of lawmaker, prosecutor, judge, jury

and disciplinarian. ...” Green v. United States, 356 US.

165, 199, 200 (1958) (dissenting opinion of Black, J.).

Moreover, where the proceeding originates in a Court of

Appeals with the consequent absence of any right of ap-

peal, the harshness of the contempt power is even more

pronounced. Due process does not require appellate re-

view; however, we submit that in view of the unusual sus-

ceptibility of the contempt power to abuse—as suggested

by the important questions presented and discussed above

—the unavailability of appellate review should be given

some independent significance in determining whether to

grant certiorari.

For all of the reasons set forth in this petition, we urge

that a writ of certiorari be issued.

Respectfully submitted,

Ricwarp M. Krox

Tuomas W. JoHNSTON

JosepH V. GrFFIn

135 South LaSalle Street

Chicago, Illinois 60603

Of Counsel: Counsel for Petitioner

CHapwetL, Kreck, Kayser,

Rvueates & McLaren

135 South LaSalle Street

Chicago, Illinois 60603

April 1965

—

17

APPENDIX A

Constitutional Provisions Involved

Artie! \ ITT, § 2, Par. 3 provides in pertinent part:

“The Trial of all Crimes, except in Cases of Im-

peachment, shall be by Jury; and such Trial shall be

held in the State where the said Crimes shall have been

committed. .. .”

The Fifth Amendment provides in pertinent part:

“No person ... shall... in any criminal case . . . be

deprived of life, liberty, or property, without due

process of law... .”

The Sixth Amendment provides in pertinent part:

“In all criminal prosecutions, the accused shall en-

joy the right to a speedy and public trial, by an impar-

tial jury of the State and district wherein the crime

shall have been committed. . . .”

Statutory Provision Involved

18 U.S.C, § 401(3) provides:

“A court of the United States shall have power to

punish by fine or imprisonment, at its discretion, such

contempt of its authority, and none other, as—

» * e * *

“(3) Disobedience or resistance to its lawful writ,

process, order, rule, decree, or command.”

18

APPENDIX B

IN THE

UNITED STATES COURT OF APPEALS

For THe SeventH Circuit

SepremBer Term, 1964 — January Session, 1965

No. 13671

In re: Hotuanp Furnace Company, et al.

[Filed] January 27, 1965

Before ScrNnacKENBERG, Kizey and Swycert, Circuit

Judges.

This criminal contempt proceeding was begun on peti-

tion of the Federal Trade Commission alleging that re-

spondents “knowingly, wilfully and intentionally” violated

and disobeyed an order of this court of August 5, 1959,

directed against respondents, by failing and refusing to

comply with said order. The Rules to Show Cause issued.

Issues were joined by respondents’ answers, and this court,

without a jury,’ heard evidence and arguments on the

issues.

In the August 5, 1959 order of this court, respondents

were “commanded forthwith to obey and comply” with an

FTC order, entered July 7, 1958, “until and unless,” the

Commission order “shall be set aside upon review by this

court or the United States Supreme Court, or until further

order of this court.”

1 Following the Supreme Court’s decision in United States v.

Barnett, 376 U.S. 681 (1964), this court denied motions of certain

respondents for jury trial.

wa

19 Appendix B

The Commission order of July 7, 1958 was entered at

the conclusion of hearings of proceedings against Holland

Furnace Company charging unfair methods of competition

and deceptive acts and practices in commerce. The order

directed “respondent Holland Furance Company, a corpo-

ration, and its officers, agents, representatives, and em-

ployees, directly or through any corporate or other device”

in selling or distributing Holland products or services, to

cease and desist from:

(1) Representing, directly or indirectly, that any of its

employees are inspectors or are employees or representa-

tives of government agencies or of gas or utility companies.

(2) Representing, contrary to fact, that its salesmen or

servicemen are heating engineers.

(3) Representing that any furnace manufactured by a

competitor is defective or not repairable or that the con-

tinued use of such furnace will result in asphyxiation,

carbon monoxide poisoning, fires, or other damage, or for

any other reason, when such is not a fact.

