Petition — Brown v. United States
Supreme Court brief1978
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IN THE
Supreme Court of the United States
Octroper TERM, 1976
No.
7
6-1556
Coton Brown and J. P. Nicery, Petitioners,
v.
Unirep States or AMERICA, Respondent.
JOINT PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
CiaRK M. OCLIFrorD
Carson M. Gass
Tuomas RicHARD SPRADLIN
Barry J. IsRaEL
Ciirrorp, Giass, McILwain &
FINNEY
815 Connecticut Avenue, N.W.
(an) ae odes C. 20006
Counsel for Petitioners
May 9, 1977
Pures or Bryson S. Apams Purine, Inc. Wasmrworon, D. C.
INDEX
Page
Joust Petition ror a Writ or CerTIornaRi TO THE UNITED
Sratres Court or Appgats ror THE Tuinp Crrcuir.. 1
GeO BING o.os coccoccadecececsecctotecessctoes 1
SEE nan cnathsccdedbimbedenaneenceseteanses 2
SS PUIG 6.06 vot ic decdécctecdcecocccacece 2
ED o.oo cdncutdencnenedasbeseanensee 2
STATEMENT oF THE CasE
hpi ERA ep Ce aL ae ROE EE NE 4
Bo Bo GE Kddtidc Koike Gerdcccccavendte conccdecs 9
Reasons ror GRANTING THE WRIT
1. The Decision of the Court of Appeals To Re-
verse and Remand for a New Trial Erroneously
Ignored the Total Absence of Any Evidence
To Implicate Either Colon Brown or J. P. Nicely
During the Statutory Period in a Conspiracy
To Violate the Antitrust Laws ............... 16
Colon Brown ...... wideeansededdsnuneds 17
i: is EE a catanecohotcanveseaihcanseben 20
ED cn ccnnnvecedvesadcodecetsbhdtes 22
2. By Effectively Perpetuating the Erroneously
Retroactive Application Given by the Trial
Court to United States v. Container Corp., 393
U.S. 333 (1969), the Court of A s Violated
the Due Process Clause of the itution. .. 24
GRD. ocd ccc deccedteadésbédbtuccdccveupdedctt 32
APPENDIX
Opinion of the Court of Appeals ............... la
Excerpts From Appendix in the Court of Appeals 58a
Selected Exhibits From the Trial Below......... 174a
Excerpts From Trial Transcript ................ 192a
Go t Memorandum, M 1 Docket
Wo. 240 (Tr. 8058) nf. ts 16a
ii
AUTHORITIES
CASES: Page
American Tobacco Co. v. United States, 328 U.S. 781
CURED cccccccccccossccpecesescesecess A eeeeees
Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir. 1972),
certiorari denied, 408 U.S. 928 (1972) ........++- 26
Blumenthal v. United States, 332 U.S. 539 (1947) .... 16
Bouie v. City of Columbia, 378 U.S. 347 (1964) ..... 28, 29
Cement Manufacturers Protective Association v. United
States, 268 U.S. 588 (1925) ........... 25, 26, 27, 30, 31
Conaway v. United States, 349 F.2d 907 (8th Cir. 1965),
certiorari denied, 382 U.S. 976 (1966) ........... 17
Curley v. United States, 160 F.2d 229 (D.C. Cir. 1947),
certiorari denied, 331 U.S. 837 (1947) .....--..--
Gray v. Shell Oil Company, 469 F.2d 742 (9th Cir. 1972),
certiorari denied, 412 U.S. 948 (1973) ..........- °6
Hamling v. United States, 418 U.S. 87 (1974) ......-. 29
Harris v. United States, 404 U.S. 1232 (1971) ........ 20
Johnson v. Florida, 391 U.S. 596 (1968) ...........++ 20
Kotteakos v. United States, 328 U.S. 750 (1946) ...... 16
Kroger Co. v. Federal Trade Commission, 438 F.2d 1372
(6th Cir. 1971), certiorari denied, 404 U.S. 871
SEED -nocducentaccésdpunsssbetase ch ddeneseese 31
Lemon v. Kurtzman, 411 U.S. 192 (1973) ............ 30
Maple Flooring Manufacturers Ass'n v. United States,
SD We ED GENO wanccscdcceceucscesscceses 25, 27
McKinney v. Parsons, 513 F.2d 264 (5th Cir. 1975) ... 29
Miller v. California, 413 U.S. 15 (1973) ............ 29, 30
Mortensen v. United States, 322 U.S. 369 (1944) ..... 17
Parker v. United States, 378 F.2d 641 (1st Cir. 1967),
certiorari denied, 389 U.S. 842 (1967) .......... 17
Pierce v. United States, 314 U.S. 306 (1941) ......... 28
Stanley Marks v. United States, 45 U.S.L.W. 4233
PEE scenncustascudbdsndaduansounseseussets 29, 30
Theatre Enterprises, Inc. v. Paramount Film Distrib-
uting Corp., 346 U.S. 537 (1954) .............45: 11
Thompson v. City of Louisville, 362 U.S. 199 (1960) . .16, 20
Toussie v. United States, 397 U.S. 112 (1970) ........ 23
United States v. Allard, 240 F.2d 840 (3d Cir. 1957),
certiorari denied, 353 U.S. 939 (1957) ........... 17
United States v. Container Corporation of America,
ff: e Ff eer. 2, 12, 19, 24, 25, 26,
27, 28, 29, 30, 31
Authorities Continued iil
Page
United States v. Insco, 496 F.2d 204 (5th Cir. 1974) .. 29
United States v. Jacobs, 513 F.2d 564 (9th Cir. 1975).. 29
United States v. Marchisio, 344 F.2d 653 (2d Cir. 1965) 16
United States v. Palladino, 490 F.2d 499 (1st Cir. 1974) 29
United States v. Sawyer, 294 F.2d 24 (4th Cir. 1961),
certiorari denied, 368 U.S. 916 (1961) ........... 17
se _ v. Sherpiaz, Inc., 512 F.2d 1361 (D.C. Cir.
EE PRE De OE RS ang ey EL eee 29
United States v. Thevis, 484 F.2d 1149 (5th Cir. 1973) 29
United States v. United States Gypsum Co., 550 F.2d
RRR I cA a ie 1
— 2 v. Wasserman, 504 F.2d 1012 (5th Cir.
RR ES EE ELS LO EN ae re ey ee 29
United States ex rel. Clark v. Anderson, 502 F.2d 1080
SPL PT 6, bkdddouanceanesieess hanced sdeece 29
Vachon v. New Hampshire, 414 U.S. 478 (1974) ...... 20
Viviano Macaroni Company v. Federal Trade Commis-
ston, 411 F.2d 255 (3d Cir. 1969) ............... 31
Wall Products Co. v. National Gypsum Co., 326 F.Supp.
if - 4 & RAR pai Saeed 26
Webster v. Sinclair Refining Com , 338 F.Supp. 248
(S.D. Ala. 1971) — -
ad cae ca babae ies iataleedcns 26
STaTUTEs :
Federal Rules of Criminal Procedure, Rule 29 ....... 17
Robinson-Patman Act, 15 U.S.C. § 13(b)....... 3, 7, 24, 25,
26, 27, 31
wes of the Supreme Court of the United States, Rule .
Sherman Antitrust Act, 15 U.S.C. §1........ 2, 3, 4, 24, 25,
United States Code ie
SI eed ch See rs ed 3, 22
a 2
United States Constitution
SIE WT digs benbbh ails dbdéccdncecsctkeeccs 2
Article I, Section 10
No.
Coton Brown and J. P. Nicery, Petitioners,
v.
Unitep States or America, Respondent.
JOINT PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Petitioners, Colon Brown and J. P. Nicely, pursuant
to Rule 46 of the Rules of this Court jointly pray that
a writ of certiorari issue to review the opinion and
judgment of the United States Court of Appeals for
the Third Cireuit entered in these proceedings on
January 6, 1977.
The opinion of the Court of Appeals (Appendix la)
has been reported at 550 F.2d 115 (3rd Cir. 1977).
The Judgment of the Court of Appeals for the Third
Cireuit was entered on January 6, 1977. A timely pe-
tition for rehearing filed by the respondent was de-
nied on March 10, 1977. On March 31, 1977, Mr. Justice
Brennan extended the time in which to file a petition
for a writ of certiorari to May 9, 1977. This petition
for certiorari is filed within that extended period.
The Court's jurisdiction is invoked under 28 U.S.C.
§ 1254(1).
1. Whether the failure of the Respondent to intro-
duce any evidence at trial connecting either petitioner
with participation during the statutery period in a
conspiracy charged under 15 U.S.C. § 1 required that
the Court of Appeals for the Third Cireuit reverse the
judgment of the District Court and enter an order aec-
quitting the petitioners.
®. Whether fundamental fairness and the Due Proe-
ess Clause were violated when the courts below effee-
tively gave erroneously retroactive application to this
Court's decision in United States vy. Container Corp.,
393 U.S. 333 (1969).
STATUTES INVOLVED
United States Constitution, Amendment V:
“No person shall be held to answer for a capital,
or otherwise infamous crime, unless on a present-
ment or imlietment of a Grand Jury, except in
cases arising in the land or naval forces, or in the
Militia, when in actual service in time of War or
publie danger; nor shall any person be subject for
the same offence to be twice put in jeopardy of life
or limb; nor shall be compelled in any
ease to be a witness against himself, nor be de-
3
prived of life, liberty, or property, without due
process of law; nor shall private property be taken
for publie use, without just compensation.”
United States Code, Title 15:
§ 13(b). “‘Upon proof beiug made, at any hearing
on a complaint under this section, that there bas
been discrimination in price or services or facili-
ties furnished, the burden of rebu the prima-
facie case thus made by showing justification shall
the prima-facie
case made by showing that his lower price or
the furnishing of services or facilities to any
chaser or purchasers was made in good to
meet an equally low price of a competitor, or the
services or facilities furnished by a competitor.”
United States Code, Title 15:
if
|
|
with foreign nations, is declared to be illegal . . . .”’
United States Code, Title 18:
§ 3282. Offenses Not ot as “Except as other-
wise expressly provided , ho person shall
spansetiel Gel on iy off ~
capital, unless the indictment is found or the
formation is instituted within five years next after
such offense shal] have been committed.”’
Rules of the Supreme Court of the United States:
4
a petition for writ of certiorari therefrom; or,
without summons and severance, any one or more
ot Gam any egy @ pes gee oe
two or more of them may join in an appeal or
petition.”’
STATEMENT OF THE CASE
Colon Brown
From January 1, 1965, to the time of his indictment
on December 27, 1973, Colon Brown was Chairman of
the Board and Chief Executive Officer of the National
Gypsum Company, a producer of Gypsum wallboard.
On December 27, 1973, he, along with some other de-
fendants, both individual and corporate, was indicted
for allegedly having conspired to violate Section 1 of
the Sherman Antitrust Act, 15 U.S.C. 61, by fixing
the price, terms, and conditions of sale of gypsum
hoard products. Nearly 36 months were consumed by
grand jury proceedings alone. Following a trial in
excess of four months resulting in a transcript of over
15,000 pages, a jury entered a verdict of guilty as
to all defendants. From this verdict, Petitioner
Brown sought review by the Third Cirenit arguing
that the evidence presented at trial was insuffi-
cient to support the verdict. In the alternative he re-
quested a new trial because the trial court committed
numerous errors of law, failed to discharge the jury
in light of the repeated misconduct of the prosecution,
and coerced the hopelessly deadlocked jury.
On January 6, 1977, the Third Cireuit agreed that
prejudicial errors had occurred and thus the judgment
of conviction was reversed and the case was remanded
to the trial court. In doing so, however, the Third Cir-
cuit ignored Judge Hunter's own significant observa-
tion that the only possible references which might con-
5
ceivably link Colon Brown to a price-fixing conspiracy
was for a period almost three vears prior to the be-
ginning statutory period. (Appendix p. 27a).
The evidence shows without dispute that Colon Brown
prior to January 1, 1965, had nothing whatsoever to do
with the pricing or sale of gypsum products. His entire
experience during his years of employment with the
National Gvpsum Company had been with other prod-
uet lines aml in positions related only to the manu-
facture and shipping of such products. Between
January 1, 1965, and the commencement of the rele-
vant period under the statute of limitations, De-
eember 27, 1968, the evidence presented against
Colon Brown fell into three categories discussed below.
Even so, very little in the voluminous record of the case
even referenced Colon Brown. The scarce mentions of
him were legally innocuous. No witness testified as to
any meetings, telephone conversations, or correspon-
dence in which he engaged in any discussions with eom-
petitors about the pricing of gypsum products. His
own sworn and unrefuted testimony explains fully the
legally valid purpose of any oceasion on which he com-
municated with officials of other companies engaged in
the manufacture and sale of gypsum. The prosecution
made no slightest effort to produce witnesses or docu-
ments that might cast any doubt on these explanations.
Accordingly, the purported case against Colon Brown
consisted solely of the prosecutor’s innuendo and sur-
mise and failed utterly to meet the minimum standards
of probative evidence.
First, in an effort to connect Colon Brown with an
alleged agreement among competitors to increase the
price of gypsum wallboard effective December 15, 1965,
the prosecution introduced calendar entries and ree-
6
ords showing that Colon Brown had some meetings and
telephone contacts earlier in 1965 with officials of the
United States Gypsum Company. But no evidence of
any kind was introduced to show that these ever in-
volved discussions of gypsum wallboard pricing. The
only evidence in the record with regard to those meet-
ings established their wholly lawful nature and pur-
pose. (App. p. 154a-16l1a).
Second, in an effort to connect Colon Brown with
an alleged agreement to change terms of credit effee-
tive March 1, 1966, the prosecution was able to argue
only that in August of 1965 Mr. Brown had authorized
a study of National Gypsum Company's eredit terms
and that, ina quite unremarkable coincidence, one fol-
lowup memorandum in a series of internal National
(iypsum memoranda to and from Mr. Brown in con-
nection with this credit study was dated December 10,
1965, a date on which his calendar showed the name of
Mr. Fredericks, then with the Bestwall Division of
Georgia-Pacitie Corporation. Neither Colon Brown nor
Mr. Fredericks remembered any such meeting. (App.
p. 15a).
Totally lacking in the record is any indication that
National's study of credit problems was initiated pur-
suant to any diseussions with competitors or for reasons
other than those completely internal to the National
(ivpsum Company. There was no testimony offered
and no doeument presented to prove that Colon Brown
ever talked with a competitor about credit terms in
the sale of gvpsum wallboard.
In the end, the prosecution's case against Petitioner
Colon Brown was reduced to the argument that he was
Chairman of the Board and Chief Executive Officer
of National Gypsum Company during a period when
one or more of the Corporation's employees, in accord-
ance with open policy followed pursuant to advice of
outside legal counsel, on oeeasion called a competitor
to verify a eustomer’s report that the competitor had
offered lower competitive prices or more advantageous
terms and conditions of sale. As was documented fully
at the trial, such action—popularly referred to as
**verifieation’’—was undertaken: (a) to ensure com-
pliance with the requirements of the Robinson-Patman
Act by establishing a bona fide basis for extending a
lower price to meet a reported lower price offered by
a competitor, 15 U.S.C, § 13(b); or (b) to prevent eus-
tomer fraud. Virtually every witness who testified to
a purpose for price verification in the gypsum indus-
trv, including Petitioner Brown, cited the reasons of
Robinson-Patman compliance or protection from eus-
tomer fraud, or both."
The great bulk of the Respondent's evidence pre-
sented as to all defendants at the trial related to the
period prior to December 27, 1968, and thus prior to
the time Petitioner could be held responsible under
the antitrust laws. None of this evidence sueceeds
even remotely in connecting Petitioner with any unlaw-
ful conspiratorial conduct. For the period relevant to
a criminal trial based on an indictment issued on De-
cember 27, 1973, there is an absolute absence of any
evidence even purporting to implicate Colon Brown in
any conspiracy to violate the antitrust laws.
' See the testimony of witnesses :
Bean, App. 58a-59a ; Simpson, 60a-61a; Gimlin, 62a-65a ; McCaskill,
66a-67a; Burch, 68a-69a; A. L. Meyer, 70a-Tla; Sikes, 27a-74a;
Atwell, 80a-82a; Montgomery, 90a-92a; Galvin, 93a-95a; Hayes,
96a-97a ; Thompson, 98a-108a ; Fisch, 109a-113a; and the individual
defendants; Watt, 114a-115a; and Brown, 168a-169a.
S
In any event the central issue of the case was verifi-
cation. Yet the record shows, without question, that
verification had first taken place long before Colon
Brown became Chairman of the Board or had anything
to do with the entire company’s pricing procedures. In
the four vears after he became Chairman of the Board
and before National ceased verifving, there is no in-
stance shown by the record in which Petitioner Brown
ever made or requested a verification call to a competi-
tor, Nothing in the reeord establishes that he super-
vised such calls or had any knowledge of their extent.
Colon Brown's sworn testimony was that he had
nothing to de with competitive price verification and
that he did net even learn of its existence until 1968
shortly before the practice was diseonutinned by the
National Gypsum Company. CApp. p. Pola-T2a).
Mr. Atwell, who was the National officer auth-
orized to make verification calls, did not recall ever
talking to Mr. Brown about them. (App. p. 75a-76a).
Nor is there proof of any kind that Colon Brown even
knew what, if anything, other gypsum wallboard pro-
ducers did with respect to verification of customers’
reports of competitive pricing. The record shows that
compaiy poliey required cessation of price verifiea-
tion with competitors in January of 1969. CApp. p.
