Federal Trade Commission v. Flotill Products, Inc.

PETITIONER:Federal Trade Commission
RESPONDENT:Flotill Products, Inc.
LOCATION:Lafayette Diner

DOCKET NO.: 20
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 389 US 179 (1967)
ARGUED: Oct 16, 1967
DECIDED: Dec 04, 1967

Facts of the case

Question

Audio Transcription for Oral Argument – October 16, 1967 in Federal Trade Commission v. Flotill Products, Inc.

Earl Warren:

Number 20, Federal Trade Commission petitioner versus Flotill Products Incorporated et al. Mr. Shapiro.

Howard E. Shapiro:

Mr. Chief Justice, may it please the Court.

The question in this case is whether a majority of a quorum of the Federal Trade Commission may issue a valid cease-and-desist order under Section 1 of the Federal Trade Commission Act.

The Commission is composed of five commissioners.

Since its inception, its rules have provided that a majority of the commission that is three commissioners constitute a quorum for the transaction of business.

A three-judge Division of the Court of Appeals for the Ninth Circuit held that a three-member quorum could not act when divided two-to-one.

The Court of Appeals itself was divided two-to-one and the Commission petitioned for rehearing en banc.

The Court of Appeals adhered to its ruling that a single dissent would bar valid action.

It divided itself on this issue five-to-four.

The Commission is here on a writ of certiorari because it believes that the ruling below will severely impair its ability to function when only three of its five members are available to participate in a decision.

Now, an order issued by divided two-to-one quorum of the Commission is an order issued by a minority of the total number of commissioners authorized by the statute.

The Court of Appeals taking note of this concluded that this is not what Congress had intended.

It relied on two factors.

First, the statute makes no express provision for action by a three member quorum and second, the Commission must have a politically balanced makeup, at least the statute says that not more than three of the five commissioners shall be members of the same political party.

So in effect, the Court of Appeals held that the Commission could act by a three-member quorum, but the three member quorum would have to be unanimous.

A dissent by the three member quorum would constitute a veto.

The Commission proceeding involved charges that the respondent Flotill Products, a West Coast canner and food processor made payments in lieu of brokerage, illegal under Section 2(c) and payments of promotional allowances illegal under Section 2(d) of the Robinson-Patman Act.

There were cross appeals from a hearing examiner?s decision by the respondent and by the Commission?s Complaint Counsel and these cross appeals were argued to a full five member panel of the Commission.

But while the case was under submission, two of the commissioners resigned, leaving only three commissioners who had heard the oral argument sitting.

A fourth commissioner was appointed prior to the decision by the Commission, but he declined to participate on the ground that he had not heard oral argument.

The three remaining commissioners were Chairman Dickson, Commissioner McIntyre, and Commissioner Elmon.

They agreed with Commissioner Elmon concurring in the result that the charges of illegal promotional allowances had been established.

Now the Court of Appeals affirmed and enforced this part of the order, so that aspect of the case if out.

When it did that, it also of course recognized that the Commission may act by a valid three-member quorum.

Now the commissioners disagreed as to the illegal brokerage charges.

There were three elements in this charge of illegal brokerage.

As to one of them, all three commissioners were agreed that the charge should be dismissed and they dismissed that aspect of the charge on the merits.

As to a second, Commissioner Dickson and Commissioner Elmon were agreed that they should be dismissed, but Commissioner McIntyre dissented, so those aspects of the charges were dismissed.

Now, the third aspect of these brokerage charges involved the respondent Flotill and they concerned some charges, some illegal brokerage it was alleged, paid to the Nash-Finch Company.

Commissioners Dickson and McIntyre agreed that the Nash-Finch charges had been sustained, and Commissioner Elmon dissented.

Howard E. Shapiro:

So what we had was a situation in which one of the illegal brokerage charges was unanimously dismissed by the three member panel.

One was dismissed two-to-one and the Nash-Finch charges were sustained two-to-one.

The Court of Appeals set aside the portion of the order relating to the payments in lieu of brokerage to Nash-Finch and that is the issue that’s before this Court.

And the practical question is what the Commission is to do when there are only three commissioners who can participate in a decision.

The Court of Appeals and the respondent here concede that the Commission may consider a case when only three members participate.

Indeed the respondent at page 18 of its brief says that the problem that we have here does not arise from the Commission’s three commissioner quorum or which it had since 1916, rather what respondent objects to is to the corollary to that rule and the corollary is of course that when a deliberative body is permitted to act by a quorum consisting of less than its total membership, the decision of a majority of that quorum is dispositive.

