Whole Foods V. Ftc - Motion For Preliminary Injunction

Case 1:08-cv-02121-PLF

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

WHOLE FOODS MARKET, INC., Plaintiff, v. FEDERAL TRADE COMMISSION, Defendant.

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Case No. 1:08-cv-02121 PLF

PLAINTIFF WHOLE FOODS MARKET, INC.’S MOTION FOR A PRELIMINARY INJUNCTION 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 Declarations of Paul T. Denis and Lanny J. Davis, attached hereto. Pursuant to Local Civil Rule 65.1(d), for the reasons set forth in the accompanying Memorandum of Points and Authorities, Whole Foods respectfully requests a hearing on this motion at the earliest possible date.

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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. Dated: December 19, 2008

Respectfully submitted, /s/ Lanny J. Davis Lanny J. Davis (D.C. Bar No. 158535) Garret G. Rasmussen (D.C. Bar No. 239616) Antony P. Kim (D.C. Bar No. 489553) (app. pending) ORRICK, HERRINGTON & SUTCLIFFE LLP 1152 15th Street, N.W. Washington, D.C. 20005 Telephone: (202) 339-8400 W. Stephen Cannon (D.C. Bar No. 303727) Todd Anderson (D.C. Bar No. 462136) CONSTANTINE CANNON, LLP 1627 I Street, N.W. Washington, D.C. 20006 Telephone: (202) 204-3500 Attorneys for Plaintiff Whole Foods Market, Inc.

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

WHOLE FOODS MARKET, INC., Plaintiff, v. FEDERAL TRADE COMMISSION, Defendant.

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Case No. 1:08-cv-02121 PLF

PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR A PRELIMINARY INJUNCTION

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TABLE OF CONTENTS Page TABLE OF AUTHORITIES ..................................................................................................... ii INTRODUCTION..................................................................................................................... 1 STATEMENT OF FACTS ........................................................................................................ 3 ARGUMENT ............................................................................................................................ 9 I.

THE DISTRICT COURT HAS JURISDICTION TO HEAR THIS CASE ..................... 9

II.

A PRELIMINARY INJUNCTION SHOULD BE GRANTED..................................... 11 A.

B.

C.

Whole Foods is likely to prevail on its equal-protection claims......................... 11 1.

Fifth Amendment requirements of equal protection prohibit the federal government from treating similarly situated persons differently without a rational basis.. ...................................................... 12

2.

The FTC Act imposes outcome-determinative differences on merging parties... .................................................................................. 13

3.

There is no rational basis for these outcome-determinative differences in treatment of similar merging parties.. .............................. 16

Whole Foods is likely to prevail on its due-process claims................................ 17 1.

The Commission has violated due process by publicly prejudging the merits of Whole Foods' merger and credibility of its witnesses and evidence, and thus has in appearance, if not if fact, gutted any potential for an impartial and disinterested tribunal.. ............................. 18

2.

The Commission has violated due process by imposing a prejudicial Scheduling Order that denies Whole Foods appropriate discovery to reasonably and adequately prepare for trial........................ 20

Whole Foods Has Suffered And Will Continue To Suffer Irreparable Harm ................................................................................................................ 28 1.

Deprivation of constitutional guaranteed rights constitutes irreparable injury................................................................................... 28

2.

Whole Foods has suffered and will continue to suffer irreparable harm per se because there is no legal avenue by which Whole Foods could recover any monetary damages against the Commission.......................................................................................... 29

D.

The Commission Will Not Be Harmed By A Preliminary Injunction ................ 30

E.

