Nos. 74-1547 to 74-1551 and 74-1553, 74-1554.
Argued April 18, 1975.
Decided August 8, 1975.
Robert E. Duncan, Atty., FTC, with whom Gerald Harwood, Asst. Gen. Counsel, William A. Cerillo, Atty., FTC., Howard E. Shapiro and Robert B. Nicholson, Attys., Dept. of Justice, were on the brief for appellant.
William Simon, Washington, D.C., with whom Roger C. Simmons, Washington, D.C., and Robert L. Norris, Houston, Tex., were on the brief for appellee Exxon Corp., in No. 74-1550 also argued for appellees Shell Oil Co., Standard Oil Co. (Indiana) and Texaco Inc.
J. Wallace Adair, Terrence C. Sheehy, Washington, D.C., and Thomas G. Johnson, Houston, Tex., were on the brief for appellee, Shell Oil Co. in No. 74-1551.
John W. Howard, Chicago, Ill., was on the brief for appellee, Standard Oil Co. (Indiana) in No. 74-1548.
Robert F. McGinnis, New York City, was on the brief for appellee, Texaco Inc., in No. 74-1547. W. C. Weitzel, Jr., New York City, entered an appearance for appellee, Texaco, Inc., in No. 74-1547.
Abe Krash, Washington, D.C., with whom Paul A. Porter, Daniel A. Rezneck, Washington, D.C., and Herbert W. Varner, Houston, Tex., were on the brief for appellee, The Superior Oil Co. Inc., in No. 74-1549.
Lee Loevinger, Washington, D.C., with whom Martin Michaelson, Washington, D.C., was on the brief for appellee Standard Oil Co. of California in No. 74-1553.
Harry M. Reasoner, Houston Tex., with whom Michael J. Henke, Washington, D.C., was on the brief for appellee Mobil Oil Corp. in No. 74-1554.
Appeals from the United States District Court for the District of Columbia (Civil Action Nos. 1089-73 to 1093-73 and 1095-73, 1096-73).
Sitting by designation pursuant to 28 U.S.C. § 294(d).
WILKEY, Circuit Judge:
This litigation is an outgrowth of a Federal Trade Commission (FTC) investigation into the reporting of natural gas reserves by natural gas producers in Southern Louisiana. Specifically, we have before us seven consolidated appeals by the FTC from orders entered by the District Court granting enforcement in part and denying enforcement in part of subpoenas duces tecum issued by the Commission to appellees, seven large natural gas producers, in connection with its investigation. The subpoena issued to each of the appellees and the orders issued by the District Court are reproduced as appendices to this opinion.
Southern Louisiana as used throughout this opinion includes the offshore producing area (seaward from the Louisiana coastline) and that portion of Louisiana defined as the "South Louisiana District." Joint Brief for Appellees Texaco, Inc., Standard Oil Co. (Indiana), Shell Oil, Co., and Exxon Corp. [hereinafter Common Counsel Brief], p. 3 n. 4. Southern Louisiana is recognized as the most important gas-producing area in the country. Southern Louisiana Area Rate Cases, 428 F.2d 407, 418 (5th Cir.), cert. denied, 400 U.S. 950, 91 S.Ct. 243, 27 L.Ed.2d 257 (1970).
I. The Facts and the Issues
The American Gas Association (AGA) is a trade association of producers, distributors, and marketers of natural gas. Through its Committee on Natural Gas Reserves, the AGA has since 1946 been providing the industry, the Government, and the general public with annual estimates of the proved natural gas and natural gas liquid reserves of the United States. For the purposes of gathering reserve data, the nation is divided into ten geographical districts. A member of the Committee on Natural Gas Reserves is assigned to each district; the committee member in turn appoints a subcommittee to assist him in gathering reserve data within the district. The FTC's investigation focuses on the activities of the South focuses on the activities of the South Louisiana subcommittee.
Throughout this opinion we will use the term "proved reserves." The following is the definition of proved reserves adopted by the AGA in its annual publication, "Reserves of Crude Oil, Natural Gas Liquids, and Natural Gas in the United States and Canada and United States Productive Capacity," Volume 28, June 1974. The first two paragraphs of the following definition appear on page 103 of this publication, the third paragraph is derived from page 99 and the last paragraph is derived from pages 96 and 97:
Proved Reserves are the estimated quantity of natural gas which analysis of geologic and engineering data demonstrate with reasonable certainty to be recoverable in the future from known oil and gas reservoirs under existing economic and operating conditions. Reservoirs are considered proved that have demonstrated the ability to produce by either actual production or conclusive formation test.
The area of a reservoir considered proved is that portion delineated by drilling and defined by gas-oil, gas-water contacts or limited by the structural deformation or lenticularity of the reservoir. In the absence of fluid contacts, the lowest known structural occurrency of hydrocarbons controls the proved limits of the reservoir. The proved area of a reservoir may also include the adjoining portions not delineated by drilling but which can be evaluated as economically productive on the basis of geological and engineering data available at the time the estimate is made. Therefore, the reserves reported should include total proved reserves which may be in either the drilled or the undrilled portions of the field or reservoir.
Natural gas reserves take into account the shrinkage of the reservoir gas volume resulting from the removal of the liquefiable portions of the hydrocarbon gases and the reduction of volume due to the exclusion of non-hydrocarbon gases where they occur in sufficient quantity to render the gas unmarketable.
