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WHOLE FOODS MARKET, INC., )
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Plaintiff, )
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v. ) Case No. 1:08-cv-02121 PLF
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FEDERAL TRADE COMMISSION, )
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Defendant. )
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Plaintiff Whole Foods Market, Inc. (“Whole Foods”), by and through its
undersigned counsel, respectfully moves this Court, pursuant to Federal Rule of Civil Procedure
65(a) and Local Civil Rule 65.1(c), for a preliminary injunction against the Defendant Federal
Trade Commission (“FTC”) enjoining the FTC from any further prosecution of its administrative
action against Whole Foods, pending the resolution of Whole Foods’ Amended Complaint for
Declaratory and Injunctive Relief filed in the above-captioned matter on December 17, 2008. In
support of this Motion, Whole Foods refers this Court to the accompanying Memorandum of
Points and Authorities in Support of Its Motion For a Preliminary Injunction, and the
Pursuant to Local Civil Rule 65.1(d), for the reasons set forth in the
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Pursuant to Local Civil Rule 7(m), counsel for Whole Foods conferred with the
FTC’s counsel by telephone in a good-faith effort to determine whether the FTC opposes the
relief sought herein. The FTC’s counsel indicated that such relief is opposed.
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Case 1:08-cv-02121-PLF Document 12 Filed 12/19/2008 Page 3 of 42
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WHOLE FOODS MARKET, INC., )
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Plaintiff, )
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v. ) Case No. 1:08-cv-02121 PLF
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FEDERAL TRADE COMMISSION, )
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Defendant. )
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TABLE OF CONTENTS
Page
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TABLE OF AUTHORITIES
Page
Cases
Bowen v. Massachusetts,
487 U.S. 879 (1988)............................................................................................................ 29
Feinerman v. Bernardi,
558 F. Supp. 2d 36 (D.D.C. 2008)................................................................................... 2, 29
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TABLE OF AUTHORITIES
(continued)
Page
Gibson v. Berryhill,
411 U.S. 564 (1973)............................................................................................................ 18
McClelland v. Andrus,
606 F.2d 1278 (D.C. Cir. 1979) .....................................................................................21, 25
Shapiro v. Thompson,
394 U.S. 618 (1969)............................................................................................................ 13
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Case 1:08-cv-02121-PLF Document 12 Filed 12/19/2008 Page 7 of 42
TABLE OF AUTHORITIES
(continued)
Page
Vlandis v. Kline,
412 U.S. 441 (1973)................................................................................................................ 13
Withrow v. Larkin,
421 U.S. 35 (1975) ............................................................................................................18, 19
Zobel v. Williams,
457 U.S. 55 (1982) ........................................................................................................... 12, 13
Statutes
5 U.S.C. § 702.............................................................................................................................. 29
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TABLE OF AUTHORITIES
(continued)
Page
15 U.S.C. § 53.............................................................................................................................. 14
15 U.S.C. § 57.............................................................................................................................. 9
Rules
Miscellaneous
Exhibit 2 - Brief for Appellant FTC (D.C. Cir. Jan. 14, 2008)
Exhibit 4 - Reply Brief for Appellant FTC (D.C. Cir. Feb. 27, 2008)
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Case 1:08-cv-02121-PLF Document 12 Filed 12/19/2008 Page 9 of 42
TABLE OF AUTHORITIES
(continued)
Page
Exhibit 9 - FTC Scheduling Order, FTC Docket No. 9324 (Sept. 10, 2008)
Exhibit 10 - FTC Order Designating Administrative Law Judge (Oct. 20, 2008)
Exhibit 11 - Respondent’s First Status Report, FTC Docket No. 9324 (Nov. 21,
2008)
Exhibit 16 - Joint Case Management Statement, FTC Docket No. 9324 (Aug.
28, 2008)
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INTRODUCTION
Plaintiff Whole Foods Market, Inc. (“Whole Foods”) requests a preliminary injunction
against Whole Foods pending this Court’s consideration of the constitutional claims alleged in
Whole Foods’ Amended Complaint for Declaratory and Injunctive Relief (“Amended
Complaint”). As discussed below, Whole Foods has raised two constitutional issues.
First, Whole Foods has challenged on equal-protection grounds provisions of the Federal
Trade Commission Act (“FTC Act”) regarding merger challenges to which Whole Foods is now
subject. The FTC’s merger challenges subject parties like Whole Foods to materially different
standards and processes than do merger challenges by the U.S. Department of Justice (“DOJ”).
More specifically, if the FTC challenges a particular merger rather than the DOJ, the challenge
will be adjudicated under a different substantive legal test, using a different preliminary
injunction standard, in a different forum with a greater potential for prejudice to due process
rights (as explained below), using different procedural rules. Even after the initial proceeding
concludes, whereas a challenge by DOJ in U.S. district court will be reviewed by a circuit court,
the FTC can conduct an internal follow-on administrative proceeding – and even then can
completely change an adverse merits decision before appeal to the circuit court. There is no
rational basis for subjecting merging parties to different outcome-determinative standards and
legal processes.
Second, even if there were no equal-protection violations at issue, the Commission has
irreversibly deprived Whole Foods of its fundamental due process rights by:
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Each of the foregoing violations alone constitutes sufficient grounds for this Court to
immediately bar the Commissioners from adjudicating the merits of Whole Foods’ case. The
Commissioners have developed an improper “will to win” and are acting not as impartial
adjudicators but like partisans on a mission – like the “the man who has buried himself in one
side of an issue.” See Grolier Inc. v. FTC, 615 F.2d 1215, 1220 (9th Cir. 1980) (condemning
such conduct). The Commissioners’ “will to win” is evidenced by the Commission’s published
prejudgments on the crucial factual and legal issues in this case, its imposition of an unfairly
truncated schedule and its failure to separate investigative/prosecutorial functions from its
adjudicative functions.
injury. See Goldie’s Bookstore, Inc. v. Superior Court, 739 F.2d 466, 472 (9th Cir. 1984).
Moreover, Whole Foods’ injuries cannot be addressed by monetary damages since Whole Foods
cannot recover damages from the FTC. See Feinerman v. Bernardi, 558 F. Supp. 2d 36, 51
(D.D.C. 2008)
Thus, for the reasons set forth below, preliminary relief staying the FTC’s adjudicatory
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STATEMENT OF FACTS
On February 21, 2007, Whole Foods executed an agreement to acquire Wild Oats
Markets, Inc. (“Wild Oats”), and subsequently notified the Commission of the proposed merger
pursuant to the Hart-Scott-Rodino Act. Am. Compl. ¶¶ 14-15; see also Declaration of Paul T.
