Office of the Secretary

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

 
 

January 16, 2002

 

Thomas C. Willcox, Esquire
601 Indiana Avenue, N.W.
Suite 500
Washington, D.C. 20004

Re:

Superior Court Trial Lawyers' Association
Docket No. 9171

Dear Mr. Willcox:

This is in response to the September 20, 2001 petition ("Petition") filed on behalf of respondent Superior Court Trial Lawyers' Association ("SCTLA") for reopening and modification, or interpretation, of the Federal Trade Commission's order in Docket No. 9171 (the "Order").(1) The Petition requests the Commission to reopen and modify, or interpret, the Order to allow a collective work-stoppage ("Proposed Boycott") directed at the timing of payments to its members. As explained below, SCTLA has not shown that the Order can or should be interpreted so narrowly. Further, SCTLA has not made a satisfactory showing that the public interest requires reopening the Order to modify it to permit SCTLA lawyers to plan and engage in such collective work-stoppage. Therefore, the Commission has denied SCTLA's Petition.(2)

In the summer of 1983, SCTLA, its officers, members, and other lawyers (Criminal Justice Act, or "CJA," lawyers) agreed to stop providing legal services to the District of Columbia for indigent criminal defendants, until the District increased the fees it paid for such services. The Commission issued a complaint challenging that conduct and, following an administrative trial and appeal, issued its Order to Cease and Desist on June 23, 1986.(3) On appeal, the Supreme Court in 1990 held that SCTLA's collective boycott was illegal per se.(4) Following the Supreme Court's decision, the Commission's Order prohibiting collective action by SCTLA was affirmed and enforced by the D.C. Circuit.(5) SCTLA asserts that it has complied with the Order without incident for 10 years.

SCTLA alleges that it is now faced with a new situation again requiring collective action. The District of Columbia Superior Court ("D.C. Courts") has experienced two "compensation crises" during which D.C. Courts indefinitely suspended payments to CJA lawyers. SCTLA asserts that D.C. Courts' temporary suspension of payments on actually authorized CJA vouchers constitutes breach of contract or other unlawful activity. As a result, SCTLA wishes to consider the option of a collective work-stoppage of the CJA indigent appointments process to protest potential indefinite suspensions of payments.(6)

Section 5(b) of the Federal Trade Commission Act, 15 U.S.C.  45(b), provides that the Commission may modify an Order when the Commission determines that the public interest so requires. In the case of "public interest" requests, FTC Rule of Practice 2.51(b)(7) requires the petitioner to make an initial "satisfactory showing" of how modification would serve the public interest before the Commission will determine whether to reopen an Order and consider all of the reasons for and against its modification.

A "satisfactory showing," with respect to public interest requests, is one that makes a prima facie showing of legitimate public interest reasons justifying relief. A request to reopen and modify will not make out a "satisfactory showing" if it is merely conclusory or otherwise fails to set forth by affidavit(s) specific facts demonstrating in detail the reasons why the public interest would be served by the modification.(8) To make this showing, the petitioner must demonstrate, for example, that there is a more effective or efficient way of achieving the purposes of the Order, that the Order in whole or part is no longer needed, or that there is some other clear public interest that would be served if the Commission were to grant the requested relief.(9) A public interest showing must be supported by evidence that is credible and reliable.(10)

If, after determining that the petitioner has made the required showing, the Commission determines to reopen the Order, the Commission will then consider and balance all of the reasons for and against modification.(11) In no instance does a decision to reopen an Order oblige the Commission to modify it,(12) and the burden remains on the petitioner in all cases to demonstrate why the Order should be reopened and modified. The petitioner's burden is not a light one in view of the public interest in repose and the finality of Commission Orders.(13)

The Commission has considered SCTLA's Petition and supporting materials, as well as the Commission's Opinion and Final Order,(14) and the Supreme Court's opinion in Federal Trade Commission v. Superior Court Trial Lawyers' Association.(15)

As an initial matter, SCTLA has not demonstrated that the Order should be narrowly interpreted as prohibiting its members from engaging in group boycotts only when the intent is to increase the hourly rate paid to CJA lawyers for their services. By its express terms, Paragraph I of the Commission's Order prohibits SCTLA and its members from "[r]efus[ing] to provide legal services to any government program for persons eligible for appointed counsel in connection with any effort to fix, increase, stabilize, or otherwise affect the level of fees for such legal services." 107 F.T.C. at 603 (emphasis added). As this language makes clear, the Commission's Order was not narrowly limited to cover only naked price-fixing agreements pertaining to the dollar amount of hourly fees. Rather, the Order prohibits all group boycotts by SCTLA attorneys having a connection with an effort to affect, in any manner, the level of such fees. Id.