A Preliminary Injunction Will Further the Public Interest in Ensuring That FTC Proceedings Are Fundamentally Fair to Respondents ............................... 30

RELIEF REQUESTED ........................................................................................................... 32

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TABLE OF AUTHORITIES Page Cases Allegheny Pittsburgh Coal Co. v. Cty. Comm’r of Webster Cty., 488 U.S. 336 (1989)............................................................................................................ 12 Amos Treat & Co. v. SEC, 306 F.2d 260 (D.C. Cir. 1962) ............................................................... 10, 17, 18, 19, 28, 31 Bowen v. Massachusetts, 487 U.S. 879 (1988)............................................................................................................ 29 Cinderella Career & Finishing School v. FTC, 425 F.2d 584 (D.C. Cir. 1970) ............................................................................................ 19 Citicorp Services, Inc. v. Gillespie, 712 F. Supp. 749 (N.D. Cal. 1989)...................................................................................... 28 City of Cleburne v. Cleburne Living Center, 473 U.S. 432 (1985).......................................................................................................11, 12 Ellipso, Inc. v. Mann, 480 F.3d 1153 (D.C. Cir. 2007) ............................................................................................ 9 Falls v. Town of Dyer, 875 F.2d 146 (7th Cir. 1989)...........................................................................................13, 16 FTC v. Exxon Corp., 636 F.2d 1336 (D.C. Cir. 1980) .......................................................................................... 14 FTC v. H.J. Heinz, et al., 246 F.3d 708 (D.C. Cir. 2001) ............................................................................................ 14 FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1 (D.D.C. 2007)........................................................................................... 3 FTC v. Whole Foods Market, Inc., 533 F.3d 869 (D.C. Cir. July 29, 2008) ........................................................................... 6, 22 FTC v. Whole Foods Market, Inc., No. 07-5276, 2007 U.S. App. LEXIS 20539 (D.C. Cir. Aug. 23, 2007)................................. 4 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 Goldie’s Bookstore, Inc. v. Superior Court, 739 F.2d 466 (9th Cir. 1984)........................................................................................... 2, 28 Grolier Inc. v. FTC, 615 F.2d 1215 (9th Cir. 1980)......................................................................................... 2, 19 Gulf Oil Corp. v. Department of Energy, 663 F.2d 296 (D.C. Cir. 1981) .......................................................................................11, 28 Hosp. Corp. of America v. FTC, 807 F.2d 1381 (7th Cir. 1986)............................................................................................. 15 Jacksonville Port Authority v. Adams, 556 F.2d 52 (D.C. Cir. 1977) .............................................................................................. 31 McClelland v. Andrus, 606 F.2d 1278 (D.C. Cir. 1979) .....................................................................................21, 25 Mercy Hosp. of Laredo v. Heckler, 777 F.2d 1028 (5th Cir. 1985) ............................................................................................ 25 Pepsico, Inc. v. FTC, 472 F.2d 179 (2d Cir. 1972)................................................................................................ 11 Shapiro v. Thompson, 394 U.S. 618 (1969)............................................................................................................ 13 In the Matter of Rambus, Inc., 2006-2 Trade Cas. P 75, 2006 WL 2330117 (F.T.C. Aug. 2, 2006) ..................................... 16 Sioux City Bridge Co. v. Dakota Cty., 260 U.S. 441 (1923)............................................................................................................ 12 Standard Oil Co. v. FTC, 475 F. Supp. 1261 (N.D. Ind. 1979) ..................................................10, 17, 21, 22, 25, 28, 31 Telecommunication’s Research and Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984) ............................................................................................ 9, 10, 11 Ticor Title Insurance Co. v. FTC, -iii-

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TABLE OF AUTHORITIES (continued) Page 814 F.2d 731 (D.C. Cir. 1987) ................................................................................................ 10 Time Warner Entm’t Co. v. FCC, 530 F.3d 936 (D.C. Cir. 1996) ................................................................................................ 10 United States v. Baker Hughes, Inc., 908 F.2d 981 (D.C. Cir. 1990) .......................................................................................... 14, 15 United States v. Gillette Co., 828 F. Supp. 78 (D.D.C. 1993) ............................................................................................... 14 United States v. S.A. Empresa De Viacao Aerea Rio Grandense, 467 U.S. 797 (1984)................................................................................................................ 30 United States v. State of New York, 708 F.2d 92 (2d Cir. 1983)...................................................................................................... 29 Utica Packing Co. v. Block, 781 F.2d 71 (6th Cir. 1986)..................................................................................................... 19 Village of Willowbrook v. Olech, 528 U.S. 562 (2000)................................................................................................................ 12 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 16 C.F.R. § 3.1 ....................................................................................................................... 15, 31 16 C.F.R. § 3.42 ..................................................................................................................... 15, 27 16 C.F.R. 3.54 ........................................................................................................................ 15, 16 16 C.F.R. § 4.7……………………………………………………………………….....17, 25, 26, 27 5 U.S.C. § 702.............................................................................................................................. 29 -iv-

