# Petition — Aqua Media, Ltd. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1513%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 439 U.S. 959 ## Text Supreme Court, U.S, ~ FILED AUG 5 1978 IN THE \ Supreme Court of the United Ses eee 00%" 8, cue OcTOBER TERM, 1977 No. €8-237 Aqua Menta, Ltp. and A. M. LievipaTtiIne Co., Petitioners, —against— UNITED STATES OF AMERICA, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT Dae E. FREDERICKS, 111 Pine Street, San Francisco, California 9411! Attorney for Petitioners Aqua Media, Ltd. and A. M. Liquidating Co. Of Counsel: JOHN B. MarcHANT, CynTHia H. PLevin, SEDGWIcK, DetTert, Moran & ARNOLD, 111 Pine Street, San Francisco, California 94/1}. Dated: August 1, 1978. PERNAU - WALSH PRINTING CO. - 562 MISSION STREET - SAN FRANCISCO, CA 94105 A BOWNE COMPANY Subject Index Page cca cas ek cheeks h¥ishen Oke Kanak bese uaeen ines 1 Opinions below and jurisdiction ...............00-cceeeees 2 SE: SII. io bin cdinwha ance seuebknaensneeneneces 2 SE Oe OP Gc etcskevactuaensanss c6dbsebaenweuen 3 ee ee ee ee eT eR + We IR: Wks ha vee Pen scone anicdecs bh slatexse anes 5 NE I io win vdaghdnecscsangoksseseueedeuws 7 Summary of reasons for granting the writ ................ 10 Section 7 of the Clayton Act only proscribes acquisitions 11 Neither the language of Section 15 of the Clayton Act, the legislative history of the Clayton Act, nor the equitable powers of the court permit rescission of a COMMUMIMALO GOGUIEEIOMR ooo ccccccccsaciscecvecccde 15 A. The language of Sections 7 and 15 of the Clayton Act does not support the court’s conclusion .... 15 B. Congressional history of the antitrust laws demon- strates that Section 15 was not intended to allow punishment of individuals who have not violated SE Sac vie hbk ewuae cee ie ee hc Lua be cbikeeuacs 17 C. Equitable powers of the court do not authorize a rrr re ere rr re ae 22 Sellers are not proper parties to a Section 7 case where the acquisition was consummated prior to the filing ee Wb Sa euaea as tc os coke ee cuaneenwnes 24 IR ole, a a on Cea ce eee a Oe Ke eR Eee ek 27 Table of Authorities Cited Cases Pages Abell v. United States, 518 F.2d 1369 (Ct. Cl. 1975) ..... 16 Aerojet-General Corp. v. American Arbitration Assn., 478 cf 8 2. Bt we. ) eeery errs Tare Tres 27 Allen v. Grand Cent. Aireraft Company, 347 U.S. 535 EONGD vance censsevauseaersbesibicsuboedeeeu rious 22 Conley v. Gibson, 355 U.S. 41 (1967) 2... ccvencvesctos 25 Dailey v. Quality School Plan, 380 F.2d 484 (5th Cir. Ne ashes cc ko eps a RP Ea ieee nai eee ee 11,12, 14 Deckert v. Independence Shares Corp., 311 U.S. 282 (1940) ee PT TTT Tere Oe Te ee Te 25, 26, 27 Ford Motor Company v. United States, 405 U.S. 562 (1972) 23 Heine v. Board of Levee Commissioners, 86 U.S. 655 (1874) 238 Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363 EN ns ne Kd wae S/kk pak ben he be ee ka Seba nesie ek ena ee 27 Hurwitz v. Directors Guild of America, Inec., 364 F.2d 67 (2d Cir. 1966), cert. denied 385 U.S. 971 (1966) ...... 27 In The Matter of Dean Foods, et al., 70 F.T.C. 1146 (1966) 13 Keller v. Potomae Electrie Power Co., 261 U.S. 428 (1923) 25 MeGuire v. Columbia Broadeasting Company, Ine., 399 ee SD CO SR BOD iv vives kbncces dsgeeomcneetoes 12,13 Massachusetts v. Missouri, 308 U.S. 1 (1939) ............ 25 Muskrat v. United States, 219 U.S. 346 (1911) .......... 25 Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41 (1938) 26 Northern Natural Gas Company v. Grounds, 441 F.2d 704 Pe Sk SURE 44 thccrctcdeswanaanhenb haters teue es 16 Porter v. Warner Holding Co., 328 U.S. 395 (1946) ...... 24 Preiser v. Rodriguez, 411 U.S. 475 (1973) .............. 16 Rawls v. United States, 331 F.2d 21 (8th Cir. 1964) ..... 16 Record Club of America, Ine. v. Capitol Records, Inc., 1971 srede Cam, FIGGOS (BUI. FOIE) vice scssscscuscs 13 Rees v. City of Watertown, 86 U.S. 107 (1873) .......... 23 TABLE oF AUTHORITIES CITED ili Pages Sanford v. Commissioner of Internal Revenue, 308 U.S. 39 CRE: Sas wha ee bad Chk aia sha es ow bid kate tke cick ek qe 16, 22 Tidewater Oil Co. v. United States, 409 U.S. 151 (1972) ..15, 26 United States v. Chrysler Corp., 232 F.Supp. 651 (D.N.J. Gils eRe enn bales fiw bebe o-oo eta k K cawe bk. 24 United States v. E. I. duPont de Nemours & Co., 353 U.S. I la Dehetre eng Oia eta. sg wg ee et un 23, 25 United States v. E. I. duPont de Nemours & Co., 366 U.S. ee ND ns canes tN eo b ha ere hs ox keke tolnkn 9, 14, 25 United States v. Falstaff Brewing Corp., 410 U.S. 526 PUNE G40 CCUE CSS esas bce ii eheae he xO kk ARERK «Ce bees 14 United States v. Fixico, 115 F.2d 389 (10th Cir. 1940) .... 16 United States v. Freeling, 31 F.R.D. 540 (S.D.N.Y. 1962) 17 United States v. Ingersoll-Rand Co., 218 F.Supp. 530 (W.D. Pa.) aff’d 320 F.2d 509 (3d Cir. 1963) ................ 24 United States v. Pabst Brewing Co., 183 F.Supp. 220 (E.D. PEE Es ee Th es RAKE ood eke kk te lk 13, 14, 26 United States v. Phillips Petroleum Co., 1972 Trade Cases eee i Ee ek a's ie ne bbs oak cde teed. 26 United States v. Reed Roller Bit Company, 274 F.Supp. 573 (W.D. Okla. 1967) United States v. Smelser, 87 F.2d 799 (5th Cir. 19387) .... 28 U.S. v. Parker-Hannifin Corp., 1974 Trade Cas. 75,061 ee NN EEE {7 Sao hay ico cabae One a hee ook Occ excs 13 Whittacker & Company v. Sewer Improvement Dist. No. 1 of Dardanelle, Ark., 221 F.2d 649 (8th Cir. 1955) ..... 23 Willapoint Oysters v. Ewing, 174 F.2d 676 (9th Cir. 1949) 17 Yuba Consol. Gold Fields v. Kilkeary, 206 F.2d 884 (9th ee Ee a eit on tuber saat ual corset. 25 Codes Internal Revenue Code, §337 .........ccccccccccceccecce 6 Constitutions United States Constitution, Art. III ..................... 25 iv TABLE OF AUTHORITIES CITED Statutes Pages os a 685 kN ee FIR RARER Le Rae eke tb kincew ores 13 15 US.C.: eee Seer rere rs yee ee ree 18, 19, 21, 22 rr re rere ee ee ree ee TTT Te eee 12 SPORES Vib sia Virereca Cokes b nereabesseeeteraees 26 SE eae eee ees Kiet basa een eede HRC eA eee ee passim SPR ee Corer eee Tee eee 3, 15, 16, 17, 18, 22, 24, 26 28 US.C.: SED Luk cee beck enek eee Dy eh oee ew eae keke 2 | ee ry ray pe ere ree 2 i EE pre err rr ree er Tr Pr rer ery 2 Texts 2A Sutherland, Statutes and Statutory Construction (4th Ed. 1973): OE rere eee re eT oe ee Tee eRe ee 16 IE cen ee eed dee tbe we Dade heews teh ete ee 16 DEE LN cer wee meek Ea Rea A ee neues oa ee eT 16 Other Authorities H.R. Rep. Ne. 627, 63d Cong., 2d Sess. 4 (1914) ......... 18 ee we a) Re er ee 19, 20, 21 IN THE Suprewe Court of the United States OcTOBER TERM, 1977 No. Aqua Menta, Lrp. and A. M. Liguipatinc Co., Petitioners, —against— UNITED STATES OF AMERICA, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT STATEMENT Petitioners Aqua Media, Ltd. and A. M. Liquidat- ing Co. (sometimes referred to collectively as “Aqua Media”) respectfully pray that a Writ of Certiorari issue to review the judgment of the United States Court of Appeals for the Ninth Circuit (Carter, J.) entered on March 28, 1978, affirming a preliminary injunction order of the United States District Court for the Central District of California (Lydick, J.), entered on April 28, 1977. 2 OPINIONS BELOW AND JURISDICTION The district court’s preliminary injunction order, presently unreported, together with supporting find- ings of fact and conclusions of law, are attached as Appendix A. The opinion of the United States Court of Appeals for the Ninth Circuit affirming the pre- liminary injunction order is reported at 575 F.2d 222 and is attached as Appendix B. The judgment below was entered on March 28, 1978; petitioners- appellants’ petition for rehearing was denied on May 18, 1978. This petition is filed within ninety (90) days of entry of the judgment below, tolled by the petition for rehearing, as required by 28 U.S.C. §2101(¢). The jurisdiction of this Court is invoked under 28 U.S.C. §1254(1) and 28 U.S.C, $1651. The antitrust statutes relating to this petition are contained in Appendix C, QUESTIONS PRESENTED 1. As a matter of law is rescission an available remedy for redressing violations of Section 7 of the Clayton Act? 2. May a selling corporation be joined as a party defendant for purposes of implementing an order of relief against an acquiring company where the acqui- sition allegedly violative of Section 7 of the Clayton Act was consummated prior to the filing of suit? 3 STATEMENT OF THE CASE This antitrust case presents significant questions of first impression relating to the role of corporate sellers in actions instituted by the United States for alleged violations of Section 7 of the Clayton Act, 15 U.S.C. §18. The questions presented arose when the United States filed a civil action’ seeking, alter- natively, rescission or divestiture of a consummated corporate acquisition on the ground that both the buyer and seller violated Section 7 by virtue of their respective purchase and sale of assets.’ Petitioners moved for dismissal, arguing that their action did not violate the law, that mandatory relief was there- fore inappropriate and that they were not proper defendants, but the district court denied the motion, concluding as a matter of law that rescission was an available remedy. The district court then issued a preliminary injunction ostensibly to maintain the status quo pending trial and a final decision as to whether rescission would best restore competition. The Ninth Circuit affirmed, agreeing that rescission was a remedy which could be employed by district courts even where such relief necessarily would in- fringe upon the rights of third parties who were not even alleged to have violated any law in connection with the underlying acquisition. ‘Statutory authority for federal jurisdiction in the district court is found in Section 15 of the Clayton Act, 15 U.S.C. §25. 