(4) Tearing down or dismantling any furnace without the

permission of the owner.

(5) Representing that a furnace which has been dismantled

cannot be reassembled and used without danger of asphyxi-

ation, gas poisoning, fires, or other damage, or for any

other reason, when such is not a fact.

(6) Requiring the owner of any furnace which has been

dismantled by respondent’s employees to sign a release

absolving the respondent of liability for its employees’

negligence, or of any other liability, before reassembling

said furnace.

(7) Refusing to immediately reassemble, at the request of

em

20

Appendix B

the owner. any furnace which has been dismantled by re-

spondent’s employees.

(8) Misrepresenting in any manner the condition of any

furnace which has been dismantled by respendent’s em-

ployees.

The Commission’s order, as enforced by this court’s

August 5, 1959 order, remained in full force and effect

and was made permanent by this court’s affirmance of the

Commission’s order on November 7, 1961. Holland Furnace

Co. v. FTC, 295 F.2d 302 (1961). The contempt charges

before us cover the period from August 5, 1959 to the

entry of the final judgment by this court.

Certain respondents made requests for findings of facts

“specially,” under Rule 23(c), and for “special findings.”

The court, in lieu of making the “special findings” re-

quested, makes its own findings of fact and conclusions of

law on the record and transcript of evidence as follows:

I.

Holland Furnace Company is a Delaware corporation

with principal offices in Holland, Michigan. From April,

1946 to May, 1962 respondent Paul T. Cheff was Holland’s

president and chairman of its board of directors, owning

6,004 shares of stock. His wife, Katherine Nystrom Cheff,

respondent, was a director from March, 1935 to May, 1962,

2“That, if any ‘or all of the above-named respondents is held to

have been in contempt of this Court’s order of August 5, 1959, this

Court make special findings of fact as to the conduct, events, and

circumstances upon which such contempt conviction is based, in-

cluding findings as to the conduct, events, and circumstances un-

derlying any finding of a violation of that order by any other

respondent in this proceeding, including the Holland Furnace

Company, if such a violation is an element in the finding that any

or all of the above-named respondents has been in contempt.”

21 Appendix B

and owned 43,004 shares of stock. Her nephew, respondent

Edgar P. Landwehr, was a director from April, 1945 to

May, 1962, and owner of 24,410 shares of Holland stock.

Respondents John D. Ames, Ralph Boalt, Robert H. Tren-

kamp, and George Spatta were directors, respectively, from

April, 1954 to June, 1961, from April, 1953 to May, 1962,

from April, 1953 to July, 1962, and from April, 1951 to

February, 1962. Ames owned 200 shares, Boalt 200 shares,

Spatta 500-1000 shares, and Trenkamp 200 shares of Hol-

land stock.

Respondent Alvin W. Klomparens was vice president

and sales manager from April, 1956 to March, 1960. Richard

J. Koerner, respondent, succeeded Klomparens as sales

manager, from April, 1960 to April, 1961, and was also

vice president from April, 1961 to June, 1962. Respondent

Henry Weyenberg was production manager and chief engi-

neer of Holland from April, 1959 to April, 1960 and vice

president after 1960. Jay A. Wabeke, respondent, was man-

ager of Holland’s Product Service Department from the

time of its creation in September, 1959.

The parties to this proceeding stipulated that 164 “at-

tachments” to the contempt petitions, 132 attachments to

Holland’s answer, and two attachments to the Commis-

sion’s reply to Holland’s answer “may be” received in evi-

dence and be considered by this court as if affiants were

witnesses; and that this court “may resolve” any conflicts

in the affidavits and determine credibility of affiants. No

concessions were made in the stipulation as to truth or

falsity of the statements therein and as to whether re-

spondents had power or authority over the “facts” stated

in the affidavits or any responsibility for any alleged vio-

lations asserted therein. The parties waived right of con-

frontation of witnesses and right of cross-examination.