The principal question raised by SCTLA's Petition, therefore, is whether the Proposed Boycott is sufficiently "connected" to an effort to "affect the level" of fees paid to CJA lawyers as to be prohibited by the Order. Upon analysis of this question, the Commission has concluded that the Proposed Boycott would squarely violate the terms of Paragraph I of the Order, inasmuch as an effect on the timing of payment of CJA fees is substantively no different from an effect on the dollar amount of the fees paid.

The Commission notes that the issue presented here is not a novel one. The federal courts previously have held that the timing and terms of payment for goods or services are functional elements of price and, for antitrust purposes, should be treated no differently from the dollar amount of the price itself. The seminal case for this proposition, a case not cited in SCTLA's Petition, is Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980) (cited with approval in SCTLA, 493 U.S. at 424). In Catalano, the Supreme Court considered whether a horizontal restraint relating to credit terms offered to customers, but not otherwise affecting prices, should constitute a per se violation of Section 1 of the Sherman Act. Specifically, the case dealt with a secret agreement among competing beer wholesalers whereby each agreed "they would sell to retailers only if payment were made in advance of or upon delivery." Id. at 644 (emphasis added). The participating wholesalers, in other words, agreed to refuse to deal with - that is, to boycott - any retailers who would not agree to pay in advance or upon delivery.

Although the lower court had ruled that this type of agreement should not be characterized as a form of price fixing, the Supreme Court disagreed and ultimately reversed. As the Court stated:

It is virtually self-evident that extending interest-free credit for a period of time is equivalent to giving a discount equal to the value of the use of the purchase price for that period of time. Thus, credit terms must be characterized as an inseparable part of the price. An agreement to terminate the practice of giving credit is thus tantamount to an agreement to eliminate discounts, and thus falls squarely within the traditional per se rule against price fixing.

Id. at 648.

Although the Proposed Boycott in this case is not identical to the restraint at issue in Catalano, the broader point made by the Court in Catalano seems very much apropos. Just as "credit terms must be characterized as an inseparable part of price" making an agreement to eliminate credit "tantamount" to price fixing, id., the Commission believes that the timing of payment for legal services is, functionally speaking, an element of the rate paid for such services. Hence, in the Commission's view SCTLA's Proposed Boycott, even though it purportedly would not be designed to affect the set dollar amount paid to CJA lawyers for their hourly services, would nonetheless "affect the level of fees for such legal services," 107 F.T.C. at 603, thus violating the express terms of the Commission's Order.

Turning next to SCTLA's request to reopen the Order, SCTLA has not made a satisfactory showing sufficient to warrant reopening the Order to consider a modification that would permit a collective boycott. SCTLA asserts that its Proposed Boycott is in the public interest because it would force D.C. Courts to make timely payments to SCTLA's members for their work representing indigent defendants. SCTLA argues that the public interest would be served because such an action would remedy alleged breaches of contract or other law violations by D.C. Courts and that the market for CJA lawyers will therefore be more competitive. SCTLA has not provided factual support for its assertions, however.

Significantly, SCTLA has not demonstrated any harm to competition from the Order's proscriptions. SCTLA has provided no credible or reliable evidence to support its contention that the 1998 and 1999 temporary suspensions of payment to CJA lawyers negatively impacted the market. The Petition fails to allege facts indicating that lawyers did not continue to compete for CJA appointments even through 1999, when another suspension occurred. Nor does the Petition indicate that there was any shortage of CJA lawyers from 1999 through the present. Lawyers seem to have taken CJA appointments in 1998 and through to the present, even in anticipation of indefinite suspensions of payment.