As applied to administrative agencies, we think that this rule has been expressed in holding or dictum many times.

Earl Warren:

As what?

Howard E. Shapiro:

As applied to administrative agencies Your Honor.

We think the general rule that majority of a quorum may take valid dispositive action has been sustained either in holding or recognized in dictum many times by the lower courts and this appears to be the only decision to the contrary by a federal court.

Now, I want to make clear that the quorum rule and its corollary that a majority of a quorum control is regarded by the Commission as a rule of necessarily not a rule of preferred practice.

There are situations in which five commissioners are not available to participate in a decision.

They can cease to occur on the Commission as they did here, a commissioner may be ill; a commissioner may be disqualified as this happened in a number of recent cases and when that happens, then a quorum which consists of a bare majority may be all that is available to act.

Well, that is the justification really for the rule which the Commission has adopted.

Now ?

Does the Commission [Inaudible]

Howard E. Shapiro:

Yes, it does Your Honor.

The commission always sits with five members if they are available except when it uses its powers under reorganization plan number 4 of 1961.

It has delegated some of its powers to a single commissioner to dispose of motions and requests and interlocutory appeals from hearing examiner.

The single commissioner’s action however is reviewable by the full Commission on a vote by a minority of the Commission to take up the single commissioner’s action.

Byron R. White:

What would you call a division of the Commission?

I see that the reorganization plan also provides more delegating through a division.

Is this comparable to the authority, say in the ICC by statute to delegate through a camera?

Howard E. Shapiro:

It would be Your Honor, although I must state that the Commission has not purported to use that power in the situation we have here.

Byron R. White:

No but it certainly seems that this plan would contemplate forbidding the Commission to delegate to a panel but in that event I suppose the panel would be at least three, wouldn’t it?

Howard E. Shapiro:

I believe that it would ordinarily be three if the Commission were to use the power to delegate to a panel.

Byron R. White:

But then it would be subject to review?

Howard E. Shapiro:

It would be subject to review.

Byron R. White:

And so you are saying that we can do that — we can sit as three members no matter what and without using our power under the reorganization plan, which should require a review?

Howard E. Shapiro:

And it is correct Your Honor.

Howard E. Shapiro:

We are saying that the minimum majority which constitutes a quorum —

Byron R. White:

So you never needed the authority to sit as three?

Howard E. Shapiro:

The Commission would not need specific authority.

Now, they might want to sit in a smaller division than three, they might want to sit as two.

It’s conceivable as they have, they might want to grant fuller power to a single commissioner, but of course all these would be subjected to the powers under the reorganization plan.

Abe Fortas:

On the other hand, you might have a different issue if this were a case where the Commission has just decided pursuant to the reorganization plan or otherwise that it would best plan on commission authority in a panel of three.

Here I take it that there is no suggestion that this was a deliberate voluntary decision of the Commission, but rather that this panel which is consisted of the only qualified members of the Commission at the time the hearing was held?

Howard E. Shapiro:

That is correct Your Honor but the Court had —

Abe Fortas:

And do you agree or don’t you that may be a substantial difference between the two cases that I put to you?

Howard E. Shapiro:

There would be a difference because in the situation under the reorganization plan, of course the action by the panel would be subject to review by the full Commission, provided of course there was a qualified full Commission to sit.

Abe Fortas:

Yes, but if the Commission decided to acquire qualified members in a particular case, Commission then ordered that hearing will be held before three of them and I should think that in all probability they would have to provide for an appeal to the full Commission under the reorganization plan?

Howard E. Shapiro:

That is correct.

The plans will provide —

Abe Fortas:

If they did not do so provide for that appeal on these circumstances, you might have a case.

It is quite different from what the present case appears to be.

As I understand it in the present case, this was a Commission composed of all of the eligible members at that time?

Howard E. Shapiro:

And it is correct Your Honor.

In other word, eligible I should explain refers to the commissioners who heard the oral argument, who were still sitting on the Commission.

Commissioner Riley was appointed during the interim between the time the case was argued and the time the case was decided.

Since he had not heard oral argument, he decided that he should not participate in the decision.

Abe Fortas:

Well, that is quite customary, isn’t it?

Howard E. Shapiro:

I think it is a very usual practice Your Honor.

Now, what we have got here is a situation in which the Court of Appeals and the respondent say the Commission can sit when it has to with just three members, but those three members have to be unanimous.

Now this is inconsistent with the ordinary rule applicable to the liberty of bodies.

In most instances, Congress has expressly provided by statute that a majority of the deliberative body constitutes a quorum and the corollary to the rule follows automatically that a majority of a quorum can take dispositive action.