In its answer to the petition for contempt, Holland Fur-

Appendix B 22

nace Company admits that the conduct of its employees in

fifteen transactions, involving twenty-five separate vio-

lations, involving the following customers of Holland, vio-

lated the August 5, 1959 order of this court:

ALLEN, Atlanta, Georgia

BIBEAU, Spokane, Washington

CLAYMANN, Seattle, Washington

CONDON, Denver, Colorado

EHRICH, Albert Lea, Minnesota

EWING, Peabody, Massachusetts

GRUMLING, Mansfield, Ohio

HENDRICKSON, Albert Lea, Minnesota

HOOKER, San Francisco, California

NIELSEN, Chicago, Illinois

SHELLABARGER, Akron, Ohio

STEWART, Seattle, Washington

TAYLOR, Cuyahoga Falls, Ohio

THOMPSON, Cuyahoga Falls, Ohio

WINK, Spokane, Washington

In addition, the testimony shows that the Attorney Gen-

eral of Minnesota brought an action against Holland for

unfair and deceptive practices by its employees, and several

attorneys general in other states contemplated or threatened

similar action. This testimony and the fifteen admitted

instances of twenty-five violations by respondent Holland

Furnace Company of this court’s order of August 5, 1959

represent, exemplify and illustrate the contempt of this

court’s order during the entire period covered by petition,

throughout the entire territory in which respondent Hol-

land Furnace Company operates, according to a regular

and usual method by which the corporate respondent has

in that period and in that territory sold and offered for

sale its furnaces, heating equipment, and parts therefor.

23 Appendix B

We are convinced beyond a reasonable doubt, on the

basis of the entire record, that Holland Furnace Company,

acting through certain of its officers, agents, representa-

tives and employees, through a “regular and usual” sales

practice of its employees in commerce has “knowingly,

wilfully and intentionally” violated and disobeyed in one

or more instances each of the prohibitions of the August

5, 1959 order of this court; and accordingly we find the

Holland Furnace Company guilty of criminal contempt of

this court.

I.

We are convinced beyond a reasonable doubt, on the

evidence in this case, that respondent Paul T. Cheff is

guilty of “knowingly, wilfully and intentionally” causing

and aiding and abetting in causing, in one or more in-

stances, violations by Holland Furnace Company of each

of the eight prohibitions in the August 5, 1959 order of

this court.

There is abundant evidence from which we find that

Cheff was the dominant head of Holland Furnace Com-

pany in the period during which the Holland sales practices

subject of the Commission’s cease and desist order oc-

curred; that he was the dominant head of Holland when

the Commission’s hearings were conducted, when the cease

and desist order issued, when the August 5, 1959 order

of this court was entered, and thereafter until May, 1962;

that he was well aware of the condemned sales practices

and of the prohibitions in the order of this court; that

following the entry of the order Cheff made no bona fide

attempt to comply or achieve compliance with the order;