Denis dated December 15, 2008 ¶ 4 (“hereinafter “Denis Decl.”). The Commission commenced
an investigation, issued a Request for Additional Information and Documentary Material, and
conducted extensive one-way discovery over the next three months. Am. Compl. ¶ 15; see also
Denis Decl. ¶ 5.
complaint challenging the merger. Am. Compl. ¶ 19; see also Denis Decl. ¶ 6. On August 7,
2007, the Commission unilaterally stayed the administrative proceedings “[i]n light of the
pendency of the related federal court proceedings,” i.e., the Commission’s motion for a
preliminary injunction pending its FTC administrative proceedings before the U.S. District Court
for the District of Columbia (the “District Court”). Am. Compl. ¶ 20; see FTC Order Staying
Administrative Proceedings, FTC Docket No. 9324 (Aug. 7, 2007) (attached to Declaration of
Lanny J. Davis dated December 19, 2008 (hereinafter, “Davis Decl.”) at Exhibit 1).
On August 16, 2007, the District Court, after expedited discovery and hearings, denied
the Commission’s motion for a preliminary injunction, finding that the FTC had failed to prove
that it was “likely to prevail on the merits at an administrative proceeding and subsequent appeal
to the court of appeals.” FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1, 49 (D.D.C. 2007).
Thereafter, on August 23, 2007, the U.S. Court of Appeals for the District of Columbia Circuit
(the “D.C. Circuit”) unanimously denied the Commission’s emergency motion for an injunction
pending appeal for failing to make a “strong showing that it is likely to prevail on the merits of
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its appeal.” FTC v. Whole Foods Market, Inc., No. 07-5276, 2007 U.S. App. LEXIS 20539
On August 28, 2007, Whole Foods — under obligation to its best efforts to close by
August 31, 2007 and facing a potential $4 million breakup fee if it failed to do so — closed its
Despite failing to obtain an injunction from either the District Court or the D.C. Circuit,
and despite knowing about the August 31, 2007 closing deadline for the merger, the Commission
did not lift its stay of the administrative proceedings, nor did it request that the D.C. Circuit
expedite the Commission’s appeal. Am. Compl. ¶ 26; see also Denis Decl. ¶ 10. Rather, the
Commission continued to stay its administrative proceedings during the 11 months while its
In its briefs filed with the D.C. Circuit, the Commission categorically stated that it had
market for antitrust purposes.” See Brief for Appellant FTC, at 40 (D.C. Cir. Jan.
b. “proved that the premium natural and organic supermarkets market is the
Oats merger.” See Emergency Motion of the FTC for an Injunction Pending
Appeal, at 6-7 (D.C. Cir. Aug. 17, 2007) (Davis Decl. at Exhibit 3) (emphasis
added).
c. reached the “conclusion that the relevant product market is premium natural and
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d. concluded that “the combination of Whole Foods and Wild Oats will substantially
e. concluded that Whole Foods’ expert economic analysis was “garbage,” a “sheer
guess” and lacked “any” empirical foundation. See Davis Decl. at Exhibit 2, at
f. concluded that Whole Foods’ industry expert, Dr. Stanton, was a “paid industry
expert” whose testimony “carried no weight.” See Reply Brief for Appellant FTC,
at 12 n.8 (D.C. Cir. Feb. 27, 2008) (Davis Decl. at Exhibit 4) (emphasis added).
(emphasis added).
The above statements were made in briefs to the D.C. Circuit that were worked on, and
jointly signed by, the General Counsel of the Commission and the Bureau of Competition. Am.
Compl. ¶ 31. According to the FTC’s website, members of the Bureau of Competition are the
Commission’s investigative and prosecutorial staff. Thus, upon information and belief,
Commissioners have conferred with and given guidance to the attorneys drafting the
aforementioned briefs, which were communications to the FTC’s investigative and prosecutorial
staff regarding the merits of the Whole Foods merger case. Am. Compl. ¶ 96. In addition, some
of the very same counsel prosecuting the administrative case against Whole Foods were also
counsel for the Commission in the federal court proceeding challenging exactly the same Whole
On July 29, 2008, almost one year after the merger closed, the D.C. Circuit issued an
opinion reversing the District Court and remanding with instructions that the District Court
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balance the equities in determining whether any remedy should issue or the merger should be
allowed to “proceed immediately.” FTC v. Whole Foods Market, Inc., 533 F.3d 869, 891 (D.C.
Nine days later, on August 8, 2008, the Commission issued an order unilaterally
rescinding its stay of the administrative proceedings. See FTC Order Rescinding Stay of
FTC Docket No. 9324 (Aug. 8, 2008) (Davis Decl. at Exhibit 5). In that same order, the
Commission set a Scheduling Conference and appointed FTC Commissioner J. Thomas Rosch
(“Commissioner Rosch”) as the Presiding Official. Id. Commissioner Rosch, without recusing
himself from participating in the case as a Commissioner, assumed the role of presiding official
On August 22, 2008, Whole Foods filed a motion to disqualify Commissioner Rosch and
the Commission and to appoint an independent administrative law judge. Whole Foods cited the
Commission’s statements in its D.C. Circuit briefs evidenced impermissible prejudgment and
bias on the merits of Whole Foods’ case and its witnesses and evidence. See Respondent’s
Motion To Disqualify The Commission, FTC Docket No. 9324 (Aug. 22, 2008) (Davis Decl. at
Exhibit 6). That motion was denied on September 5, 2008. See FTC Order Denying
Respondent’s Motion To Disqualify The Commission, FTC Docket No. 9324 (Sept. 5, 2008)
(Davis Decl. at Exhibit 7). Commissioner Rosch participated in that Commission decision. Am.
Compl. ¶ 44.
challenging the Whole Foods/Wild Oats merger in 29 separate geographical markets across the
country. Am. Compl. ¶ 45; see also Denis Decl. ¶ 14. That same day, Commissioner Rosch
convened a Scheduling Conference. Am. Compl. ¶ 46; see also Denis Decl. ¶ 15.
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Commissioner Rosch rejected the discovery and trial timelines that Whole Foods requested both
in its Joint Case Management Statement and at the Scheduling Conference. Am. Compl. ¶¶ 49-
50; see also Denis Decl. ¶¶ 20-21. Over Whole Foods’ objection, Commissioner Rosch declared
that fact discovery would close by December 19, 2008, depositions would be completed by
January 30, 2009, and trial would commence on February 16, 2009. See Transcript of FTC
Scheduling Conference, FTC Docket No. 9324, at 44-47 (Sept. 8, 2008) (Davis Decl. at Exhibit
8).
ordered a Scheduling Order that mirrored Commissioner Rosch’s schedule, and expressly
provided that the Scheduling Order “shall not be altered absent leave of the Commission.” See
FTC Scheduling Order, FTC Docket No. 9324 (Sept. 10, 2008) (Davis Decl. at Exhibit 9).