The proved reserves estimated are to include all gas reserves regardless of size, availability of market, ultimate disposition or use.
In May 1969 when the AGA reported its 1968 figures, they indicated a decline in proved reserves nationally, the first such decline ever reported. Before the year was out, this and other information reaching the Federal Power Commission prompted a reopening of its just-concluded Southern Louisiana Area Rate Proceeding. Those proceedings will be discussed in more detail below. The May 1970 report for 1969 showed even further declines for total United States reserves and total Southern Louisiana reserves.
In late 1970 the Federal Trade Commission began an investigation into the reporting of proved natural gas reserves in Southern Louisiana. In June 1971 the investigation took on more formal status when the Trade Commission issued a resolution authorizing the use of compulsory process in furtherance of a nonpublic investigation. In that resolution the nature and scope of the investigation was defined as follows:
The purpose of the authorized investigation is to develop facts relating to the acts and practices of . . . [certain named corporations] to determine whether said corporations, and other persons and corporations, individually or in concert are engaged in conduct in the reporting of natural gas reserves for Southern Louisiana which violates Section 5 of the Federal Trade Commission Act, or are engaged in conduct or activities relating to the exploration and development, production, or marketing of natural gas, petroleum, and petroleum products, and other fossil fuels in violation of Section 5 of the Federal Trade Commission Act.
From the beginning of its investigation the AGA had been cooperating with the Trade Commission on a voluntary basis. As a result the Commission was able to obtain the field-by-field estimates of proved reserves made by each Southern Louisiana subcommittee member for the years 1966 through 1970. The Commission had also obtained reserve information from Form 15 reports filed with the Federal Power Commission. These reports are filed by interstate natural gas pipelines and list recoverable, saleable gas reserves committed to, collected by, or held by reporting pipelines.
These statistics were made available to the FTC subject to an agreement restricting access to and disclosure of the data. The agreement provided, inter alia, that:
(2) Representatives of your Bureau [i.e., the Commission's Bureau of Competition] will make use of such reports only in connection with its current investigation into the reporting of natural gas reserves by the American Gas Association, and for the purpose of verification of natural gas reserves estimates reported by the A.G.A. Committee on Natural Gas Reserves; and shall not release, disclose, disseminate or publicize in any manner, to any person, any statistic or data contained in such reports, unless otherwise available in published records or documents, without twenty days prior notice, and opportunity to seek appropriate legal protection or relief, to A.G.A. and to each member of the South Louisiana Subcommittee whose statistics are to be disclosed by the Commission.
Supplemental Reply Brief, pp. 3-4. The agreement also provided that custody of the documents be maintained by a neutral third party, Price Waterhouse Co.
The producers have alleged in supplemental filings before this court that the FTC breached this agreement by releasing to a Congressman certain staff and working papers containing excerpts from the AGA reserve statistics after less than 72 hours' notice. In a reply the Commission conceded that it had released the information to the Congressman, who by a phone call "required that the documents be immediately released" to him. The Commission argues, however, that the above paragraph was intended to prohibit disclosure of the data to the public or to competitors, and was not meant to cover the case where a Member of Congress or Congressional committee might immediately require use of the data. In addition, the Trade Commission argues that it lacks the statutory power to keep the data confidential to begin with.
Approximately one year after beginning its investigation, on 24 November 1971, the Commission's staff issued identical administrative subpoenas duces tecum to eleven natural gas producers. All eleven producers moved to quash the subpoenas. The motions to quash or limit were denied by the Commission on 27 June 1972. Following the Commission's denial, the Trade Commission's staff, after negotiations with the gas producers, offered additional safeguards for the confidentiality of information to be supplied. As a result two producers agreed to comply fully with the subpoenas and one agreed to comply in part. (Soon after petitions for enforcement were filed in the District Court, one more firm agreed to comply with the subpoena.)
App. III 498a-525a.
Petitions for enforcement of the remaining subpoenas were filed in the District Court on 4 June 1973. On 30 July 1973 the District Court held a hearing on preliminary motions and also heard a preliminary presentation of the issues posed by the case. Subsequently evidentiary materials and briefs were filed by all parties. A second hearing was held on 13 December 1973 at which time the issues were fully argued to the court over a period of several hours.
The two orders here under review were filed on 22 March 1974. One order covered the subpoenas issued to appellees Texaco, Inc., Standard Oil Co. (Indiana), Shell Oil Co., Exxon Corp., Standard Oil Co. of California, and Mobil Oil Corp. The other order related to the subpoena issued to the Superior Oil Co., Inc. (hereinafter Superior). The former order enforced specifications A, B, C, D, E, and F in full; however, it only granted partial enforcement of the remaining specifications, G through L.
The District Court found the subpoenas to be overly broad and unduly burdensome because they sought to duplicate activities of the Federal Power Commission which had already resulted in a finding that AGA proved reserve estimates were valid and accurate. As a result, specifications G through L were modified so that raw field data, bid calculation data, and bid calculation files need not be produced. However, all documents containing or underlying proved reserve estimates in the offshore Southern Louisiana area are to be produced.
The court, in an attempt to make the subpoenas less burdensome, limited production of these documents to a random sample of 100 out of approximately 225 relevant fields and to the years 1969, 1970, and 1971. Specifications J, K, and L were similarly modified so that only documents relating to proved natural gas reserve estimates in the offshore Southern Louisiana area need be submitted. However, the court enforced the subpoena as regards any documents prepared between 1966 and 1971, inclusive, "which were exchanged between or among, or constitute, contain or refer to any agreement, arrangement or communication between or among, respondents or others, including the American Gas Association." The subpoenas were also modified so that additional protections were afforded to confidential information. In addition, producers were accorded the option of producing records for inspection where they were stored.