2Later the government conceded in both the district court and Court of Appeals that the sellers, petitioners here, did not violate Section 7 although the government continued to assert that peti- tioners were nevertheless proper parties, The Parties Commencing in 1967 Aqua Media, Inc. (now known as A. M. Liquidating Co.) engaged in the business of providing pure water to industrial users in Cali- fornia, various other states and certain foreign countries (“service business”). In 1972 it began to manufacture systems and equipment for sale inter- nationally to customers whose businesses required purified water (“manufacturing business”). Then, in early 1976, for reasons set forth below, the company adopted a plan of complete liquidation pursuant to which it sold its California service business* to Arrow- head Puritas Waters, Inc. (“Arrowhead”), a wholly- owned subsidiary of Coca-Cola Bottling Company of Los Angeles (““CCLA”), for $4,750,000. CCLA and Arrowhead, together with petitioners, were named as defendants in the action which was filed in district court. Petitioner Aqua Media, Ltd. is a California limited partnership formed by shareholders owning approxi- mately 54% of the outstanding stock of Aqua Media, Inc. On the date following sale of Aqua Media, Inc.’s California service business to Arrowhead, Aqua Media, Ltd. purchased the residual assets of Aqua Media, Inc. (the manufacturing business and certain service business assets located outside California) for $405,000. Aqua Media, Inc. then changed its name to A. M. Liquidating Co. and began liquidation and preparation for eventual dissolution. *The intrastate nature of this transaction raises a serious ques- tion as to the applicability of Clayton Act $7. However, the absence of a full factual record precludes presentation of that issue in this petition. The Acquisition In early 1976 representatives of Arrowhead ex- pressed an interest in acquiring Aqua Media’s Cali- fornia industrial water service business and related assets for cash. It was contemplated that Aqua Media would retain its name and associated good will, its manufacturing business, its interests in partnerships doing business in other states, and its wholly-owned subsidiary, Aqua Media International. The expressed interest of Arrowhead prompted the Board of Directors of Aqua Media, Inc. to review the historical development of the company, the present state of the marketplace, and prospects for future growth. The Board noted that the company’s primary business had been the sale of purified water to in- dustrial users within California but that the Cali- fornia market for industrially purified water appeared finite and had remained essentially static for three years. The Board and management wished to expand into growing national and international markets through the manufacture and sale of systems and equipment as opposed to the furnishing of industrially treated water itself. However, the company lacked sufficient working capital both to maintain its position in the California service market and expand into the national and international markets. Consequently, Aqua Media entered into negotiations with Arrow- head for sale of its California service business and related assets. On July 20, 1976 Aqua Media, Inc. and Arrowhead executed an asset purchase agreement whereby Arrow- 6 head agreed to acquire the California service business of Aqua Media, Ine. The contract was entered into pursuant to a plan of complete liquidation designed to meet the requirements of Internal Revenue Code §337 in order that the sale would be essentially tax free at the corporate level. The remaining assets and business of the company not being sold to Arrowhead (the manufacturing business and service business out- side California) were to be sold to a newly created limited partnership (which came to be known as Aqua Media, Ltd.) in which every Aqua Media share- holder would have the right to participate. Aqua Media, Inc.’s shareholders approved a plan of liquidation which called for dispersal of the net cash proceeds from sale of the company’s assets in the form of liquidating distributions to its 27 share- holders. The first distribution was scheduled to be made “prior to December 31, 1976,” and the second during early 1977. (C.T. 35).' The acquisition agreement was closed on August 2, 1976. At that time Arrowhead paid $2,750,000 in eash and delivered two promissory notes aggregating $2,000,000 payable February 28, 1977. Aqua Media delivered appropriate documents passing clear title ‘References ‘‘C.T. .......’’ are to the Clerk’s Transcript and ref- erences ‘‘R.T. ....’’ are to the Reporter’s Transeript, which, to- gether with certain exhibits transmitted in separate envelopes to the Clerk of the Court of Appeals, comprise the Record on Appeal. 7 to the assets sold. Arrowhead took physical possession of the assets.’ On August 3, 1976, Aqua Media, Inc. sold its residual assets to the newly created limited partner- ship known as Aqua Media, Ltd., for $405,000. The corporation then changed its name to A. M. Liqui- dating Co. and began payment of liquidating distri- butions to its shareholders. At the time this suit was filed, those distributions totalled $2,091,000. The Anti- trust Division of the U. 8S. Department of Justice did not advise Aqua Media that it was contemplating filing suit challenging the validity of the acquisition until after those distributions were made. (C.T. 49-52). Procedural History The complaint (C.T. 332-340) filed by the Depart- ment of Justice on December 23, 1976 named both the buyers (CCLA and Arrowhead) and the sellers (A. M. Liquidating Co. and Aqua Media, Ltd.) as defend- ants. It alleges that the acquisition by Arrowhead of Aqua Media’s California service assets and business violated Section 7 of the Clayton Act and prays for divestiture or rescission as alternative remedies ‘‘to prevent and restrain the continuing violation by the defendants ... of Section 7 of the Clayton Act (15 U.S.C. §18).” ‘The parties also agreed that Arrowhead would temporarily operate certain services for Aqua Media’s service business in Arizona, New Mexico, Texas and the Pacifie Northwest, and that Arrowhead would serve as Aqua Media’s exclusive distributor of its systems and equipment in California for a limited period of time. These ancillary agreements, since terminated by the parties, are not relevant to the instant petition. 8 The complaint does not attack the sale by Aqua Media, Inc. of its manufacturing business assets and uon-California service business assets to Aqua Media, Ltd. Petitioners promptly moved alternatively for dis- missal, summary judgment or an order striking the prayer for rescission, contending that, as a matter of law, rescission was not an available remedy in Section 7 cases and, alternatively, that rescission was not available as a matter of law given the particular factual circumstances of this case, t.¢., that the trans- action was fully consummated prior to commencement of the action, that approximately 60% of the net cash proceeds of sale had already been distributed to the shareholders of A. M. Liquidating Co., and that the shareholders were not parties to the action. On February 7, 1977 the district court denied those motions. The government immediately moved for a_ pre- liminary injunction to preclude distribution of the remaining proceeds of sale te the sharehoiders, On March 14, 1977 the district court granted the govern- ment’s motion although acknowledging that “sellers are not liable under the Clayton Act.” (R.T. 102-103). The court concluded that the “argument that reseis- sion here is not available is inconclusive, and the court retains that option. A preliminary injunction, in our view, is necessary to maintain the status quo.’” The preliminary injunction order, entered on April 28, 1977 (C.T. 646), enjoins execution of the plan of "See Appendix B7. 9 liquidation, precludes distribution to the shareholders of the remaining proceeds of sale, and, despite the fact that Aqua Media, Ltd. was not a party to the original sale, restrains that entity from making any distributions to its partners, from selling assets of the partnership, from terminating the partnership, and from altering or amending the partnership agreement. Following entry of the preliminary injunction order, petitioners ascertained through discovery that the government based its contention that rescission Was an appropriate form of relief upon a conclusion that the contract by which Arrowhead agreed to acquire the Aqua Media assets was illegal. Peti- tioners thereupon moved to dissolve the preliminary injunction arguing both that the contract was not illegal and that the alleged illegality was not a recognized ground for rescission either in the abstract or in this case. The district court on July 18, 1977 denied petitioners’ motion. Timely appeal was taken and the Ninth Circuit agreed to expedite its review. The opinion of the court of appeals concedes that its ruling is one of ‘first impression in the federal circuit courts” and acknowledges that this Court’s decision in United States v. E. I. duPont de Nemours d& Co., 366 U.S. 316 (1961) leaves the question of availability of the remedy of rescission in Clayton Act §7 cases ‘‘an open question.” 575 F.2d at 229 n. 7. The Ninth Circuit held that a rescission order may be entered against a corporate seller which has not violated the Clayton Act or any other law. ¢ 10 SUMMARY OF REASONS FOR GRANTING THE WRIT The role of the corporate seller in cases brought under Section 7 of the Clayton Act has never been addressed by this Court. The question of whether rescission is an available remedy for redressing vio- lations of Section 7 by the acquiring company, and the related question of whether a seller may be re- tained as a defendant for the purpose of implementing a relief order against an acquiring company even where the acquisition involved was consummated prior to the filing of suit, rightfully deserve this Court’s attention. The court of appeals acknowledged that in answer- ing these questions it was faced with a case of first impression. In support of its holding that rescission can be ordered where a violation of Section 7 is found, the Ninth Circuit relied upon (1) inapposite decisions which dealt with the propriety of awards of relief against parties who had violated the law, (2) a mistaken understanding of the congressional history of the Clayton Act, and (3) an interpretation of the provisions of that act which ignores aecepted rules of statutory construction. Section 7 of the Clayton Act is undoubtedly one of the most significant provisions of this nation’s antitrust laws. Review of the decision rendered by the court of appeals is appropriate in order to settle an important question of federal law which has not been, but should be, resolved by this Court. 11 SECTION 7 OF THE CLAYTON ACT ONLY PROSCRIBES ACQUISITIONS Section 7 of the Clayton Act provides, in relevant part: “No corporation engaged in commerce shall ac- quire, directly or indirectly, the whole or any part of the stock or other share capital and no corpo- ration subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation en- gaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” (15 U.S.C. §18) [Emphasis added] The activities of the seller (acquired) corporation are not prohibited by any language in Section 7. Only a few reported decisions have construed the role of corporate sellers under Section 7, but they uni- formly hold that it is aimed at the acts of the pur- chaser rather than those of the seller. Only one court of appeals decision has addressed the question of possible seller liability in Section 7 cases although it did so in the context of a private treble damage action. In Dailey v. Quality School Plan, 380 F.2d 484 (5th Cir. 1967) the Fifth Circuit held that a seller’s actions are not proscribed by See- tion 7, stating: “This leaves one question. [Seller] contends that the complaint should be dismissed as to it insofar as the cause of action against it rests on Section 7 of the Clayton Act. The argument is that See- tion 7 is directed against the acquiring corpora- 12 tion and not against the seller, This position is well taken. Section 7 by its terms proseribes only the acquiring corporation. There seems to be no decision to this effect but the language of the statute is clear. We thus affirm the dismissal as to | seller | on the Section 7 charge.” 