On October 20, 2008, the Commission appointed Administrative Law Judge D. Michael
Chappell to conduct the administrative trial, and noted that all four members of the Commission
would retain jurisdiction to review the ALJ’s Initial Decision. See FTC Order Designating
Administrative Law Judge, FTC Docket No. 9324 (Oct. 20, 2008) (Davis Decl. at Exhibit 10).
However, the Commission precluded Judge Chappell from altering the Commission-set
schedule.
To date, Whole Foods has served third-party subpoenas duces tecum on 96 third parties
who either compete with Whole Foods in some of the 29 alleged geographical markets or supply
Whole Foods and competing firms. See Respondent’s First Status Report, FTC Docket No.
9324, at 3 (Nov. 21, 2008) (Davis Decl. at Exhibit 11). Under the rules governing the
administrative proceeding, third-party depositions cannot start until all parties review the related
documents. Am. Compl. ¶ 64; see also Denis Decl. ¶ 24 Accordingly, Whole Foods has been
unable to take any third-party deposition to date, and it will be impossible to conclude third-party
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discovery before the Commission-imposed discovery cut-off of January 30, 2009. Am. Compl. ¶
64.
Federal Register (the “Proposed Rule”), proposing fundamental changes to the Commission’s
administrative proceedings for reviewing merger cases. See Notice of Proposed Rulemaking in
the Federal Register, 73 Fed. Reg. 58832 (Oct. 7, 2008) (Davis Decl. at Exhibit 12). The
Proposed Rule, which virtually mirrors the Scheduling Order in the Whole Foods case, marks
such a fundamental change to existing Commission procedures that the Commission saw fit to
seek public comment on it before applying it to any future cases. Am. Compl. ¶ 69.
The Proposed Rule has drawn negative criticism from such organizations as the
American Bar Association’s Antitrust Section and the U.S. Chamber of Commerce, as well as
from a former Chairman and General Counsel of the Commission — all of whom flagged
potential due process concerns. See Comments of ABA Section of Antitrust Law, at 2, 5-6 (Nov.
6, 2008) (Davis Decl. at Exhibit 13) (the Rule could “compromise respondents’ rights and ability
America, at 1-2 (Nov. 6, 2008) (Davis Decl. at Exhibit 14) (“while the additional changes may
speed up certain parts of the process in certain circumstances, they should not be undertaken at
the expense of companies’ due process rights;” the proposed rules eliminate “a vital check on
Pitofsky and Michael N. Sohn, at 8-9 (Nov. 6, 2008) (Davis Decl. at Exhibit 15) (cautioned the
Commission to “review carefully those comments that raise questions as to whether respondents
may be unfairly limited in their pretrial rights” and noting that “the Commission’s interest in
preserving its role as a fair minded expert administrative adjudicator is best served if it abstains
from exploring the outer limits of what is statutorily and constitutionally permissible.”).
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Commission’s administrative proceeding until after the remand proceeding in the District Court
and a continuation of the administrative trial to no earlier than September 14, 2009. (Am.
Compl. ¶ 66; see also Denis Decl. ¶ 28. On December 8, 2008, the FTC Complaint Counsel
opposed Whole Foods’ motion. Am. Compl. ¶ 67. Before filing this suit, Whole Foods asked
the Commission to recuse itself from this case, but the Commission did not do so.
ARGUMENT
As discussed in Section I below, this Court has jurisdiction to immediately review Whole
Foods’ constitutional challenges to the Commission’s procedures and proceedings in this case.
Foods’ claims is proper here because: (1) Whole Foods has a substantial likelihood of success
on the merits; (2) Whole Foods will be irreparably harmed if the injunction is not granted; (3) the
injunction would not prejudice Commission; and (4) the injunction would further the public
interest. See Ellipso, Inc. v. Mann, 480 F.3d 1153, 1157 (D.C. Cir. 2007).
Telecommunications Research and Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984)
(“TRAC”), held that where “a statute commits review of agency action to the Court of Appeal,
any suit seeking relief that might affect the Circuit Court’s future jurisdiction is subject to the
exclusive review of the Court of Appeal.” TRAC is inapplicable for at least three reasons.
· First, unlike the statute at issue in TRAC, the Federal Trade Commission Act (the “FTC
Act”) does not provide exclusive review in the circuit courts for all cases and all agency
actions. Rather, the FTC Act provides that the circuit courts are the exclusive forum only
for (i) appeals from cease and desist orders and (ii) appeals based on FTC rules. See 15
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· Second, unlike TRAC, this case presents “questions of constitutional law, which require
no special administrative expertise to resolve, and do not fall within the ‘class of claims’
covered by the typical statutory grant of appellate review power.” 1 Ticor Title Insurance
Co. v. FTC, 814 F.2d 731 (D.C. Cir. 1987) (Green, J., concurring).2 Moreover, Whole
Foods’ equal-protection claim directed at Sections 5 and 13 of the FTC Act (and the
issue in Time Warner Entertainment Co., v. FCC, 530 F.3d 936 (D.C. Cir. 1996), where
the D.C. Circuit held that the district court had jurisdiction to consider the constitutional
challenge.
· Third, to the extent that this Court determines that the first two reasons set forth above
are insufficient, Whole Foods’ Amended Complaint requests that this Court enjoin the
Commissioners who voted out the Complaint and who participated in the appellate court
the decision of an independent ALJ, thus making the ALJ decision the final Commission
order appealable to a circuit court of appeals. Such relief would not implicate TRAC.
This case is also ripe for review. When, as here, “an agency violates a clear right of a
not require the petitioner to exhaust his administrative remedies and will intervene
immediately.” Standard Oil Co. v. FTC, 475 F. Supp. 1261, 1267 (N.D. Ind. 1979) (intervening
and granting preliminary injunctive relief against FTC on due process grounds) (emphasis
added); accord Amos Treat & Co. v. SEC, 306 F.2d 260, 264 (D.C. Cir. 1962). As the D.C.
1
The TRAC court stated that “appellate courts develop an expertise concerning the agencies assigned them for
review . . . [e]xlusive jurisdiction promotes judicial economy and fairness to the litigants by taking advantage of that
expertise.” TRAC, 750 F.2d at 78.
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Circuit held in Gulf Oil Corp. v. Department of Energy, 663 F.2d 296 (D.C. Cir. 1981),
“interlocutory review of non-final administrative action” is proper where the plaintiff is denied
“a fair proceeding” due to a “fundamental infirmity” in the administrative process. Id. at 312
(citations omitted); accord, Pepsico, Inc. v. FTC, 472 F.2d 179, 187 (2d Cir. 1972) (“one can
find final agency action . . . if an agency refuses to dismiss a proceeding that is . . . being
Count I of the Complaint alleges that provisions of the FTC Act regarding merger
challenges (and regulations promulgated pursuant to those provisions) violate Whole Foods’
right to equal protection under the Fifth Amendment.3 The Fifth Amendment to the U.S.