89a; Dla-M2a). There is no evidence that Colon
Brown knew of a single verification eall by National
(ivpsum Company thereafter or, indeed, at any time
within the statute of limitations. ‘The unimportance
of verification to Colon Brown is obvious from the evi-
dence that in December of 1969 his assistants were un-
sure that he even knew that these calls had been stopped
in January of that year. (App. p. S3a-86a; GX-25,
App. p. 174a).
J. P. Nicely
Unlike any of the other several appellants to the
Third Cireuit Court of Appeals, Petitioner J. P. Nicely
did not seek the alternative of a new trial. Instead,
Mr. Nicely chose to base his appeal on the single com-
pelling fact that after over four months of trial it was
painfully obvious that he had been mistakenly indicted.
There was an utter absence of evidence even to sug-
gest that Petitioner Nicely had participated in the
conspiracy charged. Yet presented with only this
request for acquittal because of insufficient evidence,
the Court of Appeals somehow ignored the basis for
Mr. Nicely’s appeal and the clear statement that he
did not seek a new trial and instead reversed and re-
manded his case to the trial court. By ignoring the
clear thrust of his appeal, the Court of Appeals was in
error.
The evidence presented at trial failed completely to
implicate Petitioner Nicely even as a participant in
most of the fragmented and sporadic events which the
prosecution portrayed as elements in a price-fixing
couspiracy. There was as to Mr. Nicely no evidence
that he had even opportunities to reach agreements or
understandings with competitors that could conceivably
have violated the antitrust laws.
Petitioner Nicely was a sales specialist for National
Gypsum Company. Throughout his employment with
the Company he spent at least 60 percent of his time in
the field calling on customers. (App. p. 118a-119a). His
responsibility was for sales, not for pricing. This spe-
cialized nature of his service is further demonstrated
by Mr. Nicely’s position with the Company. During
the statutory period he was not even a corporate officer.
10
He was instead a‘ Vice President, Sales’’ for the Gold
Bond Building Products Division. (App. p. 117a). He
had no official pricing authority.
Mr. Nicely, while fulfilling his specialty of calling
on dealer customers of the Division during his term as
a sales vice-president, had no occasion to meet with his
competitors or to discuss industry matters with them
either in person, by telephone, or through correspon-
dence. His infrequent contacts with representatives
of National's competitors were limited to casual greet-
ings at customers’ conventions and the occasional ne-
gotiation of intra-industry sales with procuremen: per-
sonnel. (App. p. 135a-136a). Apart from one dinner
in 1954 or 1955, he never attended a meeting of the
Gypsum Association, one touchstone of the Govern-
ment’s case, and never received any reports about such
meetings. (App. p. 136a-137a).
As to the elements of the prosecution's case to which
the bulk of its evidence was directed, Petitioner Nicely
appears only as a peripheral participant. Moreover,
all the meager attempts to link him toe the major events
supposedly constituting the conspiracy were well prior
to the beginning of the statutory period. For instance,
the prosecution's opening statement described the
December 15, 1965, price increase, three years prior
to the statutory period, as one of the most important
elements of its case. Yet on this assertedly key ele-
ment, no evidence of improper conduct by Petitioner
Nicely was ever introduced. The proseeution’s evi-
dence against Mr. Nicely relating to this price increase
was confined to its confused questioning with regard to
a series of so called “Plan of Action’? documents
(GX 500-502, App. p. 176a-178a). Mr. Nicely partieci-
pated in the preparation of these documents which un-
ll
disputed evidence proved were developed by National
in reaction to learning on November 17, 1965, of a sur-
prise announcement by United States Gypsum Com-
pany (**USG’’) of a price increase. Those documents
constituted National’s efforts to implement an inde-
pendent business decision to follow USG’s price in-
erease. (App. p. 77a, et seq.; p. 137a; p. 14la, et seq.;
p. 162a, et seq.).
Although National and other industry members
followed USG’s lead, such action is not indicative of
collusion. It is completely consistent with competition.
Parallel pricing action is not proof of conspiracy even
in a civil case against a corporation. It has no proba-
tive value in a criminal case against an individual.
Theatre Enterprises, Inc. v. Paramount Film Distri-
buting Corp., 346 U.S. 537, 541 (1954).
In any event, Mr. Nicely did not make the decision
to follow USG’s price increase. He received no advance
word of the change (App. p. 137a), and participated
only to the extent that he followed the orders of his
superior, National’s President, Mr. Manske. (App.
p. 148a; p. 146a-147a; p. 149a-153a). No evidence was
ever presented to offer even the slightest challenge to
Petitioner Nicely’s testimony that this was his sole
connection with the 1965 price change.
The prosecution also offered evidence to link Peti-
tioner Nicely with another pre-statutory period inci-
dent involving a March, 1966, change in credit terms
even though Mr. Nicely had no authority in this area
other than to indicate whether from a Sales Depart-
ment standpoint proposed changes were acceptable.
(App. p. 138a-139a). On the record presented below
there was nothing which could connect Mr. Nicely in
12
any way with a conspiracy to fix credit terms, even if
one had been shown to exist. Absolutely no evidence
was offered to place him at meetings, discussions, or in
correspondence with competitors about credit matters.
A third and perhaps the major area of allegedly
conspirational activity was the antitrust policy of the
National Gypsum Company permitting direct verifica-
tion with competitors of customers’ claims of lower
prices. This policy was already in effect when, on
February 25, 1964, Mr. Nicely became Vice-President,
Sales-East located in Buffalo. (App. p. 116a). He was
unable to testify when verification calls began. (App.
p. 127a-128a). He testified without contradiction that
he had no direct participation in verification, that he
never made a verification call to a competitor or
received one from a competitor, and, that he never
talked to a competitor about verification of a price.
He testified further that he never gave instructions to
anyone else with regard to verification of prices with
competitors and never asked any employee of National
Gypsum Company to make a verification call. (App.
p. 127a-128a, 134a; p. 140a). °
Moreover, the sole initiative taken by Petitioner
Nicely with respect to verification was to suggest to
Mr. Kenneth Atwell that the practice of verification
be discontinued when, in January, 1969, he read of this
Court’s decision in United States v. Container Corp.,
393 U.S. 333 (1969). (App. p. 132a-133a).
It is clear that Petitioner Nicely had no role in veri-
fication other than to question in light of the Container
case whether it should continue. There was no evidence
that he made or received verification calls. Neither
was he shown ever to have supervised procedures for
13
such calls or to have received reports of their results.
He vigorously denied any participation in verification
other than his suggestion that it be terminated, and no
witness was shown to have made a verification call to
or received one from Mr. Nicely.
Even the Government’ prosecutor finally appeared
to recognize Mr. Nicely’s lack of involvement. When
objecting to a line of questions directed to Mr. Nicely
on the verification issue, he stated: ‘*Objection, Your
Honor. Mr. Warnke has asked a series of questions
now as to this man’s understanding of the practices
[verification] which he wasn’t even engaged in he
said.”’ (App. p. 129a-130a). The objection was sus-
tained. (Jd.)
Perhaps the proseeution’s most outrageous effort to
build a case against Petitioner Nicely where none
existed was its allegation of predatory conduct
allegedly designed to discourage the competition of
single-plant producers. That specious effort by the
prosecution related to Mr. Claude Huckleberry in his
operation of Texas Gypsum Company in the early
1960's. The dominant theme of Mr. Huckleberry’s
testimony at trial was that he had some inherent right
to take over the customers of other gypsum producers
in the Texas market without competitive reaction.
(£.g., App. p. 194a). Adopting this theme in its effort
to convict Mr. Nicely, the prosecution strained to attach
significance to a sales call he made on a Texas customer
in 1962, over six years prior to the statutory period.
Mr. Nicely’s call was on Groves Lumber Company in
Dallas, Texas, where he had a conversation with its
manager, Mr. John D. Tinsley. The offer of proof led
the trial judge aptly to characterize the Tinsley testi-
14
mony as something ‘‘less than earthshaking.’’ (Tr.
2521).
Nonetheless, the trial court admitted and then re-
fused to strike the Tinsley testimony over defense
objection that this unremarkable incident, occurring
over 13 years prior to trial, was irrelevant and im-
material to any issue of the case in that it did not tend
to prove the existance of a price-fixing conspiracy.
The Court of Appeals also ignored this prejudicial and
improper testimony.
The evidence whieh was introduced threugh Mr.
Tinsley certainly fell far short of what the prosecution
had promised in its opening statement and offer of
proof. It was shown only that Mr. Nicely, accompanied
hy one of National’s local sales representatives in
Dallas, visited the Groves Lumber Company among
other customers on March 22, 1962. For some vears
Groves had been a customer of National, but, prior to
Mr. Nicely's visit, had dropped National and had begun
to purchase from Texas Gypsum Company. CApp. p.
192a-193a). The Dallas-Fort Worth market was an im-
portant one for National, as it was for many of the
other manufacturers of gypsum wallboard. It was
therefore, entirely reasonable, as Mr. Tinsley readily
admitted, for National and its sales force to want the
(ireves account back again. Also, just prier to Mr.
Nicely’s visit the salesman who had formerly handled
the Groves account had left National’s employment,
thereby giving another reason for Mr. Nicely’s eall
to reestablish communication. (/d.).
The esseice of the prosecution's contention that this
normal business call was in some way predatory in-
volved a conversation Mr. Nicely had with Mr. Tinsley.
15
Mr. Tinsley confirmed the substance of the conversa-
tion which oceurred between them. It was also de-
scribed in DX (Nicely)-1 (App. p. 179a-180a), a sworn
statement by Mr. Nicely dated August 24, 1964, only
two years after the conversation. Mr. Tinsley remem-
bered the use of three words—** policy of containment”
—which were alleged to have some predatory signifi-
cance. However, a review of Mr. Nicely 's statement and
his testimony makes clear that he was merely giving his
opinion on the reason why United States Gypsum
Company, a competitor of both National and Texas
Gypsum, would not willingly surrender its business.
(App. p. 124a-126a). It certainly could not have in-
volved any conspiracy including Mr. Nicely or National
Gypsum because, as paragraph (d)(i) of the exhibit
shows, National was not even meeting the competition
of Texas Gypsum at the time.
There was no evidence to refute Mr. Nicely’s sworn
testimony that he never discussed his call on Groves
Lumber Company with any competitor, before or after
the event. His uncontested testimony was that when
he went to Dallas he had no plans to call on Groves
Lumber and had no prior knowledge that Texas Gyp-
suum was selling in the area. When the Tinsley incident
is reduced to its essentials, it is nothing more than one
of several visits by Mr. Nicely, then a Central Division
Sales Manager—Eastern Area, seeking to regain a lost
National account. Its receipt in evidence was error, as
was its retention, since it proves no part of the alleged
conspiracy. (App. p. 120a-126a).
Objective analysis of the entire record requires the
conclusion that Mr. Nicely must be acquitted. The
record was ignored by the Court of Appeals even
though it was Petitioner Nicely’s request that as to him
16
this was the only issue to be considered. Ordering
that he be sent back to the District Court for retrial
provides no remedy. As in any mass conspiracy trial,
a serious risk exists that stale or irrelevant evidence
as to Mr. Nicely might be considered by the jury as
bearing on the issue of his guilt or innocence. The
utter absence of evidence of Mr. Nicely’s guilt at the
first trial failed to protect him from this danger. A
retrial would merely subject him te a rehashing of
what is obvieusly not evidence of guilt—merely an im-
proper case of guilt by implication.
The question before this Court is very similar te that
which it faced in the case of Thompson v. City of
Louisville, 362 U.S. 199 (1960) : are the charges against
petitioners so totally devoid of evidentiary support as
to render the conviction unconstitutional? In Thomp-
sow this Court observed that the “[dJecision of this
question turns not on the sufficiency of the evidence,
but on whether this conviction rests upon any evidence
at all.”
As a matter of law, both Mr. Nicely and Mr. Brown
were entitled to be judged solely on the evidence ap-
plicable to them. See Blumenthal v. United States,
332 U.S. 539, 559 (1947); Kotteakos vy. United States,
328 U.S. 750 (1946); United States v. Marchisio, 344
F.2d 655, 666 (2d Cir. 1965). As to each petitioner,
the Constitution and laws of the United States require
17
that the evidence be considered separately to deter-
mine first if the alleged conspiracy existed and, if so,
whether each petitioner was a knowing participant.
Here, whatever might be concluded with respect to
others involved in the trial, there is nothing whatsoever
to show that either Colon Brown or J. P. Nicely partici-
pated in any conspiracy of any kind. Under estab-
lished principles of law, as embodied in Rule 29 of the
Federal Rules of Criminal Procedure, the District
Court was thus required to order the entry of judgment
of acquittal. American Tobacco Co. v. United States,
328 U.S. 781, 787 (1946); Mortensen v. United States,
322 U.S. 369, 374 (1944) ; Parker v. United States, 378
F.2d 641 (1st Cir. 1967), cert. denied, 389 U.S. 842
(1967) ; Conaway v. United States, 349 F.2d 907 (8th
Cir. 1965), cert. denied, 382 U.S. 976 (1966); United
States v. Sawyer, 294 F.2d 24 (4th Cir. 1961), cert.
denied, 368 U.S. 916 (1961); United States v. Allard,
240 F.2d 840 (3d Cir. 1957), cert. denied, 353 U.S. 939
(1957); Curley v United States, 160 F.2d 229 (D.C.
Cir. 1947), cert. denied, 331 U.S. 837 (1947).
Colon Brown
The record in the District Court established that as
to Petitioner Brown evidence of participation im a
conspiracy for which he could be adjudged guilty is
non-existent. As specifically recognized by Judge Hun-
ter, author of the majority opinion below, the only
possible evidence relating to Colon Brown concerned
episodes predating the statutory period by almost three
years. Clearly very little in the voluminous record of
this case even had reference to Colon Brown. The
searce mentions of him were legally innocuous. No
witness testified as to any meetings, telephone conver-
sations or correspondence in which he engaged in any
18
discussions with competitors about the pricing of gyp-
sum wallboard. His own sworn and unrefuted testi-
mony explains fully the legally valid purpose of any
vceasion on Which he met with officials of the other
companies engaged in the manufacture and sale of
gypsum wallboard. (App. p. 155a, ef seq.). The Govern-
ment made no consequential effort to produce witnesses
or doemmnents that might cast any doubt on these ex-
planations.
In one of the rare references to Colon Brown in his
opening statement, the prosecutor announced to the
jury: “you will learn from the evidence how [he], too,
attempted to, whenever and wherever possible to seek
agreement with (his) competitors, in fact, did effect
and obtain an agreement with (his! competitors, on
terms and conditions of sale."’ (App. p. 192a). No sueh
evidence was ever presented, Instead, Colon Brown was
convicted, not by evidence of illegal conduct on his part,
since none existed, but by errors which prejudiced all
of the defendants and by the trial court's failure to
honor Petitioner Brown's constitutional protection
against improper imputation or transference of guilt
in this multi-party conspiracy trial which, according
to the Government's contentions, invelved over 160
co-conspirators. Accordingly, the case against Colon
Brown consisted solely of the prosecutor's innuendo
and surmise which failed totally to meet even the most
minimum standards of probative evidence.
It was alleged that Petitioner Brown had conspira-
torial contacts with officials of another gypsum manu-
facturers. Not only is there no evidence of price-fixing
discussions, but there is complete and une: atroverted
evidence that the only and lawful purpose of these
contacts which occurred in 1965 was to settle under
19
court deadline longstanding patent litigation involving
the potential loss to his company of millions of dollars
and settled through his efforts for under $200,000.
There was further innuendo with respect to a March
1966 change in credit terms. Rather than bcing indica-
tive of conspiracy, the record shows only that this
stale event was one in which Petitioner Brown acted in
the independent business interest of his own company
and is devoid of anything proving collusion with
competitors.
And, of course, there was price verification. Peti-
tioner Brown did not initiate, supervise or receive re-
ports of verification calls, and the practice was dis-
contimed under his Chairmanship as soon as the legal
question was raised by outside counsel after the Su-
preme Court’s decision in the Container case.
The only pertinent evidence with regard to the
charge that Colon Brown engaged in an antitrust con-
spiracy is his own sworn testimony categorically deny-
ing the allegation. No testimony and no documents
refute his denial. None indeed presents even minor
inconsistency with his testimony.
Perhaps it was this absence of evidence which caused
the jury foreman—prior to the time the trial court
coerced the verdict—to tell the court that in his opin-
ion the jury was hopelessly deadlocked: ‘‘We have
taken enough ballots now, and we have had enough
discussions, and the way it is divided is not going to
be settled by any document, any remembrance of tes-
timony.”’ (App. p. 172a-173a).
For reasons not expressed, the Third Circuit failed
to order the acquittal of Colon Brown despite the fatal
deficiency in the evidence. This failure is in direct con-
20
flict with this Court’s holdng that ** [i]t is beyond ques-
tion, of course, that a conviction based on a record lack-
ing any relevant evidence as to a crucial element of the
offense charged .. . violate{s] due process.’’ Vachon v.
New Hampshire, 414 U.S, 478, 480 (1974), citing Har-
ris V. l nited States, 404 U.S. 1232, 1233 (1971). (Doug-
las, J.. in chambers); Thompson v. City of Lowsrille,
362 U.S. 199 (1960); Johnson v. Florida, 391 US. 596
(1968). The failure of the Third Circuit to exercise
its responsibility and protect Petitioner Colon Brown’s
due process rights deserves the attention of this Court.