380 F.2d at 485. The Ninth Circuit adopted the reasoning of Dailey in MeGuire ve Columbia Broadcasting Company, Lne., 399 F.2d 902 (9th Cir. 1968) in which it was called upon to construe analogous language in Section 3 of the Clayton Act.” Instead of focusing upon the lia- bility of a purchaser, as is the case with Section 7, the proscription in Section 3 is upon the seller. In affirming summary judgment in McGuire the Ninth Circuit held: “The language of the statute defines liability in terms of a person who makes a sale or contracts for sale and nowhere provides for liability of the buver. Here, General Foods ts not the seller, and consequently no cause of action ts created against it, While no case which holds to this effect has heen drawn to our attention, the language in the statute seems plain. A similar interpretation of Section 7 of the Clayton Act (15 U.S.C. S18) was made in Dailey v. Quality School Plan, 380 F.2d 44 (5th Cir. 1967) where the court held that See- tion 7 forbidding certain acquisitions applied only 7Seetion 3. provides in relevant part: “It shall be unlawful for any person ... to make a sale .. of goods, wares, merchandise, machinery, supphes or other commodities... Where the effect of such... sale... may be to substantially lessen conipetition or tend to create a monopoly ino any line of commerce.” [Emphasis added. | 15 U.S.C. $14. 13 to an acquiring corporation and not to the corpo- ration being acquired.” [Emphasis added]. 399 F.2d at 906. The Federal Trade Commission has also held that Section 7 has no application to corporate sellers. In its decision in In The Matter of Dean Foods, et al., 70 F.T.C. 1146 (1966), the commission stated that “it is clear under the language of [Section 7] that the Clayton Act prohibition was directed solely against the acquiring company and did not encompass the ac- tivities of the acquired company,” and then proceeded to dismiss the Section 7 claim against the selling company. Jd. at 1290. However, because the activi- ties of the seller were found by the commission to constitute an “unfair trade practice” in violation of Section 5 of the F.T.C. Act, which was separately charged, the Commission retained the seller as a de- fendant to the Section 5 claim. Other district courts have reached similar conclu- sions regarding the inapplicability of Section 7 to sellers.© See U.S. uv. Parker-Hannifin Corp., 1974 Trade Cas., 175,061 (C.D. Cal. 1974); Record Club of America, Inc, v. Capitol Records, Inc., 1971 Trade Cas., 173,694 (S.D.N.Y. 1971). A seemingly contrary result was reached in United States v. Pabst Brewing Co., 183 F.Supp. 220 (E.D. Wis. 1960) where the district court held that an 8In United States v. Reed Roller Bit Company, 274 F.Supp. 573 (W.D. Okla. 1967) the court was presented with a request for rescission but found it “unnecessary” to decide the question. 274 F.Supp. at 590. 14 award of relief agaist a seller might be appropriate. Upon analysis, however, Pabst is distinguishable from Dailey and cases following it for in Pabst the sellers closed the acquisition in spite of knowledge that the Department of Justice intended to challenge the acquisition under Section 7. Pabst is further distin- euishable on the grounds that a close continuing con- nection remained between buyer and seller subsequent to closing by the virtue of the seller’s stock ownership in the acquiring company. This Court has never before been called upon to decide the propriety of awards of relief against (or orders dismissing) sellers. In United States v. Fal- staff Brewing Corp., 410 U.S. 526, 529 n.9 (1973), the Court merely noted m passing that the seller had heen dismissed. In the one decision touching on the issue, United States vu. KL. duPont de Nemours & C'o., 366 US. 316 (1961), this Court reversed a district court ruling denying the government’s request for complete divestiture by duPont of its General Motors stock, in the process stating that upon remand: “General Motors, Christiana, and Delaware [sel- lers| will thus be able to renew, for the district court’s decision in the first instance, any objee- tions they may have to the power of the court to grant relief against them.” 366 U.S. at 334- BOO. Consequently, as noted by the court of appeals below, this Court has never ruled upon the e;plica- bility of Section 7 to a seller or upon the extent to which a seller may be embroiled in litigation in- 15 volving the government and an acquiring company,’ and petitioners submit that a writ of certiorari should issue to settle the important questions of federal law presented here. NEITHER THE LANGUAGE OF SECTION 15 OF THE CLAYTON ACT, THE LEGISLATIVE HISTORY OF THE CLAYTON AOT, NOR THE EQUITABLE POWERS OF THE COURT PERMIT RESCISSION OF A CONSUMMATED ACQUISITION The court below concluded that the language of the Clayton Act, that Act’s legislative history and the broad equitable powers of federal courts all support its conclusion that rescission is an available remedy for violations of Section 7 of the Clayton Act. Upon analysis, however, none of these three touchstones of the Ninth Circuit opinion supports its conclusion. A. The Language of Sections 7 and 15 of the Clayton Act Does Not Support The Court’s Conclusion Two portions of the language of Section 15 of the Clayton Act were singled out for analysis in the Ninth Circuit’s opinion. The first of these was that portion of Section 15 which empowers courts to ‘prevent and restrain” violations of the act. The second was the portion of Section 15 which provides tha “Whenever it shall appear to the court before which any such proceeding may be pending that the ends of justice require that other parties should be brought before the court, the court may °In the one prior instance where the question was squarely presented, this Court declined to rule on jurisdictional. grounds. Tidewater Oil Co. v. Unted States, 409 U.S. 151 (1972) (inter- locutory appeal barred by Expediting Act). 16 ‘ause them to be summoned, whether they reside in the district in which the court is held or not. 99 ere Each of these sections must be construed in accord with basic principles of statutory construction which require that statutes which are in part materia be construed together. Sanford v. Commissioner of In- ternal Revenue, 308 U.S. 39 (1939) ; 2A SUTHERLAND, STATUTES AND StatTuTORY CONSTRUCTION, §51.01 et seq. (4th Ed. 1973) [hereinafter SUTHERLAND]. Such a mode of interpretation gives effect to all provisions of both statutes and ensures development of an har- monious interpretation of statutes which were in- tended to be read together. Rawls v. United States, 331 F.2d 21 (8th Cir. 1964); Northern Natural Gas Company v. Grounds, 441 F.2d 704 (10th Cir. 1971) ; SUTHERLAND, supra, at §51.02. When, in construing statutes in part materia together, the court concludes that a conflict exists between the language of two provisions, the specific substantive statute must con- trol over more general remedial provisions absent ex- pression of any contrary Congressional intent. Preiser v. Rodriquez, 411 U.S. 475 (1973); Abell v. United States, 518 F.2d 1369 (Ct. Cl. 1975); United States v. Firico, 115 F.2d 389 (10th Cir. 1940) ; SUTHERLAND, supra, at $51.05. In accord with these rules Sections 7 and 15 of the Clayton Act must be construed together for they 17 are clearly mm part materia since Section 15 establishes the framework for redressing violations of Section 7.’ To the extent that the language of Section 15 is sus- ceptible of an interpretation which would make the provisions of Section 15 broader than the provisions of Section 7, the more specific substantive language of Section 7 must control. A review of the Ninth Circuit’s opinion requires the conclusion that that court erred in applying the rules of sound statutory construction set out above for after conceding that Section 7 does not prohibit the activities of a seller the Ninth Circuit went on to conclude that Section 15, which merely provides the statutory basis for redressing violations of Section 7, authorizes the award of relief against sellers. Each of the portions of Section 15 upon which the Court relied to support its decision must be read consis- tently with Section 7. Neither can be read to provide a remedy where Section 7 finds no wrong. B. Congressional History of the Antitrust Laws Demonstrates That Section 15 Was Not Intended to Allow Punishment of Individuals Who Have Not Violated The Law In concluding that rescission might be an appro- priate remedy in an action brought pursuant to Sec- tion 7 of the Clayton Act the Court below relied in part upon that portion of Section 15 of the Clayton Act which provides that: Statutes are considered to be tn pari materia when they relate to the same person or thing or have the same object. United States v. Freeling, 31 F.R.D. 540 (S.D.N.Y. (1962): Willapoint Oysters v. Ewing, 174 F.2d 676 (9th Cir. 1949). 18 “Whenever it shall appear to the court before which any such proceeding may be pending that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not ” The Ninth Circuit read this portion of Section 15 as evidencing a congressional conclusion “that on oc- casions third parties whose conduct is not specifically addressed by the Clayton Act would be so related to the anticompetitive effects at which the act was di- rected that their presence would be necessary in order to fashion complete relief.” 