Superior was in a different position from the other six producers. Superior had never been a member of the AGA nor had it ever furnished proved reserve figures to the AGA. Superior's employees also had not participated in the work of AGA's committees or subcommittees. As a result, the District Court enforced specifications A through F and K through L in full and denied enforcement of specifications G, H, I, and J. Identical confidentiality protections were afforded Superior.
Because the producers have not cross-appealed, the issues before us relate solely to the limiting modifications made by the District Court. For the purposes of this opinion, we have formulated those issues as follows:
(1) Was the District Court in error in refusing to enforce those portions of the subpoenas that called for documents which did not relate to estimates of proved reserves?
(2) Did the District Court abuse its discretion in limiting production of documents to a random sample of fields and to the years 1969, 1970, and 1971?
(3) Did the District Court abuse its discretion in attaching conditions to disclosure to insure confidentiality and in permitting documents to be produced for inspection at their situs?
(4) Was the District Court in error in affording Superior Oil differing treatment?
We proceed now to deal with these issues.
Standard Oil Co. of California argues that the six producers order is not a final decision within the meaning of 28 U.S.C. § 1291 and therefore is not appealable. We disagree. It is well established that an order of a District Court granting or denying a petition of an agency for enforcement of an administrative subpoena is a final decision and hence appealable. Ellis v. ICC, 237 U.S. 434, 442, 35 S.Ct. 645, 59 L.Ed. 1036 (1915); Int'l Brotherhood of Electrical Workers v. EEOC, 398 F.2d 248, 251 (3rd Cir. 1968), cert denied, 393 U.S. 1021, 89 S.Ct. 628, 21 L.Ed. 565 (1969); Martin v. Chandis Securities Co., 128 F.2d 731, 734 (9th Cir. 1942). The mere fact the District Court indicated that it might be persuaded to reconsider certain aspects of the order if the Commission were able to make an adequate showing after examining the documents to be produced does not deny the order of its final character. A final decision is not necessarily "the last order possible to be made in a case. . . ." Gillespie v. United States Steel Corp., 379 U.S. 148, 152, 85 S.Ct. 308, 311, 13 L.Ed.2d 199 (1964). A "practical rather than a technical construction" of the District Court's order. Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1226, 93 L.Ed. 1528 (1949), indicates that the Trade Commission should be entitled to appeal an order which shows every sign of being a final resolution of its controversy with the six producers.
II. Documents Which Did Not Relate to Proved Reserves A. The Arguments
The producers have never quarreled with the power or the right of the Federal Trade Commission to investigate the natural gas industry to uncover violations of the antitrust laws or unfair trade practices. However, they argue that there can be no possible reason for wanting documents that do not relate to proved reserve estimates because it is only proved reserve estimates that are taken into account by the Federal Power Commission in the setting of area rate ceilings. In addition, they argue that the Federal Power Commission, the only agency possessing the requisite expertise, has determined that AGA proved reserve data is accurate. Therefore, the FTC is collaterally estopped from relitigating the issue.
The Trade Commission, on the other hand, points out that there is no provision in the Federal Trade Commission Act (FTCA) excepting gas producers from the coverage of the Act, as there is for banks and certain common carriers, and that therefore jurisdiction to investigate exists. They argue that such jurisdiction is broad, "reaching not only existing violations of . . . [the Sherman and Clayton Acts], but trade practices which conflict with their basic policies." The Trade Commission goes on to argue that, as a factual matter, its investigation does not duplicate studies made by the Federal Power Commission and that, even if it did, collateral estoppel would be inapplicable because its purpose in determining the accuracy of reserve data is different from the Power Commission's purpose in determining accuracy.
We are fully cognizant of section 15(b) of the Federal Energy Administration Act of 1974, P.L. 93-275, 88 Stat. 96, 109 (7 May 1974), which provides:
(b) Not later than one year after the effective date of this act, the Administrator shall submit a report to the President and Congress which will provide a complete and independent analysis of actual oil and gas reserves and resources in the United States and its Outer Continental Shelf, as well as of the existing productive capacity and the extent to which such capacity could be increased for crude oil and each major petroleum product each year for the next ten years through full utilization of available technology and capacity. The report shall also contain the Administration's recommendations for improving the utilization and effectiveness of Federal energy data and its manner of collection. The data collection and analysis portion of this report shall be prepared by the Federal Trade Commission for the Administration. Unless specifically prohibited by law, all Federal agencies shall make available estimates, statistics data and other information in their files which, in the judgment of the Commission or Administration, are necessary for the purposes of this subsection.
The FTC has never argued that this statute provides independent justification for their subpoenas, since, of course, the subpoenas were issued three years before the statute was enacted. The Commission has, however, used the statute in its briefs as evidence of the fact that "Congress . . . considers the Federal Trade Commission to have a major role in determining the extent of natural gas reserves." Appellant's Brief, p. 22.
In furtherance of its duties under section 15(b), the Trade Commission has prepared yet another questionnaire concerning proved reserves and has sent it to "60 selected natural gas producers." Letter of 28 April 1975 from Commission to the court. The Commission's staff intends to use the responses along with information gathered by the Federal Power Commission and other government agencies in preparing its natural gas study and in aiding the Federal Energy Administrator in the preparation of its energy report. Ibid.