Constitution guarantees American citizens, including corporate entities, equal protection under
the law, requiring that “persons similarly situated be treated alike.” City of Cleburne v. Cleburne
The FTC and DOJ are the only two federal enforcement agencies. They allocate mergers
between themselves so that only one of them will challenge any given merger. Merging parties
subject to FTC challenge, however, are treated differently than merging parties subject to
challenge by DOJ. Specifically, the disparate treatment here is based upon specific provisions of
Sections 5 and 13 of the FTC Act (and regulations promulgated pursuant to those provisions)
which impose more onerous legal standards and processes on parties subject to FTC merger
challenge than on parties subject to DOJ merger challenge, and these differences can be outcome
2
In his concurring opinion in Ticor, Judge Edwards, in dicta, incorrectly noted that TRAC covered constitutional
challenges. TRAC did not involve a constitutional challenge, and further, it cited cases based on constitutional law
claims as correctly brought in the district courts. TRAC 814 F.2d at 78.
3
This equal protection challenge is limited to federal merger enforcement only, and does not extend to provisions of
the FTC Act related to consumer protection or other aspects of unfair competition.
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determinative. Because there is no rational basis for treating these similarly situated parties
differently, the statutory scheme violates the Fifth Amendment equal protection rights of
The purpose of the equal-protection clause is to secure every person against intentional
and arbitrary discrimination, whether caused by the express terms of a statute or by its improper
execution through duly constituted agents. See Sioux City Bridge Co. v. Dakota Cty., 260 U.S.
441 (1923) (violation of equal protection to assess bridge at a higher rate than other property in
county). The equal-protection test relevant in this case involving a non-suspect class is whether
the disparate treatment is rationally related to a legitimate government end, interest, purpose, or
objective. See, e.g., Zobel v. Williams, 457 U.S. 55, 60 (1982); Cleburne, 473 U.S. at 440.
While the equal protection clause allows the government wider latitude in cases involving
social or economic legislation, courts nevertheless have struck down economic regulation that
lacks a rational basis. Id.. For example, in Allegheny Pittsburgh Coal Co. v. County
Commissioner of Webster County, 488 U.S. 336 (1989), the Court found a violation of the Equal
significantly higher valuations than valuations of comparable long-held property. Id. at 336. Id.
Similarly, in Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000), the Court acting per
curiam affirmed that a plaintiff stated an equal-protection claim based upon a municipality’s
demand for a wider easement to connect to a water supply than was required of other property
owners. “Our cases have recognized successful equal protection claims brought … where the
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plaintiff alleges that she has been intentionally treated differently from others similarly situated
Moreover, the courts will scrutinize whether the proffered purposes underlying the
statutory, regulatory or enforcement scheme are, in fact, rationally related to a legitimate state
purpose. In Zobel v. Williams, for example, the Court invalidated on equal-protection grounds an
Alaska dividend distribution plan based on the length of residency, where two of the three
asserted statutory goals advanced by the state did not rationally promote the asserted interest, and
the third purported interest was held not to be legitimate. Zobel, 457 U.S. at 65; accord, Vlandis
v. Kline, 412 U.S. 441, 449-50 (1973) (apportioning state tuition rates by length of residence
contravenes the equal-protection clause); Shapiro v. Thompson, 394 U.S. 618, 632-633 (1969)
residency).
The disparate treatment here is based upon specific provisions of Sections 5 and 13 of the
FTC Act (and regulations promulgated pursuant to those provisions) which impose more onerous
legal standards and processes on parties subject to FTC merger challenge than on parties subject
to DOJ merger challenge, and these differences can be outcome determinative. These
differences in treatment disadvantage and have a disparate impact on merging parties, like Whole
Foods, whose merger is being reviewed by the FTC. These differences can affect whether a
merger challenge succeeds or fails; they can create disparate levels of uncertainty in the
4
Arbitrary enforcement of otherwise lawful statutory or regulatory schemes also will run afoul of the equal-
protection mandate. See, e.g., Falls v. Town of Dyer, 875 F.2d 146, 147 (7th Cir. 1989) (noting that a lawful
ordinance against a business display of portable signs would contravene equal-protection rights if selectively
enforced against one individual or only “one whose last name starts with ‘F’,” and would be just as “whimsical,
capricious, [and] without a rational basis for support” as an unconstitutional ordinance expressly targeting only such
persons).
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marketplace that have direct financial impacts on the merging parties; and they can substantively
impact material terms of settlement agreements entered into by merging parties and federal
c. Differences in the forum for adjudicating the merits. The DOJ must adjudicate
the merits of the merger challenge, if at all, in a U.S. district court. 15 U.S.C. §
18(f). In contrast, the FTC can choose to adjudicate the merits of the merger
challenge at an administrative proceeding within the FTC itself as well as in U.S.
district court. Id.; 15 U.S.C. § 53(b).
5
The Antitrust Modernization Commission (“AMC”) was a bipartisan federal commission of antitrust experts
appointed by the President and Congress to undertake a comprehensive review of the nation’s federal antitrust laws.
The AMC’s report included, inter alia, a recommendation to prohibit the FTC from pursuing administrative
litigation within the FTC to challenge mergers under the FTC Act. See AMC Report at 140 (Davis Decl. at Ex. 17).
On this point, the AMC concluded that “[t]he FTC’s ability to pursue administrative litigation even after losing a
preliminary injunction proceeding can impose unreasonable costs and uncertainty on parties whose mergers are
reviewed by the FTC, as compared to the DOJ.” Id.
6
It was Whole Foods’ position during the FTC’s appeal of this Court’s denial of a preliminary injunction of the
Whole Food/Wild Oats merger that these standards should be, and are, the same for DOJ and the FTC. The D.C.
Circuit did not agree.
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d. Differences if a U.S. district court rules against the merger challenge. If a U.S.
district court rules against DOJ’s challenge of a merger, DOJ has no legal
recourse except to appeal to the circuit court. 28 U.S.C. § 1291; Fed.R.App.P.
3(a)(1); see also AMC Report at 139 (Davis Decl. at Exhibit 17)(“the decision of
the district court in a consolidated DOJ proceeding is final (barring an appeal) . . .
.”). In contrast, if the FTC chooses to challenge a merger in U.S. district court –
which the FTC need not do at all – and that U.S. district court rules against the
challenge, the FTC subsequently can retry the entire merits proceeding in an
administrative proceeding within the FTC itself. 15 U.S.C. § 45(b); see also
AMC at 139 (Davis Decl. at Exhibit 17)(“if the DOJ loses [in district court], the
parties can be certain that the challenge is finished. In contrast, if the FTC fails to
obtain a preliminary injunction, it may pursue relief in a potentially lengthy and
costly internal administrative proceeding”).
