No. 98-713
In the Supreme Court of the United States
OCTOBER TERM, 1998
FRONTIER PACIFIC INSURANCE COMPANY, PETITIONER
v.
FEDERAL TRADE COMMISSION
ON PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
BRIEF FOR THE FEDERAL TRADE COMMISSION
IN OPPOSITION
DEBRA A. VALENTINE
General Counsel
JOHN F. DALY
Assistant General Counsel
LAWRENCE DEMILLE-WAGMAN
Attorney
Federal Trade Commission
Washington, D.C. 20580
SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTIONS PRESENTED
1. Whether the Federal Trade Commission, having obtained a judgment for
restitution against a telemarketer, has the authority to enforce that judgment
against a bond posted by the telemarketer pursuant to a state regulatory
scheme.
2. Whether the Federal Trade Commission violates the Tenth Amendment when
it enforces a judgment against a bond posted pursuant to a state regulatory
scheme.
T
In the Supreme Court of the United States
OCTOBER TERM, 1998
No. 98-713
FRONTIER PACIFIC INSURANCE COMPANY, PETITIONER
v.
FEDERAL TRADE COMMISSION
ON PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
BRIEF FOR THE FEDERAL TRADE COMMISSION
IN OPPOSITION
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 1a-11a) is reported at 149
F.3d 1036. The opinion of the district court (Pet. App. 12a-13a) is unreported.
JURISDICTION
The opinion of the court of appeals was entered on July 20, 1998. The petition
for a writ of certiorari was filed on October 19, 1998 (a Monday). The jurisdiction
of this Court is invoked under 28 U.S.C. 1254(1).
STATEMENT
1. On March 7, 1996, the Federal Trade Commission (FTC or Commission) filed
a complaint in the United States District Court for the Central District
of California against MTK Marketing (MTK), Copy Resource Center (CRC), and
13 other defendants. The complaint alleged that the defendants had violated
Section 5 of the Federal Trade Commission Act (FTC Act), 15 U.S.C. 45, by
telephoning customers of other suppliers, falsely claiming to be the customer's
usual supplier of toner, falsely claiming that the price of toner had just
increased or was about to increase, and by shipping and demanding payment
for toner that customers had not actually ordered. The complaint sought
injunctive relief and redress for consumers injured by the defendants' conduct.
Gov't C.A. Br. 3-4; Pet. App. 4a.
On August 5, 1996, the district court entered a stipulated final judgment
against nine of the defendants. On September 18, 1996, the court entered
a default judgment against MTK, CRC, and the remaining four defendants.
The default judgment enjoined those six defendants from engaging in telemarketing.
In addition, the court ordered MTK to pay $1,335,093 in consumer redress
and ordered CRC to pay $494,856 in redress. Gov't C.A. Br. 4-5; Pet. App.
4a. No appeal was taken from those final judgments.
2. California's Telephonic Sellers Act, Cal. Bus. & Prof. Code §§
17511 et seq. (West 1997), regulates the practices of California telemarketers
such as MTK and CRC. The Act requires telemarketers to post a $100,000 bond
"for the benefit of any person suffering pecuniary loss" resulting
from the telemarketer's "unlawful, unfair or fraudulent business act
or practice." Id., §§ 17511.12(a), 17203, 17200. On July
3, 1995, MTK and CRC jointly posted the bond with petitioner Frontier Pacific
Insurance Co. Gov't C.A. Br. 7; Pet. App. 4a.
3. Neither MTK nor CRC had sufficient assets to satisfy the judgment against
them. On November 8, 1996, the FTC therefore filed a motion with the district
court to enforce the bond they had posted. As required by the Telephonic
Sellers Act, the FTC served its motion on petitioner. Cal. Bus. & Prof.
Code § 17511.12(c) (West 1997). Petitioner opposed the motion. It argued,
inter alia, that the FTC lacked jurisdiction to enforce the bond, and that
the FTC was not a "person" (as that term is defined in the Telephonic
Sellers Act) entitled to enforce a bond. Gov't C.A. Br. 8-9; Pet. App. 4a-5a.*
On December 6, 1996, the district court denied the FTC's motion. Pet. App.
12a-13a. The court held that the FTC does not fall within the Telephonic
Sellers Act's definition of "person" and therefore "is not
a proper party to this motion." Id. at 13a.
4. The court of appeals reversed. Pet. App. 1a-11a. The court first held
that the FTC is a "person" within the meaning of the Telephonic
Sellers Act. The court observed that "ample precedent supports the
position that the term 'person' may include a governmental agency."
Id. at 7a. It noted that "evidence in the record indicates that the
Attorney General of California believes that FTC enforcement would serve
the Act's purpose; his interpretation is entitled to deference." Id.
at 7a-8a. The court also concluded that FTC enforcement would serve the
purposes of the Act by expanding the group of people entitled to benefit
from the bond. Id. at 9a.
The court also rejected petitioner's contention that permitting the FTC
to enforce the bond is inconsistent with the Tenth Amendment. The court
explained that
allowing FTC enforcement would not compromise the State of California's
sovereignty in any way. In fact, FTC enforcement would assist the State
of California in furthering the policy interests the Act was designed to
serve. Moreover, although the Tenth Amendment precludes the federal government
from commandeering a state by forcing it to enact or enforce a federal regulatory
program, no such conduct occurred here.
Pet. App. 10a (citation omitted). Finally, the court held that the FTC Act
grants the agency the power to obtain ancillary relief from law violators
and to enforce a favorable judgment against assets in the hands of third
parties. Ibid.
ARGUMENT
The court of appeals' decision is correct and does not conflict with any
decision of this Court or of any other court of appeals. Further review
is not warranted.
