Opposition Brief — Aluminum Co. of America v. United States

Office-Sucreme Count, U.S. .-

JUL 16° 1965

HI V CLERK

IN THE 10 1N F. DAVIS,

Supreme Court of the United States

“OcroBerR TERM, 1965

<

No. 84

ALUMINUM Company or AMERICA and CUPPLES

Propucts CorPoration, Appellants, 4

Vv.

Unirep States or America, Appellee,

On Appeal From the United States District Court for: the

Eastern District of Missouri

' APPELLANTS’ BRIEF IN OPPOSITION TO

MOTION TO AFFIRM

Herpert A. Brereson

Howarp AbD LER, JR.

SAMUEL H. Srymour

BERGson & BorkEAND .

| 888 17th Street. N. W.

‘ nae Washington, D. C. 20006

WILLIAM K. UNveRzAGtT

a — - 1901 Alcoa Building

Pittsburgh 19, Pemsylvania.

July 16, 1965 : Attorneys: for Appellants

Press-or Byron S. ApaMs, Waskincion, D.C. : 8

nn OO

. INTRODUCTION ........ Pat reese eee oa 1

1. The Order Under Review Oontonplates —

© Divestitures of Cupples and the Corona Plant . 3

2.The District Court Has: Not Found, and the Bvi-

dence Does Not Establish, That Corona Is the

“‘Fruit”’ of the Cupples Acquisition es eeeceevees 6

3. An Appropriate Injunction Would Effectively

Redress the Pr re errr er ere a 9

4.The District Court’s Failure to Comply With

Rule 52(a) Is Reversible Error ...... jiieesawer 10

Concrusion see eeeees TTT TCT Ter Te err aeteee 11

CITATIONS

Cases: oO

' Burlington-Truck Lines, Inc. v. U nited States, 371 US.

Sn I hic iiss vc Rintnts aeidlebh ath edee va 3,11

« Gilbertville Trucking Co. v: United States, 371 U.S. |

i i shikecec ss Shbuoun seudeesn ita’ 2, 9, 10,11

Jacob Siegel Co. v. FTC, 397 U.S. 608 (1946) ieseausa om

Maryland & Virginia Milk Producers Ass’n. v. United

States, 362 U.S. 458 (1960) o..5... cc ccc c cc eeees 2

Phelps Dodge Corp. v. NLRB, 313 U.S. 177 (1941) . 11

Schine Chain Theatres, Ine, v. United States, 334 US.

In gee aee irene aes £7, 11.

United States v. E. I. duPont de Mocsuwe & Co., 366

U. 8. Se EE AG CaN owas Raab eehakaanesasdes 2,9, 10

IN THE

° Supreme Court of the United Stutes

OcToBER TERM, 1965

No. 84

ALUMINUM COMPANY OF AMERICA and CUPPLES

Propucts Corporation, Appellanés, °

v.

‘Unirep STATES OF America, Appellee.

On Appeal From the United States District Court for the

Eastern District of Missouri

APPELLANTS’ BRIEF IN OPPOSITION TO

MOTION’ TO AFFIRM

INTRODUCTION

The district court, without findings of fact, conclu-

sions of law or opinion explaining the basis for its

action, has ordered Alcoa to divest a'€2.8 million plant

at Corona, California, which it built more than two

years after the Cupples acquisition and which was

not found, or even alleged, to be held in violation of

. law. It was shown in the Jurisdictional Statement that

the disputed order is not supported by a finding that

the public interest requires divestiture of the Corona

2

plant (J.S. 12-16), and that, in fact, the record would

not support any such finding’ (JS. 16-21), This is the

first time an order to divest after- poe aan property has

been before this Court.