J. P. Nicely
As a review of the trial record makes painfully
clear, there was as to Mr. Nicely no basis for any trial
on the charges or issues involved in this case. No evi-
dence relevant to the charge that he violated the anti-
trust iaws was presented in the nineteen weeks of the
trial. Apart from his own testimony and the proseeu-
tion’s improper introduction of testimony eoncerning
the routine sales call he made to John D. Tinslev of
Groves Lumber Company in March of 1962, the over
15,000 pages of transcript are devo.d of meaningful
references to him.
In the prosecution's opening statement at the trial
there were a few and highly general references to
Petitioner Nicely. However, the follow-up in the
prosecution’s proof was conspicuous by its absence.
At page 218 of the trial transcript, the prosecution
purported to link Mr. Nicely to a Gypsum Association
Task Force claimed to be ‘‘a cover-up so that these
defendants could get together and agree on terms and
conditions of sale.”’ Nothing in the evidence intro-
duced by the prosecution indicated that Mr. Nicely had
21
anything whatsoever to do with any ‘Task Force,”
regardless of its nature, or indeed with any Gypsum
Association unit or activity.
The prosecution in its opening statement alleged
further: ‘‘You will learn from the evidence how { Mr.
Nicely], too, attempted to, whenever and wherever
possible, to seek agreement with [his] competitors, in
fact, did effect and obtain an agreement with [his]
competitors.’’ (App. p. 192a). There was no evidence
ever offered to deliver on the prosecutor’s pledge.
In its opening statement the prosecution also de-
scribed the December 1965 price increase as one of the
most important elements of its case. On this assertedly
key element, no evidence at all of any improper con-
duct by Mr. Nicely was introduced. Neither was any
evidence offered to place Mr. Nicely at meetings with
competitors or as a participant in telephone conversa-
tions with competitors relating to price changes. As to
him even ‘‘opportunity evidence’’ was lacking. More-
over, the decision for National to follow United States
Gypsum ’s lead in the 1965 price change was not Mr.
Nicely’s decision. Mr. Nicely’s only role was to carry
out the directions of his superior, Mr. Manske. (App.
p. 143a-153a).
Called as a witness in his own defense, Mr. Nicely
testified fully and freely as to the facts involved in
each of the few episodes for which evidence was intro-
duced concerning him. The extensive cross-examina-
tion served only to confirm the truth of his denials of
any complicity in conduct violative of the antitrust
laws. No rebuttal witnesses were called in an effort to
challenge this testimony. No witness and no document
presented by the prosecution was even relevant to the
oo
—
issue of Mr, Nicely’s guilt or innocence of the charges
brought against him. The record, therefore, demon-
strates that he has been wrongly accused,
Given this dearth of evidence, risk is inescapable
here that even the mere review of the proseeution’s
feeble efforts to connect Mr. Nicely with events on
which the alleged conspiracy is based may magnify the
‘‘ease’’ against him to a degree it does not deserve. It
should be remembered, therefore, that the matters dis-
cussed in this petition constitute the prosecution’s en-
tire case against J. P. Nicely—a case that flagrantly
fails to meet the criterion of proof of guilt beyond a
reasonable doubt.
Summary
As to both of these petitioners, Brown and Nicely,
there is no evidence of participation in a conspiracy to
violate antitrust laws. Moreover, the very few refer-
ences to each of them were for incidents far prior to
the statutory period. The statute of limitations which
is applicable to the offense with which Petitioners were
charged is found at 18 U.S.C. § 3282 and reads as
follows :
‘Except as otherwise expressly provided by jaw,
no person shall be prosecuted, tried, or punished
for any offense, not capital, unless the indictment
is found or the information is instituted within five
years next after such offense shall have been
committed.”
The Indictment was returned on December 27, 1973.
Thus the statutory period began to run on December 27,
1968. The record below, however, demonstrated con-
23
clusively that for this statutory period there is an abso-
lute absence of any evidence even purporting to impli-
eate either Colon Brown or J. P. Nicely in any con-
spiracy to violate the antitrust laws. As this Court
observed in Toussie v. United States, 397 U.S. 112,
114-15 (1970):
“The purpose of a statute of limitations is to limit
exposure to criminal prosecution to a certain fixed
period of time following the occurrence of those
acts the legislature has decided to punish by crimi-
nal sanctions. Such a limitation is desi to pro-
tect individuals from having to defend themselves
against charges when the basic facts may have
become obscured by the of time and to
minimize the danger of punishment because
of acts in the far-distant Such a time limit
may also have the salutary effect of encouraging
law enforcement officials promptly to investigate
suspected criminal activity.”’
For the pertinent five years, not even so-called ‘‘op-
portunity evidence”’ exists to support the charge that
Petitioners conspired to fix prices and terms and con-
ditions of sale. Perhaps the best evidence of this comes
from the prosecution itself. A pleading signed by the
chief prosecutor and filed with the trial court was
represented as showing ‘‘Price-Fixing Discussions
Within the Statutory Period.’’ Neither that document
nor a supplement to it even mentioned the name of
either Colon Brown or J. J. Nicely. (App. p. 196a-
199a).
The key elements of the prosecution's case were all
before the statutory period. The December, 1965, price
change was three years prior to it. The March 1966
credit change was two and one-half years prior thereto.
Verification, even if it were improper, ended within
24
the first month of the statutory period and Petitioner
Nicely was at least partially responsible for alerting
his Company to the questions raised by this Court's de-
cision in Container. And, of course, the most prejudi-
cial and improper pre-statutory period submission by
the prosecution related to the 1962 sales call on Tinsley
by Mr. Nicely which oceurred fully six and one-half
years prior to the statutory period.
The failure of the respondent to introduce any evi-
dence at trial connecting either of these petitioners
with participation during the statutory period in a
conspiracy charged under 15 U.S.C. § 1 required that
the Court of Appeals for the Third Circuit reverse the
judgment of the District Court and enter an order ac-
quitting the petitioners. The failure to do so requires
review by this Court.
2. By Effectively Perpetuating the Erroneously Retroactive
Application Given by the Trial Court to United States v.
Container Corp.. 393 U.S. 333 (1969), the Court of Appeals
Violated the Due Process Clause of the Constitution.
As the Court of Appeals noted, the central theme of
the Respondent's case was the issue of ‘‘ verification.”
In those instances when confirmation could not be ob-
tained in other ways an employee of one gypsum board
manufacturer would occasionally telephone a competi-
tor to determine the price at which the competitor was
offering gypsum board to a specific customer. Virtu-
ally every witness who testified during the trial about
the purposes of verification established overwhelmingly
that those purposes were fraud protection, Robinson-
Patman Act compliance, or both. Indeed, National
Gypsum Company had a compilation of legal guide-
lines cleared by outside counsel which specifically ap-
proved the practice of checking with competitors to
25
verify a competitive situation which would justify, un-
der the Robinson-Patman Act, meeting a lower com-
petitive price or more favorable terms. (DX (NG)-77,
App. p. 182-191a).’
This policy was based wpon prior decisions of this
Court which approved of such exchanges among com-
petitors under certain controlling circumstances. In
Maple Flooring Mfrs. Ass’n vy. United States, 268 U.S.
563 (1925), the Sherman Act was held to permit the ex-
change of average cost data relating only to closed
transactions, despite an apparent stabilizing effeet on
price, where no intent to constrain individual competi-
tive activity was found. Further, the Court in Ce-
ment Mfrs. Protective Ass’n v. United States, 268
U.S. 588 (1925) approved the exchange of specific
price information concerning specific customers, de-
spite possible effects on prices, where the purpose of
the dissemination scheme was to prevent buyers from
defrauding sellers.
In mid-January 1969, after the Court's decision in
United States v. Container Corp., 393 U.S. 333 (1969).
National decided, as a matter of company policy and
on the advice of outside legal counsel, to discontinue
* Section 2(b) of the Robinson-Patman Act, 15 U.S.C. § 13(b)
permits a prima facie showing of price discrimination to be re-
butted or justified by the seller—
“by showing that his lower price or the furnishing of serv-
ices or facilities to any purchaser or purchasers was made in
good faith to meet an equally low price of a competitor, or
the services or facilities furnished by a competitor.’’
The Act emphasizes, however, that :
“the burden of rebutting the prima-facie case thus made by
showing justification shall be upon the person charged with
a violation of this section, and unless justification shall be
affirmatively shown, the Commission is authorized to issue an
order terminating the discrimination. . . ."’ (Emphasis added).
26
any verification calls to competitors. The decision was
made because Container cast at least some doubt on
whether any verification of competitive discounts
should continue.
National apparently exercised good judgment in
terminating the practice. Some confusion did exist
particularly with the trial court below. Notwithstand-
ing the consistent finding by other Federal courts that
verifieation by competitors of customers’ claims of
more favorable competitive offers does not violate the
Sherman Act when done for the purpose of complying
with the Robinson-Patman Act or to protect against
eustomer fraud,’ the trial court below believed that
the Container decision in 1969 had changed the law
of Cement Manufacturers. It was the trial court’s
position that Container prohibited even good faith veri-
fication for Robinson-Patman purposes, at least, where
such verification might have had a stabilizing effect on
prices.
The trial court inaccurately instructed the jury that
‘defendants do not dispute the fact that they did ex-
change price and other competitive information among
themselves and with each other and with others.”’
(App. p. 170a). Not only did this instruction not differ-
entiate among defendants, it also did not identify the
periods for which various defendants acknowledged
that they had verified. It left the jury with the mis-
taken judicial assertion that Petitioners Colon Brown
* Belliston v. Teraco, Inc., 455 F.2d 175 (10th Cir. 1972), cert.
denied, 408 U.S. 928 (1972); Gray v. Shell Oil Co., 469 F.2d
742 (9th Cir. 1972), cert. denied, 412 U.S. 943 (1973); Webster v.
Sinclair Refining Co., 338 F.Supp. 248 (S.D.Ala. 1971); Wall
Products Co. vy. National Gypsum Co., 326 F.Supp. 295 (ND.
Cal. 1971).
27
and J. P. Nicely had made sweeping admissions of
general price discussions with competitors. Both did
and do dispute that they at any time exchanged price
and other competitive information with competitors or
that they either authorized or participated in the ex-
change of price and other competitive information by
National’s employees with employees of other gypsum
producers. Moreover, there was no evidence within
or before the statutory period proving otherwise.
The trial court’s attention was called to the error of
its instruction, but it did not correct the situation.
(App. p. 171la). Thus the jury was allowed to measure
the defendants’ verification activities before Container
and before the statutory period by an erroneous stand-
ard which the judge drew from Container and errone-
ously applied retroactively. That was a fatal error
which the Court of Appeals for the Third Circuit did
not correct.
But even if the trial court had been correct in its
reading of Container, it would still have been erro: to
permit the jury to consider good faith verification
prior to Container as evidence of Sherman Act illegal-
ity." Such a reading of Container would constitute a
sharp departure from the previously established prin-
ciples of Maple Flooring Mfrs. Ass’n vy. United States,
268 U.S. 563 (1925) and Cement Mfrs. Protective
Ass'n Vv. United States, 268 U.S. 588 (1925). Retro-
* Both National and Andrew Watt submitted requests, which
(under the procedures established for the multi-party trial) ac-
erued to all defendants’ benefit, for an instruction that, under
the court's interpretation of Container, the jury could not con-
sider pre-Container verification for Robinson-Patman purposes to
be evidence of unlawful conduct. (National’s Supp. Req. Regard-
ing Retroactivity of Intervening Change of Law).
28
active application of such a changed rule of law would
do violence to basic fairness and is prohibited under
the Due Process clause.
Such unexpected judicial enlargement, by decisional
interpretation or the expanded definition of a crime, if
retroactively applied would be unconstitutional.’ In
Bouie v. City of Columbia, 378 U.S. 347, 352-54 (1964),
the Supreme Court approved the prospective applica-
tion only of unanticipated judicial changes of law and
compared such changes to ex post facto laws:
“There can be no doubt that a deprivation of the
right of fair warning can result not only from
vague statutory language but also from an un-
foreseeable and retroactive judicial expansion of
narrow and precise statute language. As the
Court recognized in Pierce v. United States, 314
U.S. 306, 311, ‘judicial enlargement of a eriminal
Act by interpretation is at war with a fundamen-
tal concept of the common law that crimes must be
defined with appropriate definiteness.’ .. . Indeed,
an aatesmneall e judicial enlargement of a crim-
inal statute, applied retroactively, operates pre-
cisely like an ex post facto law, such as Art I, § 10,
of the Constitution forbids .... If a state legis-
lature is barred by the Ex Post Facto Clause
from passing such a law, it must follow that a
State Supreme Court is barred by the Due Proe-
ess clause from achieving precisely the same re-
sult by judicial construction.’’ °
* Importantly, Container itself was filed as a civil injunction
suit, not a criminal prosecution. This fact reinforces the inherent
unfairness of retroactive application, in this criminal case, of the
drastie change which the trial judge believed Container had effected
in the antitrust laws.
“It might be suggested that the Sherman <Aet itself is so
vague that it inadequately defines the elements of the crime with
which defendants were charged. But, at least on the subject of
verification, many years of decisional interpretation have made it
The Bouie principle has now been more
delineated. (See, e.g., United States v. Insco, 496 F.2d
204, 209 (Sth Cir. 1974); United States v. Palladino,
490 F.2d 499, 500 (Ist Oir. 1974). And this Court
recently held that a criminal conviction could be up-
held under Due Process only if the defendant had ade-
quate notice of the standard to be applied to govern
his conduct. Stanley Marks vy. United States, 45
U.S.L.W. 4233 (1977). Furthermore, as Judge Hastie
stated in United States ex rel. Clark v. Anderson, 502
F.2d 1080, 1083 (3d Cir. 1974) ; **Such speculative an-
ticipation of a series of future judicial rulings is not
the stuff out of which adequate notice can be fash-
ioned,”’
Other Federal cases illustrate application of the
non-retroactivity principle. For example, after Miller
v. California, 413 U.S. 15 (1973), and related cases,
changed the constitutional standards for regulation of
obscenity on June 21, 1973, Federal appellate courts
ruled that the Miller decision could not be applied
retroactively. Rather, defendants indicted in ob-
scenity cases for their conduct prior to the Miller de-
cision were to be judged under the more favorable pre-
Miller standards. And in Hamling v. United States,
418 U.S. 87 (1974), reaffirmed by this Court in Stanley
Marks, supra, this Court held that in review of a pre-
Miller conviction the defendant must be given benefit
30
of the more favorable of the pre-Miller and post-M iller
standards.
Moreover, even where the lack of notice of a new
rule of law does not rise to the level of a Due Process
violation, the courts will nonetheless refuse to apply
such a rule retroactively where unfairness will result.
As the Supreme Court stated in Lemon v. Kurtzman,
411 U.S. 192, 199 (1973):
‘**However appealing the logie of [the old rule of
automatic retroactivity | — 4 have been in the ab-
stract, its abandonment our recognition
that statutory or even j rules of law are
hard facts on which must rely in making
decisions and in shaping their conduct. This fact
of legal life underpins our modern decisions ree-
ognizing a doctrine of non-retroactivity.”’
Certainly, where persons have acted in reliance on the
teachings of Cement Mfrs. and similar decisions and on
the advice of their counsel based on these decisions, it
would shock the conscience to hold that such conduct
occurring prior to a judicial enlargement of the law
could be the basis for criminal convictions.
Under the trial court’s unique and unsupported
reading of Container, it was error to refuse to give the
requested non-retroactivity instruction. This refusal
especially prejudiced Petitioners Brown and Nicely,
who had no connection with and only an incomplete
comprehension of the practice of verification.
While the Court of Appeals conceded that this issue
of verification was the central issue in the case and
based its reversal on the trial court’s error in not con-
sidering the purpose of verification, the Court of Ap-
31
peals appears also to give retroactive effect to Con-
tainer, and thus focuses not on the compelling lack of
evidence to support a conviction of these Petitioners
but on the extent to which the practice of pre-Container
verification is permitted under the Supreme Court's
decision. (Appendix p. l4a, ef seq.). This too deserves
the attention of this Court.
In its effort to judge occasional verification in
light of the Container decision as wel! as several other
decisions which were handed down after National
(iypsum stopped verifying, the Third Cireuit estab-
lished a new rule by which Petitioners’ alleged conduct
was to be judged. Cement Mfrs. stood for the proposi-
tion that to prevent against buyer fraud the exchange
of information was permissible. However, to per-
mit Contaimer to “retain more vigor’’ to distinguish
the “gasoline war’ case with which the Court
disagreed (decided long after National ceased veri-
fication), and to align the Third Cireuit’s decision
in Vivieno Macaroni Co. v. F.T.C., 411 F.2d 255 (3rd
Cir. 1969) with Kroger Co. v. Federal Trade Commis-
ston, 438 F.2d 1372 (6th Cir. 1971), cert. denied, 404
U.S. 871 (1971) the Third Cireuit judged Petitioners’
conduct with the following new four-part test :
32
This four-part test effectively purports to change at
the expense of these Petitioners the existing law which
required no such detailed finding. Such an unantici-
pated judicial change of an established rule of law if
applied retroactively violates the Due Process Clause
and deserves the attention of the Court.
For the reasons stated, a writ of certiorari should
be granted to review the judgment and opinion of the
United States Court of Appeals for the Third Circuit.
Respectfully submitted,
CLARK M. CLIFrorD
Carson M. Gass
THomas RicHarp SPRADLIN
Barry J. Israew
Cuirrorp, Gass, McILwatn &
FINNEY
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
Counsel for Petitioners
May 9, 1977
la
550 F.2d 115 (3d Cir. 1977)
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 75-1836/75-1842
Unrrep States or AMERICA
vs.