575 F.2d at 228. Having thus concluded that one of the remedial sections of the Clayton Act was intended to reach the activities of parties whose actions are not prohibited by the sub- stantive portions of the statute, the court went on to decide that rescission is an appropriate remedy where a violation of Section 7 has occurred. The court of appeals’ conclusion is based upon an ‘inaccurate reading of congressional intent in adopting the above- quoted portion of Section 15. As first reported by the House Committee on the Judiciary in 1914, Section 15 of the Clayton Act contained the precise language set out above H.R. Rep. No. 627, 638d Cong., 2d Sess. 4 (1914). The drafters of Section 15 adopted this language ver- batim from Section 5 of the Sherman Act (15 U.S.C, §5) which was originally enacted in July of 1890. The subject portion of Section 15 is not analyzed 19 in the Congressional Record. However, the reasons for adoption of Sherman Act Section 5 were discussed in detail by the 51st Congress which first enacted it. According to proponents of the bill this particular language was intended to cure two problems: 1. It was intended to allow nationwide service of process so that all members of a “trust” might be made defendants in a single action. Section 737 of the Revised Statutes at that time pre- cluded such a complete adjudication by providing that a defendant could be sued only where he re- sided or was found. §1 Cong. Rec. 2640-2642 (1889)." “Pertinent portions of the Congressional Record read as follows: “Mr. Spooner [proponent of the amendment to the Sherman Act which became Section 5]: Mr. President, I offer this amendment to cure what seems to be a very great defect in the bill. Most if not all of the combinations, however they may be called, aimed at by the bill, are detrimental to the publie interest. . . . Manifestly, to deal with the trust or combination of [the magnitude of the Sugar Trusts made up of 17 different corporations} it must be possible to bring into one action, into one court, the essential parties defend- ant. One of the arguments made by the Senator from Ohio in favor of this bill was that there might be under its provisions such a concentration of defendants; but as the law stands today there could be none, and I desire to eall the attention of the Senate for a moment to the sections of the Revised Statutes bearing upon the subject. Section 737 provides: ‘Sec. 737. When there are several defendants in any suit at law or in equity, and one or more are neither in- habitants of nor found within the district in which the suit is brought, and do not voluntarily appear, the court may entertain jurisdiction, and proceed to trial on the adjudication of the suit between the parties who are properly before it; but the judgment or the decree ren- dered therein shai! not conclude or prejudice other parties 20 2. It was intended to empower courts before which antitrust suits were brought to enforce their judgments through writs of tmyjunction which could be served outside of the jurisdiction of the court. As the propounder of the language not regularly served with process nor voluntarily appear- ing to answer; and non-joinder of parties who are not inhabitants of nor found within the district, as aforesaid, shall not constitute matter of abatement or objection to the suit.’ Whoever may be parties defendant in the action, under that section the court might proceed as to those within the jurisdiction; but its judgment could have no effeet whatso- ever upon those not served or not voluntarily appearing. Section 738 provides: ‘Sec. 738. When any defendant in a suit in equity to enforee any legal or equitable lien or claim against real or personal property within the district where the suit is brought .. .’ And it was amended so as to include suits brought to remove a cloud upon title to land in a distriet— ‘is not an inhabitant nor found within said district, and does not voluntarily appear thereto, it shall be lawful for the court to make an order directing such absent defendant to appear, plead, answer or demur to the com- plainant’s bill at a certain day, therein to be designated.’ Then follows a provision for obtaining jurisdiction in a mode to be pointed out by the order of publication or otherwise: ‘But the said adjudication shall, as regards such absent defendant without appearance, affect his property within such distriet only’ Then comes this seetion to which I call the attention of the Senator from Ohio: ‘Sec. 739. Except in the eases provided in the next three sections, no person shall be arrested in one district for trial in another in any civil action before a Circuit or District Court; and except in said cases and eases pro- vided by the preceding sections, no civil suit shall be brought before either of said courts against an inhabitant of the United States, by any original process, in any other district than that of which he is an inhabitant or in which he is found at the time of serving of the writ.’ “One object of the amendment is to provide that the Court may bring in these parties wherever they reside or wherever they are doing business and have as full and complete juris- diction over them upon publication as if they voluntarily appeared in this action.” Cong. Ree., supra, at 2640. 21 which became Section 5 stated, ‘‘as the law stands today that writ cannot be made effective except where it is served within the jurisdiction of the Oia. A review of the Congressional history of Section 5 can lead only to the conclusion that that portion of the statute which reads ‘*Whenever it shall appear to the court ... that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned... .” was intended only to extend the geographical reach of the district court’s power so as to enable a single court to resolve all issues related to each violation of the antitrust laws, and to allow that same court to enjoin activities found violative of the antitrust laws even if those activities occurred outside the court’s physical jurisdiction. Sherman Act Section 5 did not increase the number of parties against whom relief could be awarded—it merely decreased the number of actions which would be necessary to obtain total relief. 2Pertinent portions of the Congressional Record provide: “Mr. Spooner: . . . Another matte which is covered by the amendment is this. For myself, I think the efficacious remedy will be found to be, not the criminal prosecution provided for by the Senator from Texas ... but the vigorous and drastie use of the writ of injunction. Under the law as it stands today that writ can only be served and punishment for its disobedience enforced within the distriet over which the court has jurisdiction. By the amendment which I have sent to the desk this writ of injunction may be served any- where within the United States, and if it is disobeyed the attachment for contempt may be served anywhere within the United States. I think the amendment ought to be adop ” Id. at 2642. 22 As discussed above, the language of Section 5 of the Sherman Act was adopted in toto as a portion of Clayton Act Section 15. The Congressional Record contains no discussion of the reasons for inclusion of this language in Section 15. However, commonly applied rules of statutory construction require that statutes dealing with the same subject matter (here the antitrust laws), particularly where they contain identical language, should be construed consistently. Allen v. Grand Cent. Aircraft Company, 347 U.S. 535 (1954); Sanford v. Commissioner of Internal Reve- nue, 308 U.S. 39 (1939). Thus, the subject language of Section 15 can only be read as an extension of the jurisdictional reach of courts enforcing the antitrust laws. Petitioners submit that the court of appeals erred in construing this key language as carte blanche authority to summon innocent third parties before district courts. C. Equitable Powers of the Court Do Not Authorize The Remedy Awarded The opinion rendered by the court of appeals con- tains numerous references to the breadth of the in- herent power of a court of equity to design flexible decrees adequate to restore competition. Petitioners do not take issue with the proposition that equity’s powers are broad and flexible. However, it does not follow from the premise that equity has broad inher- ent power to fashion decrees that equity may award affirmative injunctive relief against a party who has 23 not even violated the law." To hold otherwise, par- ticularly in actions based upon statute, would be to allow equity to usurp the power possessed solely by Congress for such a holding would allow a court of equity to create a remedy which is outside the authority of the law, Rees 1. City of Watertown, 86 U.S. 107 (1873); Whittacker d& Company v. Sewer Improvement Dist. No. 1 of Dardanelle, Ark., 221 F.2d 649 (8th Cir, 1955); Heine v. Board of Levee Commisstoners, 86 U.S, 655 (1874). The court below in creating a remedy directed at a party whose activities did not violate the law went beyond even the broad powers of a court of equity. Rather than fashioning an effective remedy against a party whose activities had been condemned by Congress, the court ordered a party which has com- mitted no wrong to repurchase a business which it no longer wishes to own, to compete in a market from which it intentionally departed, and to invest its human and financial resources in a manner contrary to its independent best business judgment. Creation of such a “remedy” can be considered as nothing less than judicial legislation. “Petitioners do not argue that the full extent of equity's inherent power should not be utilized in redressing violations of the Clayton Act, Prior decisions of this court have hioned divestiture as a remedy for redressing violations of Section 7 by acquiring companies, United States v, EB, I, duPont de Nemours & Co,, 353 U.S, 586 (1957), and have held that additional relief ancillary to divestiture may be appropriate, Ford Motor Company v. United States, 405 U.S, 562 (1972), Petitioners merely assert that even the far reaching powers of courts of equity are subject to certain limitations which the court below exceeded, United States v, Smelser, 87 F.2d 799 (5th Cir, 1937), 24 SELLERS ARE NOT PROPER PARTIES TO A SECTION 7 CASE WHERE THE ACQUISITION WAS CONSUMMATED PRIOR TO THE FILING OF THE SUIT The court of appeals recognized that petitioners here, and sellers in general, do not violave Clayton Act §7 but held that Clayton Act §15 was sufficiently encompassing to permit joinder of third parties in Section 7 cases and authorize broad relief against third parties. In the court of appeals petitioners conceded, based upon a line of district court decisions, that a district court is empowered to enjoin sellers (as well as buy- ers) from completing an asset sale where the govern- ment establishes the reasonable probability that the acquisition might violate Section 7. United States v. Chrysler Corp., 232 F.Supp. 651 (DN. 1964) ; United States v. Ingersoll-Rand Co,, 218 F.Supp. 530 (W.D. Pa.) aff'd, 320 F.2d 509 (38d Cir, 1963), How- ever, petitioners noted that in this case the govern- ment did not seek to enjoin the transaction prior to its consummation and that, based upon a literal 5, any violation resulting from reading of Section 1 the acquisition could no longer be ‘‘prevented” or “restrained.” The court of appeals’ response to this argument was that it “strains the normal meaning of the terms ‘prevent’ and ‘restrain’ far out of perspec- tive,” 575 F.2d at 230, That response is without ana- lytical support. Porter v. Warner Holding Co., 328 U.S. 395 (1946), upon which the court of appeals relied, is inapposite inasmuch as it sought only to construe the scope of the equity powers of federal courts to award relief against a law violator, See 25 also United Stales v. E. I. duPont de Nemours & Co., 366 U.S. 316, 334-335 (1961). The legislative history of Section 15 discussed above, reveals no intent to proscribe the actions of sellers or to permit their joinder. Reference to the only stated Congressional intent relating to the statutory language in question requires the conclusion that the ‘short answer” offered by the court of appeals is itself short of the mark, Decisions such as United States v. 2. I. duPont de Nemours & Co., 353 U.S. 586 (1957), regarding the extent to which district courts may order necessary and appropriate relief to eliminate the effects of acquisitions found violative of Clayton Act §7, do not address the fundamental question of the extent to which third party sellers may be summoned before district courts and subjected to prejudicial relief orders, Petitioners submit that where a