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Any one of these differences makes it substantially more onerous for a merging party
subject to FTC merger review than to DOJ merger review. Taken together, there can be no
doubt that some or all of these indisputable differences in treatment are material and arbitrary
The equal protection violation at issue here is based upon differences in how federal
antitrust enforcers challenge similar mergers. There is no rational basis for this difference in
treatment. The government has no legitimate end, interest, purpose, or objective in treating
merging parties in certain industries, such as the grocery industry, differently from merging
parties in other industries. Like the hypothetical in Falls v. Town of Dyer in which the
government treated persons differently depending on whether or not their last name started with
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the letter “F,” there is no rational basis for the difference in treatment of merging parties under
The mere identity, per se, of the specific antitrust enforcement agency challenging any
given merger is irrelevant to this equal protection analysis. In fact, there would be no equal
protection violation if the same legal standards and processes applied regardless of whether the
DOJ or the FTC was challenging a merger. Whole Foods is not challenging the allocation of
mergers between DOJ and the FTC. Standing alone, that allocation of mergers so that only one
of the agencies will challenge any given merger – apparently based upon relative agency
expertise regarding the industry at issue – may be rational. The constitutional infirmity is that
there is no rational basis for the differences in the treatment of merging parties.
Even if the FTC has relatively more expertise than DOJ in certain industries, that does
not provide any rational basis for subjecting merging parties in those industries to more onerous
and outcome-determinative legal standards and processes than merging parties in other
industries. Such a difference in treatment is arbitrary and has no fair or substantial relation to the
between merger challenges by DOJ and the FTC violate the merging parties’ guarantee of equal
Count II of Whole Foods’ Complaint alleges that the Commission has unconstitutionally
denied Whole Foods the appearance, if not the reality, of an administrative proceeding before
“an impartial and disinterested tribunal,” and has denied Whole Foods the right to “appropriate
discovery in time to reasonably and adequately prepare” for trial. See Amos, 306 F.2d at 264;
Standard Oil, 475 F. Supp. at 1274. It has also impermissibly failed to respect the Commission’s
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firewall between the investigative and prosecutorial functions and adjudicatory functions. See 16
C.F.R. § 4.7. As set forth below, Whole Foods is likely to prevail on the merits.
contested questions by an impartial and disinterested tribunal.” Amos, 306 F.2d at 264 (D.C.
Cir. 1962) (emphasis added). This is impossible where, as here, the Commission has already
“made exceedingly important findings of fact [and] already thrown [its] weight on the other
side.” Id. The Commission reached conclusions on the ultimate factual and legal issues on the
merits of Whole Foods’ case before the administrative trial had even scheduled. For example,
the Commission stated in public briefs to the D.C. Circuit that it had “proved that the premium
natural and organic supermarkets market is the appropriate relevant product market” and that
“the combination of Whole Foods and Wild Oats will substantially lessen competition.” See,
The Commission, like every other administrative agency, must respect and comply with
the strictures of Due Process. See Gibson v. Berryhill, 411 U.S. 564, 579 (1973). As the D.C.
Circuit has held, the minimum requirement is “fair play.” Amos, 306 F.2d at 264; see also
Grolier Inc. v. FTC, 615 F.2d 1215, 1220 (9th Cir. 1980) (“Congress intended to preclude from
decision-making in a particular case not only individuals with the title of ‘investigator’ or
‘prosecutor,’ but all persons . . . who had developed, by prior involvement with the case, a ‘will
to win.’”); Withrow v. Larkin, 421 U.S. 35, 58 (1975) (“risk of bias or prejudgment” deemed
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that they would consciously or unconsciously avoid the appearance of having erred or changed
position”).
As itemized above, the Commission’s legal briefs to the D.C. Circuit — submitted well
before the administrative trial was ever scheduled — contained multiple, unqualified statements
of prejudgment and bias on “exceedingly important findings of fact” and law pertaining to the
merits of Whole Foods’ case, and the application of the law to those facts. The Commission
declared that it had proven not only the relevant market but also that competition had been
harmed in that market. These statements demonstrate that the Commission had prejudged the
merits of the merger, not just the merits of the preliminary injunction that was on appeal to the
D.C. Circuit, and had developed an improper “will to win.” Grolier, 615 F.2d at 1220.7
Even assuming the Commission had not in fact prejudged Whole Foods’ case, its
statements create the improper “appearance” of prejudgment and bias. “[A]n administrative
hearing . . . must be attended, not only with every element of fairness but with the very
appearance of complete fairness.” Amos, 306 F.2d at 267 (emphasis added); see also Withrow,
421 U.S. at 47 (“Not only is a biased decision-maker constitutionally unacceptable but ‘our
system of law has always endeavored to prevent even the probability of unfairness.’”); Utica
Packing Co. v. Block, 781 F.2d 71, 77 (6th Cir. 1986) (noting that due process “requires the
7
In contrast, in past legal briefs to the federal courts, the Commission has demonstrated greater care to qualify
important assertions of facts and law regarding merger cases that were still pending on its administrative docket.
For example, in FTC v. H.J. Heinz, et al., 246 F.3d 708 (D.C. Cir. 2001), the Commission’s brief referred to “a
reasonable probability” that the merger would “increase[] the likelihood” of anticompetitive conduct. (Emphasis
added.). In FTC v. Arch Coal, No. 04-5291, 2004 WL 2066879 (D.C. Cir. 2004), the Commission’s brief in support
of an injunction pending appeal stated that “[t]he testimony of numerous customers confirmed that the SPRB coal
market is susceptible to coordinated interaction and the proposed acquisition is likely to increase the risk of such
coordination” and “that acquisition makes anticompetitive coordination among the major producers more profitable
and easier, and thus more likely.” (Emphasis added.) In FTC v. Tenet Health Corp., et al., 186 F.3d 1045 (8th Cir.
1998), the Commission’s brief stated that “plaintiffs made an extensive factual showing, uncontradicted by credible
evidence from defendants, that it was unlikely there would be such defections [to alternative hospitals to make a
price increase unprofitable].” (Emphasis added.)
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Commissioner [gave] a speech discussing the merits of a pending case.” See Davis Decl. at
Exhibit 7, at 3 (citing Cinderella Career and Finishing School v. FTC, 425 F.2d 584 (D.C. Cir.
1970). The conduct here is worse. If a single Commissioner’s public speech on the merits of a
the merits of a case made in public legal briefs — precisely what occurred here.
Notwithstanding, the Commission refused to remove itself from serving as the Presiding Official
over scheduling and the ultimate adjudicator in this case. See Davis Decl. at Exhibits 7, 10.