Although the producers may be correct in arguing that data relating to any reserves other than proved reserves would be irrelevant, our reading of the transcript of the 10 December 1973 hearing indicates to us that the District Court had not reached the issue of relevance in regard to the totality of all documents subpoenaed. The court believed that the Trade Commission had subpoenaed all reserve records in order to determine independently the total gas reserves of the area. Since the Power Commission had already determined that AGA figures were accurate, the court was of the view that the Trade Commission could not force the producers to relitigate the matter and that, in any event, it would be unduly burdensome to permit yet another plenary investigation (for the third time in two years) of natural gas reserves.
In order to fully understand the District Court's ruling on this aspect of the case, it is necessary for us to discuss the previously alluded to Power Commission investigations.
B. The Federal Power Commission Investigations
Although the Federal Power Commission (FPC) began area rate proceedings in 1961 for the Southern Louisiana area, it was not until 1968 that the Commission rendered a final decision, which in turn was modified in early 1969. Even before oral argument could be heard before the Fifth Circuit on petitions for review sought by producers, pipeline companies, and consumers, the FPC had instituted new proceedings ( So La II) "to reconsider all major actions it had taken" in the prior proceeding. As the FPC stated in its order instituting So La II, Phase I of its new proceeding "should include evidence with respect to the adequacy of gas supply and adequacy of service to consumers, the demand for gas, the gas shortage, if any, the effect of price on gas supply and demand, and other relevant economic evidence . . .."
Order Enlarging Investigation and Proposed Rulemaking Area Rate Proceeding (Southern Louisiana Area), 42 F.P.C. 1110, 1112 (15 December 1969).
The FPC was concerned in So La II with complaints that adequate supplies of natural gas were not being produced and would not be produced under the recently ordered area rate ceilings. More important for present purposes, the FPC during So La II was presented with the argument by Municipal Distributors Group (MDG), an intervenor which represented the interests of municipal and other publicly owned gas distribution systems, that the supply shortage was more apparent than real. It was argued that "the sharp decline in the supply picture in 1968-69 is revealed by the above record evidence to be caused . . . largely by revisions in the estimates" of proved reserves reported by the American Gas Association (AGA). Such a contention went to the heart of the Power Commission investigation. If it were true that the decline in reserves was a matter of definition and not of economics, the concern of the FPC that new area rates might be required to encourage production would be obviated.
MDG's Initial Brief in So La II, p. 15.
In its final opinion in So La II the FPC discussed testimony which was used by MDG to impeach AGA data. The testimony outlined several methods by which producers could withhold reserves from the AGA. Discussed also were MDG's arguments relating to discrepancies between figures gathered by the FPC and those submitted by the AGA. The FPC also referred in some detail to the testimony and exhibits supporting the reliability of AGA data. As a result, it reached the following conclusions:
AGA and Form 15 data show similar trends of reserves and reserve-to-production (R/P) ratios. AGA data indicates a steady decline in the national R/P ratio from 19 in 1963 to 13 in 1969. Form 15 data indicates a similar decline in the national R/P ratio from 20 in 1963 to 14 in 1969. The American Gas Association reserve data is not impeached, in our opinion, in this discrepancy.
* * * * * *
For the reasons stated herein. We find the AGA reserve data is reasonably reliable for the purposes used herein. Accordingly, and because petitioner has not raised any new evidence, we deny the petition to reopen.
In other words, while AGA data started with 19 years of reserves and the Form 15 data started with 20 in 1963, by 1969 each calculation had dropped 6 years off its proved reserve figure, so the two calculations were comparable. Thus, AGA data was shown to be reliable.
The issue was raised again on review before the Fifth Circuit and received the following extensive rebuttal in a footnote:
 As might be expected, there is some controversy over this. Standing virtually alone against the National (and record) judgment of a near energy calamity, the American Public Gas Association (APGA) contends that the current critical shortage of natural gas is but a pretextual "cry of wolf" calculated to mislead FPC into establishing artificially high rates in the producers' behalf. APGA would have us believe that the energy crisis is a mirage — indeed, a hoax! APGA claims that "there appear to be adequate supplies of gas in the domestic United States to satisfy the projected demands of U.S. consumers well into the 21st Century." APGA Supp.Brf. at 5 n. 9. But to talk of "Supplies" of gas is a misleading oversimplification. Obviously, the gas is not presently available. At most, if there is appropriate exploration, the demonstrable reserves may be exploited to meet the needs. Given a system which depends on private stewardship and marshalling of natural resources, there is a supply shortage if the producers do not produce. FPC has the statutory duty, not only to guard the consumers against super-profits reaped from artificially inflated rates, but also to protect consumer interests by making sure that the rate schedule is high enough to elicit an adequate supply. It is a delicate balancing test. FPC must fix its course to attain the utopian "optimum" rate schedule. Given the current shortage of available supply FPC must swing the pendulum towards the incentive, supply-eliciting side of rates. And so it has done.
