Association of National Advertisers, Inc. v. Federal Trade Commission
627 F.2d 1151 (1979)
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Rule of Law:
An agency member may be disqualified from participating in a legislative rulemaking proceeding only upon a clear and convincing showing that the member has an unalterably closed mind on matters critical to the disposition of the rulemaking. The standard for disqualification in adjudicatory proceedings, which prohibits the appearance of having prejudged the facts, does not apply to rulemaking.
Facts:
- In November 1977, Michael Pertschuk, Chairman of the Federal Trade Commission (FTC), delivered a speech to the Action for Children’s Television (ACT) Research Conference.
- In the speech and subsequent interviews and letters, Chairman Pertschuk stated that children are a "vulnerable population," that advertisers "exploit" their trust, and that children's advertising had an "inherent defect."
- The day after his speech, Pertschuk sent a letter to an associate stating he had tried to establish the underpinnings for a "fundamental assault on television advertising directed toward young children."
- In another letter to the FDA Commissioner, Pertschuk stated his "conviction" that one of the "evils" of children's advertising was the distortion of nutritional values.
- On April 27, 1978, the FTC issued a Notice of Proposed Rulemaking to consider restrictions on television advertising directed toward children.
- On May 8, 1978, the Association of National Advertisers, Inc. (ANA) and other industry groups petitioned Chairman Pertschuk to recuse himself from the proceeding, which he declined to do.
- The full Commission, without Pertschuk participating, also reviewed the petition and determined that disqualification was not necessary.
Procedural Posture:
- The Association of National Advertisers, Inc., and other advertising groups sued FTC Chairman Michael Pertschuk in the U.S. District Court for the District of Columbia.
- The plaintiffs sought a declaration that Pertschuk was disqualified from a rulemaking on children's advertising and an injunction to bar his participation.
- On cross-motions for summary judgment, the district court (a trial court) ruled in favor of the plaintiffs.
- The district court, applying the standard from Cinderella v. FTC, found that Chairman Pertschuk had prejudged the issues and enjoined him from further participation in the proceeding.
- Chairman Pertschuk and the FTC (appellants) appealed the district court's decision to the U.S. Court of Appeals for the D.C. Circuit, with the advertising associations as appellees.
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Issue:
Does the disqualification standard applicable to adjudicatory proceedings, where a decisionmaker must not appear to have prejudged the facts, also apply to an agency member participating in a legislative rulemaking proceeding under Section 18 of the Federal Trade Commission Act?
Opinions:
Majority - Tamm, J.
No, the disqualification standard for adjudicatory proceedings does not apply to agency rulemaking. Rulemaking is a legislative function, fundamentally different from adjudication, which is a judicial function. Rulemaking involves the formulation of policy based on 'legislative facts'—generalized facts about the world—not 'adjudicative facts' concerning specific parties' past conduct. To be effective, agency policymakers must be free to discuss policy matters and form tentative views, a process that would be crippled by the strict neutrality standard of adjudication. The proper standard for disqualification from rulemaking is a clear and convincing showing that the agency member has an 'unalterably closed mind on matters critical to the disposition of the proceeding.' Chairman Pertschuk's statements were expressions of policy and legal theory made before the rulemaking record was developed, and they do not demonstrate that his mind is unalterably closed to evidence that may be presented.
Concurring - Leventhal, J.
Yes, I agree that the 'unalterably closed mind' test is the correct standard for disqualification from a rulemaking proceeding. Agency officials are appointed to implement statutory programs and are expected to have policy dispositions; it would be absurd for an agency to initiate rulemaking without some preliminary concern that a problem needs to be addressed. However, I have serious doubts about the district court's jurisdiction to intervene before a final agency action. Interlocutory review of disqualification claims should only occur in the rarest cases of a clear statutory violation or a structural flaw in the proceeding. While this case does not meet that high standard for intervention, I concur in reversing on the merits to remove the 'stain' of the erroneous district court ruling that has been hanging over the FTC's proceeding.
Dissenting in part and concurring in part - MacKinnon, J.
No, while the adjudicatory standard does not perfectly fit, the majority’s 'unalterably closed mind' standard is incorrect because it is practically impossible to prove and imposes too high a barrier to ensuring fair decisionmakers. The Magnuson-Moss Act created a 'hybrid' rulemaking procedure with significant adjudicative elements, such as the right to cross-examination and a substantial evidence standard for review, which implies a right to a fair and impartial arbiter. The proper standard should be whether a moving party can show by a preponderance of the evidence that the decisionmaker could not participate fairly due to substantial bias. Under either this standard or the majority's, Chairman Pertschuk’s repeated public statements describing children's advertising as an 'evil' and an 'exploitation,' and his commitment to a 'fundamental assault' on it, demonstrate disqualifying prejudgment on the ultimate issues to be decided.
Analysis:
This case establishes a vital distinction between the due process standards for agency adjudication and agency rulemaking, creating a high barrier for disqualifying an official from the latter. By setting the standard as an 'unalterably closed mind,' the court strongly protects the ability of agency officials to engage in public policy debates and express their views without fear of disqualification. This decision significantly limits the ability of regulated industries to challenge rulemaking proceedings based on the alleged bias of commissioners, thereby strengthening the power of agencies to pursue their policy objectives. It clarifies that even 'hybrid' rulemaking proceedings with some adjudicative features are fundamentally legislative in nature and do not require the same level of judicial neutrality as a trial-like hearing.
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