“The test for disqualification has been succinctly stated as being whether ‘a disinterested
observer may conclude that (the agency) has in some measure adjudged the facts as well as the
law of a particular case in advance of a hearing.’” Cinderella, 425 F.2d at 591. Here, instead of
disqualifying itself, the Commission appointed Commissioner Rosch as the Presiding Official,
locked in a prejudicial Scheduling Order, and will retain jurisdiction to hear any appeal from the
ALJ’s Initial Decision. See Davis Decl. at Exhibits 7, 10. Absent immediate relief from this
Court, “the ultimate determination of the merits [of Whole Foods’ administrative case] will move
Any doubt that the Commission has prejudged the ultimate outcome of Whole Foods’
case is put to rest by the Commission’s September 10, 2008 Scheduling Order — which deprives
Whole Foods of needed discovery and thus of a reasonable opportunity to prepare its defense.
Indeed, the Commission’s failure to permit Whole Foods “appropriate discovery in time to
reasonably and adequately prepare” for trial — standing alone — is sufficient to (i) establish a
violation of due process and (ii) justify immediate judicial review and preliminary relief. See
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Standard Oil, 475 F. Supp. at 1274-75 (N.D. Ind. 1979) (“it is, and only is, the matter of
discovery that compels the court to intervene”); cf. McClelland v. Andrus, 606 F.2d 1278, (D.C.
Cir. 1979) (“discovery must be granted if in the particular situation a refusal to do so would so
proceeding because the ALJ refused to allow the respondents any discovery until they complied
with the complaint counsel’s subpoenas. Standard Oil, 475 F. Supp. at 1277. In noting that the
issue was “one of timing,” the court found that a delay of several years before the respondents
might obtain discovery was problematic because evidence could be lost. Id. More
fundamentally,
Id. at 1278-79 (emphasis added). Thus, the court vacated the ALJ’s discovery orders as
“tantamount to depriving plaintiffs of a fair opportunity to be heard” and ordered the ALJ to
proceed in a manner that “acknowledges plaintiffs’ constitutional rights.” Id. at 1278, 1280.8
The present case is arguably worse than Standard Oil. While the ALJ in Standard Oil
improperly delayed plaintiffs’ discovery under a schedule that was too long, the Commission
here, as discussed below, has denied Whole Foods critical discovery under a schedule that is too
short.
8
Notably, the Standard Oil court rejected the FTC’s arguments that plaintiffs were “merely challenging the legality
of a series of discovery rulings.” Id. at 1276.
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The Commission and Commissioner Rosch have repeatedly rejected Whole Foods’
requests for appropriate time to reasonably and adequately prepare for trial — they simply
refused to “listen” and “turned [their] head[s] to [Whole Foods’] requests.” See Standard Oil,
475 F. Supp. at 1278-79. As stated above, the administrative case alleges antitrust violations in
29 separate geographical markets across the country. Whole Foods must conduct fact discovery
and expert analyses on the competitive dynamics (e.g., products, prices, competitors, re-
positioning, entry barriers, and efficiencies, etc.) that exist in each of the 29 alleged markets.
Based on this immense task, Whole Foods explained in a Joint Case Management
Statement (“JCMS”) that “Complaint Counsel’s proposed schedule -- 2 months of fact discovery
beginning in 11 days after the scheduling conference -- does not provide sufficient time for third
party discovery, which is critical to the defense in this matter.” See Joint Case Management
Statement, FTC Docket No. 9324, at 15-16 (Aug. 28, 2008) (Davis. Decl. at Exhibit 16); see also
Denis Decl. ¶ 18. Whole Foods argued that, unlike Complaint Counsel, it took “no discovery
during the Commission’s Second Request investigation, and had only two weeks in which to
conduct fact discovery in the district court proceeding.”10 (Davis Decl. at Exhibit 16). It further
explained that Whole Foods “in advance of the only plenary trial on the merits,” needed an
“opportunity to obtain evidence from third parties in each of the markets contested by the
Commission.” Id. This would require “issuing subpoenas to third parties throughout the land,
negotiating the scope of the subpoenas, potentially litigating motions to enforce or to quash,
collecting, reviewing and analyzing documents, and subpoenaing third party witnesses for
9
Indeed, Circuit Judge Brown in ruling on the District Court’s denial of the Commission’s preliminary injunction
action held that “if . . . it remains possible to reopen or preserve a Wild Oats store in just one of these markets, such
a result would at least give the FTC a change to prevent a [Clayton Act] § 7 violation in that market.” FTC v. Whole
Foods Market, Inc., 533 F.3d 869, 875 (D.C. Cir. 2008) (Emphasis added.)
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deposition throughout the nation.” Id. Complaint Counsel’s proposed schedule for fact
discovery was “not sufficient for Whole Foods to conduct all of the necessary fact witness
depositions in the proposed time period, especially when many third party witnesses require
substantial advance notice prior to a deposition in a matter in which they are not a party.” Id.
Thus, Whole Foods requested that fact discovery close in or around May 2009, and that
trial commence in or around October 2009. See Davis. Decl. at Exhibit 16, at 17. Commissioner
Rosch rejected this timetable at the September 8, 2008 Scheduling Conference. He declared that
fact discovery would close on December 19, 2008 (i.e., four weeks later than Complaint
Counsel’s request) and trial to commence on February 16, 2009 (i.e., three weeks later than
Complaint Counsel’s request). See Davis Decl. at Exhibit 8, at 44, 46-47. Whole Foods
reiterated on the record that the schedule “circumscribed” the ability of Whole Foods to “marshal
the evidence and present the evidence” necessary from potentially over 100 third-party witnesses
in a complex case involving 29 separate markets. Id. at 50-51. Commissioner Rosch did not
The Commission went still further. The full Commission (including Commissioner
Rosch), issued a Scheduling Order on September 10, 2008 that mirrored Commissioner Rosch’s
schedule. See Davis Decl. at Exhibit 9. It then, in a highly irregular move, cemented the order in
place by providing that it “shall not be altered absent leave of the Commission.” Id.
Confronted by the futility of requesting additional time from the Commission for
appropriate discovery, Whole Foods attempted to comply in good faith with the Scheduling
Order. However, it is now clear that it is impossible for Whole Foods to reasonably and
adequately prepare for an antitrust trial encompassing 29 alleged geographical markets across the
10
Moreover, in the District Court proceeding, 11 of the 29 markets that the Commission now challenges were either
not contested (4 markets) and/or no evidence was presented on them (7 markets). Davis Decl., at Exhibit 16, at 14.
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country and nearly 100 third-party witnesses by the scheduled February 16, 2009 trial date, much
less the January 30, 2009 discovery cut-off date. See Denis Decl. ¶¶ 24-26.