In addition to the examination undertaken in relation to the So La II proceedings, the Power Commission undertook in early 1971, at the direction of Congress, a National Gas Survey, a portion of which was a National Gas Reserves Survey (NGRS). NGRS was a completely independent survey of reserves and did not rely on AGA figures at any point. However, in the Final Staff Report of the NGRS (May 1973) a comparison was made with AGA figures:
The NGRS estimate is lower than the estimate by A.G.A.; however, the difference is less than 10 percent. The difference of 23.5 Tcf between the estimate of the non-associated and associated gas reserves for the 6,358 entries in the reported fields category (a) is the primary difference between the total estimates. The gas reserves in the "A.G.A. omitted fields" are a relatively insignificant part in the total NGRS estimate, and it seems evident that the 62 entries in the "omitted" category (b) are small fields. The two dissolved gas estimates differ by 1.7 Tcf or by about 5 percent.
C. Collateral Estoppel
The Supreme Court and this court have clearly stated that an agency or a private party can be collaterally estopped in a later court proceeding if a relevant issue had already been resolved in a contested hearing before the agency. The Supreme Court recently affirmed this principle:
United States v. Utah Construction Co., 384 U.S. 394, 421-422, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966); Sunshine Coal Co. v. Adkins, 310 U.S. 381, 60 S.Ct. 907, 84 L.Ed. 1263 (1940); Pacific Seafarers, Inc. v. Pacific Far East Line, Inc., 131 U.S.App.D.C. 226, 231, 404 F.2d 804, 809 (1968), cert. denied, 393 U.S. 1093, 89 S.Ct. 872, 21 L.Ed.2d 784 (1969) ("Principles of collateral estoppel may properly be applied in administrative cases."); Fairmont Aluminum Co. v. Commissioner of Internal Revenue, 222 F.2d 622, 627 (4th Cir.), cert. denied, 350 U.S. 838, 76 S.Ct. 76, 100 L.Ed. 748 (1955); Tampa Phosphate Railroad Co. v. Seaboard Coast Line RR Co., 418 F.2d 387, 399 (5th Cir. 1969), cert. denied, 397 U.S. 910, 90 S.Ct. 907, 25 L.Ed.2d 90 (1970); Int'l Wire v. Local 38, Int'l Brhd. of Elec. Workers, 357 F. Supp. 1018 (N.D.Ohio 1972), aff'd, 475 F.2d 1078 (6th Cir. 1973), cert. denied, 414 U.S. 867, 94 S.Ct. 63, 38 L.Ed.2d 86 (1973).
Occasionally courts have used language to the effect that res judicata principles do not apply to administrative proceedings, but such language is certainly too broad. When an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate, the courts have not hesitated to apply res judicata to enforce repose. Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 [ 60 S.Ct. 907, 84 L.Ed. 1263]; Hanover Bank v. United States, 285 F.2d 455, 152 Ct.Cl. 391; Fairmont Aluminum Co. v. Commissioner of Internal Revenue, [4 Cir.], 222 F.2d 622; Seatrain Lines, Inc. v. Pennsylvania R. Co., [3 Cir.], 207 F.2d 255. See also Goldstein v. Doft, [D.C.N.Y.], 236 F. Supp. 730, aff'd [2 Cir.], 353 F.2d 484, cert. denied, 383 U.S. 960 [ 86 S.Ct. 1226, 16 L.Ed.2d 302], where collateral estoppel was applied to prevent relitigation of factual disputes resolved by an arbitrator.
The Supreme Court has also held that collateral estoppel can be applied when the prior proceeding involved a different government agency because for collateral estoppel purposes, agencies of the same government are in privity with each other.
Where the issues in separate suits are the same, the fact that the parties are not precisely identical is not necessarily fatal. As stated in Chicago, Rock Island Pacific Railway Co. v. Schendel, 270 U.S. 611, 620 [ 46 S.Ct. 420, 423, 424, 70 L.Ed. 757, 53 A.L.R. 1965], "Identity of parties is not a mere matter of form, but of substance. Parties nominally the same may be, in legal effect, different . . . and parties nominally different may be, in legal effect, the same." A judgment is res judicata in a second action upon the same claim between the same parties or those in privity with them. Cromwell v. County of Sac, 94 U.S. 351 [ 24 L.Ed. 195]. There is privity between officers of the same government so that a judgment in a suit between a party and a representative of the United States is res judicata in relitigation of the same issue between that party and another officer of the government.
Other Circuits have applied both these principles in appropriate cases. The Eighth Circuit has held that the FTC was collaterally estopped from claiming use of unfair methods of competition where the claim was based on factual issues resolved favorably for defendants in a prior proceeding instituted under the Food and Drug Act. Reciprocally, the Seventh Circuit upheld the defense of collateral estoppel in a proceeding under the Food and Drug Act where a prior proceeding before the FTC held that defendant's labeling claims were not deceptive.
George H. Lee Co. v. FTC, 113 F.2d 583 (8th Cir. 1940).
United States v. Willard Tablet Co., 141 F.2d 141 (7th Cir. 1944).
It is difficult for us to discern why the policies which support the application of res judicata or collateral estoppel between court adjudications involving different agencies would not always be equally applicable between administrative adjudications (especially in an era when administrative agencies are taking on duties which were once the preserve of the courts). However, there is no need to resolve this broader issue at this time because we hold that the application of collateral estoppel is clearly appropriate on the facts of this case. The Trade Commission knew of the Power Commission's adjudicatory proceeding in So La II when it initiated its own investigation and could have intervened in the proceeding. We also weigh heavily the fact that the Power Commission has particular expertise on the factual issue involved, the accuracy of industry figures on proved natural gas reserves. In addition, we find that an area rate proceeding, bringing together as it does sharply divergent economic interests in the same arena to do battle, provided an excellent context in which to resolve such an issue. The record clearly indicates that So La II was conducted in an adversarial environment wherein third parties with adverse economic interests participated at all stages of the proceedings.
