Federal Trade Commission v. Scott Tarriff , Et Al .

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 8, 2009 Decided October 23, 2009
No. 08-5205
FEDERAL TRADE COMMISSION ,
APPELLEE
v.
SCOTT TARRIFF , ET AL .,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 1:08-mc-00217)
Eric Grannon argued the cause for appellants. With him on
the briefs was J. Mark Gidley. Christopher M. Curran entered
an appearance.
Lawrence DeMille-Wagman, Assistant General Counsel,
Federal Trade Commission, argued the cause for appellee. With
him on the briefs were Willard K. Tom, General Counsel, and
John F. Daly, Deputy General Counsel.
Before SENTELLE , Chief Judge; TATEL , Circuit Judge; and
WILLIAMS , Senior Circuit Judge.
Opinion for the Court filed by Chief Judge SENTELLE .

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SENTELLE , Chief Judge: Scott Tarriff and others
(collectively “appellants”) appeal from an order of the district
court granting a petition to enforce subpoenas ad testificandum
issued to pharmaceutical company officers in the course of an
ongoing Federal Trade Commission law enforcement
investigation into agreements among companies suspected of
unlawfully delaying entry of lower cost generic versions of a
drug. Appellants’ sole basis for asserting the invalidity of the
subpoenas is that the FTC proposed to record the testimony, not
only by the stenographic method mandated in the Commission’s
rules, but also by videotape. Finding this objection to be utterly
without merit, the district court granted the petition for
enforcement of the subpoenas. We agree and affirm.
* * *
In an ongoing investigation, the Commission seeks to
determine whether agreements among Unimed Pharmaceuticals,
Inc., Laboratories Besins Iscovesco, and Solvay
Pharmaceuticals, Inc., or any other agreements, unlawfully
delayed entry of a lower cost generic version of a drug called
AndroGel in violation of section 5 of the FTC Act, 15 U.S.C. §
45. See FTC v. Tarriff, 557 F. Supp. 2d 92, 93 (D.D.C. 2008).
The FTC issued subpoenas ad testificandum for corporate
officials, including appellants herein. The Commission’s rules
of practice governing investigative hearings provide for
stenographic recording, and the first round of subpoenas
referenced stenographic recording of the testimony adduced
under the subpoenas. Thereafter, the Commission on
February 13, 2008, issued the amended subpoenas before us in
the current litigation, which provided for sound and visual
recording in addition to stenographic recording of the testimony.
Appellants objected on the basis that the rules of the FTC do not
provide for recording by other than stenographic means. The
Commission rejected the objection. Some of the subpoenaed

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1 Although the depositions contemplated by the subpoenas
have now been completed, we agree with the parties that the
controversy is saved from mootness by the prayer of appellants that
we order the Commission to destroy the videotapes of the proceedings.
See Church of Scientology of California v. United States, 506 U.S. 9
(1992) (compliance with summons for production of audiotapes did
not moot church’s appeal because court has power to order
government to return or destroy tapes); Office of Thrift Supervision v.
Dobbs, 931 F.2d 956, 958 (D.C. Cir. 1991) (finding that compliance
with summons mooted appeal, but stating that the “case would present
a different issue were Dobbs requesting the government to return
documents he had provided, rather than merely to seal his testimony”).
witnesses notified the Commission of their intention not to
comply with the subpoenas. The Commission brought the
instant action for enforcement in the district court. The district
court granted the petition and ordered the subpoenas enforced.
Appellants filed the appeal now before us.1
Appellants’ objection to the subpoenas relies solely on the
proposition that the rule of the Commission, by mandating that
“[investigational] hearings shall be stenographically reported
and a transcript thereof shall be made a part of the record of the
investigation,” 16 C.F.R. § 2.8(b), somehow precludes the
possibility that the Commission could record the proceedings by
other methods as well. Lest we be misunderstood, the
Commission does not propose to use video methods of
transcription instead of stenographic transcription, but only in
addition thereto. Nor do appellants argue that the taking of the
videographic transcription is in any fashion inconsistent with, or
the cause of any interference with, stenographic transcription
mandated by the rule. Instead, respondents rest solely on the
novel proposition that somehow the use of the word “shall” in
the rule not only requires that the stenographic transcription be
prepared, but also precludes the Commission from doing
anything else in the way of transcription.