The Motion to Affirm portrays this sonal as pre-

senting ‘‘only a single narrow issue as to the scope of

divestiture’ (Motion 1), and argues that it-is too in-

significant to ‘‘warrant plenary consideration by this

Court’’ (Motion 7). The implicit premise of this. con-

tention—that questions of relief are inherently less

important than those of substantive law—is untenable,

for it is well-settled that ‘‘the choice of remedy is as

important a decision as the initial construction of the

statute and finding of a’violation.’"' Significantly, the

Government, itself, has not hesitated to present ques-

tions’ regarding the scope of divestiture when it has

failed to obtain the desired relief from the trial court:’

This appeal, we submit, presents substantial and un-

resolved questions regarding the use of divestiture. .

with respect to after-acquired or after-created prop-

erties (J.S. 15-21). In this era of active Section 7 en-

forcement, these are issues of great importance to the

courts and antitrust enforcement agencies as well as to

~ the business community.’ In addition, fundamental

questions are raised as to the trial court’s obligation to

make findings of fact and conclusions of law in support

1 Gilbertville saat Co. v. United States, 371 U.S. 115, 130

(1962).

2 See, e.g., United States v. E. L. duPont de Nemours & Co., 366.

U.S. 316 (1961); Maryland & Virginia Milk Producers Ass’n. V.

United States, 362 U.S. 458 (1960). =

3 Nor should the alleged narrowness of the ‘issue obscure the fact

that a very substantial Alcoa investment is involved. The cost of

Corona, $2.8 million, is more than 40 per cent of the value of Alcoa

stock used for the purchase of Cupples itself (GX 16; R. XVI 116).

.

of its decision on relief (J.S. 12-16). These issues

merit plenary.review, and nothing i in the Government’s

arguments as to the alleged correctness of the disputed

order leads to a different conclusion.

l. The Order Under Review a Separate

Divestitures of Cupples and the Corona Plant

[Motion, Point 1, 7-10] |

If, as shown in the Jurisdictional Statement (J.S.

11-12, 17), the disputed order permits separate divesti-

tures of Corona and Cupples, this would eliminate the .

most plausible justification for divestiture of Corona,

namely, that divestiture of Cupples as a going concern

requires the inclusion of Corona. Recognizing this, the

Government now attempts to show that the district

cOnee has entered a unitary divestiture order which

‘requires Alcoa initially to offer all three plants [in-

eluding Corona] for sale and to permit.a purchaser, if

he wishes, to acquire as a going concern all the facilities

that Cupples. had while Alcoa owned it’’ (Motion 7).

Under this theory, only if there is no prospective pur-

chaser of Cupples who wants the Corona plant would

Aleoa be free to dispose of it separately (Motion 9).

Though closely akin to the unitary divestiture theory

of the Government’s Proposed Final J udgment, which

the district court rejected, the Government’s theory on

appeal was not presented to, or. articulated by, .the

district court. It is merely one of ‘‘appellate counsel’s

post hoc rationalizations’’ for the court’s action.

The Government’s new theory is refuted by the

- history and language of the disputed order. - On

N ovember 18, 1964, the Government submitted its Pro-

‘ Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

168 (1962).

a

i

4

posed Final Judgment calling fora unitary ‘divestiture

of Cupples and Corona (R. XIV. 2907 A-B). After

hearing, at which appellants stressed that Corona was

sustaining heavy losses and would be a liability to the.

divested Cupples (DXR 52; R. XIV 2995, 3027-32),

the court rejected the Government’s proposal and in

separately numbered subparagraphs of Paragraph 2 .

ordered Alcoa to-divest (1) Corona; and (2) Cupples .

(J.S. App. 24a-25a). At the same time, the court ~

adopted Paragraphs 3 and 4 of the Government’s

Proposed Final Judgment, except for a significant -

' conforming change in the final sentence of Para-

graph 3, which changed ‘‘divestiture’’ to ‘‘divesti-

tures,’’ so that the sentence then read: ‘‘ Divestitures

shall then be accomplished by defendants in accordance

with the plan approved by the Court” (R. XIV 2907 B;

J.S. App. 25a). '

_T£ the district court had meant to adopt ea Govern-

ment’s unitary divestiture theory, it would have been

perfectly simple to insert language requiring Alcoa to

offer the’Corona plant as part of Cupples in the first

instance. Not only was this not done, but, as shown,

the court switched to the plural when referring to the

sales Aleoa would be required to make pursuant to

the Judgment. The inference is inescapable, therefore,

that the unitary divestiture concept was reqpenee by

the court.