Having concluded that the application of collateral estoppel would be appropriate in this case, we turn now to the essentially factual question whether the Power Commission actually did determine an issue which the Trade Commission now seeks to relitigate. We note that on this matter our scope of review is narrower; we may reverse the District Court's determination only if it is clearly erroneous. The Trade Commission in its briefs never directly argues that the Power Commission did not actually determine the accuracy of AGA figures. Rather, the Trade Commission contends that the Power Commission only determined that AGA figures were appropriate for its use in the determination of just and reasonable rates. The Trade Commission seeks to determine whether the producers are underreporting reserves and are thus violating the FTCA. We agree with appellees that the distinction is illusory. "[T]he FTC's very theory is that there is antitrust significance in reporting misleading reserves data because rates were affected."
Rule 81(a)(3), F.R.Civ.P., provides that Federal Rules of Civil Procedure "apply to proceedings to compel the giving of testimony or production of documents in accordance with a subpoena issued by an officer or agency of the United States . . .." We are thus bound by Rule 52(a), which states that "[f]indings of fact shall not be set aside unless clearly erroneous.
Another requirement for the application of collateral estoppel is that "the issue in the prior action must have been necessary and essential to the resulting judgment." 1B Moore's Federal Practice ¶ 0.443 (1974). The FTC has not argued this issue in this appeal.
Common Counsel Brief, p. 25 n. 49.
The District Court probed counsel for the Trade Commission on this point several times. At some points counsel argued that it wanted reserve estimates because it was investigating "possible collusive conduct by the natural gas producers in the reporting of these reserves." In this regard, the District Court explicitly stated in its order that the producers must produce all documents passing inter se or with the AGA. At other points the argument appears to be what we set out above.
App. II 352a.
See ¶ 3(b) of the six producers order. Reproduced as Appendix B.
There can be no question that the Trade Commission has jurisdiction to determine whether the antitrust laws or the FTCA has been violated. However, the District Court was entitled to conclude on the present record (1) that the Trade Commission desired all reserve data in the possession of appellees in order to recompute independently Southern Louisiana reserves, and (2) that the Power Commission, on the basis of a contested evidentiary hearing, had found that the industry's figures for Southern Louisiana reserves for the relevant years were accurate. Based on these findings, the District Court could reasonably have concluded that it would be unjust and unreasonable to require the production of every scrap of data which related to reserves of any kind. By limiting production to "documents containing or underlying proved natural gas reserve estimates," the court has drawn a reasonable balance between the investigatory needs of the Trade Commission and the producers' claims arising out of the prior Power Commission investigations.
D. The Bid Files
Among the documents which would be liable to disclosure under specifications G, H, and I would be the producers' bid files. The bid files include information which producers assemble in advance of an oil lease bid. The information is based upon limited geophysical information and usually not upon actual exploration. The producers consider the models they have developed for making lease bids the most valuable trade secrets they own, because of the large outlays which have gone into their development and the ease with which any producer could be outbid on leases if its competitors had access to the model. The producers assert that data contained in a bid file would give a competitor easy access to their bid models and understandably strongly argue against disclosure.
Mobil Oil Co. refers us in its brief to the all too frequent cases in which such information has been stolen and sold for large sums of money. See, e.g., Tlapek v. Chevron Oil Co., 407 F.2d 1129 (8th Cir. 1969); Abbott v. United States, 239 F.2d 310 (5th Cir. 1956); Hunter v. Shell Oil Co., 198 F.2d 485 (5th Cir. 1952); Ohio Oil Co. v. Sharp, 135 F.2d 303 (10th Cir. 1943)." Brief of Mobil Oil Co., p. 27.
The producers argue that the bid files are not relevant to any calculation of proved reserves, because the bids files only contain speculative estimates of producing capacity based on limited information. Once a producer obtains a lease and thus is able to drill exploratory wells, these bid estimates are no longer used by the company (except presumably to improve their bidding model or to analyze the bidding behavior of opponents). As a result, producers contend that the bid files could not be relevant to an investigation into conspiratorial and other practices to underreport proved reserves.
The Trade Commission on the other hand argues that "[t]he `bid files' contain estimates of reserves, no matter how speculative or untested, and as such, are plainly relevant to the analysis of gas reserve reporting which is part of the Commission's investigation." The Trade Commission adds in a footnote that the FTCA gives it the authority to report to Congress and that it therefore should be permitted to gather information for that purpose as well as for the more limited purpose of individual cease-and-desist orders.
Appellant's Reply Brief, pp. 9-10.
The Supreme Court in Oklahoma Press Publishing Co. v. Walling. clearly indicated that the District Court must consider in an enforcement proceeding whether the documents sought by an administrative subpoena are relevant to the agency's inquiry. The judicial function in this regard is to be considered "neither minor nor ministerial." Because such a question is essentially factual in nature, we must defer to the District Court's finding unless we can conclude that its determination was clearly erroneous.