Now, when Congress has intended to depart from the ordinary rule, it has done so expressly.

It made expressed provision in the Court of Claims for example, when that was a five member court that three members of that court would have to concur in a decision for a valid decision to issue.

It made a similar provision in 1909 for the Court of Customs and Patent Appeals, both of these are courts where statutes adopted prior to the Federal Trade Commission Act of 1940 and a similar provision now appears for one administrative agency only, the Federal Maritime Commission, which also must as a result of a 1961 reorganization plan, make its decisions with the concurrence of three members.

William J. Brennan, Jr.:

I gather this suggests that [Inaudible] this is a decision that reaches far beyond this Federal Trade Commission?

Howard E. Shapiro:

Well, the full scope of the decision isn’t completely clear to me Your Honor, because the Court of Appeals seem to say that where there is a provision in the statute which says that the agency may act by a quorum consisting of a majority, then it would be as a corollary of that alright for a majority of the quorum to take dispositive action, but the Federal Trade Commission statute as I said earlier has no express provision for a majority of the quorum.

William J. Brennan, Jr.:

For example, as you know, there is a provision that permits this Court to sit in quorum of six.

We have had decisions where six of us sat down, that were four-to-two.

Now, you wouldn’t suggest that we have no authority to run through a four-to-two decision by reason of anything you have said in the opinion of this case?

Howard E. Shapiro:

No Your Honor, we would not.

I think the respondent would explain that you have an express statute and that makes the difference between this Court and the Federal Trade Commission which had no express statute.

Byron R. White:

Except that the reorganization act does permit the ? make them sit in a panel?

Howard E. Shapiro:

Yes it does, subject to review by the full Commission.

Byron R. White:

I know but that would not be the point.

Howard E. Shapiro:

Well, it can sit in panels under the Reorganization Plan.

Earl Warren:

Is your position this simple Mr. Shapiro that either — that the Federal Trade Commission either must act by a full membership or it can act by a quorum, which would be a majority and if it can act by a quorum, it can act by a majority of the quorum?

Howard E. Shapiro:

That is the essence of the Commission provision.

Earl Warren:

Is that —

Howard E. Shapiro:

Yes it is Your Honor and we think this is a perfectly practical sensible rule.

It applies to every other administrative agency.

Now, there are some justifications were given for the result that was reached by the court.

Earl Warren:

May I ask just one more question?

Is there any other federal agency that under statute like the Federal Trade Commission acts as you suggest, they should be entitled to act in this case?

Howard E. Shapiro:

Yes, Your Honor.

The Securities and Exchange Commission, like the Federal Trade Commission does not have any statute and express provision stating that a majority shall constitute a quorum.

Nevertheless, the Commission since its beginning days, some two years after it was organized has held that it can act by a quorum consisting of majority of its five member membership and that a majority of the quorum it can take dispositive action.

Now the SEC statute actually is a good illustration of Congress’ recognition of the propriety of this course of conduct the FTC has followed since it was created.

The original Securities Exchange Act of 1933 was to have been administered by the Federal Trade Commission.

And in 1934, Congress set up an independent agency and transferred those functions to the new Securities and Exchange Commission.

Well, that provided in the statute that the new Commission was to begin its functions as soon as a majority of the commissioners were qualified, So that it apparently contemplated that as soon as there were three commissioners on the five member SEC, they could take action by majority of a quorum.

Now, the Court of Appeals suggested that one of the justifications for its rule was that the Commission is a politically balanced agency that is that not more than three members of the Commission may be of the same political party, but this is true for all of the great regulatory agencies and they all have the same general approach to this question of quorum.

They have a provision that permits them to act by a majority of quorum.

I think a second answer to what the Court of Appeals suggested is that the regulatory commissions are not supposed to be voting according to partisan viewpoint.

They perform quasi-legislative and quasi-judicial functions.

And as the Court, this Court said in Humphrey’s Executor, the Commission is to be non-partisan and the members of the Commission and the very nature of their duties have to act with impartiality.

For this reason, I think that the Court of Appeals emphasis on the political makeup of the commission is somewhat —

William O. Douglas:

I suppose you would suggest that even though they are all Democrats they would even then disagree?[Laughter]

Howard E. Shapiro:

It has happened Your Honor.

And I think that points up the exact situation, certainly the issues that come before the Federal Trade Commission, don’t follow partisan line.