In view of the above, it is:indeed nn that the

Government should now rely on the court’s alleged

use of the term “‘the divestiture’ in the singular

(Motion 8). Such usage occurs when the court is refer-_

ring generally to the two-part divstiture ordered in

Paragraph 2; as shown, when referring to the sales

Alcoa would be required to make, the court adopted the

plural. Since the Motion to Affirm’ does not mention,

D

much less explain, the court’s important shift from

singular to plural, it can only be assumed that the

Solicitor General was unaware of it.

There is little need to consider in detail other argu-

ments advanced by the Government. It is particularly

absurd to suggest that divestiture of Corona as part of

Cupples. ‘‘may be essential’’ to the reconstitution of

Cupples ‘‘as a going business’’ (Motion 8).. Before

the acquisition, Cupples, without Corona, was the na-

tion’s leading producer of aluminum curtain wall (J.S.

App. 22a-23a). If anything, it will now be.an even -

stronger ‘‘ going business”’ since its original plants have

been expanded and improved at a cost to Alcoa of over

$1.5 million (J.S. App. 18a; GX 53, 54, R. X VIII 423,

425). The absurdity is compounded by the fact that

the Corona plant, which was shown to be a badly losing

proposition at the time of the divestiture proceedings

(DXR 52, R. XIV 2995, 3027-32), was later permitted

to be shut down because of ‘‘substantial and continuing

losses,’’ which the district court found were ‘‘adversely

affecting the strength and viability of Cupples,’’ and

would ‘‘continue to do so unless the Corona ‘plant is

shut down” (R. XV 3190). The evident contempla-

- tion of the district judge thus is that the Corona opera:

tion will not be a ‘‘going business’”’ and could not be.

divested as such.

The motion at pages 8-10 merely offers reasons why

it might have been wise for the district court to order

a unitary divestiture. This free wheeling discourse

is not supported by a single citation to the record, and,

- in fact, is refuted by the evidence. While Cupples had

considered building a West Coast plant, the undisputed

evidence is that it would’ have done so on a much

smaller seale, and that it would have withdrawn if the

' 4

$e

6

West Coast curtain wall market failed to materialize.

(R. XIV 3015-17). Nor is there merit in the Govern- .

ment contention that ‘‘a prospective purchaser might -

well consider an existing [ West Coast] facility ... to

. bean important asset of the Cupples businéss’’ (Motion

9), for the court has found ‘‘no reasonable grounds

for believing’ that Corona’s substantial losses will

not continue (R. XV 3190). Finally, the Govern--

ment’s claim that Alcoa’s retention of Corona, even

if subject to an injunction against ‘‘making curtain

‘ wall and/or related products, . .. might chil! the inter-.

est of prospective purchasers of Cupples’’ (Motion

10), is sheer speculation, without either evidence or

reasoned argument to support it.

_ In sum, the Final Judgment contemplates two sepa-

rate divestitures, and, therefore, the order to divest

Corona cannot be rationalized as necessary to effect

the divestiture of Cupples as a going concern.

2. The District Court Has Not Found, and the Evidence Does

Not Establish, That Corona Is the “Fruit” of the Cupples

. Acquisition

[ Motion, Points la and b, 10- 15]

The Government states that ‘‘the district court’s

_ findings and the supporting evidence fully establish

that the Corona plant was one of the ‘fruits’ of Aleoa’s |

acquisition of Cupples.’’? (Motion 10, emphasis added).