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TABLE OF AUTHORITIES (continued) Page

15 U.S.C. § 18........................................................................................................................ 13, 14, 15 15 U.S.C. § 45........................................................................................................................ 9, 14, 16 15 U.S.C. § 53.............................................................................................................................. 14 15 U.S.C. § 57.............................................................................................................................. 9 28 U.S.C. § 1291 .......................................................................................................................... 15 28 U.S.C. § 2680 .......................................................................................................................... 30 Rules Fed. R. App. P. 3……………………………………………………………………………………15 Miscellaneous Declaration of Paul T. Denis dated December 15, 2008. Declaration of Lanny J. Davis dated December 18, 2008: Exhibit 1 -

FTC Order Staying Administrative Proceedings, FTC Docket No. 9324 (Aug. 7, 2007)

Exhibit 2 -

Brief for Appellant FTC (D.C. Cir. Jan. 14, 2008)

Exhibit 3 -

Emergency Motion of the FTC for an Injunction Pending Appeal (D.C. Cir. Aug. 17, 2007)

Exhibit 4 -

Reply Brief for Appellant FTC (D.C. Cir. Feb. 27, 2008)

Exhibit 5-

FTC Order Rescinding Stay of Administrative Proceeding, Setting Scheduling Conference, and Designating Presiding Official, FTC Docket No. 9324 (Aug. 8, 2008)

Exhibit 6 -

Motion To Disqualify The Commission As Administrative Law Judge And To Appoint A Presiding Official Other Than A Commissioner, FTC Docket No. 9324 (Aug. 22, 2008)

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TABLE OF AUTHORITIES (continued) Page Exhibit 7-

FTC Order Denying Respondent’s Motion To Disqualify The Commission, FTC Docket No. 9324 (Sept. 5, 2008)

Exhibit 8 -

Transcript of FTC Scheduling Conference, FTC Docket No. 9324 (Sept. 8, 2008)

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 12 -

Notice of Proposed Rulemaking in the Federal Register, 73 Fed. Reg. 58832 (Oct. 7, 2008)

Exhibit 13 -

Comments of ABA Section of Antitrust Law (Nov. 6, 2008)

Exhibit 14 -

Comments of Chamber of Commerce of the United States of America (Nov. 6, 2008)

Exhibit 15 -

Comments of Robert Pitofsky and Michael N. Sohn (Nov. 6, 2008)

Exhibit 16 -

Joint Case Management Statement, FTC Docket No. 9324 (Aug. 28, 2008)

Exhibit 17 -

Report of the Antitrust Modernization Commission, Section II (April 2007).

Exhibit 18 -

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)

Exhibit 19 -

Response of FTC to Petition for Rehearing En Banc, No. 07-5276 (D.C. Cir. 2008).

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INTRODUCTION Plaintiff Whole Foods Market, Inc. (“Whole Foods”) requests a preliminary injunction staying the Federal Trade Commission’s (“FTC” or “Commission”) administrative proceeding 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: ·

Prejudging, in appearance if not in reality, the outcome of Whole Foods’ case as evidenced by its categorical, unqualified conclusions on the ultimate merits of the Whole Foods/Wild Oats merger made prior to commencing what is required to be a fair and impartial administrative proceeding;

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Failing to keep separate its investigative/prosecutorial functions from its adjudicative functions; resulting, upon information and belief, in Commissioners conferring with and giving guidance to the attorneys drafting the Commission’s aforementioned legal briefs;

·

Imposing an unreasonably truncated and arbitrary discovery schedule that was developed by a Commissioner (not an independent Administrative Law Judge) acting as Presiding Official over the proceedings, and that prejudices Whole Foods by giving it just five months to defend its merger in 29 separate geographical markets across the United States; and

·

Appointing as Presiding Official of the administrative proceeding one of its own Commissioners who had prejudged the case, and then subsequently replacing the Commissioner with an Administrative Law Judge (“ALJ”) and stripping the ALJ of his independence to modify the truncated schedule without the full Commission’s permission.