Even if some tiny weight were given to this political balance element, I suggest the unanimity rule is more disruptive than the two-to-one rule, because with the unanimity rule, the Court of Appeals adopted thus as to give to the dissenting member a veto over valid action by the Commission, which he wouldn’t have in the full Commission.

If two members of the Commission dissent, the decision goes into effect nonetheless.

Here is a situation where one member dissents, no action can be taken at all and then there is some practical considerations that come with this.

The Commission can’t know in advance of course when two members are disqualified and three members are sitting whether the three will agree, so this would mean that the cases have to be reheard and if a valid or qualified — another qualified member couldn’t be found to break the deadlock there might be no valid action at all.

Now, the respondent argues that the case, the Commission should act by an absolute majority for a judicial body.

I think the short answer to that is it is not.

It is a quasi-judicial and quasi-legislative agency.

It does not have the attributes or powers of the Court, it never has had them.

This Court said as much in Federal Trade Commission against the Eastman Kodak many years ago.

There are some other practical considerations that are advanced in support of the rule by the Court of Appeals suggested that two-to-one decisions are inherently unstable, because they may be overruled later by the full Commission or they may be overturned in appeals by the courts.

Well, this objection really goes to an institutional problem that all deliberative bodies are faced with, the close decision.

The principles underlying a three-to-two decision may be modified because of a subsequent change in the Commission’s membership or because the commissioner has changed his thinking or because he has been persuaded by dissent and as far as the possibility of cases being changed in the Courts of Appeals are concerned any decision that is supported by a well-reasoned dissent invites resort to the courts by the losing party.

Earl Warren:

Yeah [Inaudible]

Howard E. Shapiro:

Well, what it comes down to is that two-to-one decisions are invalid.

There were times when the Commission is not going to be able to act at all.

If the Commission can act with a two-to-one decision, there may be some disadvantages on occasion because after all we are dealing with the situation in which you are faced with some imperfection in the administrative process, because a full Commission isn’t available, but you have to balance the consequences of permitting a veto on the one hand against the effective performance of the Commission’s duty on the other.

Now in the absence of some of congressional expressions to contrary, I think that the general rule that ordinarily applies to deliberative bodies applies to the Federal Trade Commission just as it applies to all the other administrative agencies.

For these reasons, we think the Court of Appeals has erred that its rule would simply serve either to bar action by the Commission in some cases or to deter the expression of dissenting views and that neither of these possibilities, which server the purposes underlying the Federal Trade Commission Act.

William J. Brennan, Jr.:

Mr. Simon.

William H. Simon:

Mr. Chief Justice, may it please the Court.

This case involves a simple question of statutory construction and that is whether the Congress authorized the Federal Trade Commission to decide adjudicatory matters with the concurrence of less than a majority of its members.

Now while the Court may not — need not go beyond this question of statutory construction, we urge that there is no basis in the administration of justice for reaching a different conclusion.

The facts of this case illustrate the need for the rule which we advocate.

In 1958, a complaint was filed against Flotill, charging them with the violation of the brokerage provision of the Robinson-Patman.

This Section makes it illegal for a seller to grant or a buyer to receive a discount in lieu of brokerage.

Precisely the same standard, precisely the same liability is fixed for the seller and the buyer.

Two issues were raised; one with respect to field brokers and one with respect to advertising or promotional allowances made in 1955 to a single customer, the Nash-Finch Company.

William H. Simon:

When the case came before the Commission for decision, there were three separate opinions.

No commissioner concurred in the opinion of any other commissioner.

Chairman Dickson and commissioner Elmon dismissed the field broker charge, commissioner McIntyre dissented.

Chairman Dickson and Commissioner McIntyre held as liable on the Nash-Finch payments, commissioner Elmon dissented.

Commissioner Riley who was qualified to act in every respect did not participate and may I say Mr. Justice Fortas, it is quite frequent for commissioners who have not heard oral argument to participate in the decisions.

Now subsequently, the very same issue involving the very same transaction came before the Federal Trade Commission in a proceeding against Nash-Finch, who had received this illegal brokerage.

The same witnesses were called in the Nash-Finch case, the same documents were offered in evidence, I might add humbly even the same lawyers represented both the litigants, but in the Nash-Finch case, by a vote of four-to-nothing, the complaint was dismissed.

Commissioner McIntyre, who had been the one holding guilty all the time in the Flotill case did not participate and the Commission’s action in the Nash-Finch case was foretold by its action in the Court of Appeals for the Second Circuit in the Empire Mills case.

The Second Circuit had handed down a decision which basically followed the majority opinion in this case, in a case pending before the Second Circuit.