_ This, again, is inaccurate and misleading. The only

findings cited are those made by the district court

when it entered a preliminary injunction concerning

the.use of Corona.pendente lite. Those findings, how-

ever, as the court made clear, were ‘‘for the exclusive

purpose of this Motion for Preliminary Injunction”’

(R. V 630), and did not, and could not, reflect con-

7

sideration of the evidence adduced on this issue at

the hearing on relief. In fact, there were no findings

on the ‘‘fruit’’ question or on any other aspect of the

Corona divestiture, and this deficiency is itself revers-

ible error (J. S. 12-16).°

Moreover, the ‘‘fruit’’ theory does not appear to be

seriously advanced as a justification for divestiture,

since the Government concedes, first, that if no pro-

spective purchaser of Cupples wants Corona, it would

consider a ‘‘modification of the Judgment to permit

[ Aleoa] to retain the Corona plant subject to suitable

restrictions on its use ...’’ (Motion 9-10) ; and, second,

that such restrictions ‘“‘would, of course, prevent Alcoa

from gaining certain competitive advantages from the

illegal aequisition’’ (Motion 16). Thus, even the Gov-

ernment acknowledges that injunctive relief could ef-

fectively ons Aleoa of the alleged “fruits” of the

acquisition.®

In any event, Corona cannot fairly be considered the

‘‘fruit”’ of the Cupples acquisition (J.S. 17-19) :

_ First. The Government’s contentions that ‘‘the

plant embodies Cupples’ know-how, at least in layout

5 See Schine Chain Theatres, Inc. v. United States, 334 U.S. 110,

129-30 (1948), where this Court ‘‘set aside the divestiture provi-

sions of the decree’’ and remanded the ¢ase for ‘‘findings necessary

for an appropriate decree,’’ including, inter alia, findings: that

would ‘‘reveal what the rewards of the conspiracy were . .. and

what would be the preferable way of eausing appellants to surrender

them.”’

® Furthermore, there are as yet unresolved issues as to the ap-

plicability of the ‘‘fruits’’ doctrine in Section 7°cases. The only

cases cited by the Government involved_hardeore Sherman Act

violations (Motion 13-14), and the ‘‘fruit’’ concept appears —a

to have been invoked’ in cases arising under Section 7 of the

_ Clayton Act.

: ‘ : ©

and design’’ and that the great value of such know-how

induced Alcoa to acquire Cupples (Motion 14) are re-

futed by undisputed evidence that the Cupples know-

how desired by Alcoa was in the design and marketing

of aluminum curtain: wall, not in the design of*curtain

wall plants; that Cupples had no special capability in

2 ied such plants ; and that Alcoa, with its many |

yeurs’ experience in the aluminum business, could

readily have designed and built Corona without assist-

ance from Cupples (J.S. 18; R. XIV 2929-75, 3019-24;

DXR 2-47).

‘Second. There is nothing etalon about Alcoa’s ar-

rangements with’ respect to title to the Corona plant,

nor do these arrangements bear on the ‘‘fruit’’ issue.

Alcoa does not contend that its ownership of. Corona

would immunize it from divestiture if such divestiture

were really required in order to redress the violation.

Alcoa retained title because this accurately reflected

the true facts, namely, that Corona was not an asset of -

Cupples at the time of acquisition, and hence was not

part of the acquisition challenged by the Complaint.

Retention of title was not intended to, and could not,

assure ‘‘continued participation i in the industry” ( Mo-

tion 13).,

Third. There is no indication that ie court itself

relied on the ‘‘fruit’”’ theory in ordering divestiture of

Corona. On the contrary, insofar as the court’s mental

processes are revealed at. all, its real objective seems to

have been to deny Alcea use of the plant ‘‘as a means

- of getting into the business’”’ (R. XIII 2881-82). This

objective, as the Government now eoncedes, can be

achieved by — injunctive relief (Motion 10,

16; J.S8. 19-21). ¢ ;

Seen oo Gat

\

Ce

9

38. An Appropriate Injunction Would Effectively

Redress the Violation ri

[ Motion, Point 2, 15, 16]

It is argued that divestiture of Corona must be up-

-held because ‘‘no injunction, however broad in scope,

will or can provide as effective relief as divestiture of

the Cupples’ portion of the business’’ (Motion 15).