The evidence and argument presented to the District Court permitted it to conclude that the producers' bid file contained highly speculative estimates, which would be rapidly superseded by much sounder estimates, once the winning bidder could begin drilling. After the first well is drilled on a lease, no company relies on bid file data, nor is such data ever reported to the AGA. Only data relevant to proved reserves is reported, and the essential ingredient in the definition of "proved reserves" is that the data is obtained by drilling, by penetration of the formation. The "proved reserves" definition is accepted by the industry, the Power Commission, and the Trade Commission here. Thus, even if the bid file data showed a gross disparity compared to the data on proved reserves submitted to the AGA, this would prove nothing except that the company's original bid estimates were sadly in error, for by definition the proved reserves data must be based on geological information obtained by drilling at a later time than when the bid data is assembled. The preliminary data has no relevance whatsoever in showing whether the preliminary estimates of reserves should later be moved to the strictly defined category of "proved reserves."
There is no consistently used or accepted definition for reserves other than "proved reserves." Various companies describe their data, at different stages, as "probable," "possible," "recoverable," and "ultimately recoverable."
The Trade Commission makes one final argument, that companies sometimes delay drilling in order not to acquire any proved reserve data which they would be obligated to turn in to the AGA. Aside from the dubious wisdom (and likelihood) of a petroleum company paying millions of dollars and then permitting the lease to go untested, the District Court judiciously added the following caveat:
If you can later come back to me with a situation where a company has been awarded a bid on a property and has delayed an unreasonable time in drilling on it so they could come up with a proper estimate, then you may apply and I will consider giving you the bid file on that particular one.
We therefore affirm the District Court's finding that the bid materials were not relevant at the present time to the Trade Commission's inquiry and the related modification contained in paragraph 2(a) of its six producers' order.
We noted earlier that the District Court had not reached the issue of relevance with regard to the overall category of documents that do not relate to proved reserves. Page 144. Although logically the bid files fall within this category, throughout these proceedings they have been treated and discussed as if they were a discrete class of documents. The Record indicates that the District Court gave separate consideration to the bid files and ultimately based the relevant portions of the final order on a finding that the bid files lacked relevance. App. 431a.
III. Random Sampling and Time Limitations
The Trade Commission argues that the District Court should have required complete disclosure of all proved reserve data in the Southern Louisiana area back through 1962. Instead, the court ordered disclosure (1) of proved reserve data for a random sample of 100 fields out of the 220 in Southern Louisiana (2) for the years 1969, 1970, and 1971.
It is well established that an enforcing court may limit through modification or partial enforcement subpoenas it finds to be unduly burdensome. Such modification or partial enforcement is an exercise of the District Court's sound discretion and will only be overturned on appeal for abuse of discretion.
SEC v. Brigadoon Scotch Dist. Co., 480 F.2d 1047, 1056 (2nd Cir. 1973), cert. denied, 415 U.S. 915, 94 S.Ct. 1410, 39 L.Ed.2d 469 (1974); Adams v. FTC, 296 F.2d 861, 866-67 (8th Cir. 1961), cert. denied, 369 U.S. 864, 82 S.Ct. 1029, 8 L.Ed.2d 83 (1962); Hunt Foods Industries, Inc. v. FTC, 286 F.2d 803, 811 (9th Cir. 1960), cert. denied, 365 U.S. 877, 81 S.Ct. 1027, 6 L.Ed.2d 190 (1961); Chapman v. Maren Elwood College, 225 F.2d 230 (9th Cir. 1955); Comet Electronics, Inc. v. United States, 381 F. Supp. 1233, 1242 (W.D.Mo. 1974), affirmed, ___ U.S. ___, 95 S.Ct. 1439, 43 L.Ed.2d 758 (1975); Genuine Parts Co. v. FTC, 313 F. Supp. 855, 857 (N.D.Ga. 1970), affirmed, 445 F.2d 1382 (5th Cir. 1971); In re United Shoe Machinery Corp., 6 F.R.D. 347 (D.Mass. 1947). See also See v. Seattle, 387 U.S. 541, 544, 87 S.Ct. 1737, 18 L.Ed.2d 943 (1967).
NLRB v. Northern Trust Co., 148 F.2d 24, 29 (7th Cir.), cert. denied, 326 U.S. 731, 66 S.Ct. 39, 90 L.Ed. 435 (1945).
With respect to the random sampling, the Trade Commission's position is that
Such a limitation and sampling would make impossible any comparison of the total data supplied by producers who have fully complied with the subpoenas with the limited data which would be forthcoming from producers who supplied documents on only a random and numerically limited basis. Similarly the comparison with all the data submitted to the AGA for this region would be foreclosed.
. . . Clearly the requirement that the Commission resort to a random sample of 100 fields would preclude any possibility of making a reasonable evaluation of natural gas reserves or checking the accuracy of estimates of natural gas reserves for Southern Louisiana.
On either theory of its investigation the Trade Commission's argument is unconvincing. If the Trade Commission is looking for an antitrust conspiracy, a random sample made up of data from 45% of the relevant fields should be adequate to turn up evidence of a conspiracy (if there is evidence to be turned up). If the FTC is investigating whether either the industry-wide definition of proved reserves or the manner of reporting such reserves is an unfair trade practice, we fail to see how a random sample of data from 45% of the fields would be inadequate. A random sample permits comparisons between producers or between producers and the AGA figures, especially since the FTC already has the AGA's complete field-by-field figures. The District Court was entitled to conclude on the record before it that disclosure of data from all 220 fields would be burdensome, and that use of a random sample would neither preclude a reasonable evaluation of the manner in which reserves are estimated nor prohibit the Commission from checking the data as to its accuracy. We therefore affirm this aspect of the District Court's order.