that on the contrary he pursued a course of conduct de-

signed to construct an apparent compliance with the order

and to devise a defense against charges of violation; that

he established the Product Service Department, not to

a

Appendix B 24

“discipline” the Holland organization or bring about com-

pliance with this court’s order, but as a facade behind which

to continue the condemned sales practices; that his appoint-

ment of Wabeke to head the department was in furtherance

of Cheff’s plan to make no substantial change in Holland’s

sales practices since he could not help but know that Wabeke

would not be effective in investigating complaints and dis-

ciplining the sales force; that Cheff had no intention of

permitting Wabeke to be effective; that he frustrated

Wabeke’s since attempts to accomplish compliance with this

court’s order by telling Wabeke he had complete authority

to discharge salesmen while telling others that Wabeke

could only “recommend” discharge; that in the Holland

Furnace Company house organ, the “Firepot,” Cheff com-

plained of recommendations to discharge salesmen, and

that with the knowledge and approval of Cheff, salesmen

whom Wabeke had recommended discharging were praised

in the publication; that Cheff’s occasional meetings with

division sales managers, without Wabeke, at which he read

from extensive notes to the eight or so in attendance, were

apparent rather than real attempts to comply with this

court’s order; that instead of traveling to meet with Better

Business Bureaus in various parts of the country to adjust _

serious complaints, he sent Wabeke and Weyenberg, neither

of whom was suited to the purpose; that Cheff did not

himself go out into the field to meet with branch managers

or salesmen, or with Wabeke, to induce compliance with

the order, and did not take pains to see that his entire sales

organization understood the seriousness of compliance, as

did his successors in management by bringing 2,000 sales-

men to Holland, Michigan; that his bulletin, “The policy we

work by,” purporting to bring about compliance with the

court’s order, carefully avoided the word “discharge” and

purposely avoided mentioning restraint on unauthorized

dismantling of farnaces—that the bulletin was ineffective

25 Appendix B

to influence radical changes in Holland’s sales policy, even

if, and there is doubt of this, it reached the salesmen; and

that Cheff’s design in his relations with directors, employees

or customers was to insulate Holland and himself from

compliance with this court’s order and from guilt for non-

compliance.

Cheff made no substantial change after August 5, 1959

in Holland’s sales practices or in the fundamental struc-

ture underlying the practices. Holland’s policy remained

the same: working on the replacement of furnaces instead

of the original furnace market, operating on a straight

commission basis with salesmen, and higher prices for

Holland furnaces than its competitors, and realizing prof-

it only on sales of furnaces, not on repairs or cleaning.

The loose sales hierarchy, with tenuous relationship be-

tween Cheff and the sales managers, between them and

the division sales managers, and between them and the

branch managers, remained as it had been. Cheff re-

mained aloof from the sales managers, division managers

and salesmen. All this contributed to a condition which

lent itself to undisciplined sales practices. Moreover,

Cheff’s unbending attitude toward the Commission’s cease

and desist order and his confidence in eventually setting

it aside were an obstruction to change and to compliance

with the court’s order.

IIT.

Alvin W. Klomparens was employed by Holland in 1937,

and served as sales manager and vice president from

April, 1956 until April, 1960. He was succeeded by Richard

J. Koerner, who was employed in 1948, and was a division

sales manager when he was appointed by Cheff as sales

manager to succeed Klomparens. After Koerner served in

that position for one year, Cheff appointed him also a vice

president.

———

a;

We are convinced beyond a reasonable doubt, by the

evidence in this record, that respondents Klomparens and

Koerner aided and abetted in causing the proven viola-

tions of this court’s order of August 5, 1959 during the

respective periods of time each served as sales manager.

Appendix B 26

Both of these respondents were well aware of Holland’s

sales practices, of the proceedings before the Federal Trade

Commission, and of the August 5, 1959 order of this court.

The oral and documentary proof has convinced us beyond

a reasonable doubt that each of these respondents willingly

lent himself to Cheff’s program of maintaining the sales

practices which were prohibited by this court’s order.

They not only aided and abetted Cheff’s design by disre-

garding what obligation the office of sales manager imposed

on them in view of the order of this court, but they aided

and abetted the violation of that order in an affirmative

way. Klomparens edited the “Firepot,” and requested,

wrote and approved articles directed at the sales force

with the intention of neutralizing any attempt by Wabeke’s

Product Service Department to bring about compliance.

And Koerner, after his appointment as sales manager,

wrote division sales managers that only he and Cheff had

power to discharge and that sales managers must fight

“obstacles” such as the Product Service Department and

the Better Business Bureaus.

IV.

We find that the evidence does not prove beyond a

reasonable doubt that Henry Weyenberg and Jay A.

Wabeke caused or aided and abetted in causing respond-

ent Holland Furnace Company to violate and disobey, and

fail and refuse to comply with, the order of this court.

They have not committed criminal contempts of this court

and of its lawful authority.