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. As discussed further below, the deprivation of constitutional rights constitutes irreparable 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 proceedings pending resolution of Whole Foods’ constitutional claims is fully warranted. -2-

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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. On June 27, 2007, the Commission voted unanimously to issue an administrative 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 (D.C. Cir. Aug. 23, 2007) (per curiam). 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 merger with Wild Oats. Am. Compl. ¶ 25. 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 appeal to the D.C. Circuit was pending. In its briefs filed with the D.C. Circuit, the Commission categorically stated that it had a. “established that premium natural and organic supermarkets constitute a distinct market for antitrust purposes.” See Brief for Appellant FTC, at 40 (D.C. Cir. Jan. 14, 2008) (Davis Decl. at Exhibit 2) (emphasis added). b. “proved that the premium natural and organic supermarkets market is the appropriate relevant product market in which to analyze the Whole Foods-Wild 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 organic supermarkets is supported by extensive evidence presented to the district court.” See Davis Decl. at Exhibit 3, at 8 (emphasis added).

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d. concluded that “the combination of Whole Foods and Wild Oats will substantially lessen competition.” See Davis Decl. at Exhibit 3, at 5 (emphasis added). 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 52, 24 (emphasis added). 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). g. concluded that Whole Foods’ employees gave “exceptionally unreliable” testimony and allowed themselves to be “subject to manipulation.” See Davis Decl. at Exhibit 2, at 24 (emphasis added); Davis Decl. at Exhibit 4, at 10 n.7 (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 Foods merger. Am. Compl. ¶ 97. 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 -5-

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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. Cir. July 29, 2008) (J. Tatel, concurring). 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 Administrative Proceeding, Setting Scheduling Conference, and Designating Presiding Official, 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 for scheduling purposes. Am. Compl. ¶ 42. 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. On September 8, 2008, the Commission issued an amended administrative complaint 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. -6-

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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. ¶¶ 4950; 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). On September 10, 2008, the Commission, with Commissioner Rosch participating, 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 -7-

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discovery before the Commission-imposed discovery cut-off of January 30, 2009. Am. Compl. ¶ 64. On October 7, 2008, the Commission published a Notice of Proposed Rulemaking in the 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 to mount an effective defense”); Comments of Chamber of Commerce of the United States of 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 potential unfairness inherent in the FTC’s administrative procedure.”); Comments of Robert 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.”). -8-

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On December 3, 2008, Whole Foods filed a motion requesting a stay of the 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. As discussed in Section II below, a preliminary injunction pending the resolution of Whole 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). I.

THE DISTRICT COURT HAS JURISDICTION TO HEAR THIS CASE 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 U.S.C. §§ 45(c), (d), 57a. Neither of the foregoing applies here. -9-

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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 regulations pursuant to those sections) is analogous to the facial constitutional claim at 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 briefing from participating in the administrative proceeding or from reviewing de novo 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

petitioner by disregarding a specific and unambiguous . . . constitutional directive, a court will 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 conducted in a manner that cannot result in a valid order”). II.

A PRELIMINARY INJUNCTION SHOULD BE GRANTED. A.

Whole Foods is likely to prevail on its equal-protection claims.

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 Living Ctr., 473 U.S. 432, 440 (1985). 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 merging parties like Whole Foods. 1.

Fifth Amendment requirements of equal protection prohibit the federal government from treating similarly situated persons differently without a rational basis.

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 Protection clause where a county assessed property taxes on recently-acquired property at 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 and that there is no rational basis for the difference in treatment.”4 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) (equal-protection clause prohibits apportionment of welfare services based on length of residency). 2.

The FTC Act imposes outcome-determinative differences on merging parties.