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Like the district court, we are unconvinced “that the word
‘shall’ expresses not only a mandatory direction, but also a
limiting principle.” FTC v. Tarriff, 557 F. Supp. 2d at 94. It is
fixed law that words of statutes or regulations must be given
their “ordinary, contemporary, common meaning.” Williams v.
Taylor, 529 U.S. 420, 431 (2000) (citations omitted). It is also
fixed usage that “shall” means something on the order of “must”
or “will.” See, e.g., Black’s Law Dictionary 1407 (8th ed. 2004)
(defining “shall” as “has a duty to; more broadly, is required
to”). We know of no usage, nor do appellants bring forward
any, that suggests that the use of “shall” mandating one act
implies a corresponding “shall not” forbidding other acts not
inconsistent with the mandated performance. Borrowing from
the Commission’s litigation documents, the district court noted
an illustrative example of “shall” in common parlance: A
direction to a teenage son that he “shall” clean his room does not
thereby forbid him from taking out the trash, walking the dog,
or going to school. Appellants are without contra example.
Appellants offer as authority for their novel proposition the
Supreme Court decision in National Association of Home
Builders v. Defenders of Wildlife, 551 U.S. 644 (2007), which
they assert “held that a provision’s use of ‘shall’ as a directive
‘does not just set forth minimum requirements . . . . The
provision operates as a ceiling as well as a floor.’” (Emphasis
in original.) It is indeed true that the high court used the
language appellants quote to us, 551 U.S. at 663, but not in a
context remotely supporting appellants’ construction of the
Commission’s rule. In National Association of Home Builders,
the Supreme Court was construing § 402(b) of the Federal Water
Pollution Control Act, 33 U.S.C. § 1342(b), which mandates that
the Environmental Protection Agency (EPA) “shall approve”
transfer of certain permitting authority to a state upon a showing
that the state has met nine specified criteria. In attempting to
reconcile that statute with § 7(a)(2) of the Endangered Species

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Act, the Ninth Circuit held that the EPA must also require the
completion of another criterion before transferring the
permitting authority. See Defenders of Wildlife v. USEPA, 420
F.3d 946 (9th Cir. 2005). It was in the context of reversing the
Ninth Circuit’s imposition of an additional criterion into the
triggering mechanism for the mandatory performance of a duty
created by the word “shall” in the statute that the Supreme Court
described the statutory mandate as “operating as a ceiling as
well as a floor.” 551 U.S. at 646. Contrary to appellants’
argument, the Supreme Court’s use of “ceiling” and “floor” had
nothing to do with the possibility that the agency, in carrying out
the statutory mandate, might do some other act, as well as that
mandated by the statute. The floor and ceiling referred to by the
Supreme Court had to do with the triggering mechanism of the
mandate, not the carrying out of the mandate once triggered. In
other words, once the nine statutory criteria were accomplished,
the floor of necessity was met, and neither the agency nor the
Ninth Circuit could erect a higher ceiling that would prevent the
mandate from operating. Nonetheless, so far as we know, the
EPA could do other things while transferring the permitting
authority. It could, for example, send a nice congratulatory note
to the state receiving the authority, thank the governor for the
state’s efforts, or create a videographic transcription of its
meetings. Appellants’ argument, that the Supreme Court’s
decision is somehow authority for the proposition that the term
“shall” is a mandate not only to do one thing but to cease and
refrain from doing all others, borders on sophistry.
Appellants also rely on Beverly Health and Rehabilitation
Services, Inc. v. NLRB, 317 F.3d 316 (D.C. Cir. 2003), which,
if anything, has less to do with the current controversy than
National Association of Home Builders. In that case, this court
reversed the decision of the NLRB approving the unilateral
extension of a strike deadline notice by a union. The statute
mandated that a strike notice state “the date and time that such