On rehearing, the Court of Appeals asked the Commission to file an amicus curiae brief.

The Commission did so and four commissioners, with Commissioner McIntyre dissenting, adopted in that amicus brief what is substantially the view of Commissioner Elmon in this case and therefore Commissioner Elmon’s minority view here became the majority view of the Commission and when Nash-Finch came before it that case was dismissed.

Now, I turn to the face of the statute.

There is no language in the statute, none whatever which justifies a decision by less than a majority of the commissioners.

First, Congress provided for this quasi-judicial body of five members and it said that no two of their term should expire in the same year.

This was obviously designed to promote continuity.

Then it said, they could be removed only for cause and in the Humphrey’s, this Court held that the President could not remove a commissioner except for a good cause.

Third, the Congress provided that no more than three of the members of the commission should be of the same political party, obviously to achieve a bi-partisan agency and yet if the Commission’s view is sustained here, the President can appoint three members of his own party and let the other two vacancies be unfilled permanently and the three members of his party could constitute the commission and destroy the congressional bi-partisan purpose.

Fourth the Act —

Potter Stewart:

I had understood if that was one of the things that was provided for by the statute that the Commission could act even when there was a vacancy?

William H. Simon:

Yes sir, but not when there are two vacancies, I was just about to say the same Justice Stewart but statute then says that a vacancy, both in the singular, a’ and vacancy’ in the singular, shall not impair the ability of Commission to act.

The Commission today asked you to interpret that language to say that two vacancies shall not impair their ability to act.

And finally, whenever the Congress has intended that less than a majority of the members of a agency be authorized to act, it has known the words to use to do so, both in the National Labor Relations Act and in the Interstate Commerce Commission Act the Congress has expressly provided that the agency may act by panels of three.

And in the Atomic Energy Commission Act as well as in the Renegotiation Board Act, Congress provided for five-man bodies and then provided for a three-man quorum and then provided that a majority of the three-man quorum could act for the agency.

None such language is contained in the Federal Trade Commission Act.

Earl Warren:

Then Mr. Shapiro name some other agencies that were set up in a different way?

Didn’t he say that the rule was just the opposite so far as Congress congressional acts that was concerned?

William H. Simon:

Of course, he contends it because they had provided for a quorum provision in some agencies that you must assume they intended to do it for the agencies they didn’t.

I draw the opposite congressional intend sir I say when Congress did it here, there and there, we must assume they deliberately did not intended to do it here.

Mr. Shapiro says if they did it here, there and there, you must assume they also intended to do it where they didn’t do it.

Our argument is you cannot imply congressional intent when Congress has not done it.

Abe Fortas:

Well, how long has this quorum provision been on the FTC rules?

William H. Simon:

The quorum provision has been on the rules Mr. Justice Fortas for since 1950, over 50 years but so far as we know —

Abe Fortas:

Since 19-what?

William H. Simon:

50, for over 50 years, but so far as we know, the first case in which the Commission ever acted by two-to-one vote occurred in 1963.

Abe Fortas:

Well I know, I understand that but your argument up to this time sounded to me as if you were arguing against the three-man quorum, that you said that some wicked President may come along in appoint three-man by the Commission of his own party and they would function as a Commission and he won’t appoint any minority members and summarily it seemed to me you are arguing against the three-man quorum?

William H. Simon:

Not at all sir.

As Mr. Shapiro said earlier Mr. Justice Fortas, we have conceded throughout that the three-man quorum rule is wholly valid and when three commissioners are unanimous in their decision it would be irrelevant what the other two did.

Abe Fortas:

But if you had three Republicans and all three of them agreed, there would still be a decision by the three Republicans —

William H. Simon:

What Congress provided for was a five-man Commission; three of them may be Republicans, three of them may be Democrats and certainly they can decide cases by a three-to-two vote.

If there are three affirmative votes for any position, the statutory requirement has been met and we do not question at all the right of the Commission to act by three-to-nothing, three-to-one, or three-to-two, so long as there are three votes for the action to take.

William J. Brennan, Jr.:

Well, it seems Mr. Simon that is that you do not make it requisite that the statutory authority for a three member quorum, is that it?

William H. Simon:

No sir.

William J. Brennan, Jr.:

As long as they well now if it’s immaterial then I put the question to you I put to Mr. Shapiro.

The statutory authority for this Court to sit with quorum of six, but nothing was ever said about that a majority, there is nothing in our statute, which says that the majority of the six may decide for the Court?

William H. Simon:

May I say Mr. Justice Brennan, there are three instances to that.

