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Federal Trade Commission v. Standard American Inc.

argued: February 23, 1962.

FEDERAL TRADE COMMISSION
v.
STANDARD AMERICAN, INC., STANDARD AMERICAN CONSTRUCTION CO., INC., MANSVILLE CONSTRUCTION, INC., VAL WORTH ENTERPRISES, INC., AND WOLF, DORLEG AND WOLF, INC.



Author: Kalodner

Before GOODRICH, KALODNER and GANEY, Circuit Judges.

Opinion of the Court

By KALODNER, Circuit Judge: Did the District Court err (1) in ordering appellants, respondents below, to produce documentary evidence, originals or copies, within 30 days at a time and place to be fixed by the Federal Trade Commission; (2) in authorizing the Commission to take into custody the evidence produced and to remove it to Washington, D.C. for a period not to exceed 30 days; and (3) in failing, in its Order, to require that the production of documents be to, and before, a member of the Commission or one of its Hearing Examiners?

These issues are presented on this appeal by the four appellants from the District Court's Order entered following a hearing on a rule to show cause, pursuant to the Commission's Application*fn1 for enforcement of its subpoenas requiring appellants to give testimony and produce documentary evidence in an investigation being conducted by the Commission. In its Application, the Commission alleged that the appellants had failed and refused to comply with the subpoenas.

In its Memorandum and Order*fn2 the District Court stated

". . . we have examined and reexamined the entire record and are totally unable to determine from it that the business corporations herein involved would in the slightest degree be hindered in their normal operations by the production and turning over of the various documents contained in the specifications attached to the subpoenas."

Appellants do not challenge the relevance of the records involved to the Commission's investigation although they dispute the District Court's finding that they would not be hindered in the normal operations of their business by turning over the records to the Commission. On this score it must be noted that the District Court, in its Memorandum Opinion, stated that

"if it is brought to the attention of the Court that any serious hinderance to respondents' business will be caused by adherence to the provisions of the Order, we will reconsider it as to those specific instances."

Further, the Commission's subpoenas specifically provided that copies of appellants' records could be produced in lieu of original records.

Pertinent to our disposition of the instant appeal are these facts as evidenced by the record:

Appellants*fn3 Standard American, Inc. ("Standard") and Mansville Construction, Inc. ("Mansville") are engaged in the sale of home improvement fixtures, equipment and supplies and their installation; appellant Val Worth Enterprises, Inc. ("Val Worth") prepares scripts for and produces television commercials for Standard and Mansville, and appellant Wolf, Dorleg and Wolf, Inc. ("Wolf") buys time from TV stations for these commercials.

The appellants have interlocking officers and directors; Sam Leonard is president of Standard and Mansville and an officer and director of Val Worth and Wolf; Samuel Moskowitz is secretary and treasurer of Standard and Mansville and an officer and director of Val Worth and Wolf;*fn4 Abraham B. Wolf is president of Val Worth and Wolf; vice-president, office manager and accountant of Standard and Mansville.

On January 5, 1961, the Commission, in the course of an ex parte administrative investigation to determine whether appellants, among others, "in connection with the sale and offering for sale of home improvement fixtures, equipment and supplies and the installation thereof are engaging in false and misleading advertising or other deceptive acts or practices in a manner violative of Section 5 of the Federal Trade Commission Act",*fn5 served subpoenas upon appellants requiring them to appear at the United States Court House in Philadelphia, Pennsylvania, before one Eugene R. Baker, a designated attorney-examiner of the Commission, and to testify and produce specified documentary evidence. The documents subpoenaed were limited to the calendar year 1960. The appearance of each appellant was scheduled in the subpoenas for stated hours on January 23-24-25, 1961.

Appellants, in response to the subpoena, appeared through Leonard and Wolf. The record establishes that they failed to produce numerous records specified in the subpoenas and that their oral testimony was so evasive at times that it bordered on sham and evidenced a transparent attempt to conceal the truth.*fn6 Moreover, with respect to such records as were produced appellants refused to permit the Commission's attorney-examiner to retain them for the purpose of making copies or inspection and analysis. They in particular challenged the right of the Commission to transport the records to Washington so that they might be photostated and studied. Appellants while on the witness stand, and their counsel, ...


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