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 equalprotection 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 antitrust enforcers. See generally Antitrust Modernization Commission, Report and Recommendations (April 2007) at Ch. II.A.3. (Davis Decl. at Exhibit 17).5 The specific outcome-determinative differences in treatment of similarly-situated merging parties include the following: a. Differences in the substantive test of a violation. The substantive test in a DOJ merger challenge is whether or not the merger substantially lessens competition. United States v. Baker Hughes, Inc., 908 F.2d 981, 982 (D.C. Cir. 1990) (citing Clayton Act § 7). In contrast, the FTC can choose to use the substantiallylessens-competition standard or an “unfair competition” standard having different elements. See 15 U.S.C. § 45(n) (defining an “unfair” act or practice as one that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition”). Thus, it is easier for the FTC than for the DOJ to challenge mergers. b. Differences in the preliminary injunction standard. The preliminary injunction standard facing DOJ in a merger challenge includes elements of the traditional test such as likelihood of success on the merits and balancing of the equities. United States v. Gillette Co., 828 F. Supp. 78, 80 (D.D.C. 1993). In contrast the D.C. Circuit has held that the preliminary injunction standard facing the FTC in a merger challenge “depart[s] from . . . the more stringent, traditional ‘equity’ standard” faced by the DOJ and instead focuses on “a unique ‘public interest’ standard.” FTC v. Heinz, 246 F.3d 708, 714 (D.C. Cir. 2001); FTC v. Exxon Corp., 636 F.2d 1336, 1343 (D.C. Cir. 1980).6 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”). e. Differences in independence of the merits fact finder. In adjudicating the merits of a merger challenge and making a trial record, DOJ must face an independent fact finder who is a confirmed federal judge, unbiased, and has no allegiance to DOJ. 15 U.S.C. § 18(f). In contrast, the FTC can choose to avoid facing an independent fact-finder altogether. The FTC can perform the fact-finding itself without any input or oversight from any independent fact-finder. The presiding officer at an administrative proceeding within the FTC is determined by the FTC, and can be an individual Commissioner, all of the Commissioners collectively, or an ALJ who the Commissioners can constrain or replace at any time and can reverse on a de novo review. 16 C.F.R. § 3.42 (“Hearings in adjudicative proceedings shall be presided over by a duly qualified Administrative Law Judge or by the [Federal Trade] Commission or one or more members of the Commission sitting as ALJs; 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. § 3.54. f. Differences in applicable procedural rules. Because merger challenges by DOJ must be adjudicated in U.S. district court, the Federal Rules of Civil Procedure and Federal Rules of Evidence govern. 15 U.S.C. § 18(f); Fed. R. Civ. P. 1 (“These rules govern the procedure in all civil actions and proceedings in the United States district courts . . . “); Fed. R. Evid. 101 (“these rules govern proceedings in the courts of the United States”). In contrast, the FTC can choose to ignore the Federal Rules of Civil Procedure and the Federal Rules of Evidence, relying instead on different rules the FTC itself created by regulation that are codified in 16 C.F.R. Part 3 and govern administrative hearings held within the FTC. 16 C.F.R. § 3.1 (“The rules in this part govern procedure in adjudicative proceedings”). Indeed, the FTC has proposed a rule permitting hearsay testimony. g. Differences in appellate standards. A circuit court cannot reverse a successful merger challenge by DOJ unless it is clearly erroneous. Baker Hughes, Inc., 908 F.2d at 983. In contrast, a circuit court cannot overturn a merger challenge by the FTC if there is substantial evidence supporting it. Hosp. Corp. of America v. FTC, 807 F.2d 1381, 1385 (7th Cir. 1986) (“Our only function is to determine -15-