First, this Court is different than any other court, because it is a branch of the government, independent of a Congress and the executive, so there is a limitation on even the rules that Congress can provide for deliberations by this Court.

William J. Brennan, Jr.:

You mean that perhaps Congress could not even have said our quorum shall be six and we might think that a quorum of five would do as well?

William H. Simon:

Well, I would not want to argue the case, if this Court had adopted a rule for a quorum of five, but the Court is an independent branch of our government.

Secondly the validity of the quorum rule cannot be confused with the power of the Commission to act by a vote of three.

For example, if the Commission had adopted a quorum rule saying that two commissioners are a quorum, I would be here urging that that rule was invalid or if they had said one commissioner was a quorum, I would urge that rule is invalid.

So it is not that we say that the Commission has the authority to adopt any quorum rule it chooses, but we concede in a five-member body, all you need is three affirmative votes to take any action and if you assume the other two votes would be contrary, it would still be a three-to-two decision.

William J. Brennan, Jr.:

Well, I like to suggest the logic of that seems to be that any decision by which by a quorum of this Court is six would require five votes, then to decision —

William H. Simon:

No sir, if six is a quorum then a majority of the quorum would be four, but Congress did not provide Mr. Justice Brennan for a quorum of three of the Commission.

Mr. Shapiro gains comfort —

William J. Brennan, Jr.:

Well, and I do not follow, Congress had first time provided and I thought that was going to be the distinction, you just answer Mr. Justice Fortas that you are not quarreling with the quorum of three rule as such, it is only the decision of a majority of the quorum that you challenge?

William H. Simon:

Yes sir and the distinction I make Mr. Justice Brennan is that I do not agree that the Commission has authority to establish a quorum rule of its own.

For example, I do not agree they could establish a quorum rule that two was a quorum or that one was a quorum.

Byron R. White:

Or the three was a quorum?

William H. Simon:

But I concede Mr. Justice White that a decision by three members of the commission is the majority of the whole body.

Earl Warren:

What’s the practical difference in the result between this situation and the Federal Trade Commission and the Courts of Appeals where we have nine members in most power and most of the Courts of Appeals and they sit in panels of three and majority of the panels can give final judgment?

William H. Simon:

Yes sir, but one may file a petition for rehearing en banc before the full Court of Appeals?

Earl Warren:

I thought it very seldom gets to —

William H. Simon:

Yes sir, that may be and we filed Mr. Chief Justice a petition for rehearing here properly and we asked in our petition for rehearing that Commissioner Riley who was a member of the commission sit and we said, even though he did not hear the argument, we would like to have him sit and we asked them to wait until the vacancy was filled and let that commissioner fill the vacancy.

The commission could have denied our petition for rehearing on the ground that there was no merit to it, just as the Court of Appeals en banc may do so, but they denied it on the ground that the two-to-one decision was a valid binding decision from which there was no recourse.

And they relied on two cases, which I think illustrate the view they take.

The two cases were Frischer versus Bakelite, which involved the Tariff Commission and the Drath case, which involved the Federal Trade Commission.

Frischer versus Bakelite holds that governmental bodies like City Council, zoning boards, that sort of entity may act by a board of a majority of a quorum, but the judicial bodies, bodies exercising judicial functions require a majority of the whole.

And in our brief, we extensively cite the common law, which Frischer versus Bakelite relies on and it two as to the same effect that where judicial functions are at issue a majority of the whole body is required unless the statute creating it or the constitution provides otherwise.

And the Court of Appeals here did not reverse this order.

They didn’t set it aside.

They merely sent it back to the Commission to have the full five members of the Commission decide what should be the decision in this case.

Then I would like to talk a minute if I may about —

Earl Warren:

Mr. Simon, may I ask you this question Mr. Simon?

Suppose that back they were still only four members on the Commission, would the four members have a right to grant for rehearing or deny the judgment?

William H. Simon:

Yes sir, but of course if they granted it and then they split two-to-two, they would have a problem.

Earl Warren:

That is a different thing, but if they all may have one vacancy at that time, it would be alright.

William H. Simon:

The statute says in just so many words Mr. Chief Justice that a vacancy —

Earl Warren:

I remember you said that —

William H. Simon:

— shall not impair their ability to act.

To me, the strongest question here, the strongest fact in this case is the Reorganization Act of 1961.

The Commission relies heavily on it, but I think it is conclusive against them.

In the Reorganization Act of 1961, President Kennedy provided in the Act and Congress provided when it adopted it that the Federal Trade Commission could create panels of less than the full commission to decide cases.

The Commission has never done so.