Similarly, SCTLA has not shown that there would be any competitive benefits from the Proposed Boycott. SCTLA submitted an economist's opinion stating that the Proposed Boycott is theoretically procompetitive.(16) Based on this opinion, SCTLA argues that the Proposed Boycott is procompetitive because, by making the time of payment more certain, it "would facilitate competition on both price and total-compensation dimensions."(17) Other than this opinion, SCTLA did not submit additional evidence or affidavits to support its contention.

SCTLA asserts that the Proposed Boycott will benefit competition by making the time of payment more certain, because more lawyers will then be encouraged to accept CJA appointments. But the same might be said of a successful collective boycott to raise the specific level of fees, a position that was squarely rejected when the Supreme Court condemned such conduct as per se unlawful. In any event, and put more simply, to the extent the Petition is asserting that an increase in the value of the compensation would be procompetitive, it is making the same essential argument that was rejected when the Order was issued and affirmed on appeal.

Although SCTLA has not made a satisfactory showing that the public interest requires reopening the Order, the Commission has nevertheless considered all the facts and arguments raised by SCTLA to determine whether a modification of the Order would be warranted. In this case, the competitive costs that such a modification would impose would outweigh any benefits.

SCTLA urges that making the timing of payments earlier and more certain would encourage more lawyers to accept CJA appointments. The Commission has already explained the fundamental flaw in this argument. Even if the evidence submitted with SCTLA's Petition were deemed credible and reliable, the Commission would nevertheless be compelled to deny the request to modify the Order on the basis that the competitive costs of a modification would outweigh any purported benefits.

The costs that would be incurred by permitting SCTLA to engage in a concerted refusal to deal with the D.C. Courts have already been described in the Commission's Opinion.(18) When SCTLA's boycott succeeded in 1983, the District of Columbia's yearly CJA expenditures increased by $4 to $5 million, and the D.C. public defender attorneys were swamped by additional cases when they attempted to fill the market-void left by the boycott. If the Proposed Boycott were successful, it would similarly burden the District's criminal justice system and would thereby force the District to pay CJA lawyers when the lawyers wanted to be paid, rather than when payment would be made under normal competitive conditions in the CJA market.(19)

The Commission appreciates the concern of SCTLA's members that they have not always been compensated as quickly as they might have desired. In that regard, however, SCTLA is not left without recourse. The Order explicitly allows SCTLA to exercise its First Amendment rights to petition the government concerning any procedures.(20) The Order also permits SCTLA to provide information or views in a noncoercive manner to persons engaged in or responsible for the administration of the CJA program.(21) Moreover, the D.C. Courts were made subject to the Prompt Payment Act in fiscal year 1999.(22) Under this Act, D.C. Courts are required to pay interest on any voucher payment made more than 30 days after submission of a proper invoice.(23) Further, the D.C. Government has not ignored the issues raised by the D.C. Courts' temporary suspensions of payment. On June 2, 2000, the Council of the District of Columbia enacted the "Fiscal Year 2001 Budget Request Act," which requires the D.C. Courts to implement the recommendations in the Report from the General Accounting Office regarding payments to court-appointed attorneys.(24) The D.C. Council's enactments and the applicability of the Prompt Payment Act have remedied SCTLA's concerns to a great degree, without posing the competitive problems raised by SCTLA's proposed collective work-stoppage.

The Commission has duly considered SCTLA's Petition and the supporting submissions filed in connection therewith and other relevant information and has determined that SCTLA has failed to make a satisfactory showing that the public interest requires reopening the Order. Accordingly, SCTLA's Petition is denied.

By direction of the Commission.

Donald S. Clark
Secretary

Endnotes:

1. Superior Court Trial Lawyers' Association, 107 F.T.C. 510, 603-05 (1986).

2. The Petition does not assert that any changed condition of fact or law requires reopening, and the Commission has not considered that issue.

3. Order, 107 F.T.C. at 603-05.

4. Federal Trade Commission v. Superior Court Trial Lawyers' Association, 493 U.S. 411, 436 (1990).

5. Superior Court Trial Lawyers' Association v. Federal Trade Commission, 897 F.2d 1168 (D.C. Cir. 1990).

6. Petition at 1.

7. 16 C.F.R. 2.51(b)

8. Id.

9. Thus, a petitioner's mere assertion of competitive injury or disadvantage ordinarily will not constitute a "satisfactory showing" where the petitioner is unable to demonstrate how the proposed modification would promote effective competition or otherwise serve the broader public interest. See, e.g., California & Hawaiian Sugar, 119 F.T.C. 39, 44-45 (1995) (a petitioner cannot avoid order obligations just because its competitors are not so restricted; order was reopened and modified, however, to allow limited comparative claims that encouraged competition by enabling consumers to distinguish and choose among otherwise fungible products).