Unrrep States Gypsum Company, Nationa, Gypsum Com-
pany, Georota-Paciric Corporation, Kaiser Gypsum
Company, Inc., Tae Cecorex Corporation, Tue Fiiwt-
kote Company, Granam J. Morcan, Annrew J. Wart,
Coiow Brown, J. P. Nicery, Wiitam H. Hunt, CLaupe
E. Harper, Roperr A. Costa, Wusstam D. Hersert,
Georce J. Pecano, James D. Moran
Unrrep States Gypsum Company,
Appellant in No. 75-1836
Nationa, Gypsum Company,
Appellant in No. 75-1837
Georota-Pactric Corporation,
Appellant in No. 75-1838
Tue Cevorex Corporation,
Appellant in No. 75-1839
Coton Brown,
Appellant in No. 75-1840
Jay P. Nicer,
Appellant in No. 75-1841
Anprew J. Wart,
Appellant in No. 75-1842
(D.C. Criminal No. 73-347)
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
2a
Present: Apams, Hunter and Wess, Circuit Judges
Judgment
This cause came on to be heard on the record from the
United States District Court for the Western District of
Pennsylvania and was argued by counsel.
On consideration whereof, it is now here ordered and
adjudged by this Court that the judgments of the said
District Court filed July 15, 1975, be, and the same are
hereby reversed and the cause remanded in accordance
with the opinion of this Court.
ATTEST :
/3/ Tuomas Quinn
Thomas Quinn
Clerk
January 6, 1977
3a
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
(Caption Omitted in Printing)
(Fircep Janvary 6, 1977)
Hunter, Circuit Judge:
This is an appeal by United States Gypsum Company
(USG), National Gypsum Company (National), Georgia-
Pacific Corporation (G-P), The Celotex Corporation (Cel-
otex), Andrew J. Watt, Colon Brown, and J. P. Nicely, de-
fendants in a complex case ander Section 1 of the Sherman
Act, 15 U.S.C. §1.' Each torporate defendant manufac-
turers, sells, and distributes gypsum board products, which
are widely used in the construction industry. Watt is Execu-
tive Vice President of USG. Brown is Chairman of Na-
tional’s Board of Directors, and Nicely recently retired as
Vice President for Sales in National’s Building Products
Division. For the reasons that follow, we reverse and
remand.
* Section 1 reads in pertinent part as follows:
Every contract, combination in the form of trust or other-
wise, or conspiracy, in restraint of trade or commerce among
aa States, or with foreign nations, is declared to be
i b wes
* Each of the corporate defendants received the maximum $50,000
fine. Brown also drew a $50,000 fine, as well as a six-mouth sus-
pended sentence and three years probation. Watt received a $10,000
fine, a six-month suspended sentence, and one year probation.
Nicely was fined $1,000 and received a six-month suspended sen-
tence and one year probation. After the indictment in this case
was handed up, § 1 was amended to provide for a maximum fine
of $1,000,000 for corporate defendants and $100,000 for other
persons. 15 U.S.C. § 1 (1970), as amended, (Supp. IV, 1974).
da
I.
Gypsum board is produced in standard sizes, of which
4’ x &’ x 4” is the most common. It consists of a layer of
gypsum rock sandwiched between sheets of heavy paper.
Since World War II, it has replaced gypsum plaster as the
principal component of interior walls in all types of build-
ings.
The gypsum board industry is highly concentrated. Be-
tween 1960 and 1973, the number of producers varied from
nine to fourteen, and the eight major producers accounted
for more than ninety-four percent of national sales. The
corporate appellants together account for more than
seventy-five percent of national sales. There are no signifi-
cant differences in quality or appearance among the stand-
ard types of board produced by the various manufacturers.
Demand is determined by activity in the construction in-
dustry and is inelastic with respect to price. Because of the
homogeneity of the different brands, a buyer’s decision to
purchase one particular brand is generally based on price.
Price discounts and changes in credit terms are the most
important form of competition in the industry.
Between 1965 and 1970, the Department of Justice con-
ducted several investigations of possible antitrust viola-
tions in the gypsum board industry. In 1971, a grand jury
inquiry commenced, and another twenty-eight months of
investigation ensued. On December 27, 1973, an indictment
was returned in the Western District of Pennsylvania. It
named the appellants and nine other defendants ° as partici-
*The other defendants were Graham J. Morgan, chairman of
the board of USG; William H. Hunt, president of G-P; William
D. Herbert, president of Celotex ; Kaiser Gypsum Company ; Claude
E. Harper and Robert A. Costa, Kaiser’s president and vice-presi-
dent, respectively ; The Flintkote Company ; and George J. Pecaro
and James D. Moran, Flintkote’s chairman of the board and presi-
dent, respectively. The indictment named as co-conspirators, but
not as defendants, Johns-Manville Corporation; Fibreboard Cor-
5a
pants in a conspiracy, starting before 1960 and lasting to
the date of indictment, (1) to raise, fix, maintain, and sta-
bilize the price of gypsum board; (2) to fix, maintain, and
stabilize the terms and conditions of sale of gypsum board;
and (3) to adopt and maintain uniform methods of packag-
ing and handling, all in violation of Section 1 of the Sher-
man Act.
All defendants moved for dismissal, alleging that unrea-
sonable pre-indictment delay had worked a denial of their
rights to due process of law as guaranteed by the fifth
amendment to the United States Constitution. This motion
was denied after a five-day evidentiary hearing. Subse-
quently, the nine defendants who are not parties to this
appeal were convicted and sentenced on pleas of nolo con-
tendere.* Trial of the remaining defendants began on
March 3, 1975, and the jury brought in its verdict on July
15, 1975. The Government called thirty-five witnesses, ap-
pellants thirty. The trial record consists of more than
15,000 pages of transcript and some 6500 exhibits.
Il.
At the outset, we are met with appellants’ contention ©
that tle due process clause of the fifth amendment requires
dismissal of the indictment. They allege that the Govern-
ment unduly delayed bringing the indictment and that this
delay impaired appellants’ ability to present a defense. We
affirm the district court’s refusal to dismiss the indictment.
poration ; and the Gypsam Association, the industry trade associa-
tion.
* Kaiser and Flintkote each received the maximum $50,000 fine.
Morgan (USG) received a $40,000 fine, a six-month suspended
sentence and two years probation. Hunt (G-P) and Harper ( Kaiser)
each drew a $40,000 fine, a six-month suspended sentence, and
Pecaro (Flintkote), and Moran (Flintkote) each received a $20,000
fine, a thirty-day suspended sentence, and one year probation.
6a
In United States v. Marion, 404 U.S. 307 (1971), the
Supreme Court indicated that ‘‘the Due Process Clause of
the Fifth Amendment would require dismissal of the in-
dictment if it were shown at trial that the pre-indictment
delay in this case caused substantial prejudice to appel-
lants’ rights to a fair trial and that the delay was an
intentional device to gain tactical advantage over the ac-
eused.’’ Jd. at 324. Because no prejudice was shown, how-
ever, the Marion Court upheld the indictment. Thus, there
was no holding as to the specific requirements of a success-
ful showing of prejudicial delay, and it was unclear whether
both prejudice and governmental intent are necessary or
whether prejudice alone would suffice. See, e.g., United
States v. Barket, 530 F.2d 189, 194-195 & n.9 (Sth Cir.),
petition for cert. filed, 44 U.S.L.W. 3518 (U.S. March 16,
1976). We need not resolve this question, because we find
neither undue delay nor substantial prejudice.
We consider first the alleged undue delay. Appellants’
major argument is that the Government deliberately post-
poned empaneling the grand jury to await the outcome of a
civil ease, Wall Products Co. v. National Gypsum Co., 326
F. Supp. 295 (N.D. Cal. 1971), involving charges of the
same conspiracy. After a lengthy evidentiary hearing, how-
ever, the court below found that the interval between the
initial investigations of the gypsum board industry and
the bringing of the indictment was not unreasonable in
light of the extraordinary magnitude of the case and the
frequent dead ends encountered by the investigators.
United States v. United States Gypsum Co., 383 F.Supp.
462, 464-70 (W.D. Pa. 1974). As the district court noted,
id: at 467, any delay in empaneling the grand jury resulted
from the Government’s reluctance to frame criminal
charges against appellants before learning whether plain-
tiffs in a civil action could carry their burden of proof.
The district court’s findings are not clearly erroneous.
7a
USG separately argues that the Government is collater-
ally estopped to deny intentional delay, relying on United
States v. United States Gypsum Co., Civil No. 71-2467
(N.D. Cal., filed Dee. 30, 1971). In that suit against six
gypsum companies, the Government sought to recover dam-
ages accrued before the start of the normal four-year
period, claiming that defendants’ fraudulent concealment
of their conspiracy had tolled the statute of limitations.
The district court granted a motion for partial summary
judgment, declaring that the Government did know, or
should have known, of the alleged conspiracy prior to Jan-
aary 1, 1968. This finding, insists USG, estops the Gov-
ernment from denying delay in this case.
In Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d 840,
844 (3d Cir. 1974), Judge Garth noted three requirements
that must be satisfied before collateral estoppel will apply:
a) The issue decided in the prior litigation must be
identical with the issue presented in the action
in question;
b) The prior litigation must have resulted in a final
judgents [sic] on the merits; and
c) The party against whom the estoppel is asserted
must have been a party, or in privity with a party,
to the prior adjudication.
USG’s claim does not satisfy the first requirement. Gov-
ernmental knowledge sufficient to preclude reliance on the
doctrine of fraudulent concealment in a ciwil case is not
identical with the availability of evidence sufficient to sup-
port the decision to bring criminal charges against the
same defendants. Proof of the existence of the former does
not entail proof of the existence of the latter. Therefore,
there can be no collateral estoppel.
Having found no undue delay, we note that, in any event,
appellants have not met their burden of proving substan-
Sa
tial prejudice. In United States v. Dukow, 453 F.2d 1328
(3d Cir.), cert. denied, 406 U.S. 945 (1972), this court,
following Marion, refused to order the dismissal of an in-
dictment where no substantial prejudice was shown. Ac-
cord, United States v. Benson, 487 F.2d 978, 984-85 (3d
Cir. 1973). In Dukow, Judge Adams held the deaths of two
potential witnesses not prejudicial, because there had been
neither an offer of the testimony they would have given
nor any indication that they possessed unique knowledge of
the transaction in question. Dukow, supra, 453 F.2d at 1330.
Here, as in Dukow, appellants argue that potential wit-
nesses died in the lengthy interval between initial investi-
gation and trial, but there is no showing that the deceased
would have proffered testimony not merely cumulative of
the evidence already at appellants’ disposal.
Of the thirty-six deceased potential witnesses listed, only
three received particular attention from appellants. One
was Melvin Quayle, who was depicted in other testimony
as an emissary of the other alleged conspirators. Quayle’s
denial before the grand jury of this role was read at trial.
Appellants do not suggest that he would have testified any
differently had he lived.
Appellants also insist that Donald Miller, late mechan-
dising manager of Celotex, ‘‘would have made an excellent
witness for the defense.’’ They vouchsafe no reason to be-
lieve, however, that Miller’s testimony would have been
significantly more exculpatory than that offered by other
witnesses.
Finally, appellants single out a USG memorandum of
June 6, 1961, as a document the Government was able to
exploit because its author, B.J. Nabors, was dead. Appel-
lants, though, were free to offer alternative explanations
of the document’s contents. Moreover, Nabors died in 1967,
ten months before the date on which USG claims the Gov-
ernment should have known of the conspiracy and sought
an indictment. Cases of this magnitude often last so long
that documents are introduced when the authors are no
longer available to dispel any inculpatory impressions the
documents may create. To hold that this handicap, by itself,
is a violation of due process would be to erect a practical
barrier to suits of this sort.
Appellants argue that under United States v. Barket,
supra, the Government bears the burden of proving that
none of the unavailable witnesses possessed exculpatory
evidence. We find this argument unpersuasive. Barket dif-
fers from the case sub judice in several important respects.
First, the procedural posture of Barket was the reverse of
that here: the district court had granted the motion to
dismiss the indictment. Second, the Barket court expressed
grave misgivings about the merits of the Government’s
case. Third, the Eighth Circuit found the Government
guilty of culpable negligence in delaying Barket’s indict-
ment. Fourth, and most important, the Barket court ex-
plicitly found that ‘‘Barket’s ability to defend himself
on the crucial issue’’ had ‘‘undoubtedly’’ been impaired.
Id. at 193.
None of these conditions obtains in the case before us.
Because the court refused to dismiss the indictment, we
can order it dismissed only if we hold the district court’s
findings clearly erroneous. We are unable to take the
frankly skeptical view of the Government’s case on the
merits. adopted by the Barket court. As we have already
noted, the Government did not cause any undue delay in
this case. Most importantly, we do not find that appel-
lants’ ability to defend themselves was impaired. Because
the Barket court explicitly reached the opposite conclusion,
its statement concerning the burden of proof on the issue
of missing witnesses’ possession of exculpatorv evidence
was dictum.’ And were the statement indeed necessary to
5In concluding that the Government bears the burden of prov-
ing that no unavailable witness would have offered significant,
10a
the result in Barket, we would see no reason to depart
from the clear teaching of Dukow and impose upon the
Government the burden of proving that none of the un-
available witnesses possessed significant, exculpatory evi-
dence. See, e.g., United States v. McGough, 510 F.2d 589,
604 (5th Cir. 1975).
III.
Thorough scrutiny of the voluminous record and careful
consideration of the many issues raised on appeal con-
vinces us that reversal is required.
A.
The Government’s case on price fixing centered on a
practice appellants call ‘‘verification.’’ An officer of one
gypsum board manufacturer would telephone a competing
exculpatory evidence, the Barket court relied on United States v.
Norton, 504 F.2d 342 (8th Cir. 1974), cert. denied, 419 U.S. 1113
(1975). Norton, however, involved an unusual situation. The Gov-
ernment intentionally delayed its arrest of Norton on drug charges
so that its informant, a key witness, could remain undercover and
gather evidence for other prosecutions. Before Norton's arrest, the
informant was murdered. The Eighth Cireuit held that the Gov-
ernment had to accept the risk that its conscious decision to delay
Norton's prosecution might result in the unavailability of a witness
necessary to guarantee Norton a fair trial. Therefore, the burden
of showing the informant's lack of exculpatory evidence was placed
on the Government. Norton, however, was held to have waived the
right to argue that the delay had prejudiced his defense, because
he had rejected the Government's offer of proof on the issue of the
informant's probable testimony. Id. at 453.
Whatever the merits of the Norton holding in the context of
informant cases, we do not believe that it should be extended be-
yond that special context. An informant in a drug case is a po-
tential witness who may be presumed to possess unique knowledge
about the transaction. Rovario v. United States, 353 U.S. 53, 64
(1957). No sueh special presumption attaches to the usual wit-
nesses in other cases. See United States v. Dukow, 453 F.2d 1328,
cert. denied, 406 U.S. 945 (1972).
lla
firm’s officer to determine the price at which the competitor
was offering gypsum board to a specific customer. The
scope, purpose, and duration of this activity are sharply
disputed by the parties. The Government contends that the
purpose of verification was to enable competitors to sta-
bilize prices and ‘‘police’’ agreed-upon increases, that the
calls involved broad discussions of present and future
pricing policies, that the appellants verified daily, and that
they continued to do so until 1973. Appellants insist that
the only purpose of the calls was to ensure compliance
with the Robinson-Patman Act (discussed below), that the
conversations were limited in scope and number, and that
the practice had been discontinued, except for a few iso-
lated, unauthorized calls, before the start of the applica-
ble limitations period, December 27, 1968. There is evi-
dence to support each claim of both sides.
Appellants contend, however, that the court below erred
in instructing the jury on the legal status of the practice.
Although appellants assert that the evidence demonstrated
that the purpose of certification was to comply with the
Robinson-Patman Act, the trial court instructed the jury
that any purpose was irrelevant so long as the jury found
that verification had a stabilizing effect on prices.* The
exchange of com itive information between the Defendants
If you decide that, if you decide this was merely done in @
good faith effort to with the Robinson-Patman Act,
then you could not verification, standing alone, as
l2a
refusal to instruct the jury about the relevance of purpose
was, for the following reasons, reversible error.
Section 2(a) of the Robinson-Patman Act, 15 U.S.C.
§13(a),’ prohibits sellers from discriminating in price
between different purchasers of the same commodity. Sec-
tion 2(b), 15 U.S.C. §13(b),* permits a seller to rebut a
prima facie case under 2(a) by ‘‘showing that his lower
price or the furnishing of services or facilities to any pur-
chaser or purchasers was made in good faith to meet an
equally low price of a competitor, or the services or facili-
ties furnished by a competitor.’’ The Supreme Court has
held that Section 2(b) places
"Section 2(a) reads in pertinent part as follows:
It shall be unlawful for any person engaged in commerce, —
in the course of such commerce, cither directly or indirectly,
to dis -riminate in price between different purchasers of com-
modities of like grade and quality, where either or any of the
purcha es involved in such discrimination are in commerce,
where such commodities are sold for use, consumption, or re-
sale within the United States or any Territory thereof or the
District of Columbia or any insular possession or other place
under the jurisdiction of the United States, and where the
effect of such discrimination may be substantially to lessen
competition or tend to create a monopoly in any line of com-
meree, or to injure, destroy, or prevent competition with any
person who either grants or knowingly receives the benefit of
such discrimination, or with customers of either of them. .