1. When the FTC brings a district court action to enforce Section 5 of the
FTC Act, the court has "the authority to grant any ancillary relief
necessary to accomplish complete justice." FTC v. Pantron I Corp.,
33 F.3d 1088, 1092 (9th Cir. 1994), cert. denied, 514 U.S. 1083 (1995);
see also FTC v. Gem Merchandising Corp., 87 F.3d 466, 470 (11th Cir. 1996)
("the court's authority to exercise full equitable powers is especially
appropriate" in an action enforcing Section 5); FTC v. Security Rare
Coin & Bullion Corp., 931 F.2d 1312, 1314 (8th Cir. 1991); FTC v. World
Travel Vacation Brokers, Inc., 861 F.2d 1020, 1026 (7th Cir. 1988). Petitioner
does not contest the FTC's authority to obtain a judgment for consumer redress
against MTK and CRC. Petitioner contends, however, that the Commission lacks
authority to pursue that judgment against an asset, such as the bond posted
with petitioner, that is not in the hands of the wrongdoer. Pet. 5-6. That
claim is without merit.
As this Court has recognized, a federal court may exercise ancillary jurisdiction
to enable it "to function successfully, that is to manage its proceedings,
vindicate its authority, and effectuate its decrees." Peacock v. Thomas,
516 U.S. 349, 354 (1996) (quoting Kokkonen v. Guardian Life Ins. Co., 511
U.S. 375, 379-380 (1994)). A federal court has
inherent power to enforce its judgments. Without jurisdiction to enforce
a judgment entered by a federal court, "the judicial power would be
incomplete and entirely inadequate to the purposes for which it was conferred
by the Constitution." Riggs v. Johnson County, 6 Wall. 166, 187 (1868).
In defining that power, we have approved the exercise of ancillary jurisdiction
over a broad range of supplementary proceedings involving third parties
to assist in the protection and enforcement of federal judgments-including
attachment, mandamus, garnishment, and the prejudgment avoidance of fraudulent
conveyances.
Peacock, 516 U.S. at 356. That inherent authority is also recognized by
Federal Rule of Civil Procedure 69(a), which "permits judgment creditors
to use any execution method consistent with the practice and procedure of
the State in which the district court sits." Peacock, 516 U.S. at 359
n.7.
In FTC v. Dean Foods Co., 384 U.S. 597 (1966), this Court held that various
"ancillary powers" not specifically conferred on the FTC by statute--including
the power to "bring contempt actions in the appropriate court of appeals
when the court's enforcement orders were violated"--"have always
been treated as essential to the effective discharge of the Commission's
responsibilities." Id. at 607. See also id. at 608 (Congress has not
"withdrawn from the Commission its inherent standing as a suitor to
seek" relief generally available to litigants under the All Writs Act).
Such "ancillary powers" include the authority to enforce a judgment
obtained in an action brought by the Commission pursuant to Section 5 of
the FTC Act. The court of appeals therefore correctly held that the FTC
had authority to seek enforcement of the bond posted with petitioner by
MTK and CRC. Petitioner identifies no contrary ruling from any court, nor
any other reason why this issue warrants further review.
2. Petitioner also contends (Pet. 6-10) that the FTC's enforcement of a
bond mandated by California law intrudes on the State's sovereignty in violation
of the Tenth Amendment. That claim lacks merit. This Court has held that
the federal government violates the Tenth Amendment when it forces a State
to enact or enforce a regulatory program. New York v. United States, 505
U.S. 144, 161 (1992). California's enactment of the Telephonic Sellers Act,
however, was not the product of any federal compulsion. Nor does the FTC's
enforcement of the statutory bond intrude upon state sovereignty or subvert
the purposes of the California law. To the contrary, the Commission's action
furthers California's interests by providing redress to consumers injured
at the hands of telemarketers covered by the Act.
The court of appeals thoroughly examined the text and history of the Telephonic
Sellers Act (Pet. App. 5a-9a) and concluded that the FTC is a "person"
entitled to enforce the bond under the terms of the statute. That holding
was supported by, inter alia, "evidence in the record indicat[ing]
that the Attorney General of California believes that FTC enforcement would
serve the Act's purpose." Id. at 7a-8a. The court's construction of
the Telephonic Sellers Act raises a question of state law that is not suitable
for this Court's review. See, e.g., Haring v. Proisie, 462 U.S. 306, 314
n.8 (1983) ("standing alone, a challenge to state-law determinations
by the court of appeals will rarely constitute an appropriate subject of
this Court's review"); Commissioner v. Estate of Bosch, 387 U.S. 456,
462 (1967) (this Court "ordinarily accept[s] the determination of local
law by the Court of Appeals") (quoting Ragan v. Merchants Transfer
Co., 337 U.S. 530, 534 (1949)). In light of the court of appeals' resolution
of that interpretive issue, petitioner's Tenth Amendment claim is insubstantial.
The Commission cannot plausibly be said to "commandeer" (Pet.
8) or "conscript" (Pet. 9) the resources of a state government
by invoking remedial provisions that the State has freely chosen to make
available to federal entities.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
DEBRA A. VALENTINE
General Counsel
JOHN F. DALY
Assistant General Counsel
LAWRENCE DEMILLE-WAGMAN
Attorney
Federal Trade Commission
SETH P. WAXMAN
Solicitor General
DECEMBER 1998
* The Act provides that bonds may be enforced by "the [California]
Attorney General, district attorney, city attorney, or any other person
who has obtained a judgment for restitution against the seller." Cal.
Bus. & Prof. Code § 17511.12(c)(2) (West 1997). The term "person"
is defined to "include[] an individual, firm, association, corporation,
partnership, joint venture, or any other business entity." Id., §
17511.2(d).