Congress had said in the Reorganization Act, you can do this, if you pass a rule or regulation, they have never done it.

But it is equally clear and they expressly concede this at page 25 of their brief that if they had done it, we would be entitled to review by the full Commission.

And if we had been entitled to review by the full Commission, what the full Commission did in Nash-Finch would certainly indicate that our case would have been dismissed.

Now as I said earlier, the first case of the two-to-one decision was in 1963, at least the first case that either we or Commission Counsel are aware of.

Byron R. White:

But this argument — well, in this argument however, the point you should be making up here is that Commission erred in not granting a petition for rehearing?

William H. Simon:

That is the other side of the same coin Mr. Justice White.

Byron R. White:

Well, is that what you are arguing here, that they should have granted your petition for rehearing?

William H. Simon:

Well, if I may state it differently, what we are arguing is that we want a hearing before the full Commission.

We want a hearing before the full Commission and we asked for it.

Byron R. White:

I think you could argue that this is the actual Commission having a hearing for three and have refusing the petition for rehearing is that, is the Commission designating a panel to overhearing, is that going to effective whether they pass a rule or not, they nevertheless are purporting to have a hearing and as you said —

William H. Simon:

But that the Reorganization Act provides that they may enact a rule with this effect.

They have never enacted any such rule.

Byron R. White:

For this case?

William H. Simon:

After the fact, this suggestion —

Byron R. White:

Or before the fact, they said it’s three, didn’t they?

William H. Simon:

Yes sir but they never claimed —

Byron R. White:

But even added ripped out an order and said with respect to Reorganization Act we hereby say that three officers are going to sit.

William H. Simon:

The difficulty with that argument Mr. Justice White is that the Reorganization Act was never mentioned in this case until on petition for rehearing in the Court of Appeals.

The Commission did not purport to be acting under the Reorganization Act when it decided the case and when we petitioned for review, which we would have had the right to under the Reorganization Act, they denied it on the ground that two-to-one decision was binding and we had no right to go beyond.

I would like to point out that the first —

Earl Warren:

May I ask when the Reorganization Act was passed in relevance to your appearing here?

William H. Simon:

It was passed in 1961 and this order was in 1964.

From the first two-to-one decision that we are aware of, there have been 30 cases decided by the Commission by vote of three members.

In 17 of those cases, the three commissioners were unanimous, there was no division.

In 13 of them, the vote was two-to-one.

Of those 13 cases, 12 of them were taken to the Courts of Appeals, indicating I submit that the businessmen were unwilling to accept the Commission’s two-to-one decisions.

Of the 12 cases that went to the Courts of Appeals, one of them was a commission refusal to review a prior three-to-one decision, so that 12 of them involved the problem we have here.

Of those cases, four of them are still pending in the courts; two in the Courts of Appeals and two in this Court, this case and the Pureleter case.

There had been seven of those cases, which have been finally decided and the Commission was reversed in six out of the seven cases, so that if this Court were to sustain the view that we urge, there are only some two or three cases that would have to be reheard by the Commission, virtually all the rest of them have already been reversed by Courts of Appeals.

Earl Warren:

How many of those cases were the panel of three which unanimous whether appealing to the Court?

William H. Simon:

I cannot answer that question Mr. Chief Justice, but it was much fewer percentage than where they were two-to-one.

It is in an appendix to the Commission’s brief.

I have not taken the time to compile, and I am sorry Sir.

The final point that I would like to make is that the Commission argues here for administrative practicality.

They say they would like to have five commissioners sit, but it is not always feasible and so they ask this Court to substitute convenience for justice.

But the fact is that there has only been one double vacancy in the last 45 years and that occurred more than 30 years ago for six weeks during July and August when this Commission is not active in any event.

They argue that if only three commissioners hear that argument, they can’t know whether they will be unanimous and the argument might turn out to be a waste.

William H. Simon:

But the fact is that this is equally true where four commissioners hear the argument because they might turn out to be divided two-to-two.

If the Federal Trade Commission wants to decide cases by a two-to-one vote, we respectfully submit that their course is to enact a rule under the Reorganization Act of 1961 providing for such a practice and this would give the losing litigant the opportunity for review by the full Commission.

This is all the Court of Appeals ordered in this case.

This is all that Flotill asks and there can be no prejudice to the public interest for having the full Commission decide this case.

Thank you.

Earl Warren:

Mr. Shapiro, before you head into your argument, may I ask you this?