27 Appendix B

During the period covered by the contempt citation

herein, respondents Weyenberg and Wabeke had no real

or effective power or authority over or responsibility for

the sales operations of the company or the actions of its

agents, representatives, and employees in connection with

the offering for sale, sale, and distribution of its products

and services, and no real or effective power or authority

over or responsibility for the selection, employment, pro-

motion, demotion, transfer, removal, or discharge of those

agents, representatives and employees.

¥,

We find the record shows that directors John D. Ames,

Ralph Boalt, George Spatta, and Robert H. Trenkamp were

grossly negligent in failing to perform fully their duties

as directors of Holland Furnace Company and in relying

upon Cheff’s assurances that this court’s order was not

being violated or disobeyed. The gross negligence in this

case does not, however, constitute criminal contempt. Tren-

kamp’s position, as attorney for Holland during and after

the proceedings before the Commission, imposed upon him

a special responsibility, in addition to that which he had

as director. It is questionable, to say the least, whether

this professional responsibility was discharged by Tren-

kamp in a manner that reflected fully an awareness of this

added responsibility.

There is no justification upon testimony in the hearing

and the facts stated in their answers to the petition, which

we are taking as true, to infer that these respondents did

anything affirmatively or positively to cause or to aid and

abet in causing violations of this court’s order. We have a

reasonable doubt that they knowingly, wilfully and inten-

tionally caused or aided and abetted in causing respondent

Holland Furnace Company to violate the order. We find

Tee a Sy ee

Appendix B 28

that the evidence does not prove beyond a reasonable doubt

that directors Ames, Boalt, Spatta, and Trenkamp are

guilty of the criminal contempt charged against them. The

rule to show cause as to them is discharged.

What we have said in the next preceding paragraph

about the above-named four directors applies equally to

Katherine Nystrom Cheff and Edgar P. Landwehr, who

filed no answers. The record is virtually silent as to them,

and justifies only the inference that they were grossly

negligent in their duties. It does not justify an inference

that they knowingly, wilfully and intentionally caused or

aided and abetted in causing the violation of this court’s

order. The rule to show cause as to them is discharged.

29

APPENDIX C

UNITED STATES COURT OF APPEALS

For tHE SeventH Circuit

Chicago 4, Illinois

January 27, 1965

Before

Hon. Elmer J. Schnackenberg, Circuit Judge

Hon. Roger J. Kiley, Cireuit Judge

Hon. Luther M. Swygert, Circuit Judge

Petition for Criminal

In re: Hottanp Furnace Company Contempt.

No. 13671

JUDGMENT ORDER

[Entered January 27, 1965]