*Section 2(b) reads as follows:
Upon proof being made, at any hearing on a complaint
under this section, that there has been discrimination in price
or services or facilities furnished, the burden of rebutting the
prima-facic case thus made by showing justification shall be
spon tho pesenn changed Gt 0 vistation of Gin cotton, and
unless justifieation shall be affirmatively shown, the Commis-
sion is authorized to issue an order terminating the discrimi-
nation: Provided, however, That nothing herein contained shall
prevent a seller rebutting the prima-facie case thus made by
showing that this lower price or the furnishing of services or
facilities to any purchaser or purchasers was made in good
faith to meet an equally low price of a competitor, or the
services or facilities furnished by a competitor.
13a
on the seller the burden of showing that the price was
made in good faith to meet a competitor’s. .. . [T]he
statute at least requires the seller, who has knowingly
discriminated in price, to show the existence of facts
which would lead a reasonable and prudent person
to believe that the granting of a lower price would in
fact meet the equally low price of a competitor.
Federal Trade Commission v. A.E. Staley Mfg. Co., 324
U.S. 746, 759-60 (1945). This court declared in Viviano
Macaroni Co. v. Federal Trade Commission, 411 F.2d 255,
259-60 (3d Cir. 1969), that the seller cannot meet this
burden merely by accepting the purchaser’s word with re-
spect to competitor’s offers; instead the seller must at-
tempt to corroborate the report, as well as the reliability
of the purchaser or other reporter.
Appellants claim that their verification practice was de-
signed to comply with the dictates of Staley and Viviano.
They assert that almost all discounting off list prices was
not reflected in invoices, rendering that form of corrobora-
tion ineffective. In addition, they say, purchasers of the
gypsum board were notoriously unreliable and often were
discovered to have lied about a competitor’s offer in order
to ‘‘whipsaw’’ a price cut. There is evidence to support
these assertions. Therefore, argue appellants, they had
three choices: (1) offer the reduced price on the basis of
the purchaser’s unconfirmed report and risk Robinson-
Patman liability; (2) forego the price cut and risk losing
the sale; or (3) call the competitor, verify his offer, and
establish a section 2(b) defense to any Robinson-Patman
charge concerning the price cut.
The countervailing policies of section 1 of the Sherman
Act, however, complicate appellants’ exposition of the
issue. The Supreme Court has dealt several times with the
limits imposed by the Sherman Act on exchanges of in-
formation among competitors. In American Column ¢
l4a
Lumber Co. v. United States, 257 U.S. 377 (1921), the
Court held that section 1 of the Sharman Act condemned
the exchange of specific price information with regard to
specific customers, where the clear purpose was to sta-
bilize prices. The Court reached the same result in United
States v. American Linseed Oil Co., 262 U.S. 371 (1923).
Then in 1925, two cases upheld the exchange of information
among competitors. In Maple Flooring Ass'n v. United
States, 268 U.S. 563 (1925), the Sherman Act was held to
permit the exchange of average cost data relating only to
closed transactions, despite an apparent stabilizing effect
on price, where no intent to constrain individual competi-
tive activity was found. And the Court in Cement Manu-
facturers Protective Ass’n v. United States, 268 U.S. 588
approved the exchange of specific price information con-
cerning specific customers, despite possible effects on
prices, where the purpose of the dissemination scheme was
to prevent buyers from defrauding sellers.
The Supreme Court has drawn a narrow line in deciding
the data dissemination cases under section 1 of the Sher-
man Act. The difficulty derives from the fact that in com-
petitive markets, information exchanges promote competi-
tion, while in oligopolistiec markets, they depress competi-
tion. United States v. Container Corp. of America, 393 U.S.
333, 342-43 (1969) (Marshall, J., dissenting); P. Arerna,
Awntirrust Anatysis 13-16 (1974). Thus, the Court has at-
tempted to fashion rules that will reach the latter, yet not
amount to broad proscriptions embracing the former.
In Container, supra,—the most recent data dissemina-
tion case—the facts were similar to those presented in the
ease sub judice. Eighteen manufacturers of corrugated con-
tainers accounted for 90% of the shipments of such prod-
ucts from the southeastern United States. The industry ex-
hibited excess capacity and a downward trend in prices,
yet twenty-one new competitors entered the industry dur-
ing the period covered by the complaint—a clear indication
15a
that prices were above competitive levels. Containers were
produced to customer specifications, but were substantially
identical regardless of manufacturer. With a few excep-
tions, no manufacturer could command a higher price than
another. From 1955 to 1963, defendants exchanged with
varying frequency the prices most recently quoted to spe-
cific customers. No Robinson-Patman defense was raised,
however.
The Supreme Court, 6-3, found a combination or con-
spiracy proscribed by the Sherman Act. The freedom to
supply information only if each defendant so chose was
described merely as the freedom to withdraw from the
agreement. From the concentrated nature of the industry,
the majority concluded that the information exchanges
must have set a floor under prices. The Court distinguished |
Cement Manufacturers, supra, by pointing out that Con,
tainer revealed no ‘‘controlling circumstance, viz., that
cement manufacturers .. . exchanged price information asa
means of protecting their legal rights from fraudulent in-
ducements ... .’’ Jd. at 335.
Mr. Justice Fortas concurred, declaring that he did not
understand the majority to have established a per se ban
of such exchanges. Instead, he concluded that the record
supported a finding that the data dissemination had in fact
affected prices. Jd. at 338-40 (Fortas, J., concurring). Jus-
tice Marshall, joined by Justices Harlan and Stewart, dis-
sented. He agreed that exchanges of price information
were not illegal per se, but he disagreed with Justice
Fortas’ conclusion that the record showed any effect on
prices. Id. at 340-47 (Marshall, J., dissenting).
Each of the Container opinions found an agreement in
the reciprocal dissemination of price information. The
discord arose over proof of the agreement’s effect. None
of the Justices concerned himself with the agreement’s
purpose. The Court’s careful distinction of Cement Manu
l6a
facturers, however, suggests that proof of an actual pur-
pose is not irrelevant in all cases. Where the information
exchange occurs under a ‘‘controlling cireumstance,’’ such
as the purpose of preventing fraud in Cement Manufac-
turers, the exchange can be upheld under the Sherman Act,
despite a proven or presumed effect on price.”
The question before us is whether appellants’ alleged
desire to establish a defense, to price discrimination
*If purpose were always irrelevant, as Judge Weiss’s dissent
declares, then the Container Court would effectively have over-
ruled Cement Manufacturers. See The Supreme Court, 1968 Term,
83 Harv. L. Rev. 7, 234-5 (1960). Yet the vitality of Cement Manu-
facturers has been reaffirmed by favorable citation in Goldfarb
v. Virginia State Bar Ass’n, 421 U.S. 773, 781, reh. denied, 423
U.S. 886 (1975), and United States v. Citizens & Southern Nat'l
Bank, 422 U.S. 86, 113 (1975). Those cases also cite Justice Fortas’s
Container concurrence, suggesting that Container did not establish
a per se rule aaginst information exchanges, but left some to qualify
as legitimate under the Sherman Act.
Judge Weiss's dissenting opinion also attempts to liken the
factual setting in the case sub judice to that found violative of
the Sherman Act in Container. The dissent notes that the district
court in Container found that buyers ‘‘on oecasion’’ furnished in-
accurate information as to competing sellers’ prices, see United
States v. Container Corp. of America, 273 F. Supp. 18, 28 (M.D.
N.C. 1967), and held that the desire to prevent frand took the
container manufacturers outside the Sherman Act ban.
All this is irrelevant to the case at hand. Here, fraud is not at
issue. Indeed, the Container opinion makes it clear that mere bad
faith bargaining does not amount to ‘‘fraud’’ in the Cement Manu-
facturers sense.
What appellants urge here, though, is not a desire simply to
avert occasional bad faith bargaining, but to comply with the posi-
tive duties imposed by another statute, the Robinson-Patman Act.
The Robinson-Patman defense was not raised by the Container
defendants at trial and was argued to the Supreme Court merely
as an afterthought. That Court did not deal with it.
The question before us, then, is not whether occasional, or even
widespread, buyer prevarication justifies price information ex-
changes, but whether the commands of Robinson-Patman may
sometimes do so, when accommodated to Sherman Act strictures.
17a
charges, of compliance with section 2(b) of the Robinson-
Patman Act would create a similar ‘‘controlling circum-
stance’’ that would legitimate an agreement otherwise pro-
hibited by section 1 of the Sherman Act. If it would, then
the trial court’s instruction was improper in permitting
the jury to convict appellants merely by finding an effect
on prices, with no consideration of purpose. The Govern-
ment denies that compliance with section 2(b) amounts to
a ‘controlling cireumstance.’’ Container, claims the Gov-
ernment, limited ‘‘controlling cireumstances’’ to preven-
tion of fraud.
We do not read that case so narrowly. If the Container
Court had sought to restrict the exception to ‘‘ prevention
of fraud,’’ it could have distinguished Cement Manufac-
turers by noting simply that the Container case did not
involve an attempt to thwart fraudulent purchasing prac-
tices, as had Cement Manufacturers. Instead, the Court
used that much broader term ‘‘controlling circumstance,’’
one of which was the desire to prevent fraud present in
the latter case. This suggests that there are ‘‘controlling
cireumstances’’ other than the one delineated in Cement
Manufacturers.
Price verification, insist appellants, must be considered
a controlling circumstance. They claim that otherwise the
very activity dictated by the Robinson-Patman Act could
be used as evidence of conspiracy to convict under the
Sherman Act. This conflict between the two acts would
leave them with their three unappealing alternatives: (1)
forego the price cut and probably lose a sale; (2) cut the
price and risk a Robinson-Patman charge, if the buyer was
lying; or (3) verify the price and risk the Sherman Act
charge involved here.
The Government replies that nothing in the Robinson-
Patman Act condones discussions about prices among
competitors, nor has any court ever required such discus-
18a
sions as a condition of establishing a section 2(b) defense.
Section 2(b), says the Government, does not force appel-
lants to verify. The Government poses its alternatives for
the appellants: (1) refrain from cutting prices to the single
buyer; (2) eut prices as to all buyers. In neither event
will the seller break either antitrust law.
Even the Government concedes that this choice is ‘‘dif-
ficult.’’ We fear that so limiting sellers’ alternatives would
discourage price competition in industries like gypsum
board, where the fact that price cutting occurs off list
prices and invoices makes corroboration of reported com-
petitor’s offers difficult or impossible. In such industries,
the Government’s alternatives would eliminate the section
2(b) defense. This, it seems to us, would be more likely to
put a floor under prices than to induce wholesale cutting,
since a firm in a concentrated industry would be unlikely
to reduce prices across the board simply to close a single
sale. Rerort or THE AtTorNeEY GenerAL’s National Com-
Mirtee to Stupy tHe Antitrust Laws 181 (1955). And it
is through isolated price reductions that established price
levels are eroded, precipitating widespread price cuts.
P. Areepa, supra, at 231. The Government’s position, then,
could induce greater price rigidity.
Because the Government’s resolution of the conflict be-
tween the Sherman and Robinson-Patman Acts would re-
quire us to read the Sherman Act as discouraging the very _
price competition it was designed to promote, we reject
that resolution. Appellants, however, seek an accommoda-
tion of the two acts that would recognize any bona fide
attempt to comply with section 2(b) of Robinson-Patman
as a ‘‘controlling circumstance’’ for Sherman Act pur-
poses. Anti-competitive dangers exist on this side, too.
Such a resolution would countenance a broad range of data
dissemination schemes and communications among com-
petitors, which might provide camouflage for illegitimate
19a
agreements. With this problem in mind, we turn ic the
cases that have already addressed this issue.
Except for the court below, each court to consider the
issue has agreed with appellants that the attempt to estab-
lish a 2(b) defense amounts to a ‘‘controlling circum-
stance’’ that shields those exchanging information from
Sherman Act liability. The first and most apposite case
involved a civil action alleging essentially the same con-
spiracy charged here. In Wal! Products Co. v. National
Gypsum Co., 326 F. Supp. 295 (N.D. Cal. 1971), the court
found that manufacturers of gypsum board, because their
products were homogeneous, deemed it essential to meet
lower offers by competitors. Purchasers aggressively
played one manufacturer against another, whipsawing a
series of price cuts through the industry by falsely report-
ing lower offers. When purchasers told sellers’ field repre-
sentatives of competitors’ lower offers, the representatives
asked for invoices or other written corroboration, but these
requests usually proved fruitless. In order io insulate
themselves against possible Robinson-Patman liability, spe-
cific company officials were given authority to communicate
with the competitor in question. This communication took
place ‘‘only after exhausting other means of confirming
the truth of such reported deviation.”’ Jd. at 309. Specific
confirmation was obtained, and no reported offers were met
unless verified. The Wall Products court held that this
activity amounted to a ‘‘controlling circumstance’’ con-
templated by Container. 326 F. Supp.
_The three other cases that involved this issue shared
similar facts. In each, a major oil company conferred with
its competitors during a gasoline price war, in order to
verify its competitors’ prices before granting temporary
allowances to its own local retailer. Although its is not
made clear in Webster v. Sinclair Refining Co., 338 F.
Supp. 248 (S.D. Ala. 1971), whether the defendant com-
municated directly with competitors or merely observed
20a
publicly posted prices, the court must have thought that
there was direct communication. It stated that obtaining
information from competitors does not violate section 1
of the Sherman Act if the ‘‘controlling cireumstance’’ of
Robinson-Patman compliance is present, citing Wall Prod-
ucts, 338 F. Supp. 251-52. ©
In Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir.),
cert. denied, 408 U.S. 928 (1972), the competitors exchanged
price information that was also publicly available through
trade journals and financial dailies. Jd. at 181. The court
cited Wall Products, however, for the broad proposition
that price information exchanges for the purpose of estab-
lishing a Robinson-Patman defense amount to a ‘‘control-
ling cireumstance.’’ Jd, at 182.
The third gasoline war case was Gray v. Shell Oil Co.,
469 F.2d 742, 746-47 (9th Cir. 1972), cert. denied, 412 U.S.
943 (1973). There the court held that the jury had to de-
cide whether the purpose of Shell’s communications with
its competitors was to comply with the Robinson-Patman
Act. Because the jury had found that purpose, the court
upheld a verdict of no liability, citing Belliston, supra.
First, it should be noted that the three gasoline war
eases significantly expanded the Wall Products holding.
None contained any suggestion that alternative means of
corroboration, such as invoices or public trade papers, were
unavailable, as they had been in Wall Products. Indeed,
the Belliston court expressly found that they were avail-
able. None indicated that the gasoline retailers had achieved
the same reputation for mendacity that the Wall Products
court ascribed to wallboard buyers. The gasoline war
cases, then, suggest that the category of price exchanges
that qualify as ‘‘controlling cireumstances”’ is quite broad.
So free a license to exchange price information might
undermine the Container holding.
2la
Second, these cases diluted the pro-competitive strength
of the Sherman Act in order to preserve the force of Rob-
inson-Patman’s requirement of solid corroboration. Yet
Automatic Canteen Co. v. Federal Trade Commission, 346
U.S. 61 (1953), suggests that when policies of the Sherman
and Robinson-Patman Acts conflict, it is the Robinson-Pat-
man Act that should give way. In Automatic Canteen, a
buyer was charged with violating section 2(f)* of the
Robinson-Patman Act, which forbids inducement of a dis-
criminatory price. The question before the Court was which
party—the FTC or the defendant—had the burden of pro-
ducing evidence on the issue of the seller’s costs, informa-
tion that might demonstrate that the varying prices were
not in fact discriminatory. The Court refused to place the
burden of discovering the seller’s costs upon the buyer
because, among other things, ‘‘it would almost inevitably
require a degree of cooperation between buyer and seller,
as against other buyers, that may offend other antitrust
policies,’’ id. at 69, that is, section 1 of the Sherman Act.
We are therefore reluctant to embrace the accommoda-
tion fashioned by the gasoline war cases, which seems to
eviscerate the Sherman Act for the benefit of Robinson-
Patman. The best way to resolve the dilemma framed by
appellants in this case, in the light of Automatic Canteen,
would be to ease their burden under Robinson-Patman,
instead of facilitating evasions of the Sherman Act’s pro-
competitive strictures as did the gasoline war cases. If
Robinson-Patman is interpreted to permit a seller lacking
other corroboration to cut his price without taking the
ultimate corroborative step of verifying the purchaser’s
report with his competitor, then the Sherman Act and Con-
tainer retain more vigor. We think Wall Products, Vivi-
* Section 2(f), 15 U.S.C. § 13(f), reads as follows:
It shall be unlawful for any person engaged in commerce,
in the course of such commerce, knowingly to induce or receive
a discrimination in price which is prohibited by this section.
22a
ano, and a recent case in the Sixth Circuit outline such a
solution to appellants’ alleged dilemma.
In Kroger Co. v. Federal Trade Commission, 438 F.2d
1372 (6th Cir.), cert. denied, 404 U.S. 871 (1971), the Sixth
Circuit affirmed an FTC finding that Kroger had induced a
discrimination in price, in violation of section 2(f) of the
Robinson-Patman Act. In soliciting bids for sale of private
label milk to its chain of grocery stores, Kroger falsely
told Beatrice Foods that it had received a bid twenty per-
cent off list price from another dairy. The FTC found that
Beatrice attempted to corroborate Kroger’s report, but
did not contact its competitor directly. Beatrice Foods
Co., 76 F.T.C. 719, 809-11 (1969). Relying on Kroger’s
false report, Beatrice cut its price to Kroger. Both Beatrice
and Kroger were charged with violating the Robinson-Pat-
man Act. The FTC, however, held that Beatrice had estab-
lished the ‘‘good faith meeting competition’’ defense under
section 2(b). Despite this finding that the price was not
illegal as to the seiler, Kroger was held to have induced a
discriminatory price. The FTC declared that Beatrice
could not be held liable for the discriminatory effect of the
price, because it had no reason to disbelieve Kroger. The
Sixth Circuit affirmed the ruling that Kroger could never-
theless be held to have known that the price it induced was
in fact discriminatory. Kroger, supra, 438 F.2d.