In its November 24, 2008 Status Report, Whole Foods informed the ALJ that it had
issued third-party subpoenas duces tecum on 96 third parties — representing only a subset of the
total number of firms that either compete with Whole Foods in some of the 29 alleged markets or
supply Whole Foods and competing firms. See Davis Decl. at Exhibit 11, at 3; see also Denis
Decl. ¶ 25. As of that date, only 37 out of the 96 subpoenaed parties (and currently, still less
than 40% of the parties) have even partially complied by producing documents, which had only
recently begun to trickle in to Whole Foods’ counsel. Id. Given that the Scheduling Order
requires depositions to occur only after the produced documents are given to Complaint Counsel,
and due to the intervening holidays and other scheduling difficulties on the part of the third
parties, Whole Foods has been unable to even notice, much less take, a single third-party
deposition. See Davis Decl. at Exhibit 11, at 4-5 (One of the third-party supermarkets, New
Season’s Market, Inc., has moved to quash its subpoena.); see also Denis Decl. ¶¶ 4-5.
The foregoing says nothing of Whole Foods’ additional obligations to among other
(which to date have totaled over 1.6 million pages and 53 gigabytes of data providing over 300
million records of weekly transaction prices, and 280 spreadsheets). See Davis Decl. at Exhibit
11, at 1-2. It must also depositions noticed by Complaint Counsel; work with experts on
reviewing evidence, preparing reports and depositions; prepare for direct and cross examinations;
identify and mark trial exhibits; and engage in pre-trial and dispositive motions practice.
These duties, along with the limited time for third-party discovery under the Scheduling
Order — e.g., all depositions must be completed by January 30, 2009 — make it impossible for
Whole Foods to adequately prepare its defense by February 16, 2009. See Davis Decl. at Exhibit
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11 at 3. The foregoing is a denial of Due Process under any test. Cf. McClelland v. Andrus, 606
F.2d 1278, (D.C. Cir. 1979) (holding that “discovery must be granted if in the particular situation
a refusal to do so would so prejudice a party as to deny him due process” and finding that Civil
As in Standard Oil, despite Whole Foods’ best efforts to obtain relief in the
administrative forum, Commissioner Rosch and the Commission have “clearly said what [they]
had to say and [have] made up [their] mind . . . [and] that decision is final.” Standard Oil, 475 F.
Supp. at 1280; cf. Mercy Hosp. of Laredo v. Heckler, 777 F.2d 1028, 1033-34 (5th Cir. 1985) (“it
would be futile to comply with the administrative procedures because it is clear that the claim
will be rejected”) (citation omitted). The ALJ, of course, has been stripped of his independence
to conduct the proceedings in light of the facts and circumstances of the case. Thus, absent
immediate relief from this Court, it is guaranteed that Whole Foods will be denied its rights to a
fair proceeding.
16 C.F.R. § 4.7(b)(2) (emphasis added); see also id. at § 4.7(b)(1) (same prohibition on
administrative proceeding enters “adjudicative status” as soon as “the complaint has issued and
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the adjudication phase has begun.” See Complaint Counsel’s Response to Respondents’ Motion
For Recusal of Commissioner Rosch, In the matter of Inova Health System Foundation, et al.,
FTC Docket No. 9326, at 5 (May 27, 2008) (Davis Decl. at Exhibit 18). “For this reason, after a
Part III complaint is voted out, the Commissioners, ALJ, and staff adhere to a strict firewall that
Here, the Commission voted out the administrative complaint against Whole Foods on
June 27, 2007 — at which time the case entered “adjudicative status” and a “firewall” was
erected between the Commissioners and the investigative/prosecutorial staff. See 16 C.F.R. §
4.7(b)(1). However, subsequently, both the General Counsel of the Commission (thus the
worked on and jointly signed briefs to the D.C. Circuit that contained the statements of
prejudgment and bias on the factual and legal merits of Whole Foods’ case. (Am. Compl. at
¶94.) Upon information and belief, Commissioners conferred with and gave guidance to the
counsel drafting and working on these legal briefs. (Id. at ¶95.) In addition, some of the exact
same Complaint Counsel that are prosecuting the administrative action against Whole Foods also
served as counsel and signed at least one brief to the D.C. Circuit along with the Commission’s
General Counsel. See Response of FTC to Petition for Rehearing En Banc, No. 07-5276 (D.C.
11
The D.C. Circuit briefs were signed by both the Director and Deputy Director of the Bureau of Competition, and
the Bureau’s Director of Litigation. According to the FTC’s website: “[t]he Bureau of Competition investigates
potential law violations and seeks legal remedies in federal court or before the FTC’s administrative law judges.”
Statement by David Wales, Acting Director of Bureau of Competition, “About the Bureau of Competition,”
available at http://www.ftc.gov/bc/about.htm (last accessed Dec. 13, 2008) (emphasis added).
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While in certain contexts it may be proper for the Commissioners to confer with and give
guidance to federal court counsel (e.g., where the counsel are not also prosecuting an
administrative action against the same respondents and same merger), it is not proper here, where
some FTC attorneys serve as both federal court and administrative complaint counsel. By
communicating with the foregoing counsel, the Commissioners have effectively “ma[de] or
staff regarding the merits of the Whole Foods/Wild Oats merger. See 16 C.F.R. § 4.7(b)(1).
Indeed, the Complaint Counsel in the Inova Health case, supra, stated that there, “the
Commission ha[d] gone out of its way to limit the conflict inherent in every proceeding before
the members of an administrative body which both votes out and adjudicates complaints.” See
Inova, at 5-6 (May 27, 2008) (Davis Decl. at Exhibit 18). No such limitations on this “inherent”
Inova Health - FTC Docket No. 9326 Whole Foods - FTC Docket No. 9324
Commissioner Rosch did not participate in the Commissioner Rosch participated in the
Commission’s issuance of the administrative Commission’s issuance of the administrative
complaint. complaint. (June 27, 2008)
Commissioner Rosch did not participate in the Commissioner Rosch participated in the
Commission’s order appointing him as the Commission’s order appointing him as the ALJ
Administrative Law Judge (“ALJ”). for the Scheduling Conference.12 (Aug. 8,
2008)
12
The Commission’s Rules of Practice provide in § 3.42 (titled “Presiding officials”) provides:
(a) Who presides. Hearings in adjudicative proceedings shall be presided over by a duly qualified
Administrative Law Judge or by the Commission or one or more members of the Commission
sitting as Administrative Law Judges; and the term Administrative Law Judge as used in this part
means and applies to the Commission or any of its members when so sitting.
16 C.F.R. §3.42(a) (emphasis added).
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Commissioner Rosch (as the ALJ) set the Commissioner Rosch (as the ALJ) set the
discovery/trial schedule and the Commission discovery/trial schedule and participated in the
did not issue a binding Scheduling Order that Commission’s issuance of a Scheduling Order
limited the ALJ’s discretion to change the that precluded any subsequent modifications to
schedule in any manner. the schedule absent leave of the Commission.
(Sept. 10, 2008)
Commissioner Rosch did not participate in the Commissioner Rosch participated in the
Commission’s order that stated Commissioner Commission’s order that stated Commissioner
Rosch would not participate in any appeal from Rosch would participate in any appeal from
ALJ’s initial decision. the newly-appointed ALJ’s initial decision.