This cause having come on to be heard in open court on

the petition of the Federal Trade Commission, filed March

19, 1962, and the order to show cause as prayed in said

petition, which order was issued March 19, 1962, and which

order directed Holland Furnace Company to answer said

petition and to show cause, if any there be, why it shouid

not be adjudged in criminal contempt of this court, and

puuished for such criminal contempt, by reason of having

knowingly, wilfully and inteationally violated and diso-

beyed, and failed and refused to comply with an order of

this court entered on August 5, 1959, in Cause No. 12451,

entitled on the records of this court “Holland Furnace

Company, Petitioner, v. Federal Trade Commission, Re-

spondent,” all as appears from the said petition of the

Federal Trade Commission, and the answer of Holland

Furnace Company filed August 15, 1962, and its further

answer filed November 27, 1962, a reply to said answer and

further answer filed April 18, 1963 by the prosecutors ap-

‘Appendix C 30

pointed by this court, together with said prosecutors’ mo-

tion for a finding that Holland Furnace Company has com-

mitted criminal contempt of this court and that the court

adjudge punishment accordingly, as well as the answer of

Holland filed September 30, 1963; and

This cause also having been heard on the verified petition

filed Apri! 19, 1963 by the attorneys appointed to prose-

cute on behalf of the court, which petition named as ad-

ditional respondents herein Paul Theodore Cheff, Kath-

erine Nystrom Cheff, Edgar P. Landwehr, John D. Ames,

Ralph Boalt, Robert H. Trenkamp, George Spatta, Alvin

W. Klomparens, Richard J. Koerner, Henry Weyenberg

and Jay A. Wabeke; and the answer of said additional re-

spondents filed herein, including the amendments to answer

and a supplemental answer, the prosecution’s replies to all

of said respondents’ answers, and the court having reserved

its ruling on the motions of respondents Wabeke and

Weyenberg that the order to show cause be discharged as

to them; and

The court having heard and considered the evidence of-

fered in open court in support of the petitions and the evi-

dence offered by various respondents, and the cause having

been submitted to the court therson, and the court having

considered the motions of the various respondents for a

discharge of the rule to show cause and having considered

the various briefs and memoranda of law filed by counsel

representing all respondents and said prosecutor, and the

court having this day filed a written opinion which makes

findings of fact in this case;

The court finds that, as to the respondents Wabeke and

Weyenberg, it has not been proved by evidence beyond a

reasonable doubt that they knowingly, wilfully and inten-

tionally caused, or aided and abetted in causing respondent

31 Appendix C

Holiand Furnace Company to violate, disobey and fail and

refuse to comply with said order of this court entered on

August 5, 1959.

As to respondent Katherine Nystrom Cheff, the court

finds that it has not been proved by evidence beyond a rea-

sonable doubt that she knowingly, wilfully and intention-

ally caused, or aided and abetted in causing respondent

Holland Furnace Company to violate, disobey and fail and

refuse to comply with said order of this court entered on

August 5, 1959.

As to the respondents Edgar P. Landwehr, John D.

Ames, Ralph Boalt, Robert H. Trenkamp and George

Spatta, the court finds that it has not been proved by evi-

dence beyond a reasonable doubt that they knowingly, wil-

fully and intentionally caused, or aided and abetted in

causing respondent Holland Furnace Company to violate

and disobey, and fail and refuse to comply with said order

of this court entered on August 5, 1959.

Ir Is THEREFORE OrpERED that said rule to show cause is

hereby discharged as to said Henry Weyenberg, Jay A.

Wabeke, Katherine Nystrom Cheff, Edgar P. Landwehr,

John D. Ames, Ralph Boalt, Robert H. Trenkamp and

George Spatta.

And having considered the evidence offered in open court

and the admissions made in the answer of respondent

Holland Furnace Company, the court finds that it has

been proved beyond a reasonable doubt that said respond-

ent knowingly, wilfully and intentionally violated, dis-

obeyed, failed and refused to comply with said order of this

court entered on August 5, 1959; that, as to respondents

Paul Theodore Cheff, Alvin W. Klomparens and Richard J.

Koerner, the court finds that it has been proved beyond a

reasonable doubt that they and each of them knowingly,

Appendix 0 — 32

wilfully and intentionally caused, and aided and abetted

in causing, the aforesaid violations by Holland Furnace

Company of the said order of this court, entered on

August 5, 1959; and said Company and Cheff, Klomparens

and Koerner have thereby committed criminal contempt of

this court and of its lawful authority.

Ir Is, Tuererore, Orperep that said Holland Furnace

Company, Paul Theodore Cheff, Alvin W. Klomparens and

Richard J. Koerner be and they are hereby each adjudged

in criminal contempt of this court, by reason whereof the

court imposes a fine on said Holland Furnace Company of

One Hundred Thousand Dollars and costs to be taxed by

the clerk of this court, payable forthwith, and that execu-

tion issue therefor; and also by reason whereof the court

sentences Paul Theodore Cheff to imprisonment for a

period of six months and he is ordered committed to the

custody of the Attorney General of the United States or

his authorized representative for imprisonment for said

period of six months; and also by reason whereof the court

sentences the respondents Alvin W. Klomparens and

Richard J. Koerner each to pay a fine of Five Hundred

Dollars forthwith, and in default of payment of said fine

each is to stand committed to the custody of the Attorney

General of the United States or his authorized representa-

tive for imprisonment until said fine be paid or until other-

wise discharged as provided by law, said fines and costs to

be payable to the clerk of this court, either in United

States currency or a bank’s certified check.