The Kroger case, when combined with the Wall Products
decision and our Viviano holding, offers a solution to the
quandary in which appellants claim to find themselves.
Kroger indicates that sellers can establish a section 2(b)
defense without taking the ultimate corroborative step of
communicating directly with their competitors. It accom-
plishes this by holding the purchaser to a high standard of
good faith bargaining under section 2(f). Thus, as long as
the seller has taken all other reasonable steps in an attempt
to corroborate his purchaser’s report of lower offers, he
need not fear Robinson-Patman liability, provided that—
as in Kroger—he has no independent reason to doubt the
purchaser’s reliability.
Viviano, though, requires the seller to investigate that
reliability. Viviano, supra, 411 F.2d at 259. This holding
protects the integrity of the section 2(b) defense. If the
seller could discriminate in price when he had good rea-
son to believe that the buyer—even a buyer held to a high
standard by Kroger—was lying about a competitor’s sup-
posedly lower offer, then the ‘‘good faith’’ requirement of
section 2(b) would be rendered nugatory. Therefore, if
previous experience or the investigation required by Vivi-
ano reveals that the purchaser cannot be trusted, as was
the case in Wall Products, supra, 326 F.Supp. at 309, then,
and only then, the seller may communicate with his com-
petitor to test the buyer’s veracity. The presence of this
doubt as to the purchaser’s truthfulness, combined with
the seller’s inability to corroborate the buyer’s reports
independently, creates the ‘‘controlling cireumstance’’ that
exempts price information exchanges from the Sherman
Act ban, under Container. This is a narrow ‘controlling
circumstance,’’ not the broad one of the gasoline war cases.
There was some evidence of this narrow ‘‘controlling
circumstance’’ in this case. Several witnesses testified that
the purpose of the ‘‘verification’’ calls was to establish a
Robinson-Patman defense and that their scope was con-
fined by that purpose. There was also testimony concerning
the unreliability of purchasers in the gypsum board mar-
ket. Therefore, appellants were entitled to an instruction
that their verification practice would not violate the Sher-
man Act if the jury found: (1) the appellants engaged in
the practice solely to comply with the strictures of Robin-
son-Patman; (2) they had first resorted to all other reason-
able means of corroboration, without success; (3) they had
good, independent reason to doubt the buyers’ truthful-
ness; and (4) their communication with competitors was
strictly limited to the one price and one buyer at issue.
24a
Trial court charged instead that if the jury found that
verification had an effect on prices, they had to find guilt
under the Sherman Act. Because this charge improperly
ignored Container’s exception for price information ex-
changes carried out under a ‘‘controlling cireumstance,”’
reversal is required.
Appellants also contend that, on the state of the evidence,
they were entitled to a more precise charge on the purpose
and scope of the conspiracy any particular defendant was
alleged to have joined. The Government insists that the
trial court’s charge on this point was sufficient and that
appellants waived their objections in any event. I agree
with appellants that the court’s charge was deficient. Find-
ing no waiver, I would order reversal on this point."
Over a period of five months, the Government introduced
masses of evidence concerning a multitude of seemingly
unrelated events and attempted to link them together to
show a single, overall conspiracy to stabilize the prices
and marketing conditions of gypsum wallboard. Most of
this evidence dealt with actions prior to the start of the
applicable limitations period. In these circumstances, it was
necessary specifically to inform the jury that any particu-
lar defendant could be found guilty of conspiracy only if he
understood that he had joined the single, overall agreement
charged in the indictment; participation in any of the sub-
sidiary events was not enough. United States v. Peoni,
100 F.2d 401, 403 (2d Cir. 1938); accord, United States v.
Purin, 486 F.2d 1363, 1369 (2d Cir. 1973), cert. denied sub
nom. Da Silva v. United States, 416 U.S. 987 (separate
appeal), cert. denied sub nom. Purin v. United States, 417
U.S. 930 (1974) (separate appeal). The great number of
activities in evidence and the huge cast of characters in-
Neither Judge Adams nor Judge Weis agrees with this view.
volved made it essential to impress upon the jury that each
defendant could be found guilty of the conspiracy charged
only if that overall design was within his reasonable con-
templation when he engaged in any of the isolated activi-
ties. Specifically, the jury should have been asked to decide
whether a given defendant, by engaging in one or more of
the apparently isolated events, was associating himself
with the overall agreement charged in the indictment.
United States v. Borelli, 336 F.2d 376, 385 (2d Cir. 1964),
citing Peoni, supra, 100 F.2d at 403. This the trial court
did not do.
Trial court did—as did the trial court in Borelli, supra
—repeatedly instruct the jury tha: each defenda.t could be
found guilty only if he knowingly joined the conspiracy
charged and that guilt was to be determined on an individ-
ual basis.’ But this left the jury—like the jury in Borelli—
* Relevant portions of the charge are as follows :
Now I want to charge you at this time that it is your duty
to give separate consideration to the charges against each of
the Defendants, whether they were a corporation or an indi-
vidual. Each must be passed upon by you separately. You
may find all the Defendants guilty. You may find all of the
endants not guilty or you may find some guilty and some
not guilty. This depends on the facts as you find them and
the inferences which you deem appropriate to draw from those
charges. ...
An individual's membership in a conspiracy must be estab-
lished by evidence as to his own conduct, what he, himself,
knowingly said or did. ...
Now, there has been an issue raised that, even if—and it is, of
course, denied there ever was a conspiracy—but it is con-
there is that a Defendant will not be judged solely
upon the applicable to him. In this regard, you must
consider the evidence as to each Defendant separately.
26a
free to find that a defendant automatically associated him-
self with the overall conspiracy charged merely by partici-
pating in one or a few of the acts alleged to be individual
elements of the grand design. In this sense, the findings of
guilt may have been ‘‘all-or-none’’: once an overall con-
spiracy was found as to some defendants, all of the defend-
ants could have been connected to the conspiracy by their
involvement in one of the minor agreements allegedly part
of it. The court failed to emphasize that joining a subsid-
iary agreement would not constitute guilt unless it was
done with the intent to join the overall conspiracy. This
‘*all-or-none’’ basis for determining guilt is what bothered
the Borelli and Peoni courts.
The Borelli court described the problem:
The view that if the evidence warrants the finding
that some defendants were parties to a single agree-
a conspi to the character alleged in the indictment; and,
second. if wo, which of the Defendants, if any or all, were
knowing participants in it. This involves an examination of the
evidence, separately, with respect to each Defendant.
Now, in this instance—in this case, two of the Defendants are
represented by one attorney. You stil] must examine the evi-
dence as to each of those independently and reach your con-
clusion based on that evidence independently. Each defendant
has the right to have you consider the evilence from his point
of view—that is, you are to consider whether or not the evi-
dence shows him individually guilty or not, and, unless you
are convinced beyond a reasonable doubt of the guilt of a
Defendant, you must return a verdict of not guilty as to that
individual. .. . a _
In addition, you would not be warranted in ing any indi-
vidual Defendant guilty, unless you find beyond a reasonable
doubt that, knowing of the existence of the conspiracy, he took
some action or authorized or directed the em t of one
or more means and methods in furtherance of the conspiracy,
as I explained to you earlier.’’
Thus, the trial court never explicitly told the jury that participa-
tion in one of the allegedly conspiratorial subsidiary events was
insufficient, without more, to support a verdict of guilty.
27a
ment to sell contraband for a nine-year period, it neces-
sarily does so as to every defendant who has conspired
with them at any time for any purpose, is thus a con-
siderable over-simplification. Rinaldo’s testimony
thoroughly warranted the finding of an agreement
among himself, Joe and Rosario Magavero beginning
in 1950 and continuing through 1959. But it does not
follow, for example, that his recital of two deliveries to
Tantillo in March and July, 1951, on the instructions
of Locascio in one instance, and of Rosario Mogavero
in the other, would justify a finding that Tantillo had
thereby made himself a part of whatever narcotics
enterprises Locascio, the Mogaveros and their future
partners might engage in for the rest of their lives,
provided only that these were uninterrupted—a theo-
rem that would lead to the inevitable but extraordi-
nary conclusion that Tantillo’s two purchases entered
him into a ‘‘partnership in criminal purposes,’’ United
States v. Kissel, 218 U.S. 601, 608, 31 S.Ct. 124, 54
L.Ed. 1168 (1910), with Castiglia, who supplied a
source to and took deliveries from an altered core
seven years later, and vice versa.
Borelli, supra, 336 F.2d at 384. Appellants here raise a
similar concern. For example, it does not follow that ap-
pellant Brown’s participation in the allegedly conspira-
torial 1965 industry-wide price increase and 1966 change in
credit terms—the only actions with which any evidence
connected him—means that he associated himself with an
overall conspiracy to stabilize prices beginning before 1960
and lasting until 1973. Each of the other appellants was
likewise connected by the evidence only to a few of the
dozens of allegedly conspiratorial episodes that the Gov-
ernment sought to weave into one overriding agreement.
Yet the jury was never told that participation in one epi-
sode, without more, was insufficient to prove association in
the latter enterprise.
28a
In view of the ambiguity surrounding the scope of any
agreement joined by each of the defendants, the trial court
should have given the charge they requested on this point."
Conspiracy is ‘‘an elastic, sprawling and pervasive of-
fense.’’ Krulewitch v. United States, 336 U.S. 440, 445
(1949) (Jackson, J., concurring). Trial courts must take
great pains to prevent the seine of a conspiracy charge
from entangling a defendant only tangentially related to
the agreement in question.
The Government’s assertion that appellants waived any
objection to the trial court’s charge on this point is without
merit. Defense counsel three times expressed their willing-
ness to make a record by ‘‘particularizing’’ objections to
each charge the trial court denied. On each occasion, the
court observed that particular objections would consume
too much time and that one blanket objection sufficed to
make a record for all. Where the trial judge declares that
he does not require further elucidation of the requests he
has refused, there can be no waiver. See Green v. Reading
Co., 183 F.2d 716, 719 (3d Cir. 1950) ; 3 C. Wricnt, Feperan
Practice anp Procepure § 842 (1969). Hence, the lack of a
specific objection to the refusal to give this specific charge
does not bar appellants from raising it as error on appeal.
‘* The requested charge was as follows:
Because the gist of the offense charged is a continuing agree-
ment to raise, fix, maintain and stabilize prices of gypsum
products, it is essential for you to determine what kind of
agreement or understanding, if any, existed as to cach de-
fendant. Each defendant is chargeable with the acts of his or
his fellow defendants and alleged co-conspirators only if the
acts are done in furtherance of the joint venture as he or it
understood it. No defendant is to be held responsible for what
some of the alleged conspirators, unknown to the rest, do be-
yond the reasonable intendment of the common agreement or
understanding, if any, to which you may find him or it a party.
(Emphasis added).
29a
Contrary to the Government’s claim, appellants submit-
ted their requested charge in a timely manner. After telling
counsel on June 27, 1975, what the substance of his charge
would be, the trial judge invited written objections by July
2. On June 30, the court advanced that deadline one day,
so that he could rule on the objections before closing argu-
ments began. On July 1, appellants filed numerous objec-
tions and supplemental requests designed to meet the
court’s previous comments. Among them was ra) charge at
issue here. Because of time constraints, the t urt did
not then rule on the lengthy submissions. He indicated,
however, that he would refer to them in formulating his
charge."* Because the court acknowledged on the record
that appellants had timely called his attention to the points
they wanted charged, the Government’s assertion of waiver
must fail.
C.
Appellants also question the sufficiency of the trial!
court’s charge with respect to withdrawal from the alleged
conspiracy. Where a continuing conspiracy is proven, each
defendant who by affirmative action has completely dis-
sociated himself from the agreement before the start of
the limitations period is entitled to acquittal. Hyde v.
United States, 225 U.S. 347, 369 (1911). This abandonment
may be effected by communicating it ‘‘in a manner reason-
ably calculated to reach co-conspirators.’’ Borelli, supra,
336 F.2d at 388. Proof of such communication need not
** The trial court ’s comments were as follows:
I will use them only for the purpose of my own guidance in
my final charge, but they are just too late for me to pass on
them as a supplemental request for charge, as for guidance of
(Emphasis added).
The lateness the court mentions relates not to the submissions in
general, but to the court’s ability to rule on them that day so that
counsel would be aware of the court's intent when making their.
closing arguments.
30a
involve evidence that the defendant directly informed each
co-conspirator of his intent to withdraw.
The formation of a criminal conspiracy or adherence
to a criminal scheme may be shown by evidence either
direct or circumstantial, in practice often taking a
wide range, and we see no reason whiy the withdrawal
should not be held susceptible to proof of the same
character. It might, of course, be shown by a writing,
or by an express oral agreement, and we think by con-
duct wholly inconsistent with the theory of continuing
adherence.
Buhler v. United States, 33 F.2d 382, 384 (9th Cir. 1929);
accord, Marino v. United States, 91 F.2d 691, 698 (9th Cir.
1937), cert. denied sub nom. Gullo v. United States, 302
U.S. 764 (1938). See also United States v. Goldberg, 401
F.2d 644, 648-49 (2d Cir. 1968) cert. denied, 393 U.S. 1099
(separate appeal), cert. denied sub nom. Tannenbaum v.
United States, 394 U.S. 932 (1969) (separate appeal) ; De-
velopments in the Law—Criminal Conspiracy, 72 Harv.
L.Rev. 920, 958 (1959).
Appellants introduced evidence of the resurgence of
price competition, and other forms of competition, which
could have convinced the jury that one or more of the
defendants had abandoned any conspiracy to stabilize
prices and other conditions before the start of the limita-
tions period. They also requested a charge to the effect that
active competition on price might amount to the ‘‘affirma-
tive action’’ necessary to accomplish a withdrawal.” Trial
** The requested charge was as follows:
Even if you find the existence of a conspiracy formed before
December 27, 1968 and continuing thereafter you must acquit
any defendant if it appears that he withdrew from such a
conspiracy prior to the December 27, 1968 date. To withdraw
from a conspiracy, a conspirator must take affirmative action.
Resumption of competitive behavior, such as intensified price
3la
court’s charge, however, negated this theory of withdrawal.
The couit charged as follows:
In order to find that a defendant abandoned or with-
drew from a conspiracy prior to December 27, 1968,
you must find from the evidence, that he or it took
some affirmative action to disavow or defeat its pur-
pose. Mere inaction would not be enough to demon-
strate abandonment. 70 withdraw, a defendant either
must have affirmatively notified each other member of
the conspiracy he will no longer participate in the
undertaking so they understand they can no longer
expect his participation or acquiescence, or he must
make disclosures of the illegal scheme to law enforce-
ment officials.
Thus, once a defendant is shown to have joined a con-
spiracy, in order for you to find he abandoned the
conspiracy, the evidence must show that the defendant
took some definite, decisive step, indicating a complete
disassociation from the unlawful enterprise.
(Emphasis added).
As the court explained the meaning of ‘‘ withdraw,’’ is com-
prised only affirmative notification—which connotes direct
announcement—and disclosure to law enforcement author-
cutting or price wars, could constitute such affirmative action.
If there is a reasonable doubt as to whether a defendant has
withdrawn from the conspiracy charged, if any existed, prior
to December 27, 1968, that defendant must be acquitted.
(Emphasis added).
This charge would not have told the jury ‘‘that merely the fact
that somebody was in competition shows withdrawal from con-
spiracy,’’ as the trial court feared; instead, it merely recognized
appellants’ right to have the jury apply their theory of withdrawal
if the jury believed their evidence and drew the inferences they
asked the jury to draw. While not a model charge on this point,
it at least drew the court’s attention to the improperly narrow
scope of the charge actually given.
32a
ities. Either might constitute withdrawal, but the court, by
limiting withdrawal to these two, improperly excluded
other possibilities, such as conduct inconsistent with the
theory of continued adherence.
The court did permit appellants to argue their theory of
withdrawal to the jury. That opportunity did not salvage
appellants’ rights, however, because the court in its subse-
quent charge told the jury that they could not consider
appellants’ theory. Reversal is, in my opinion, required on
this point.”
IV.
The judgments of conviction will be reversed and the
case remanded to the court below.
To Tue CLERK:
Please file the foregoing opinion.
James Hunter, III, Circuit Judge
** Neither Judge Adams nor Judge Weis agrees with this con-
clusion.
33a
Apvams, Circuit Judge, concurring.
While I concur in the reversal of the defendants’ con-
victions, I am impelled to comment on one issue that Judge
Hunter has not discussed. That issue is whether the trial
judge, in effect, directed the jury to reach definitive ver-
dicts of guilty or not guilty. A determination that the ver-
dicts were so induced would, of course, reinforce the con-
clusion reached by Judge Hunter.
I.
After a nineteen week trial, the jury began its delibera-
tions in the afternoon of Tuesday, July 8, 1975. On each
of the next two days (Wednesday and Thursday), the jury
deliberated from 9:00 a.m. until 10:00 p.m.