Admittedly, divestiture, the ‘‘most drastic’’ of anti-

trust remedies, is also the ‘‘most effective’’;’ but it is

not the necessary and inevitable remedy in every ¢ase.

On the contrary, as this Court has held, it is the duty

of the courts to give effect to the prohibitions of the

statute ‘‘with as little injury as possible to the inter-

__ ests of private parties or the general public’’ and ‘‘to

tailor the remedy to the particular facts of each case

so as to best effectuate the remedial objectives just

described.”? Gilbertville Trucking Co. v. United en

371 US. 115, 130 (1962). ag

The Government’s- an objections to injunctive

relief are completely untenable. It is true that such

relief would not assure to the purchaser of Cupples an

opportunity to acquire the Corona plant, but such op-

portunity is competitively meaningless for there is no

- continuing business at Corona, the court having per-

mitted it to be shut down. Nor is there any factual

basis for the clajm that it would be difficult to police an

injunction. Even if Alcoa were likely to disobey such

a decree, which it emphatically is not, the products -

affected are easily identified and could not be sold with-

7 United States v. E. 1. duPont de Nemours & Co., 366 US. 316,

326 (1961). hee

10°

out the instantaneous knowledge of Alcoa’s competi-

tors.* : , :

Finally, the Government asserts that ‘ Aleoa cannot

show how it would be injured by being required to

sell the Corona plant at its market value’’ (Motion 16).

This. argument hardly merits. reply. It is extremely

doubtful that fair market value could be realized in

_ a forced sale, especially in view of Corona’ S enormous

losses; but even if it could, in a free society neither

Alcoa nor anyone else should be forced to sell its prop-

erty against its will in the absence of a judicial deter-

mination that such sale is required by paramount

public interest considerations. Cf. Gilbertville Truck-

ing Co. v. United States, supra, 371 U.S. at 130-31.

4. The Distsiet \Court’s Failure to Comply —_

_» Rule 52(a) Is Reversible Error

[ Motion, Point 3, 16-17]

The Government, though aa that ‘‘it is the

better practice for a district court to make findings

explaining the basis of the relief granted,’’ argues that

the lack of such findings is not reversible error (Motion ©

16). This Court, however, has not tolerated failure

to make such. findings, but has repeatedly set aside

remedial judgnients where, as here, the court or agency

failed to explain its reasons for selecting a harsh

_ 8 Phere is no meaningful comparison between a straightforward

injunction against the manufacture and sale of specific, easily-

identified products and the type of injunction that would have been

required in the duPont-General Motors case on which the Govern-

ment relies (Motion 16). The injunctive provisions rejected in

duPont were intended to restrain subtle forms of intercorporate

favoritism and, as this Uourt observed ‘‘could hardly be detailed

enough to cover in advance all the many fashions in which im-

proper influence might manifest itself.’’ 366 U.S. at 334. .

<z.

i

dy when some less severe alternative might have

ed. Gilberiville Trucking, supra, 371 U.S. at 129-

‘chine Chain Theatres, Inc. v. United States, supra,

U.S. at 126-29; Burlington Truck Lines, Inc. Vv.

ed States, 371 U.S. 156, 165-70 (1962); Jacob

el Co. V. FTC, 327 USS. 608 (1946) ; Phelps Dodge

). V. NERB, 313 U.S. 177, 189-97 (1941). In view

e explicit holdings of these cases, we are at a loss to

rstand the Government’s inability to find any casé

which the lack of findings as to the reasons for

elief granted has precluded the court from testing

ropriety’’ (Motion 17).

CONCLUSION

r all of the foregoing reasons, we respectfully

iit that the Motion to Affirm should be denied and

able jurisdiction, noted.

HERBERT A. BERGSON

Howarp ADLER, JR.

SAMUEL H. SEYMOUR

Bercson & BoRKLAND

888 17th. Street. N. W.

Washington, D. C. 20006

WiuiaM K. UNVERZzAGT

1501 Aleoa Building

_. Pittsburgh 19, Pennsylvania

Attorneys for Appellants

16, 1965 |

1 RR Tory tm