10. As explained in a prior amendment to Rule 2.51, "[r]equests to reopen orders must not only allege facts that, if true, would constitute the necessary showing, but must also credibly demonstrate that the factual assertions are reliable. [The Rule] therefore specifically requires that petitioners provide one or more affidavits to support facts alleged in requests to reopen and modify orders. This [requirement] will not only help the Commission in its decision making process but, by clarifying the applicable standard, aid petitioners in presenting meritorious cases . . . . This [requirement] specifies the procedural method for substantiating factual assertions." 53 Fed. Reg. 40,867 (Oct. 19, 1988).

11. All information and material that the petitioner wishes the Commission to consider shall be contained in the request at the time of filing. 16 C.F.R.  2.51(b).

12. See United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376-77 (9th Cir. 1992) (reopening and modification are independent determinations).

13. See Federated Department Stores, Inc. v. Moitie, 452 U.S. 394 (1981) (strong public interest considerations support repose and finality).

14. Superior Court Trial Lawyers' Association, 107 F.T.C. at 562-603 ("Opinion").

15. 493 U.S. 411 (1990). See also Superior Court Trial Lawyers' Association v. Federal Trade Commission, supra note 5 (on remand from the Supreme Court, the Court of Appeals considered whether "the Commission's Order was overly broad and not reasonably related to the remedial purposes of the Federal Trade Commission Act," concluding that it was not and therefore enforcing the Commission's Order as originally drafted).

16. SCTLA Memorandum of Law in Support of Petition, Exhibit C. Dr. Ratliff's economic opinion does not in this case constitute "credible and reliable evidence" as necessary for a "satisfactory showing" to reopen a Commission order.

17. Id. at 22. This argument also further confirms that the Proposed Boycott would be in connection with an effort to "affect the level of fees," which is prohibited by the Order.

18. See Opinion, 107 F.T.C. at 567-69, 577-78.

19. See Initial Decision, 107 F.T.C. at 543, where the ALJ found that

[t]he expectation of the CJA lawyers was that their boycott would have a severe impact on the District's criminal justice system. This expectation was fully realized for essentially three reasons. First, the incidence of crime in the District does not subside because of the sudden unavailability of lawyers. Second, the criminal law requirements that a lawyer be assigned to each case almost immediately upon arrest of the accused and that the assigned lawyer's investigation and preparation proceed apace to meet certain early deadlines . . . are not changed either by the sudden nonavailability of enough lawyers or the imposition of massive caseloads on those who are available. Third, there was no one to replace the CJA regulars, and makeshift measures were totally inadequate.

20. Final Order, I.D.1., 107 F.T.C. at 604 ("Provided, That nothing in this order shall prevent respondents from: 1. Exercising rights under the First Amendment to the United States Constitution to petition any government body concerning legislation, rules or procedures") (emphasis in original).

21. Final Order, I.D.2., 107 F.T.C. at 604 ("Provided, That nothing in this order shall prevent respondents from: . . . 2. Providing information or views in a noncoercive manner to persons engaged in or responsible for the administration of any program to obtain legal services for persons eligible for appointed counsel.") (emphasis in original).

22. Pub. L. No. 105-277, 162, 112 Stat. 2681-148 (1998), see 31 U.S.C. 3901-07 (2001).

23. See D.C. Courts, Planning and Budgeting Difficulties During Fiscal year 1998, United States General Accounting Office Report GAO/AIMD/OGC-99-226, at 3, 23 (Sept. 1999). The GAO's recommendations are on pages 19-20 of the Report, which can be found at: http://www.gao.gov/archive/1999/ag99226.pdf or at http://www.gao.gov by following the link to GAO Reports and entering the Report number <<AIMD/OGC-99-226>>.

24. Fiscal Year 2001 Budget Request Act, 47 D.C. Reg. 5049, 5051-52 (2000).