On Friday, July 11, the fourth day of sequestered delib-
erations, the trial court advised counsel that ‘‘{s]ome of
the jurors aren’t feeling well’’ and that ‘‘[s]ome are
tired.’’ The judge suggested a weekend cessation in the
deliberations to reduce the ‘‘strain’’ on the jury, but the
defense counsel objected. The district court then summoned
the jury foreman who, in the presence of counsel, reported
that some jurors were ‘‘crying’’ and that others were con-
cerned about being ‘‘away from home for a long time.’’’
However, the foreman also stated that the deliberations
were ‘‘going as well as can be expected.’’* As a result of
this report, the trial court decided that deliberations would
terminate each day at 6:30 p.m. instead of 10:00 p.m.
On Saturday, July 12, the jedge, in open court, ordered
the jurors to continue their deliberations. He did so, using
* Transcript at 15,128.
* Id. at 15,135.
* Id. at 15,136.
34a
a supplemental instruction previously approved by this
Court in United States v. Fioravanti.*
Late on Sunday, the sixth day of deliberations, the jury
notified the court that it could not reach a verdict. A note
addressed to the judge declared: ‘‘We cannot reach a
unanimous verdict. If any juror changes his mind now, he
would only change due to compassion for his fellow
jurors.’’* In response to this note, the judge assembled the
jury and, in the presence of counsel, again gave the Fiora-
vanti charge. When the jury retired, the judge informed
counsel that he would not quickly declare a mistrial after
a nineteen week trial.
On Monday, July 14, the seventh day of deliberations,
the court received another note from the jury. This mes-
sage stated that the foreman wished to ‘‘discuss the con-
dition of the jury”’ and to ‘‘seek further guidance’’ from
the judge.* The trial judge informed counsel that he would
confer privately with the foreman (with a court reporter
*412 F.2d 407 (3d Cir.), cert. denied sub nom., Panaccione v.
United States, 396 U.S. 837 (1969).-
Basically, the Fioravanti charge outlines the responsibilities of
each juror during deliberations, including the duties to re-examine
one’s one predilections and to deliberate with a view towards reach-
ing a verdict, if possible. For the text of the recommended instruc-
tion, see 412 F.2d at 420.
In this Cireuit at least, the Fioravanti charge supersedes a sup-
plemental instruction approved in Allen v. United States, 164 U.S.
492 (1896). In essence, the Allen charge cautioned the minority
within a jury to ‘‘see the error of its ways.’’ 412 F.2d at 417.
Caustically denominated as the ‘‘dynamite’’ charge (see Green v.
United States, 309 F.2d 852, 853 (5th Cir. 1962)), the Allen in-
struction had been criticized by eminent scholars and jurists as
having an inherently coercive influence on jury deliberations. Con-
sequently, this Court suggested the more neutral statement of juror
responsibilities embodied in the Fioravanti instruction.
* Docket entry 322, #24.
* Transcript at 15,164.
35a
present) and would ampound the transcript of the confer-
ence. He went on to say, however, that if the parties ob-
jected, the foreman’s request for a meeting would be de-
nied. When the parties did not object to the proposed
conference, though defense counsel did express serious res-
ervations,’ the judge spoke with the foreman in a room
adjacent to the court. The transcript of the discussions
then was impounded, despite renewed and repeated re-
quests for it.* Indeed, it was not until this Court ordered its
disclosure, pursuant to a post-trial motion by defendants,
that they learned what the transcript contained.”
During the meeting between the judge and the foreman,
the foreman initially reported on the health of the jury.
He represented that the jurors were ‘‘distraught”’ and
‘«sick,’’ with ‘‘at least eight of the jurors . . . taking some
kind of pill.’’ The foreman next stated that ‘‘personality
conflicts on the jury’’ had impeded their discussions, but
that the jurors ‘‘have overcome those [conflicts]."" Finally,
the foreman declared that, in his ‘‘opinion,’’ the jury was
deadlocked: ‘‘We have taken enough ballots now, and we
have had enough discussions, and the way it is divided is
not going to be settled by any document, any remembrance
of testimony.’’ ** When the trial judge inquired whether the
‘‘jury is hopelessly deadlocked and will never reach a ver-
dict,’’ the foreman responded in the affirmative.”
"Id. at 15,165-71.
* Id. at 15,174-75.
* Order of the Court of Appeals for the Third Circuit, dated
September 16, 1975.
*° Conference Transeript at 2.
“Jd. at 4.
2 Id. at 4.
8 Id. at 6.
36a
At the end of the conference, the following critical ex-
change occurred:
Mr. Russell [foreman]: * * * It is a situation I don’t
know how to help you get what you are after.
The Court: Oh, I am not after anything.
Mr. Russell: You are after a verdict one way or the
other.
The Court: Which way it goes doesn’t make any dif-
ference to me."
The trial judge then instructed the foreman to ‘‘tell [the
jury] to keep deliberating and see if they can come to a
verdict.’’ *®
Upon returning to the courtroom, the judge purported
to summarize for counsel what had transpired during the
conference. The judge first stated that because of what
{the foreman] calls personality differences between some
members of the jury ... he does not feel that they are ever
going to be able to get over this.’’ Thereafter, the court
advised counsel that some of the jurors were ‘‘not feeling
well,’’ but that the foreman really did not ‘‘know if they
are sick or aren’t sick.’’ The judge then announced that
he had relayed a message to the jurors ‘‘to continue their
deliberations.”’
Significantly, the judge did not tell counsel about the
foreman’s opinion that the jury was hopelessly deadlocked;
did not indicate that the foreman was under the impression
that the court wanted a definitive verdict either for the
prosecution or the defendants; and did not mention the
directive to the jury that it should ‘‘see if [it] can come
to a verdict.’’ Thus, it does not appear that the report on
* Jd. at 7. (emphasis added)
* Id. at 8.
37a
the substance of the discussions between the court and the
foreman was accurate or even substantially accurate."
In any event, on the following morning, the eighth day
of deliberations, the jury returned guilty verdicts against
each of the defendants.
II.
Defendants contend that the trial court ‘‘coerced’’ a
deadlocked jury into reaching its verdict. The¥ maintain
that the judge caused the jurors to deliberate at excessive
lengths and despite illness and exhaustion. The defendants
also argue that the repetition of even an approved supple-
mental charge inherently compelled a verdict. Finally, they
assert that the district court impermissibly insisted upon
a verdict, foreclosing the possibility of a hung jury. Since
I believe that only the last claim—that the verdict was
improperly induced—is valid, I shall confine my discus-
sion to that proposition.
The factual linchpin of the defendants’ contention that
the court, in effect, ‘‘coerced’’ a verdict from the jury is the
private conference between the foreman and the trial
judge. There, as noted above, the foreman declared that he
knew the court wanted a verdict ‘‘one way or the other.’’
At that point, I believe, the trial judge possessed the affirm-
ative obligation to make it clear to the foreman that the
jury had the option of reaching no verdict, should juror
unanimity prove impossible. Instead, by stating merely
In his dissenting opinion, Judge Weis appears to emphasize
the fact that, after the trial court's report to counsel, one of the
defense lawyers ‘‘suggested that the appropriate point [for declara-
tion of a mistrial] would be the following morning [ Tuesday,
July 15). .. .’’ However, it is reasonable to assume that, had this
38a
‘‘which way it goes doesn’t make any difference to me,’’
there was effectively conveyed to the jury, through the me-
dium of the foreman, the directive that only a verdict for
the prosecution or a verdict for the defendants would be
acceptable to the court. Such an admonition provides justi-
fication, in my view, for overturning the defendants’ con-
victions.
Reversal on this ground would appear to be required
by prior teachings of the Supreme Court as well as this
Court. In a per curiam opinion in Jenkins v. United
States," the Supreme Court deemed as coercive a trial
court’s instruction to a jury that ‘‘You have got to reach
a decision in this case.’’ While the counterpart in the
present case was more subtle in nature, it does not appear
to differ materially from the instruction proscribed in
Jenkins. Nor is it any less coercive.”
This Court previously has provided a cogent delineation
of the relevant principles governing judge-jury relations
during the deliberative period. In Fioravanti,” we made it
very clear that jurors should not return a verdict unless
they have reached complete unanimity concerning the guilt
or innocence of a defendant.
Speaking for a unanimous panel, Judge Aldisert posited:
So long as the unanimous verdict is required in crim-
inal eases, there will always be three possible deci-
* 380 U.S. 445 (1965).
** Jenkins does differ somewhat from the case at bar, as there
the defective charge was given only two hours after the inception
of jury deliberations. However, the variance in timing between
that case and ours would not appear to be significant. In both situ-
ations, the judge made it known to the jurors that he wanted a
definitive verdict, a request that soon after was rewarded, In
Jenkins, such a procedure was deemed to be reversible error.
” 412 F.2d 407.
sions of the jury: (1) not guilty of any charge; (2)
guilty of one or more counts of the indictment; and
(3) no verdict because of a lack of unanimity. The
possibility of a hung jury is as much a part of our
jury unanimity schema as are verdists of guilty or not
guilty. * * * [I)t is a cardinal principle of the law that
a trial judge may not coerce a jury to the extent of
demand that they return a verdict.”
In our system of criminal justice, then, a jury need not,
and may not, render a verdict if it is unable to attain
agreement. To permit a trial judge to undermine a jury’s
prerogative of not returning a verdict would abrogate the
protection that the right to a jury accords criminal defend- |
ants. Moreover, if jurors are encouraged to subscribe to
verdicts to which they are not committed, merely to reach
some definitive result upon judicial insistence, then the
universal perception of jury verdicts as manifestations
of reasoned agreement would have to be examined anew.
Such reevaluation is unnecessary so long as we thwart ef-
forts to preclude one bona fide outcome of jury delibera-
tions—no verdict.
None of this is to suggest that jurors should not be
encouraged to reach a verdict, if unanimity is at all pos-
sible, or that the discretion of trial judges over declara-
tions of mistrial should be restricted. Yet where a trial
judge, in effect, eliminated the possibility of no verdict
through comments to the jury, the validity of verdicts rend-
ered by that jury should be called into question.
In the present case, it is evident that the jury had the
mistaken impression, for whatever reason, that it must
reach a verdict of guilty or not guilty. Yet, that impression
was in no way dissipated by the trial court in its confer-
* 412 F.2d at 416. (emphasis added )
4a
ence with the foreman, or at any time thereafter.” Indeed,
the court’s language seems to have confirmed the impres-
sion that a verdict of guilty or not guilty was required.
This is especially so because the critical dialogue between
the trial judge and the foreman occurred immediately
after the court learned that the jury was so ‘‘hopelessly
deadlocked’’ that the case was ‘‘not going to be settled by
any document, any remembrance of testimony.’’ In effect,
the trial judge at that point took from the jurors their pre-
rogative to render no verdict, should it have appeared to
them, as the colloquy with the foreman so indicates, that
unanimity was not attainable. Such encroachment on jury
authority, and the concomitant proscription of a possible
**no verdict’’ outcome, requires reversal of the defendants’
convictions.
In my judgment, the jury issue present here warrants
reversal, and such a conclusion buttresses the result
reached by Judge Hunter.
IT.
Having decided that the defendants’ convictions must
be reversed because of the jury question, | will comment
but briefly on the matters considered by Judge Hunter.
I concur in Parts I, II and IIIA of Judge Hunter’s
opinion. As to Part IIIA, I do so, recognizing that the
*" While the district judge had assured counsel that he would
give no instructions on the law during the conference, nor repeat
the Froravanti charge, in my view, the judge should have attempted
the assurances afforded counsel, he could ha j
and, in the presence of counsel, informed the jurors that no verdict
was appropriate and, indeed, necessary should be
reach unanimity. Here, however, the court failed to take any such
steps.
4la
exception to Sherman Act liability that the 4 2(b) proviso
of the Robinson-Patman Act creates is a narrow one.
Sellers in prosecutions for verification activities face the
difficult task of convincing the jury or the court, as the case
may be, that such activities do not constitute price-fixing
but reflect a ‘‘controlling circumstance’’ beyond their
power (e.g., the ‘‘lying buyer’’).”
With respect to the ‘‘conspiracy’’ and ‘‘withdrawal’’
issues,” it is questionable whether the charge of the trial
judge constituted reversible error. This is particularly so
given the length of the trial and the unusually complex
legal questions present in this litigation. Within the con-
text of the complete charge and of the trial as a whule, the
instructions as to these two issues would appear to be
adequate. Even so, as the case must be retried, the district
court would do well to incorporate in its charge, on reinand,
the suggestions set forth by Judge Hunter.
* 393 U.S. 333, 335 (1969).
* See Parts IIIB and C of Judge Hunter’s opinion.
42a
Wes, Circuit Judge, dissenting.
A.
The majority opinion discusses the conflict between the
Sherman and Robinson-Patman Acts and the resulting di-
lemma that a business concern may face in steering be-
tween this Seylla and Charybdis of commerce. However,
the course chartered by the majority to avoid these two
hazards, while carefully considered, does not clear the
shoals of (/nited States v. Container Corporation of Amer-
ica, 393 U.S. 333 (1969).
The trial judge charged the jurors that, standing alone,
verification to comply with Robinson-Patman did not vio-
late the Sherman Act; such activity, however, could be evi-
dence of an illegal agreement despite a proper purpose if
stabilization of prices resulted. The majority hold that this
instruction was erroneous. They read Container Corpora-
tion to allow an exchange of information with competitors
in oligopolistic markets where:
1. the motive of the seller is compliance with Robin-
son-Patman ;
2. he doubts the truthfulness of a buyer’s report that
lower offers by competitors have been made; and
3. the seller is unable to obtain independent corrob-
oration of the buyer’s representation.
This combination of factors is characterized as a ‘‘ecntrol-
ling cireumstance.’’ In the interest of brevity, it may be
termed the ‘‘lying buyer’’ defense.
There are serious difficulties with this interpretation
when the facts of the Container case are examined. The
pertinent details in the case are not elaborated in the Su-
preme Court’s opinion but must be gleaned from the ex-
43a
tensive findings and opinion of the district court.’ The
trial judge determined that:
1. buyers furnished inaccurate, incomplete or mis-
leading information on prices;
2. no defendant furnished a competitor his most re-
cent price, except in response to a specific request ;
3. verification was requested only when buyers were
suspected of furnishing inaccurate information;
4. there was no agreement to exchange price data;
5. the information was not disseminated to the public
or to customers genera)ly; and
6. there was no proof that the exchange of data had
the effect of stabilizing prices.
The district court concluded that the defendant’: conduct
was designed to ‘‘ prevent the perpetration of a fraud upon
them,’’ and thus was insulated by Cement Manufacturers
Protective Association v. United States, 268 U.S. 588
(1925). Although the district court did not discuss the
Robinson-Patman issue, it was briefed by the parties on
appeal to the Supreme Court.
The factual background of Container is strikingly similar
to that of the case sub judice, except that these defendants
do not deny the existence of an agreement to verify and the
jury verdict establishes the fact of effect upon prices.
These factors weigh the scales even more heavily on the
side of the government. The buyers’ behavior in the syP-
sum industry cannot be classified as a ‘‘controlling cir-
cumstance’’ exempting the agreement from the proscrip-
tion of Container if in that case the Court condemned that
very circumstance.
‘The case is reported at 273 F.Supp. 18 (M.D. N.C. 1967).
dta
The defendants here have been found guilty of price
fixing, and it is now well settled that such conduct is illegal
even if the motives which inspire it are beneficient or al-
truistic, United States v. Socony-Vacuum Oil Co., 310
U.S. 150 (1940). In essence, the defendants contend that if
price stabilization did occur as a result of their efforts to
prepare a Robinson-Patman defense, then such an effect
is only incidental and not prohibited. But Robinson-Patman
does not mandate price verification with competitors in
oligopolistie markets. Our opinion in Viviano Macaroni
Co. v. FTC, 411 F.2d 255 (3d Cir. 1969), does not go so
far but requires only a reasonable inqury into a buyer’s
veracity. That case does not compel an investigation which
itself is illegal either because it results in price fixing or
violates other provisions of law.
If the Robinson-Patman Act requires verification, even
that which tends to stabilize prices, it is difficult to under-
stand why the defendants’ ‘‘purpose’’ to comply would be
significant. Observance of a statutory requirement is legal
whether or not the actor has knowledge of it. Thus, it may
be seen that the defendants’ use of ‘‘ purpose’’ is to make it
interchangeable with ‘‘motive.’’ As Socony Vacuum, supra,
makes clear, that factor does not absolve those responsible
for the forbidden anti-competitive effect. See Maple Floor-
ing Manufacturers Assn. v. United States, 268 U.S. 563,
577, 585 (1925).
I do not understand Container to expand the holding of
Cement Manufacturers, but rather to confine it. The Su-
preme Court did not attempt to distinguish Cement in de-
tail but there is a difference between that fact situation
where a seller was bound by an existing contract to furnish
material and that which obtains here where he is free to
enter into a transaction or not as he chooses. Container
was based on the premise that information exchanges in a
restrictive market have the actual or theoretical effect of
stabilizing prices and generally should not be tolerated,
45a
393 U.S. at 337. In the oligopolistic setting, the control of
price information by the seller reinforces his economic
power in a manner inconsistent with the play of free mar-
ket forces. This theory led the Supreme Court to reject
the proposition that an exception should be made when
the exchange of price information is a response to the
‘lying buyer,’’ though obviously the opinion did not con-
done the purchaser’s tactics.