Ir Is Onverep that the clerk deliver a certified copy of

this judgment order and commitment to the United States

marshall and that the said copy serve as the commitment of

those respondents subject to committal as aforesaid.

33

APPENDIX D

[Order of the Court of Appeals for the Seventh Circuit,

Entered August 5, 1959, in a Proceeding Entitled “Holland

Furnace Company, Petitioner, v. Federal Trade Commis-

sion, Respondent,” being Cause No. 12451]

“This case came on for consideration on respondent’s

motion for an order commanding petitioner Holland

Furnace Company to obey and comply with the order

to cease and desist entered against it by respondent

Federal Trade Commission on July 7, 1958, unless

and until said order shall be set aside upon review

by this Court or by the Supreme Court of the United

States, and upon petitioner’s answer to said motion.

“Upon consideration whereof it is the judgment of

this Court that issuance of the order prayed for is

necessary to prevent injury to the public and to peti-

tioner’s competitors pendente lite; wherefor it is

“OrpERED that respondent’s aforesaid motion be, and

it hereby is, granted, and it is

“OrpereD that petitioner be, and it hereby is, com-

manded forthwith to obey and comply with the order

to cease and desist entered against it on July 7, 1958,

in a proceeding before respondent entitled ‘In the

Matter of HOLLAND FURNACE COMPANY, a cor-

poration, Docket No. 6203,’ until and unless said order

to cease and desist shall be set aside upon review by

this Court or by the Supreme Court of the United

States, or until further order of this Court.

/s/ Ex.mer J. ScHNACKENBERG,

Judge

/s/ Joun S. Hastryes

Judge

/s/ Frev L. WHam

Judge”

Appendix D 34

[Cease and Desist Order of the Federal Trade Commission,

Entered on July 7, 1958, in a Proceeding Entitled “In the

Matter of Holland Furnace Company, a corporation,” being

Docket No. 6203]°

“ORDER

“Tr Is Orveren, That respondent Holland Furnace

Company, a corporation, and its officers, agents, repre-

sentatives, and employees, directly or through any

corporate or other device, in connection with the offer-

ing for sale, sale or distribution in commerce, as ‘com-

merce’ is defined in the Federa) Trade Commission Act,

of furnaces, heating equipment, or parts therefor, do

forthwith cease and desist from:

“(1) Representing, directly or indirectly that any of

its employees are inspectors or are employees or repre-

sentatives of Government agencies or of gas or utility

companies.

“(2) Representing, contrary to fact, that its salesmen

or servicemen are heating engineers.

“(3) Representing that any furnace manufactured by

a competitor is defective or not repairable, or that the

continued use of such furnace will result in asphyxia-

tion, carbon monoxide poisoning, fires, or other damage,

or that the manufacturer of such furnace is out of busi-

ness, or that parts of such furnace are unobtainable,

unless such are the facts.

“(4) Tearing down or dismantling any furnace with-

out the permission of the owner.

“(5) Representing that a furnace which has been dis-

mantled cannot be reassembled and used without danger

°This order, contained in the hearing examiner’s initial de-

cision, Holland Furnace Co., 55 F.T.C. 55, 90-91 (1958), was

adopted without change by the Commission in its opinion denying

Holland’s appeal, as follows, 55 F.T.C. 91, 95:

“the findings, conclusions and order contained in the initial

decision are adopted as the decision of the Commission.”

35 Appendix D

of asphyxiation, gas poisoning, fires, or other damage,

or for any other reason, when such is not a fact.

“(6) Requiring the owner of any furnace which has

been dismantled by respondent’s employees to sign a

release absolving the respondent of liability for its em-

ployees’ negligence, or of any other liability, befwre re-

assembling said furnace.

“(7) Refusing to immediately reassciuble, at the

request of the owner, any furnace which has been dis-

mantled by respondent’s employees.

“(8) Misrepresenting in any manner the condition of

any furnace which has been dismantled by respondent’s

employees.”