In view of the fact that Congress has passed this Reorganization Act that gives you the right to set up panels, but with the right that reviewed by the entire Commission, why do you not accept that congressional approval of this saying and do it in the way Congress apparently intended to be done rather than the short circuit, they act and do it your way, that denies someone a hearing before the whole Commission?

Is that a fair question to ask?

Howard E. Shapiro:

Well, I think I have been trying to answer it [Laughter] as fairly as I can.

The Reorganization Plan when is intended to give the Commission more flexibility in carrying out its functions, it was not intended to correct any oversight about the nature of quorums in the Commission.

Now the Commission here hasn’t purported to act under the Reorganization Plan because it did not have available a full — well, because it has never felt it necessary for it to sit in panels of two or one or three, simply as a matter of general practice.

What it has done is to adopt — is to adhere to its rule now some 50 years old that when it can’t sit except with the fair majority, then it will go on and carry on its business.

Earl Warren:

I understood Mr. Simon was saying that there had been 27 cases that had gone to judgment where you have had only three to sit?

Howard E. Shapiro:

There have been I think 30 cases, where only three have sat because of vacancies on the Commission and disqualifications.

It was not a choice of the full Commission to sit with only three, it was a necessity that they felt they had.

They had to sit with three because they just were not the other members available.

Of the 30 cases, 17 resulted in unanimous decisions by the three members and 13 they were dissents, they were two-to-one decisions.

The Reorganization Plan does not is not the basis for the Commission’s action here and it did not purport to act on Reorganization Plan.

We refer to it because it does indicate that less than a full Commission can take valid action.

Byron R. White:

What is the provision in the Reorganization Plan from the rehearing by the full Commission, is that set up in your brief anywhere the actual words?

Howard E. Shapiro:

I don’t believe the full text is set out, Your Honor, but it is in Section 1(b) I think of the Reorganization Plan and it provides that the Commission may delegate its authority to perform any of its function directly to a division or panel or any employee provided that if — I think it is provided that a final action is taken disposing of a case.

Now, this is rough paraphrase.

The Commission on a vote of a minority of its membership may call that final action up for review.

Byron R. White:

So in such a cases that it has no right to have a rehearing, Commission has to —

Howard E. Shapiro:

It’s a discretion, it is a vote in the — in order to have it reviewed, it would take a vote of two members of the Commission.

Byron R. White:

It says there you got in your brief, say it would be subject to review by the full agency upon the vote of a majority of the agency less one member.

Howard E. Shapiro:

That is the point.

Byron R. White:

So that so any two members?

Howard E. Shapiro:

Any two members who are qualified to sit and that’s the real problem that you may have a case in which for some reason, while you may have a case in which there are only four members available.

Of the four, one of them may feel he is disqualified, or should not participate for some reason.

Howard E. Shapiro:

If he does, you have only got three members left on the Commission who can then consider the question of reviewing what the panel of the Commission did.

Byron R. White:

So it is not under the Reorganization Plan, but this has to be let us assume that Commission did exercise its power under the Reorganization Plan to hear en banc, set the panel for three for the vote of two and then there were two vacancies.

Howard E. Shapiro:

Under the Reorganization Plan —

Byron R. White:

Under that, you can never have a rehearing?

Howard E. Shapiro:

It would really be a question of straight rehearing by the three, trying to decide whether they should grant a rehearing in that discretion.

Byron R. White:

[Inaudible] if two people holding one way by it would not be about to have a rehearing.

Howard E. Shapiro:

Well, likely you have to change your mind would be so much more.

Earl Warren:

Well, if you adopted the Reorganization Plan that would necessarily mean that you would have to have panels of three always, would it?

Howard E. Shapiro:

No, it would not Your Honor.

Earl Warren:

You can still use it only when you wanted to or where you needed to, could not you?

Howard E. Shapiro:

That is the purpose of the plan, it was designed to give flexibility to the Commission.

Earl Warren:

I wonder why you would not want that flexibility, why that?

Howard E. Shapiro:

Well, partly it’s a matter of the five members agreeing as to how they want to delegate their functions I think.

They have delegated the functions in part as I mentioned to you for purposes for interlocutory appeals and the like but that is as far as they feel they should —

Earl Warren:

Could it mean that they want to delegate it to three members, but they do not want to take on the burden of review of their actions?

Howard E. Shapiro:

No, I do not believe that would be the case Your Honor.

The action by three members is not a delegation, this is really just the quorum rule on how they are going to carry on their business when there are not enough available.

Well, I see, my time is up.

I believe that it arguably could follow the time for appealing many decisions has to come final.

We are really concerned with the impact of the decision on the Commission’s general operations.

Thank you.