I agree with the majority that Belliston v. Texaco, Inc.,
455 F.2d 175 (10th Cir.), cert. denied, 408 U.S. 928 (1972),
and Gray v. Shell Ow Co., 469 F.2d 742 (9th Cir. 1972),
cert. denied, 412 U.S. 943 (1973), do not fit within Con-
tainey. Moreover, in my view Wall Products Co. v. Na-
tional Gypsum Co., 326 F.Supp. 295 (N.D. Cal. 1971), does
not follow the Supreme Court’s opinion.
The trial judge in the case sub judice obviously grasped
the significance of Container when he charged:
‘‘TI)f ... the effect of these exchanges was to raise,
fix, maintain, and stabilize the price of gypsum wall-
board, then you may consider these [ex]changes as
evidence of the mutual agreement . . . to raise, fix...
and stabilize list prices.’’
~ I believe that in the circumstances of this case, the instruc-
tion was correct, properly presented the issue to the jury,’
and, hence, did not constitute reversible error.
*'™n Handler, Antitrust: 1969, 55 Cornett L. Rev. 161, 176
(1970), Professor Handler writes: ‘‘A compact to exchange price
information plainly should be unlawful without more if its pur-
pose or effect was to stabilize prices.’’ He observed that in Con-
tainer Corporation defendants had stressed Robinson-Patman as
well as fraudulent conduct of the buyers as a defense, but Justice
Douglas, author of the majority opinion, ‘‘rejected these assertions
out of hand.’’
In Kefauver, The Legality of Dissemination of Market Data by
Trade Associations: What does Container Hold?, 57 Corneut L.
Rev. 777, 788 (1972), the author states: ‘‘The majority in Con-
46a
The testimony in this case took more than four months
and generated a transcript of many thousand pages. After
all the evidence had been received, the trial judge’s task
was to instruct the jury on complex issues of law in the
antitrust, conspiracy and general criminal fields. Such a
charge must be phrased in language intelligible to a lay
audience and, while conveying the substance of the law,
must be sufficiently succinct that the jury is not over-
whelmed. Too often we on the appellate courts scrutinize
jury instructions for adherence to the esoteric standards
expected of a law review article. We tend to forget that the
charge should be as simple as possible and contain no more
than the jury needs to apply law to facts in reaching a
verdict.
Judge Hunter’s opinion faults the trial judge for failing
to give the instruction requested by the defendants which
is set out in full at footnote 12. In essence, this point for
charge required the jury to determine what kind of agree-
ment or understanding existed as to each defendant. It
went on to say that no defendant was to be held respon-
sible for what another conspirator might have done be-
yond the common agreement or understanding. I assume
that the refusal of the trial judge to charge in the precise
tainer of course found an effect of price stabilization, but nothing
in the opinion indicated that they had found a purpose on the
part of defendants to achieve such an effect."’ “‘Container placed
a new emphasis on the effect of competitors’ exchange of market
information.’’ Jd. at 791. Professor Handler noted that a contrary
result would promote evasion. Cf. Eaton, The Robinson-Patman
Act: Reconciling the Meeting Competition Defense with the Sher-
man Act, 18 Antitrust Bull. 411, 427 (1973). (‘There is however
a great potential for abuse in any ‘lying buyer’ defense. Its ap-
plicability may therefore be somewhat limited.’’)
A deliberate scheme to fix prices is, of course, illegal, even if
unsuccessful, and in such a case the “‘purpose’’ of the defendants
would be relevant to establish intent.
47a
verbiage requested is not at issue, see James v. Continental
Insurance Co., 424 F.2d 1064 (3d Cir. 1970). Rather, the
error claimed is the omission of an instruction to the
effect that a particular defendant could be found guilty
of conspiracy only if he understood that he had joined the
single overall agreement charged in the indictment. As I
read it, the charge adequately set forth the spirit of the
instruction that Judge Hunter desires. The portions of the
charge noted in footnote 11 of his opinion demonstrate that
the jury was told each defendant’s membership in the con-
spiracy was to be evaluated on an individual basis.
Early in the charge, the trial judge reviewed the in-
dictment which listed allegations of some thirteen manrers
and means used to implement the price-fixing conspiracy.
He later said:
**Before the jury may find that a defendant or any
other person has become a member of a conspiracy,
evidence in the case must show, beyond a reasonable
doubt, that the conspiracy was knowingly formed and
that the defendant or other person who is claimed to
have been a member knowingly participated in the un-
lawful plan, with the intent to advance or further
some object or purpose of the conspiracy. ... [S]o, if a
defendant or any other person, understanding the un-
lawful character of a plan, intentionally encourages,
advises or assists, for the purpose of furthering the
undertaking or scheme, he, therefore, becomes a know-
ing participant, a conspirator.
“If it appears beyond a reasonable doubt, from the
evidence in the case, that the conspiracy alleged in the
indictment was knowingly formed and that any De-
fendant knowingly became a member of the conspiracy,
either at the inception of the plan or scheme or after-
ward, then the success or failure of the conspiracy
48a
to accomplish the common purpose or object is imma-
terial.
@ * e
‘‘In considering whether there was a conspiracy, you
should bear in mind that a conspiracy does not have
to be completely formed at one place or at one time.
It can be put together a little at a time and can be
joined at different times or in different ways by each
alleged conspirator.
‘‘Now, there are two essential elements which must
be proved in order to establish the offense of con-
spiracy as charged in this indictment:
‘‘First, that the conspiracy described in the indict-
ment was knowingly formed and was exciting at or
about the time alleged; and,
‘‘Second, that the Defendants knowingly became mem-
bers of the conspiracy as charged.
‘If the jury should find—you, the jury, should find,
beyond a reasonable doubt, from the evidence in the
case, that existence of the conspiracy charged in the
indictment has been proved, then the conspiracy of-
fense charged is complete, and it is complete as to
every person found by the jury to have been know-
ingly a member of the conspiracy, regardless of
whether such a person knowingly became a member at
its inception or the beginning of the conspiracy or
afterward, during the continuance of the conspiracy.
‘*You have two questions to determine: First, whether
there was a conspiracy of the character alleged in the
indictment; and, second, if so, which of the Defendants,
if any or all, were knowing participants in it. This
49a
involves an examination of the evidence, separately,
with respect to each Defendant.
*“‘In addition, you would not be warranted in finding
any individual Defendants guilty, unless you find be-
yond a reasonable doubt that, knowing of the exist-
ence of the conspiracy, he took some action or author-
ized or directed the employment of one or more means
and methods in furtherance of the conspiracy, as I
explained to you earlier.’’ (Emphasis supplied) *
The jury was not left in doubt that it was to analyze the
evidence of each defendant’s participation and return a
guilty verdict only if convinced of his participation in the
price-fixing scheme charged in the indictment. Moreover,
just as a challenged sentence or paragraph should be
viewed in the context of the complete charge, so should the
instructions be considered in the perspective of the trial as
a whole. Cupp v. Naughten, 414 U.S. 141 (1973). After able
and vigorous defense counsel had spent many hours argu-
ing their respective clients’ innocence and emphasizing
the evidentiary matters favorable to them, it is unrealistic
to believe that the lack of a semantical refinement in a
lengthy and otherwise adequate charge had any effect
whatsoever on the verdict. In my view, the charge as given
was not erroneous but, even assuming it were deficient to
some extent, reversal would not be warranted.
C.
Similarly, I do not agree that the charge on withdrawal
from the conspiracy constitutes grounds for reversal.
Judge Hunter’s view is that the instructions improperly
* These instructions were taken in large part from 1 E. Devitt
and C. oe FeperaL Jury Practice anp INSTRUCTIONS,
Chapter 23, AntiTrust-Consprracy-ConTRacT RESTRAINT
Trave (2d ed. 1970). ™ a
50a
excluded the possibility of proving withdrawal by evidence
of conduct inconsistent with adherence. Moreover, Judge
Hunter asserts that the trial judge told the jurors they
could not consider the defendants’ theory to that effect.
But the charge clearly and accurately stated that with-
drawal could be found from evidence showing a defendant
‘‘took some affirmative action to disavow or defeat the
purpose of the conspiracy.’’ The court also stated that a
defendant must have notified other members of the con-
spiracy or made disclosure to law enforcement officials.
The trial judge concluded this phase of the charge by
saying:
‘‘Thus, once a defendant is shown to have joined a
conspiracy, in order for you to find he abandoned the
conspiracy, the evidence must show that the defendant
took some definite, decisive step, indicating a complete
disassociation from the unlawful enterprise.’’
The phrase ‘‘some definite, decisive step’’ was taken from
our opinion in United States v. Chester, 407 F.2d 53, 55 (3d
Cir.), cert. denied, 394 U.S. 1020 (1969), and is a correct
statement of the law.
If the defendants understood the charge as limiting the
evidence of withdrawal to notification, it was counsel’s cuty
to request a correction. After the charge, defense counsel
stated to the court:
‘‘Your Honor in referring to the subject of determina-
tion of abandonment of conspiracy named only two
precise alternatives and failed to point out that re-
sumption of competitive behavior such as intensified
price cutting or price wars could constitute such ag-
gressive action as to terminate conspiracy.
Tue Court: I purposely left that out, as I do not
think it is a correct statement of the law.’’
5la
This colloquy must be understood in light of the discussion
which occurred before the charge. Defendants had sub-
mitted a request for charge that ‘‘resumption of competi-
tive behavior, such as intensified price cutting or price
wars, could constitute such affirmative action. ...’’ At a
conference held before the summations, the following dia-
logue took place:
[Derense Covnser): ‘‘Your Honor, may I inquire
that you would give the part which says ‘Resumption
of competitive behavior,’ such as intensified price cut-
ting, or...
Tue Cowrt: No, I will not give that. I think that’s
an improper statement of the law. I am not going to
say that.
Competitive behavior may or may not be inconsist-
ent with a conspiracy to fix prices, and it is just as
arguable that when prices are low there is a conspiracy
to try to get them up and try to get some profits, as
there is the other way.
And, furthermore, there is a logical argument here
that there are people that were not in the club—as Mr.
Fricano put it—not in the conspiracy that caused in-
tensified competition.
So, I am not going to charge that. That's for the
jury to determine.
[Derense Couwser): Do I understand that Your
Honor is going to charge that there has to be direct
evidence of withdrawal?
Tus Covrtr: No, I didn’t say that at all.
[Derense Counser): I mean the point that we are
talking about would indicate evidenve from which it
a ae ee ee ee
Tue Covrr: You can argue that to the jury, but I
am not going to tell the jury that merely the fact that
somebody was in competition shows withdrawal from
a conspiracy. I don’t think that’s good law.
[Derense Counset): I just want to be sure that you
are [sic] going to say there had to be direct evidence
of withdrawal.
Tue Court: There are numerous points here that
you gentlemen have asked for direct evidence. I am
not going to charge that in any instance that there
must be direct evidence. There can always be evidence
by conduct from which you can imply something.’’
Thus, defense counsel were advised in advance that the
court would make only a general statement of the law and
would not adopt their application of the facts, although
counsel would be free to argue their factual proposition to
the jury. The defense did not object to the charge because
it limited evidence of withdrawal to affirmative notifica-
tion, but rather because the judge refused to weave in the
defense interpretation of the evidence. However, the jurors
were free to consider that the alleged competitive activity
was a definite, decisive step indicating a complete disasso-
ciation from the unlawful enterprise. The verdict indicates
they rejected that theory. I cannot justify a new trial on
the basis of this asserted deficiency in the charge.
D.
The concurring opinion finds reversible error in the
trial judge’s comments to the jury foreman and in the
failure to declare a mistrial because the jury was dead-
locked. I am unable to agree.
In fairness to the trial judge, it must be emphasized that
he spoke to the foreman only after receiving the unequivo-
eal assent of the individual defendants and counsel, and
53a
indeed at the latter's urging. Defense counsel voiced some
misgivings when the judge advised that he would im-
pound the transcript ‘‘for review some other court
if that should ever become necessary,’’ but the judge then
stated that he would convey to counsel the import of his
conversation with the foreman insofar as it did not reflect
the thinking of the jurors. Moreover, the judge was ex«
plicit in stating that the transcript would not be available
to counsel except on appeal, and he would not meet with
the foreman if that provision was unacceptable. This con-
dition precedent could not have been misunderstood by
counsel.
After the conference with the foreman ended, the judge
met with the lawyers and relayed the substance of the
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The judge responded that he would allow the jury to con-
tinue until Friday, and at that time would rule on the mo-
tion. Sinee the verdicts were returned on Tuesday, the
following morning, the motion became moot.
On the preceding Friday, July 11, the fourth day of de-
liberation, the judge advised counsel that some jurors were
not feeling well and others were tired. He listed a number
of alternatives which might alleviate the jurors’ discom-
fort, including the option of sending them home for the
weekend. When the defense objected, the judge acquiesced,
although he recalled that this court had approved the prac-
tice of allowing jurors in a criminal case to return to their
home during deliberations. See United States v. Piancone,
506 F.2d 748 (3d Cir. 1974). In an effort to ease the
jurors’ task, the hours of deliberation were shortened but
the sequestration contined.
The coneurring opinion contends the jury had the mis-
taken impression that it was required to reach a verdict of
guilty or not guilty. But at no time did the trial judge so
charge or otherwise suggest this to the jury. Indeed, he
was well aware that such an instruction would be error.
After the Fioravanti charge was given on Sunday, the
sixth day of deliberation, the judge and counsel had the
following conversation :
| Derexse Counser]: ‘*That has oceurred after Your
Honor had on two prior occasions given the charge,
first of all in your original charge, then again yester-
day afternoon advising them as to their obligation to
reach a verdict.
* > eo
Tue Covrt: I would only point out that I did not
charge them as to their obligation to reach a verdict.
I at no time said they had a duty to reach a verdict.
I said they had a duty to deliberate toward reaching
55a
tee nt * think that would be error, and I did not do
[Derexse Counser]: I didn’t mean to indicate you
used those words. I used that as a short-hand way of
referring to the charge Your Honor had given and I
believe in all these instances it was similar to the Third
Circuit charge. ...’’
In concluding his remarks to the foreman on Mon-
day, the judge said: and =
**You tell them to deliberating and if the
come to a verdict. - Uiighade caaeay, on?
I do not read this as a direction to reach a verdict, but
rather that the jury should attempt to reach a verdict.
This was a perfectly proper admonition. Plainly the judge
anaes wt the Possibility that the jury could not come
a ve since i
A language of his remark was con-
In my view it would not have been proper for the judge
to have told the foreman at the private conference that
the jury had the option of reaching no verdict. The judge
had assured counsel in advance that he would give no in-
struction on the law during the conference and, indeed,
the defense lawyers were most anxious that there be no
repetition of the Fioravanti charge. It is also highly un-
likely that thereafter defense counsel would have asked
the court to tell the jury about its privilege to return no
verdict. For some time before the conference, all the law-
yers were aware that the possibility of a true deadlock
existed, but no request for additional charge along that
line had been made. Moreover, I would doubt that such an
instruction should be given. Experience demonstrates that
juries should be encouraged to reach verdicts and should
not be proffered an ‘‘easy way out” by a judicial sugges-
56a
tion that a deadlock is an equally satisfactory alternative.
It is the duty of the trial judge to determine when the jury
has ‘‘hung,’’ and then declare a mistrial. This procedure
adequately protects the right of the parties to a ‘‘no ver-
dict’’ trial.’
The reasoning of Jenkins v. United States, 380 U.S. 445
(1965), is not pertinent here. In that case, after only two
hours of deliberation, the trial judge stated to the jury in
part, ‘‘You have got to reach a decision in this case.’’ Jd.
at 446. The Solicitor General’s brief referred to the prin-
ciple that jurors may not be coerced into surrendering
views conscientiously held. Fioravanti also refers to that
principle, and the trial judge here cautioned the jury in
that vein on several occasions. United States v. Fioravanti,
412 F.2d 407 (3d cir.), cert. denied, 396 U.S. 837 (1969).
The record does not support the assertion that he imper-
missibly insisted on a verdict.
The decision to declare a mistrial must in large measure
be entrusted to the diseretion of the trial judge. He is ‘‘on
the scene’’ and is in a position to make an informed judg-
ment on the physical and emotional conditions of the jurors,
the difficulties involved in the issues submitted to them,
and the likelihood that a verdict will be reached. No reeord
can convey all the imponderable factors to an appellate
court, aor does its experience better qualify it in any but
the exceptional case to second-guess the trial judge. The
fact that the foreman thought no verdict could be reached
* The problem engendered by a charge to the jury advising of
its right to return ‘‘no verdiet’’ is similar to that in which a crim-
inal jury would be told that it may disregard the charge and
acquit the defendant in spite of the law. While a jury does have
such a right, the wisdom of such an instruction has been vigorously
debated. Sec the opinion of Judge Sobeloff in United States v.
Moylan, 417 F.2d 1002 (4th Cir. 1969) } 8.
(1970). Cf. United States v. Alper, 449 F.2d 1223, 1233 (3rd Cir.
1971), cert. denied, 405 U.S. 988 (1972).
Ae
;
57a
is not conclusive upon us or the trial judge. It is not un-
common that a verdict is returned after a jury has sin-
cerely thought it was deadlocked. The foreman was not
endowed with the experience of the trial judge, and it is
understandable that with so many complex issues to be
resolved, he became discouraged during the deliberations.°
This was a lengthy and vigorously contested case, where
the factual issues were close and the mass of exhibits for-
midable. It would seem inconceivable that any reasoned,
responsible verdict could have been reached without ex-
tended deliberations. Moreover, the expenditure of time,
resources and effort on the part of all concerned obligated
the
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