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whether the Commission’s analysis of the probable effects of these acquisitions . . . is so implausible, so feebly supported by the record, that it flunks even the deferential test of substantial evidence.”). h. Difference in ability to change merits decision prior to appeal to a circuit court. DOJ has no ability to make any changes to the merits decision by the fact-finder in U.S. district court before that decision is appealed to the circuit court. In contrast, the FTC can completely change an adverse merits decision prior to appeal to the circuit court. 15 U.S.C. § 45(c) (“The Commission may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of its original order, with the return of such additional evidence. “); 16 C.F.R. § 3.54(b) (“In rendering its decision, the Commission will adopt, modify, or set aside the findings, conclusions, and rule or order contained in the initial decision, and will include in the decision a statement of the reasons or basis for its action and any concurring and dissenting opinions”); In the Matter of Rambus, Inc., 2006-2 Trade Cas. P 75,634, 2006 WL 2330117 (F.T.C. Aug. 2, 2006). Even where the presiding officer in an administrative proceeding is an independent ALJ, the Commissioners can ignore that ALJ’s determinations in their entirety and substitute the Commission’s own legal and factual findings. It is those substituted legal and factual findings that are subject to appeal to the circuit court. 16 C.F.R. § 3.54. 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 with no rational basis under equal-protection jurisprudence. 3.

There is no rational basis for these outcome-determinative differences in treatment of similar merging parties.

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 statutory scheme at issue here. 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 object of merger policy. In sum, these outcome-determinative differences in the legal standards and processes between merger challenges by DOJ and the FTC violate the merging parties’ guarantee of equal protection under the Fifth Amendment of the U.S. Constitution. B.

Whole Foods is likely to prevail on its due-process claims.

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 -17-

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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. 1.

The Commission has violated due process by publicly prejudging the merits of Whole Foods’ merger and credibility of its witnesses and evidence, and thus has in appearance, if not in fact, gutted any potential for an impartial and disinterested tribunal.

An “essential” requirement of due process in an agency proceeding is “the resolution of 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, e.g., Davis Decl. at Exhibit 2, at 40 and Exhibit 3, at 5 (emphasis added). 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 “intolerably high” where “adjudicators would be so psychologically wedded to their complaints

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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 appearance of fairness . . . it does not require proof of actual partiality”).

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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The Commission itself acknowledges that disqualification would be proper “if a 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 case is proper grounds for disqualification, then so is an entire Commission’s prejudgments on 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 in predestined grooves.” Cinderella, 425 F.2d at 590. 2.

The Commission has violated due process by imposing a prejudicial Scheduling Order that denies Whole Foods appropriate discovery to reasonably and adequately prepare for trial.

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 -20-

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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 prejudice a party as to deny him due process”). In Standard Oil, the district court intervened in an ongoing FTC administrative 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, . . . what troubles the Court is that the [ALJ], according to the terms of his orders . . . is no longer making individual considerations and rulings; he is no longer “exercising his discretion to move this case along as expeditiously as is possible.” He has, in effect, decided to quit deciding, at least as regarding plaintiffs’ discovery requests, all of which must be channeled through him. . . . the [ALJ] cannot simply turn his head to plaintiffs’ requests. . . . if the [ALJ] refuses to listen, there can be no [] mitigation of the danger of plaintiffs losing their rights to a fair hearing. 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, repositioning, entry barriers, and efficiencies, etc.) that exist in each of the 29 alleged markets. This is equivalent to litigating 29 antitrust cases in 29 separate markets.9 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 change his mind. 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 things, respond to Complaint Counsel’s voluminous document and interrogatory submissions (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 -24-

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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 Service Commission improperly denied plaintiff certain key evidentiary materials). 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. 3.

The Commission has violated due process by failing to separate its prosecutorial/investigative functions from its adjudicatory functions.

The Commission’s Rules of Practice provide that “[w]hile a proceeding is in adjudicative status within the Commission,” [n]o member of the Commission, the Administrative Law Judge, or any other employee who is or who reasonably may be expected to be involved in the decisional process in the proceeding, shall make or knowingly cause to be made to . . . any employee or agent of the Commission who performs investigative or prosecuting functions in adjudicative proceedings, an ex parte communication relevant to the merits of that or a factually related proceeding. 16 C.F.R. § 4.7(b)(2) (emphasis added); see also id. at § 4.7(b)(1) (same prohibition on communications from investigative/prosecutorial staff to the Commission or ALJ). An 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 prohibits ex parte communications.” Id. (emphasis added). 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 Commissioners) and the investigative/prosecutorial staff (including the Bureau of Competition)11 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. Cir. 2008)(Davis Decl. at Exhibit 19).