(Oct. 20, 2008)
C. Whole Foods Has Suffered And Will Continue To Suffer Irreparable Harm.
See Citicorp Servs., Inc. v. Gillespie, 712 F. Supp. 749, 753-54 (N.D. Cal. 1989); see also
Goldie’s Bookstore, Inc. v. Superior Court, 739 F.2d 466, 472 (9th Cir. 1984) (“[a]n alleged
constitutional infringement will often alone constitute irreparable harm”). Thus, in Amos, the
D.C. Circuit found irreparable injury “solely on due process grounds” without even referring to
irreparable injury. Amos, 306 F.2d at 267. Similarly, the district court in Standard Oil made no
mention of “irreparable harm,” but ordered injunctive relief in ongoing FTC proceedings to
protect the plaintiffs’ rights to appropriate discovery to prepare their defenses. See Standard Oil,
475 F. Supp. at 1274; see also Gulf Oil, 663 F.2d at 307 (holding in case where parties alleged
that Department of Energy caused inter alia “irremediable injury by depriving them of
substantial procedural rights . . . the district court . . . acted in an appropriately limited way to
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protect the litigants’ rights to a fair proceeding”). The reasoning in Amos, Standard Oil, and
Whole Foods has suffered irreparable injury for a second reason – the monetary damages
it is suffering cannot be recovered against the FTC. “[W]here, as here, the plaintiff in question
cannot recover damages from the defendant due to the defendant’s sovereign immunity . . . any
loss of income suffered by a plaintiff is irreparable per se.” Feinerman v. Bernardi, 558 F. Supp.
2d 36, 51 (D.D.C. 2008) (granting preliminary injunction against Secretary of HUD from
overwhelming case for a finding of irreparably injury”) (emphasis added); see also United States
v. New York, 708 F.2d 92, 93-94 (2d Cir.1983) (finding irreparable injury where plaintiff unable
Neither the Administrative Procedure Act (“APA”) or the Federal Tort Claims Act
(“FTCA”) provides any legal avenue for recovering money damages against the Commission.
The APA provides that “[a]n action in a court of the United States seeking relief other than
money damages and stating a claim that an agency or an officer or employee thereof acted or
failed to act in an official capacity or under color of legal authority shall not be dismissed . . . on
the ground that it is against the United States or that the United States is an indispensable party.”
5 U.S.C. § 702 (emphasis added); see also Bowen v. Massachusetts, 487 U.S. 879, 893-95 (1988)
(confirming that APA does not waive sovereign immunity for actions seeking “money damages”
as compensatory relief). Thus, the APA permits actions against the Commission solely for non-
money-damages relief.
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The FTCA is equally unavailing to Whole Foods. Although the FTCA waives sovereign
immunity for certain damage suits against the agencies, that waiver does not apply to claims
“based upon the exercise or performance or the failure to exercise or perform a discretionary
function or duty . . . whether or not the discretion involved be abused.” 28 U.S.C. § 2680
(emphasis added); see also United States v. S.A. Empresa De Viacao Aerea Rio Grandense, 467
U.S. 797, 808 (1984) (holding that the discretionary acts of federal officials are immune from
Whole Foods’ monetary damages are substantial. Whole Foods has spent more than $12
million dollars in legal and expert fees and costs in complying with the Commission’s Second
Request and investigation and defending the merger through September of 2007 — and has spent
through September 2008 an additional $4.5 million in defending the merger. Am. Compl. ¶16.
Whole Foods has also incurred over $2 million in vendors’ costs and fees — not including
outside counsel’s fees and costs — just in responding to Complaint Counsel’s voluminous
document requests and interrogatories. See Davis Decl. at Exhibit 11, at 2. These injuries are
irreparable per se because the Commission is immune in this case from suits for money damages.
There is no colorable argument that the Commission could possibly be injured in any way
by a preliminary injunction that briefly delays the administrative proceedings pending resolution
of Whole Foods’ Complaint. Indeed, the Commission stayed the administrative proceedings on
its own motion for just over 12 months due to “the pendency of the federal court proceedings.”
Davis Decl. at Exhibit 1. Moreover, despite failing to obtain a preliminary injunction from the
District Court or an emergency injunction pending appeal from the D.C. Circuit, and despite
knowing about the August 31, 2007 closing deadline for the merger, the Commission did not lift
its stay on the administrative proceedings, nor request expedited briefing or oral argument on its
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appeal to the D.C. Circuit. It was only after the D.C. Circuit reversed the District Court some 11
months later that the Commission rushed to restart its administrative action despite the continued
Commission’s Rule 3.1 for adjudicative proceedings provides that Commission’s policy is that
“to the extent practicable and consistent with requirements of law, such proceedings shall be
need for an accelerated schedule in this case where the Whole Foods/Wild Oats merger closed
over 15 months ago, and Whole Foods is seeking an adequate opportunity to take third-party
discovery.
agency of the United States, complies with its duty to respect respondents’ due process rights and
to comply with the APA in its adjudicatory proceedings. See, e.g., Jacksonville Port Auth. v.
Adams, 556 F.2d 52, 59 (D.C. Cir. 1977) (“there is an overriding public interest . . . in the
The public interest also demands that the constitutional rights of a respondent be
protected by the courts before the administrative proceedings conclude. As noted above, courts
routinely hold that immediate judicial intervention is proper to rectify fundamental infirmities in
agency proceedings without the need to “exhaust remedies” or await “final agency action.” See,
e.g., Amos, 306 F.2d at 264; Standard Oil, 475 F. Supp. at 1274.
Finally, the public interest weighs in favor of bringing to light that the one-size-fits-all
approach of the Commission’s new Proposed Rule could — as it has in Whole Foods’ case —
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violate fundamental due process rights. As discussed above, the Proposed Rule has drawn a
series of high-profile negative comments that collectively express a near consensus concern that
the new adjudicatory structure could undermine the ability of respondents to defend themselves
RELIEF REQUESTED
For the foregoing reasons, Whole Foods respectfully requests that this Court enter a
preliminary injunction order staying the Commission from any further prosecution of its
administrative action against Whole Foods pending the resolution of the constitutional claims
alleged in Whole Foods’ Amended Complaint For Declaratory And Injunctive Relief.
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CERTIFICATE OF SERVICE
Pursuant to LCvR 5.3, I hereby certify that on the 19th day of December, 2008, I
electronically filed the with the Clerk of the Court Plaintiff Whole Foods Market, Inc.’s Motion
for a Preliminary Injunction, a supporting memorandum and declarations, and a proposed order,
using the CM/ECF system, which will automatically send notification of the filing to the
following counsel of record:
W. Mark Nebeker
Assistant United States Attorney
Civil Division
U.S. Attorney’s Office for the District of Columbia
555 4th Street, NW
Washington, DC 20530
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