See note 4 and accompanying text.
On the other hand, the reasons for limiting disclosure to documents prepared during 1969, 1970, and 1971 are not as apparent to us. The Trade Commission's investigation was triggered, at least in part, by the drop in 1968 and 1969 of proved reserves as reported by the AGA. The Commission would thus appear to need data for a period of time preceding the reported drop in reserves in order to make comparisons. In this regard, we find the Commission's request for disclosure under specifications G, H, and I back through 1962 to be appropriate. We therefore conclude that the District Court's failure to require such disclosure is an abuse of discretion and must therefore be reversed.
IV. Confidentiality and Production at Situs
The District Court attached the following conditions upon the disclosure of documents designated as confidential:
(1) The Secretary of the Federal Trade Commission is designated the custodian of the documents;
(2) The documents (and presumably any documents or memoranda derived therefrom) must be kept in a depository with access restricted to the FTC employees assigned to the investigation;
(3) Documents can only be removed from the depository or used for other purposes with the court's permission; and
(4) Upon the termination of the investigation, the documents (and presumably all copies of documents) must be returned to their owner.
The Trade Commission does not question the confidential nature of the documents it seeks disclosed. Rather, its position is that the FTCA and the Commission's Rules of Practice provide appellees with adequate protection. In fact, the FTCA and the Rules of Practice merely state that the public disclosure of geophysical data or information and trade secrets is within the discretion of the Commission. 16 C.F.R. 4.11(d) clearly indicates that the Trade Commission will decide ultimately whether records exempt from disclosure under the Freedom of Information Act (as most of these records probably would be) will be disclosed.
The District Court was not required to rely on the unbounded discretion of the Trade Commission to keep the producers' estimates confidential. In addition, we fail to see how the minor procedures imposed by the court will impose any substantial burden on the Commission's investigation. We therefore hold that the District Court did not abuse its discretion when it attached the conditions listed above to the disclosure of information by all seven appellees.
See note 4, supra. The action of the Trade Commission, in acceding to the telephoned demand of a Congressman for immediate access to the documents in so short a period of time as to preclude resort to a court, underlines the wisdom and reasonableness of the District Court's protective order on confidentiality. The Federal Rules of Civil Procedure currently provide for motions to quash duly authorized subpoenas, but not phone calls.
In order to protect confidential commercial information and trade secrets, District Courts frequently have required appropriate protection as a precondition to enforcement of FTC investigative subpoenas. See, e.g., FTC v. St. Regis Paper Co., 304 F.2d 731, 732 n. 1 (7th Cir. 1962); Graber Mfg. Co. v. Dixon, 223 F. Supp. 1020 (D.D.C. 1963); FTC v. Bowman, 149 F. Supp. 624 (N.D.Ill.), aff'd, 248 F.2d 456 (7th Cir. 1957); FTC v. Menzies, 145 F. Supp. 164, 171 (D.Md. 1956), aff'd, 242 F.2d 81, 84 (4th Cir.), cert. denied, 353 U.S. 957, 77 S.Ct. 863, 1 L.Ed.2d 908 (1957).
The Trade Commission also complains about the option permitting the production of documents for inspection where they are stored. The Supreme Court in CAB v. Hermann upheld the enforcement of a subpoena "with appropriate provisions for assuring the minimum interference with the conduct of the business of respondents." The Second Circuit has also upheld a similar provision. It noted that "[r]equiring records to be produced away from the place where they are ordinarily kept may impose an unreasonable and unnecessary hardship which in itself would make the issuance of the subpoena, otherwise proper, arbitrary and capricious." Since the number of documents to be produced will be quite large, it is not inappropriate to relieve appellees of some of the expense and burden entailed by permitting them the option of producing documents where they were stored. It would then be the responsibility of the Trade Commission to copy and transport to Washington any documents they consider useful. We affirm the District Court as to the in situs condition.
Walling v. American Rolbal Corp., 135 F.2d 1003 (2nd Cir. 1943).
The Trade Commission's arguments notwithstanding, it is common for a District Court to require the administrative agency to inspect subpoenaed records or documents at the place where they are stored. NLRB v. Friedman, 352 F.2d 545 (3rd Cir. 1965); Hunt Foods Industries, Inc. v. FTC, supra, 286 F.2d at 812. FTC v. Bowman, supra, 149 F. Supp. at 630; FTC v. Menzies, supra, 145 F. Supp. at 171.
V. The Superior Order
The Commission concedes that Superior does not report reserve estimates to, or participate in, the work of the AGA. Since the FTC issued identical subpoenas to all producers, it was obvious to the District Court that several specifications, those relating to reporting and participating in the AGA, were not relevant to Superior. As a result, the District Court simply refused to enforce specifications G through J. In all other respects Superior will be required to provide the Commission with the same documents and information that is being required of the other six producers, subject to the confidentiality protections previously discussed. We affirm this order.
In the last analysis a petition for enforcement of an administrative subpoena duces tecum must be judged by the District Court on a case-by-case basis. Because questions of relevance and burdensomeness are peculiarly within the ken of the trial court, appellate tribunals should be wary of second-guessing. In our view, the District Court's orders represent a just and fair accommodation between the Trade Commission and the producers.
To summarize, we have affirmed the District Court's order in all respects save one, the time limitation in paragraph 2 of the six producers' order.
Affirmed in part and reversed in part.