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 knowingly caused to be made” communications to the FTC’s investigative and prosecutorial 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 Complaint Counsel’s Response to Respondents’ Motion For Recusal of Commissioner Rosch, Inova, at 5-6 (May 27, 2008) (Davis Decl. at Exhibit 18). No such limitations on this “inherent” conflict were implemented in the Whole Foods case, as demonstrated below:

Inova Health - FTC Docket No. 9326

Whole Foods - FTC Docket No. 9324

Commissioner Rosch did not participate in the Commission’s issuance of the administrative complaint.

Commissioner Rosch participated in the Commission’s issuance of the administrative complaint. (June 27, 2008)

Commissioner Rosch did not participate in the Commission’s order appointing him as the Administrative Law Judge (“ALJ”).

Commissioner Rosch participated in the Commission’s order appointing him as the 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 participated in the Commission’s issuance of the amended administrative complaint during his service as the ALJ. (Sept. 8, 2008) Commissioner Rosch (as the ALJ) set the discovery/trial schedule and the Commission did not issue a binding Scheduling Order that limited the ALJ’s discretion to change the schedule in any manner.

Commissioner Rosch (as the ALJ) set the discovery/trial schedule and participated in the Commission’s issuance of a Scheduling Order that precluded any subsequent modifications to the schedule absent leave of the Commission. (Sept. 10, 2008)

Commissioner Rosch did not participate in the Commission’s order that stated Commissioner Rosch would not participate in any appeal from ALJ’s initial decision.

Commissioner Rosch participated in the Commission’s order that stated Commissioner Rosch would participate in any appeal from the newly-appointed ALJ’s initial decision. (Oct. 20, 2008)

C.

Whole Foods Has Suffered And Will Continue To Suffer Irreparable Harm. 1.

Deprivation of constitutional guaranteed rights constitutes irreparable injury.

Abridgements of Constitutional rights “give rise to a presumption of 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 Gulf Oil applies equally to the present case. 2.

Whole Foods has suffered and will continue to suffer irreparable harm per se because there is no legal avenue by which Whole Foods could recover any monetary damages against the Commission.

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 effectuating HUD’s debarment determination even though plaintiff “hardly present[ed] an 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 to recover damages due to defendant’s invocation of Eleventh Amendment protections). 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 nonmoney-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 actions for money damages under the FTCA). 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. D.

The Commission Will Not Be Harmed By A Preliminary Injunction.

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 -30-

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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 “pendency” of the District Court remand proceedings To be sure, the Commission has an interest in expeditious decision-making. The 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 conducted expeditiously.” 16 C.F.R. § 3.1 (emphasis added). However, there is no “practical” 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. E.

A Preliminary Injunction Will Further the Public Interest in Ensuring That FTC Proceedings Are Fundamentally Fair to Respondents.

There is a strong public interest in ensuring that the Commission, as an administrative 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 general importance of an agency’s faithful adherence to its statutory mandate”). 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 in a fair proceeding before the FTC. 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. Dated: December 19, 2008

Respectfully submitted, /s/ Lanny J. Davis Lanny J. Davis (D.C. Bar No. 158535) Garret G. Rasmussen (D.C. Bar No. 239616) Antony P. Kim (D.C. Bar No. 489553) (app. pending) ORRICK, HERRINGTON & SUTCLIFFE LLP 1152 15th Street, N.W. Washington, D.C. 20005 Telephone: (202) 339-8400 W. Stephen Cannon (D.C. Bar No. 303727) Todd Anderson (D.C. Bar No. 462136) CONSTANTINE CANNON, LLP 1627 I Street, N.W. Washington, D.C. 20006 Telephone: (202) 204-3500 Attorneys for Plaintiff Whole Foods Market, Inc.

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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

/s/ Lanny Davis___________________ Lanny J. Davis (D.C. Bar No. 158535) Orrick, Herrington & Sutcliffe LLP 1152 15th Street, NW Washington, DC 20005 (202) 339-8400

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