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action will commence” and allowed that a “notice, once given,
may be extended by the written agreement of both parties.” 29
U.S.C. § 158(g). Unsurprisingly, we held that this language
precluded the NLRB’s approval of the unilateral extension by
the union. Unconvincingly, appellants assert that this is
authority for the proposition that unambiguously mandatory
language precludes additional conduct even absent the use of the
term “only.” The lack of parallel between Beverly Health and
the present controversy is too apparent to require much
explanation. The construction offered by the NLRB in Beverly
Health would have rendered the operative sentence surplusage.
If either party could unilaterally extend the deadline, it would
have made no sense for Congress to have specified that the two
of them acting together could do it in writing. It was apparent
in that case that Congress had provided one and only one means
for extension. Nothing approaching that exists in the matter
before us. It is perfectly possible—indeed, it has already been
done—for the Commission to transcribe the testimony by
videography without interfering with the stenographic reporting
mandated by the rule. Nothing is rendered surplusage. The
mandate of the rule is not defeated.
The closest appellants come to authority supporting their
proposition is a 1968 district court decision, U.S. Steel Corp. v.
United States, 43 F.R.D. 447 (S.D.N.Y. 1968). In that case, a
judge construed the language of the 1967 version of Federal
Rule of Civil Procedure 30(c), which read: “The testimony shall
be taken stenographically and transcribed unless the parties
agree otherwise.” The district judge in U.S. Steel Corp. held
that this precluded the use of tape recording. We note that the
“unless the parties agree otherwise” language renders that rule
distinguishable from Commission Rule 2.8. In any event, not
only is that district court decision binding on no court, but the
logic of that decision has been criticized on precisely the same
basis the district court adopted and this court now adopts in

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rejecting appellants’ argument. See 8A Charles Alan Wright,
Arthur R. Miller & Richard L. Marcus, Federal Practice and
Procedure § 2115 (2d ed. 2008) (explaining that “[i]t is difficult
to see the basis for the [U.S. Steel Corp.] decision, since as long
as the examination was to be recorded stenographically in the
usual manner as well as electronically the provisions of the rule
were complied with”).
In a last desperate effort to escape defeat, appellants argued
at oral argument that even if we accept the Commission’s
interpretation of Rule 2.8, we should nonetheless remand the
matter for further consideration by the Commission. The
rationale for this late-offered argument lies in the standard of
review of an agency’s interpretation of its own regulations.
Appellants concede that “an agency’s interpretation of its own
regulations is controlling unless plainly erroneous or
inconsistent with the regulations being interpreted.” Long
Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 171 (2007)
(internal quotations omitted). Obviously, we are prepared to
affirm the district court’s enforcement of the subpoenas based
on the agency’s interpretation that the rule permitted it to
conduct videographic as well as stenographic recording of the
proceedings. However, appellants contend that this standard of
review applies to agency resolution of ambiguous regulation, but
should not support affirmance of an interpretation based on an
agency’s erroneous belief that a regulation was unambiguous.
Concededly, the doctrine of Cajun Electric Power Coop., Inc. v.
FERC, 924 F.2d 1132 (D.C. Cir. 1991), supports that reasoning.
However, Cajun Electric does not govern in the present case.
It is true that both appellants and the Commission argue for
unambiguous interpretations of the rule in their own favor.
However, this in no way mandates remand. Appellants’
foundation for their argument that the Commission erroneously
believed the rule unambiguous is a statement in the

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Commission’s litigation documents that “[m]oreover, even if
there were any ambiguity in Rule 2.8(b), which there is not, that
ambiguity should be resolved in favor of the Commission’s
interpretation, which is set forth in its decision denying
respondents’ Petition to Quash.” Reply in Further Support of
Petition of the Federal Trade Commission for an Order
Enforcing Subpoenas Ad Testificandum, FTC v. Tarriff, Misc.
No. 08-MC-217 at *12. As this is the only record support
offered by appellants for the late-stated contention, presumably
it is the best that exists. In the language of the reply, the
Commission covers both bases. That is, it proposes that its
interpretation is the only one for an unambiguous rule, but to the
extent the rule has any ambiguity, it is still the Commission’s
reasonable interpretation. We need not remand for the
Commission to redo what it has already done.
Conclusion
In short, we find the position of appellants to be completely
without merit and affirm the decision of the district court.

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