The Supreme Court, in an important victory for the independence of federal regulators, yesterday rejected efforts by the oil industry to sidetrack a massive Federal Track Commission antitrust case.
The court unanimously ruled that an industry may not delay or cut off such cases by challenging the charges against it in court before administrative action is completed.
The ruling eliminates a potential refuge for the industry, which increasingly had sought judicial intervention to get around what it regards as biased government administrative proceedings. The justices said yesterday that the courts should not get involved until the agency has a chance to do its work.
The decision, reversing a lower court's, was a relief to federal regulators, who feared a contrary holding would undermine all their future cases by allowing interminable delays through litigation.
The oil company case that prompted prompting yesterday's opinion has already lasted seven years and may continue at least another three or four more even without adverse court rulings.
The FTC began the case in 1973 by finding "reason to believe" that eight petroleum giants had conspired to fix refinery prices and to harm smaller competitors. That finding triggered the lenghty procedure that is supposed to lead to hearings and a ruling by an FTC administrative law judge -- the administrative equivalent, roughly speaking, of a prosecutor's decision to present evidence to seek an indictment from a grand jury.
Standard Oil of California challenged as politically motivated the FTC's complaint, which came amid a public and congressional uproar over gas lines. The company then asked a court to throw out the complaint.
The 9th U.S. Circuit Court of Appeals in California ruled that the challenge could be heard. The Supreme Court, with Justice Lewis F. Powell Jr. writing, yesterday reversed that ruling in a decision that applies to virtually every government administrative agency, including the Securities and Exchange Commission and the Food and Drug Administration.
The justices said that under the Administrative Procedure Act, which governs these agencies, only a final agency action is reviewable by a court. A complaint, based on a "reason to believe" finding, is only a decision that "further inquiry is warranted." It is not "a definitive ruling or regulation" and has "no legal force or practical effect . . . other than the disruptions that accompany any major litigation."
"Immediate judicial review would serve neither efficiency nor enforcement of the act," the court said; it would more likely be an "interference with the proper functioning of the agency and a burden for the courts. Judicial intervention into the agency process denies the agency an opportunity to correct its own mistakes and apply its expertise."
It is true, the court said, that fighting an agency costs a corporation time and money for a corporation. That fight, Powell said, citing a 1938 Supreme Court ruling, "is part of the social burden of living under government."
A corporation might be able to challenge the original complaint after the agency administrative law judge rules, the court said. That statement prompted a separate comment concurring opinion by Justice John Paul Stevens, who said review even at the end of the proceeding was not intended by Congress. Justice Potter Stewart, who owns oil company stock, did not take part in the decision.
Fighting off judicial intervention has become a major preoccupation of federal regulatory agencies, and a significant percentage of the federal judiciary's docket revolves reflects that effort. At least 14 cases stemming from the FTC probe of the oil industry are pending in the FTC oil industry case alone, according to John Woodstock, the agency's principal lawyer in the case.
Even without court suits, however, the cases take a long time. Accumulating the 3 million pages of documents involved in the oil case has taken seven years alone. Woodstock estimated that the trial before an administrative law judge is at least two years away.
In other action yesterday, the court agreed to decide whether a city can be sued for punitive damages. The case, Newport (r.I.) vs. Fact Concerts Inc., stems from a concert promoter's financial loss while the Newport City Council tried to decide whether to allow a performance by the group Blood, Sweat and Tears at a jazz festival. The coucnil, debating whether the group was an undesirable "long-haired" element, first canceled the concert, then reinstated it, then canceled it again and finally let it go on after a court order was issued.
Fact Concerts said the actions cut ticket sales in half and, alleging violations of free expression guarantees under civil rights law, successfully sued for $200,000. The Supreme Court decided in 1978 that cities were not immune from suits demanding only compensation for such losses. But it has never ruled on the more severe punitive damages.
The number of such suits, often brought by victims of alleged police brutality, is rapidly increasing. The issue is important because the awards come out of taxpayers' pockets.