complaint fails as a matter of law to state a claim for relief against a party, that party is entitled to dismissal. Yuba Consol, Gold Fields v. Kilkeary, 206 F.2d 884 (9th Cir, 1953); Deckert v. Independence Shares Corp., 311 U.S. 282 (1940); Conley v. Gibson, 355 U.S. 41 (1957). In retaining corporate sellers as defendants in Section 7 cases filed subsequent to consummation of the acquisition district courts assume jurisdiction over sellers where there is no pending ‘‘case or con- troversy” within the meaning of Article III of the United States Constitution, Muskrat v. United States, 219 U.S. 346 (1911); Keller v. Potomac Electric Power Co,, 261 U.S. 428 (1923); Massachusetts v., Missouri, 308 U.S. 1 (1939), 26 While it is true that some district court decisions have held sellers to be proper parties in Section 7 cases, United States v. Pabst Brewing Co., 183 F.Supp 220 (.D. Wis. 1960) ; United States v. Phil- lips Petroleum Co., 1972 Trade Cases 173,899 (C.D. Jal. 1971) ;’* none has analyzed Section 15 or exam- ined its Congressional history. Neither have they of- fered any explanation for arriving at the conclusion that sellers ought to be retained as defendants. In light of the limited but clear Congressional history pointing to a legislative intent to address only the necessity for nationwide service of process, together with the absence of any legislative intent which would support broad construction of Section 15, pe- titioners urge that this Court also review denial of their motion for dismissal. Courts of appeals and the Supreme Court may dismiss actions which fail to state a claim upon which relief may be granted,” “The Phillips decision later reached this Court but in Tide- water Oil Company v. United States, 409 U.S. 151 (1972) the Court declined to decide issues relating to the selier’s role on the vround review was when precluded by the Expediting Act. The parties have stipulated to entry of a consent Final Judg- ment in distriet court, the terms of which are set forth ver- hbatim in Appendix D, As of the date this petition was filed, the proposed Judgment is still subject to provisions of the Antitrust Penalties and Procedures Act, 15 U.S.C. §16(b)-(h) and has not been approved by the district court. Even if approved, however, the issues presented here are not moot as Paragraph XXIII(B) of the proposed judgment (Appendix D23) expressly provides that a further hearing (trial) may be held to determine whether rescission of the aequisition should be ordered. It is clear that interlocutory appeal of an equity ease brings the entire case before the reviewing court and that where “insuperable objection to maintaining the bill clearly appears, it may be dismissed and the litigation terminated.” Deckert v. Independence Shares Corp., supra at 287; Myers v, Bethlehem Shipbuilding Corp., 303 U.S. 41, 52-53 (1938). 27 Deckert v. Independence Shares Corp., supra; Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363 (1973) ; Aerojet-General Corp. v. American Arbitra- tion Assn., 478 F.2d 248 (9th Cir. 1973); Hurwitz v. Directors Guild of America, Inc., 364 F.2d 67 (2d Cir. 1966), cert. denied 385 U.S. 971 (1966), and peti- tioners should be ordered dismissed. CONCLUSION For the foregoing reasons this Court should issue a writ of certigrari to review the opinion and judg- ment of the United States Court of Appeals for the Ninth Circuit. Respectfully submitted, Dae E. FREDERICKS, 111 Pine Street, San Francisco, California 94111, Attorneys for Petitioners Aqua Media, Ltd. and A. M. Liquidating Co. Of Counsel: | JOHN B. MarcHANT, CynTuia H. PLevin, SEDGWICK, DETERT, MorAN & ARNOLD, 111 Pine Street, San Francisco, California 94111. Dated: August 1, 1978. (Appendices Follow) Appendices Appendix A United States District Court Central District of California Civil No. 76-3988-LTL United States of America, ) Plaintiff, VS. | Coca-Cola Bottling Company of Los Angeles; Arrowhead Puritas Waters, Ine.; Aqua Media, Ltd.; and A. M. Liquidating Co., Defendaats. ; ae [Filed April 27, 1977] [Entered April 28, 1977] PRELIMINARY INJUNCTION ORDER Whereas, plaintiff has moved for a preliminary in- junction, and Whereas, it appears reasonably probable that plain- tiff will prevail at trial on the merits, and Whereas, the Court may find it necessary after trial to order rescission of the Asset Purchase Agree- ment dated July 20, 1976, and ancillary agreements among the defendants in order to secure effective and expeditious relief, and A-2 Whereas, the parties have been heard and the Court has made findings of fact and conclusions of law, and good cause appearing, It Is Hereby Ordered That: 1. The plan of complete liquidation of A. M. Li- quidating Co. is enjoined from execution, except that A. M. Liquidating Co. (hereinafter “A, M.”) may distribute all of its property and assets subject to all of its liabilities, to The Bank of California, National Association, as trustee, to be held, administered and distributed pursuant to the terms and conditions of the A. M. Liquidating Trust Agreement dated April 19, 1977 (hereinafter the “Trust Agreement”). A. M., its officers, directors, employees, suecessors and as- signs and all other persons acting on behalf of any of them, are each enjoined from otherwise effecting any dissolution or termination of, or selling, disposing of or diminishing any asset of, A.M.; and from doing any other act which would in any way impair the ability of A. M. to comply with any final order of this Court implementing the relief prayed for by the Plaintiff in the complaint. 2. 7. It is reasonably probable that the effect of the CCLA-Arrowhead acquisition of the high purity in- dustrial water service assets of Aqua Media may be substantially to lessen competition or to tend to create a monopoly in each of the three sections of the coun- try. 8. It is reasonably probable that the plaintiff will prevail at trial on the merits. 9. The remedy of rescission of a sale of assets may be ordered in a proceeding under Section 7 of the Clayton Act in order to restore effectively market competition. 10. Economic hardships to the defendants in a Sec- _ tion 7 case and adverse tax consequences to the de- A - 25 fendants’ shareholders ean influence the choice only as among two or more effective remedies. If the Court concludes that measures other than rescission will not be effective to redress a violation, and that rescission is a necessary element of effective relief, the Government cannot be denied the latter remedy because economic hardships and adverse tax conse- quences may result. 11. A preliminary injunction is necessary in this case to preserve the status quo, and to preserve the ability of the Court to order effective relief should plaintiff prevail at trial on the merits. Dated: 4-27-77 /s/ UL. T. Lydick Lawrence T. Lydick United States District Judge Approved as to form: /s/ Crossan R. Andersen Crossan R. Andersen Antitrust Division Department of Justice 1444 U.S. Court House 312 North Spring Street Los Angeles, California 90012 Attorneys for Plaintiff A - 26 Appendix B /s/ John B. Marchant John B. Marchant ' United States Court of Appeals, Sedgwick, Detert, Moran & Arnold Ninth Circuit. 111 Pine St., 11th Floor San Francisco, California 94111 Attorneys for Defendants A. M. Liquidating Co. and aaa Aqua Media, Ltd. Nos. 77-2683, 77-2778. United States of America, } /s/ Don 'T. Hibner Plaintiff-A ppellee, Don T. Hibner, Jr. ve. Sheppard, Mullin, Richter & Hampton Coca-Cola Bottling Company of Los Angeles 333 South Hope Street, 48th Floor and Arrowhead Puritas Waters, Inc., Los Angeles, California 90071 Defendants, Attorneys for Defendants and CCLA and Arrowhead Aqua Media, Ltd., and A. M. Liquidating Co., Defendants-Appellants. ' March 28, 1978. Rehearing and Rehearing En Banc Denied May 18, 1978. Appeal From The United States District Court For The Central District of California. Before: CarTER and GoopwIn, Circuit Judges, and SoLomon,* District Judge. JAMES M. Carter, Circuit Judge: These are consolidated interlocutory appeals from a preliminary injunction and from an order denying appellants’ motion to dissolve the same injunction. *Honorable Gus J. Solomon, United States District Judge, District of Oregon, sitting by designation. B-2 The injunction arose in a suit by the United States against both the buyers and the sellers in a corporate acquisition which is alleged to violate Section 7 of the Clayton Act, 15 U.S.C. §18. The complaint sought divestiture or rescission of the acquisition as alternative remedies. To preserve the possibility of a decree of rescission at the conclusion of trial, the district court, on motion of the government, issued a preliminary injunction maintaining the status quo pendente lite. The sellers contend on appeal: (1) the remedy of rescission is not legally available to re- dress violations of Section 7 of the Clayton Act, and (2) even if legally permissible, rescission is precluded by the particular facts of this case. We AFFIRM. I. FACTS. A. Background and Parties. The buyer-defendants below are Coca-Cola Bottling Company of Los Angeles (CCLA) and its wholly- owned subsidiary, Arrowhead Puritas Waters, Inc. (Arrowhead). The seller-defendants, appellants herein, are A. M. Liquidating Company, a closely held California corporation presently in liquidation, and Aqua Media, Ltd., a California limited partner- ship. Appellant A. M. Liquidating Company was formerly called Aqua Media, Inc., but when the ma- jority of the assets of Aqua Media, Inc. were sold to Arvowhead the corporation changed its name and began liquidation. The limited partnership, Aqua Media, Ltd. was formed at the time of the sale by certain stockholders of Aqua Media, Inc. to purchase B-3 and operate the company’s remaining manufacturing and service business. For convenience both appel- lants are some times collectively referred to as “Aqua Media”. The defendants in the antitrust suit below are all industrial water service companies engaged in the provision of high purity industrial water services. Numerous categories of industrial and commercial businesses require water from which substantially all the impurities have been removed.’ This chemically and biologically pure water is obtained either by purchasing it directly from industrial water service companies or by purchasing the purification equip- ment itself from the same companies.” Aqua Media, Inc. was incorporated in 1967.’ Its primary line of business was the provision of purified water to industrial and commercial users. Most of its business centered in California, but eventually the company’s services expanded into Arizona, New Mex- ico, Texas and the Pacific Northwest. Certain foreign countries also purchased from the corporation. *Major customers include hospitals, laboratories, plating com- panies, aerospace firms, electronics manufacturers, food proces- sors, power utilities/shipping companies, pharmaceutical/cosmetic companies and educational institutions. *Many users prefer to purchase the water itself rather than equip and maintain purification systems due, inter alia, to the high initial cost of a permanently installed system, the cost and inconvenience of maintaining a system, the bother of training personnel to operate the system, and the necessity of obtaining emergency service should a company’s high purity water purifi- cation system break down. *Aqua Media, Inc. was originally incorporated under the name “Pacific Pure Water Co.” On April 30, 1969 its name was changed to Aqua Media, Inc. B-4 In 1972 Aqua Media, Inc. developed a secondary line of business—the manufacture of systems and equipment for industrial water purification. Origi- nally the company considered its two lines of business to be compatible, but by early 1976 its board of di- rectors had determined that the best vehicle for ex- pansion into national and international markets was the provision of systems and equipment rather than provision of the water itself. Because the California market was considered to be finite the board concluded that Aqua Media, Ine., as then capitalized, did not have sufficient working capital to expand into the national and international markets while at the same time maintaining its California water provision services. It was in this posture that Aqua Media, Ine. received Arrowhead’s invitation to enter nego- tiations for the sale of its California service business and related assets. B. The Acquisition. On May 3, 1976, in contemplation of the possible sale of its California service business to Arrowhead, Aqua Media, Ine. adopted a plan of complete liqui- dation in compliance with the Internal Revenue Code, § 337. The plan, designed to make the eventual sale tax free at the corporate level, was contingent upon the company entering a binding contract of sale with Arrowhead. Aqua Media, Inc. then negotiated with Arrowhead and on July 20, 1976, the two entered an asset pur- chase agreement whereby Arrowhead acquired “sub- B-5 stantially all of the California industrial water serv- ice business assets of Aqua Media.” R. 632. The purchase price was $4,750,000, payable $2,750,000 cash on closing and $2,000,000 in promissory notes payable February 28, 1977. In addition three ancillary agreements were en- tered: (1) a letter agreement dated July 19, 1976, provided that Arrowhead would provide certain water purification support services for Aqua Media’s cus- tomers outside California; (2) a distributorship agreement executed August 2, 1976, appointed Arrow- head to be Aqua Media, Inec.’s exclusive distributor for the sale in California of Aqua Media’s water purification systems and equipment; and (3) a parol agreement on or about August 2, 1976, granted to Arrowhead certain of Aqua Media’s customer accounts in Nevada. The acquisition agreement was closed on August 2, 1976, when Arrowhead paid the $2,750,000 cash and delivered two promissory notes in the aggregate of $2,000,000 payable on February 28, 1977. Aqua Media passed clear title to the assets sold. On the next day, pursuant to its plan, Aqua Media, Ine. sold its remaining assets* to the newly formed limited partnership, Aqua Media, Ltd.° Aqua Media, ‘These included the remaining water service assets outside California and the manufacturing business assets. The purchase price was $405,000. 5When it approved the sale of assets to Arrowhead, the board of directors of Aqua Media, Inc. also approved a written offer by two members of the company’s management team to purchase the remaining assets. The sale of these residual assets was con- B-6 Inc. then changed its name to A. M. Liquidating Company. The liquidating company proceeded to collect its assets, pay its liabilities and make liquidating dis- tributions to its shareholders. Prior to December 23, 1976, the date on which this action was filed, liquidat- ing distributions of $2,091,000 had been authorized and paid. On December 23, 1976, the company had assets of $2,488,075 subject to liquidated and undis- puted liabilities of $240,015 and certain contingent and disputed liabilities. It was then estimated that upon completion of the plan an additional $1,394,000 would be distributable to the shareholders. C. Procedural History. The Department of Justice filed its complaint on December 23, 1976, naming both the buyers (CCLA and Arrowhead) and the sellers (A. M. Liquidating Company and Aqua Media, Ltd.) as defendants. The complaint sought: divestiture or rescission as alterna- tive remedies ‘“‘to prevent and restrain the continuing violation by the defendants ... of Section 7 of the Clayton Act (15 U.S.C. §18).” Appellants moved alternatively for dismissal, summary judgment or an order striking the prayer for rescission. They con- tended that Section 7 of the Clayton Act applies only to the conduct of buyers in prohibited acquisitions, not that of sellers. Accordingly they maintained ditioned upon the creation of a limited partnership in which every Aqua Media shareholder would have the right to partici- pate as a limited partner in the same proportion as their voting stock bore to all of the issued and outstanding stock of the cor- poration. B-7 rescission was not an available remedy in Section 7 eases. They also argued that even if rescission was available in proper cases, as a matter of law it is not available in the facts of this case. The motion was denied from the bench. The government then moved immediately for a temporary restraining order and a preliminary in- junction to prevent A. M. Liquidating Company and Aqua Media, Ltd. from further inplementing the plan of liquidation by distributing the proceeds of the sale, except for certain payments currently due to bona fide creditors. By stipulated order appellants were temporarily enjoined pending a hearing on the government’s motion. On March 14, 1977, after a hearing, the district judge granted the government’s motion. He explained: “In our view the government has sustained its burden of showing substantial likelihood of its success on the merits when the action is tried and, further, that the public interest outweighs the hardships claimed by the Defendants. “While we concur with the abstract proposi- tion that sellers are not liable under the Clayton Act, we hold that in this case the requested in- junction may issue because on the record before us an effective remedial order, if the merger is completed, would be either impossible or severely limited. “The argument that rescission here is not avail- able is inconclusive, and the Court retains that option. “A preliminary injunction, in our view, is necessary to maintain the status quo.” B-8 The preliminary injunction order was filed April 27, 1977, accompanied by extensive findings of fact and conclusions of law.’ Appellants moved to dissolve the injunction on the same grounds they originally argued. Their motion was denied. From the pre- liminary injunction and the denial of their motion to dissolve it A. M. Liquidating Company and Aqua Media, Ltd. appeal. Il. LEGAL AVAILABILITY OF RESCISSION. We note at the outset that this case is before us in a unique posture. The district judge has not held a trial on the merits and has not decreed any final relief. We are only conducting an interlocutory re- view of the preliminary injunction. Yet the injune- tion is forward-looking, preserving the status quo pendente lite in contemplation of a potential decree of rescission. Appellants’ arguments center not on any immediate harm caused them by the injunction itself, but on the legal and factual availability of the ultimately possible remedy of rescission. Thus our review of the legal issue involved—the availability of *Factually the district judge concluded that rescission might be the only effective remedy if a violation is eventually proven. It was noted that divestiture might be unworkable due to the lack of interested buyers and the high entry barriers in the high purity industrial water service market. Legally the judge concluded that it was reasonably probable that the government would prevail at a trial on the merits; that the remedy of rescission of a sale of assets may be ordered in a proceeding under Section 7 of the Clayton Act in order to restore effective market competition; and that economic hardships to the sellers, in the event rescission is found to be the only effective remedy, cannot outweigh the public’s interest in mean- ingful antitrust relief. B-9 rescission in Clayton §7 cases—is conducted largely in the abstract. And our review of the factual avail- ability of the remedy in this case is significantly re- stricted by the lack of a well-developed factual back- ground. The precise issue on appeal is whether the district court based its decision on an erroneous legal premise or abused its discretion in granting the preliminary injunction, Aguirre v. Chula Vista Sanitary Service and Sani-Tainer, Inc., 542 F.2d 779, 780-81 (9 Cir. 1976); Douglas v. Beneficial Finance Co., 469 F.2d 453, 454 (9 Cir. 1972). Aqua Media’s central chal- lenge is directed at the district court’s legal conclu- sion that rescission is a permissible remedy in Clayton Act §7 cases. Appellants maintain their conduct is not proscribed by §7 and that there is no legal au- thority for an order of rescission again a non-violator of the act. The avaiiability of rescission of an acqui- sition violative of §7 of the Clayton Act is a matter of first impression in the federal circuit courts, but our review of the statutory scheme provided by §7 and $15 of the Clayton Act, the history of equity jurisdiction in the federal courts, and the treatment of similar claims in the lower courts convinces us that in appropriate cases rescission can be ordered. In relevant part § 7 of the Clayton Act reads: “No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the B -10 whole or any part of the assets of another corpo- ration engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or tend to create a monop- oly.”” (Emphasis added.) By its express terms, §7 proscribes only the act of acquiring, not selling, when the forbidden effects may occur. Aqua Media is correct in its initial as- sertion that technically it has not violated the Clayton Act. See Dailey v. Quality School Plan, 380 F.2d 484 (5th Cir. 1967); U. S. v. Parker-Hannifin Corp., 1974 Trade Cases £75,061 (C.D.Cal.1974); Record Club of America, Inc. v. Capitol Records, Inc., 1971 Trade Cases {73,694 (S.D.N.Y.1971); Jn the Matter of Dean Foods, et al., 70 F.T.C. 1146 (1966). Nevertheless, the fact that sellers are not violators of §7 does not force courts to close their eyes to the fact that the sellers are parties to an acquisition which is prohibited by law. Congress recognized that on occasion third parties whose conduct is not specifi- cally addressed by the Clayton Act would be so re- lated to the anti-competitive effects at which the act was directed that their presence would be necessary in order to fashion complete relief. Accordingly, in § 15 of the Clayton Act Congress invoked the equity jurisdiction of the federal courts and provided that when the interest of justice requires, third parties can be joined in proceedings under the act: “The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of this Act, and it shall B-11 be the duty of the several United States attor- neys ... to institute proceedings in equity to pre- vent and restrain such violations. . . . Whenever it shall appear to the court before which any such proceeding may be pending that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned .. .” (Emphasis added.) The equity jurisdiction of the federal courts tradi- tionally has permitted the fashioning of broad and flexible decrees molded to the necessities of the indi- vidual case. Particularly, when equity jurisdiction has been invoked to enforce federal statutory prohi- bitions, the Supreme Court repeatedly has recognized the power of the equity court to mold the necessary decrees to give effect to congressional policy. See, e.g., United States v. First Nat. City Bank, 379 U.S. 378, 383, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965); J. I. Case Co. v. Borak, 377 U.S. 426, 433, 84 S.Ct. 1555, 12 L.Ed. 2d 423 (1964) ; Mitchell v. Robert De Mario Jewelry, Inc., 361 U.S. 288, 291-92, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960) ; Porter v. Warner Holding Company, 328 U.S. 395, 398, 66 S.Ct. 1086, 90 L.Ed. 1332 (1946); Hecht Co. v. Bowles, 321 U.S. 321, 329, 64 S.Ct. 587, 88 L.Ed. 754 (1944). In such cases “[c]ourts of equity may, and frequently do, go much farther both to give and with- hold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved.” United States v. First Nat. City Bank, supra, 379 U.S. at 383, 85 S.Ct. at 531, citing with ap- proval Virginia Railroad Co. v. System Federation No. 40, 300 U.S. 515, 552, 57 S.Ct. 592, 81 L.Ed. 789 (1937). B-12 Porter v. Warner Holding Company, supra, is an instructive example. There the Supreme Court was concerned with the power of a federal court, in an en- forcement proceeding under §205(a) of the Emer- gency Price Control Act of 1942, to order restitution of rents collected by a landlord in excess of the per- missible maximums. The Administrator of the Office of Price Administration had sought restitution, but both the federal district court and the federal circuit court below were unwilling to assume jurisdiction to order the requested relief absent statutory authoriza- tion. In a strongly worded reversal the Court ex- plained the inherent equity jurisdiction of the district court: “. . . Unless otherwise provided by statute, all the inherent equitable powers of the District Court are available for the proper and complete exercise of that jurisdiction. And since the public interest is involved in a proceeding of this na- ture, those equitable powers assume an even broader and more flexible character than when only a private controversy is at stake. [Citation omitted.] Power is thereby resident in the Dis- trict Court, in exercising this jurisdiction, ‘to do equity and to mould each decree to the necessities of the particular case.’ Hecht Co. v. Bowles, 321 U.S. 321, 329, 64 S.Ct. 587, 88 L.Ed. 754. It may act so as to adjust and reconcile competing claims and so as to accord full justice to all the real par- ties in interest; if necessary, persons not origi- nally connected with the litigation may be brought before the court so that their rights in the subject matter may be determined and enforced. In ad- dition, the court may go beyond the matters im- B-13 mediately underlying its equitable jurisdiction and decide whatever other issues and give what- ever other relief may be necessary under the cir- cumstances. Only in that way can equity do complete rather than truncated justice. Camp v. Boyd, 229 U.S. 530, 551-552, 33 S.Ct. 785, 57 L.Ed. 1317 (1913). “Moreover, the comprehensivness of this equita- ble jurisdiction is not to be denied or limited in the absence of a clear and valid legislative com- mand.” Porter v. Warner Holding Co., supra, 328 U.S. at 398, 66 S.Ct. at 1089. Indeed, the necessity of broad equity powers to en- force the antitrust laws has often been declared. When construing §1 of the Sherman Act and §3 of the Clayton Act in International Salt Co., Ine. v. United States, 332 U.S. 392, 400-01, 68 S.Ct. 12, 17, 92 L.Ed. 20 (1947) the Supreme Court stated that the district courts: “.. are invested with large discretion to model their judgments to fit the exigencies of the partic- ular case. [Citations omitted.] In an equity suit, the end to be served is not punishment of past transgressions nor is it merely to end specific il- legal practices. A public interest served by such civil suits is that they effectively pry open to competition a market that has been closed by de- fendants’ illegal restraints. If this decree accom- plishes less than that, the Government has won a lawsuit and lost a cause.” And when affirming the power of the district court under § 7 of the Clayton Act to order divestiture, an- other far-reaching and drastic remedy, the Supreme B-14 Court was careful to note the “general consideration” that the “courts are authorized, indeed required, to decree relief effective to redress the violations, what- ever the adverse effect of such a decree on private interests.” United States v. E. I. du Pont de Nemours & Co., et al., 366 U.S. 316, 326, 81 S.Ct. 1243, 1250, 6 L.Ed.2d 318 (1961). The district courts have frequently been faced with the necessity of granting relief against third parties in order to effectively enforce § 7 of the Clay- ton Act. Consistently they have held that $15 of the Clayton Act and their general equity jurisdiction au- thorized relief against such parties if necessary to eliminate the effects of an acquisition offensive to the statute. See, e.g., United States v. Phillips Petro- leum Company, 367 F.Supp. 1226, 1261-62 (C.D. Cal. 1973), aff’d mem., 418 U.S. 906, 94 S.Ct, 3199, 41 L.Fd.2d 1154 (1974) ; United States v. Pabst Brewing Company, 183 F.Supp. 220, 221 (E.D. Wis. 1960); United States v. BE. I. du Pont de Nemours & Co., 177 F.Supp. 1, 10-12 (N.D.TI. 1959), reversed on other grounds, 366 U.S. 316, 81 S.Ct. 1243, 6 L.Ed.2d 318 (1961).” Several district courts have retained sellers "In the du Pont litigation, supra, the district court initially dismissed the government’s entire complaint. Reversing the Su- preme Court seemed to sanction joinder of third parties: “The motion of the appellees Christiana Securities Company and Delaware Realty and Investment Company for dismissal of the appeal as to them is denied. It seems appropriate that they be retained as parties pending determination by the District Court of the relief to be granted.’’ United States v. E. I. du Pont de Nemours & Co., et al., 353 U.S. 586, 608, 77 S.Ct. 872, 885, 1 L.Ed.2d 1057 (1957). On remand the district court granted relief against not only the buyer, but also the seller, General Motors, and other related B-15 as parties while specifically considering rescission under § 7, but ultimately decreed other forms of relief thought to be more effective. United States v. Reed Roller Bit Company, 274 F.Supp. 573 (W.D.OkKL 1967) ; United States v. Phillips Petroleum Company, supra. Based on the foregoing we conclude that rescission is not without the pale of equitable discretion in ap- propriate circumstances." We are mindful that the equity power of the courts is not unbounded. Each decree must be tested on review to determine whether third parties, Christiana and Delaware. The Supreme Court again reversed, on grounds unrelated to the availability of relief against these third parties, but stated: “General Motors, Christiana and Delaware will thus be able to renew, for the district court’s decision in the first in- stance, any objections they may have to the power of the Court to grant relief against them.” United States v. E. I. du Pont de Nemours & Co., et al., 366 U.S. 316, 334-35, 81 S.Ct. 1243, 1255, 6 L.Ed.2d 318 (1961). This second pronouncement seems to leave as an open question the issue of whether relief can be granted against third parties. Appellants contend this second pronouncement by the Supreme Court implies that sellers cannot be joined as parties in an action under §7 when the acquisition is consummated. How- ever, the comment is nothing more than a recognition of the issue by the Court. If anything, the Supreme Court’s first pro- nouncement suggests the leaning of the Court. ‘We note that the remedy of rescission has been approved, albeit in distinguishable circumstances, by the Supreme Court in J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed. 2d 423 (1964). Borak involved a violation of §14(a) of the Se- curities Exchange Act of 1934. It resulted in rescission of a merger where the consent of the stockholders was obtained through the use of false and misleading proxy statements. Ad- mittedly this case involves a different statute and arguably in- volves no nonviolating parties, but its relevance is in showing that the remedy of rescission is an appropriate form of equitable relief. The Supreme Court justified the remedy by resort to the broad equitable powers of the court to effectuate congressional policy. See 377 U.S. at 433, 84 S.Ct. 1555. B-16 the district court has abused its discretion or whether the dictates of due process have been infringed. The fact that sellers in \ 7 cases are not technical violators of the law is itself a strong equity consideration against rescission. Normally relief should be molded, if possible, which does not adversely affect the inter- ests of nonviolators. Nevertheless, if effective imple- mentation of public policy cannot be decreed without adversely involving third parties, courts in equity may, within limits, involve such parties in the relief to be granted. Aqua Media seeks to avoid the broad equity power invoked by § 15 of the Clayton Act by construing the section as a limitation on the equity power of the district courts.’ Section 15 invokes the equity juris- diction of the district courts to “prevent and restrain” violations of the Clayton Act. Appellants would have us interpret this language to authorize the district court to act against violations only prior to the time the acquisition actually occurs. Allegedly, after an illegal acquisition occurs it becomes a “fait accompli” and can no longer be “prevented” or “restrained”. Thus, Aqua Media concedes the authority of the district court to grant relief against sellers prior to consummation of a disputed acquisition agreement, but contends no authority to fashion relief exists if the buyer and seller are fortunate enough to finalize °*Aqua Media also argues, based on contract law, that rescis- sion cannot be ordered absent assent of the parties. Suffice it to say that this contention is inapposite. The equity power of district courts to fashion effective relief is not constrained by technical doctrines of contract law. B-17 their purchase-sale contract before the acquisition is challenged. The short answer to appellants’ contention is that their reading of §15 strains the normal meaning of the terms “prevent” and “restrain” far out of per- spective. Moreover, as previously noted, the Supreme Court in Porter v. Warner Holding Company, supra at 398, 66 S.Ct. 1086, 1089 has precluded us from implying, where not explicit, a statutory restriction of the district court’s inherent equity jurisdiction: “ , . the comprehensiveness of this equitable jurisdiction is not to be denied or limited in the absence of a clear and valid legislative command. Unless a statute in so many words, or by a neces- sary and inescapable inference, restricts the court’s jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied. ‘The great principles of equity, securing complete justice, should not be yielded to light inferences, or doubtful construction.’ Brown v. Swann, 10 Pet. 497, 503, 9 L.Ed. 508.” See also Mitchell v. DeMario Jewelry, supra, 361 U.S. at 291, 80 S.Ct. 332. Furthermore, the Supreme Court has given us ex- plicit direction as to the scope of relief affordable under § 15: “ . . The relief which can be afforded under [§ 15] is not limited to the restoration of the status quo ante. There is no power to turn back the clock. Rather, the relief must be directed to that which is ‘necessary and appropriate in the public interest to eliminate the effects of the B-18 aquisition offensive to the statute,’ United States v. DuPont & Co., 353 U.S. 586, 607, 77 S.Ct. 872, 1 L.Ed.2d 1057 (emphasis added), or which will ‘cure the ill effects of the illegal conduct, and assure the public freedom from its continuance.’ United States v. United States Gypsum Co., 340 U.S. 76, 88, 71 S.Ct. 160, 95 L.Ed. 89 (emphasis added ).” Ford Motor Company v. United States, 405 U.S. 562, 573, n. 8, 92 S.Ct. 1142, 1149, 31 L.Ed.2d 492 (1972). Section 7 of the Clayton Act was intended to arrest anticompetitive acquisitions before they work their evil, which may be at or any time after the acquisi- tion. The district court, upon motion of the govern- ment, may decree effective relief “at any time that an acquisition may be said with reasonable probability to contain a threat that it may lead to a restraint of commerce or tend to create a monopoly of a line of commerce.” United States v. E. I. du Pont de Nemours & Co., et al., 353 U.S. 586, 597, 77 S.Ct. 872, 879, 1 L.Ed.2d 1057 (1957). Ill, DISCRETION OF THE DISTRICT COURT TO ENTER THE INJUNCTION. Aqua Media does not explicitly allege that the dis- trict court abused its discretion in entering the pre- liminary injunction preserving the status quo pendente lite. However, their argument of the facts throughout their brief and at oral argument can be construed B-19 as an allegation that in the circumstances of this case it was an abuse of discretion by the district court to grant the injunction. Aqua Media presents a strong argument that even if rescission is legally available, it is impermissible in the facts of this case. The strongest point in appellants’ favor is the fact that over $2 million of the consideration paid for their California water service assets already has been dis- tributed to the shareholders. This is a compelling argument against the decree of rescission which makes it difficult to conceive of how such a decree might be fashioned without impermissibly injuring either Aqua Media or its shareholders. Again, however, we note the unique posture of this case. We are not reviewing an actual order of rescis- sion by the district court. The court has not yet granted rescission and may never do so. Rather, we are reviewing a preliminary injunction designed to preserve the ultimate availability of rescission in the event it is determined necessary at the conclusion of a trial on the merits. We can reverse the grant of this injunction as an abuse of discretion only if we conclude that under no conceivable circumstances could a final decree involving rescission be permis- sible. This we cannot do. First, in the event a violation is ultimately proven and rescission is deemed necessary, it does not seem impossible for the district court to devise some way to rescind the acquisition without forcing the undoing of the approximately $2 million distribution already made to Aqua Media’s shareholders. If nothing B - 20 else, the buyers in this transaction—CCLA and Arrowhead—as actual violators of § 7, might be re- quired to give back the illegally acquired assets of Aqua Media without accepting full repayment. It is well established that economic hardship, particularly that of violators of the antitrust laws, can influence choice only as among two or more effective remedies and that the district courts are required to decree relief effective to redress antitrust violations “what- ever the adverse effect of such decree on private interests.” United States v. du Pont de Nemours & Co., et al., 366 U.S. 316, 326-27, 81 S.Ct. 1243, 1250, 6 L.Ed.2d 318 (1961). Second, numerous factors which have not yet been developed at trial may color the availability of relief against Aqua Media. The trial judge specifically noted in his “Findings of Fact and Conclusions of Law” that he has not yet had the benefit of cross-examina- tion and presentation of argument by counsel to develop a complete picture of the transaction in dispute. It is not inconceivable that proof at trial could show Aqua Media to be a culpable party, though not a technical violator of §7. For example, it may turn out that Aqua Media was fully aware that its sale to Arrowhead would violate the provisions of §7. Or proof may show that Aqua Media is now in a strong equitable bargaining position only because it conspired with Arrowhead to make a quick sale and then speeded up its distribution of the proceeds of the sale before the FTC could conduct an investigation B - 21 and bring suit.” If any culpability on Aqua Media’s part is proven it would be relevant to the form of relief eventually granted. Third, even though the complaint alleges only a violation of § 7 of the Clayton Act, amendment of the complaint is still possible. The complaint should not be dismissed unless “it appears beyond doubt that the [United States] can prove no set of facts in support of [its] claim which would entitle [it] to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). Further discovery or the proof adduced at trial may expose a violation by Aqua Media of other provisions of the antitrust laws. An acquisition in violation of Clayton §7 is also poten- tially a violation of Section 1 or 2 of the Sherman Act or Section 5(a)(1) of the Federal Trade Com- mission Act. See Von Kalinowski, Antitrust Laws and Trade Regulation § 15.06. We are not intimating that these acts have been violated or that such violations could be proved against Aqua Media. We simply recognize that proof of what actually occurred is yet to be made. A showing that Aqua Media violated some other antitrust provision is at least a possibility and would not only be relevant to the availability of rescission against it under §7 of the Clayton Act, but also would be an independent ground for relief. Precisely because we do not know what trial will show and because we do not know what form of relief Within 13 days of reaching the negotiated agreement on July 20, 1976, Aqua Media held an annual shareholder meeting at which the proposals were approved and proceeded to close the agreement with Arrowhead on August 2, 1976. B - 22 the district court will eventually devise, if any, we cannot say that there are no circumstances in this case in which rescission would be permissible. Finally, we note that Aqua Media has not pursued on appeal its contention in the district court that the preliminary injunction would cause undue hardship. In that regard the district court has permitted A. M. Liquidating Company to distribute its assets to a trustee, satisfying § 337 of the Internal Revenue Code and making the liquidation tax free at the corporate level. And evidence seems sufficient that 1.) the partners of Aqua Media, Ltd. will not be unable to meet their obligations to make capital contributions to the partnership because the liquidation has been suspended, and 2.) Aqua Media, Ltd. will be able to raise sufficient operating capital to pursue its manu- facturing business while defending this suit. IV. CONCLUSION The federal district courts are not precluded as a matter of law from ordering rescission of acquisitions found to be in violation of §7 of the Clayton Act. Each case must be decided on the basis of the equities of its individual facts. The preliminary injunction issued in this case was within the discretion of the district judge because we cannot say that no form of relief involving rescission is available on the facts of this case and because the interests of the enjoined parties have been adequately protected by the pre- liminary injunction order. The order of the district court is AFFIRMED. B - 23 United States Court of Appeals For The Ninth Circuit Nos. 77-2683 and 77-2778 United States of America, ! Plaintiff-Appellee, vs. Coca-Cola Bottling Company of Los Angeles, Arrowhead Puritas Waters, Inc., . Defendants, and Aqua Media, Ltd., and A. M. Liquidating Co., Defendants-Appellants. : [Filed May 18, 1978] ORDER DENYING PETITION FOR REHEAR- ING AND REJECTING THE SUGGESTION FOR REHEARING EN BANC Before: Carter, Goopwin and SoLomon, Judges. The panel in the above entitled case voted to deny the petition for rehearing. Judge Goodwin voted to deny the petition for rehearing en bane, and Judge Carter and Judge Solomon recommended the rejection of the suggestion for rehearing en bance. The petition for rehearing and rehearing en bane having been circulated to all active judges, and no judge having voted for a rehearing en bane, B - 24 It Is Ordered that the petition for rehearing is denied and the suggestion for rehearing en bane is rejected. Appendix C CLAYTON ACT §7, 15 U.S.C. $18: §18. Acquisition by one corporation of stock of another No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation sub- ject to the jurisdiction of the Federal Trade Com- mission shall acquire the whole or any parts of the assets of another corporation engaged also in com- merce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to cre- ate a monopoly. No corporation shall acquire, directly or indirectly, the whole or any part of the stock or other share cap- ital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of one or more corporations engaged in commerce, where in any line of commerce in any section of the country, the effect of such acqui- sition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or other- wise, may be substantially to lessen competition, or to tend to create a monopoly. This section shall not apply to corporations pur- chasing such stock solely for investment and not using the same by voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition. Nor shall anything contained in this section prevent a corporation engaged in commerce C-2 from causing the formation of subsidiary corporations for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof, or from owning and holding all or a part of the stock of such subsidiary corporations, when the effect of such formation is not to substanti- ally lessen competition. Nor shall anything herein contained be construed to prohibit any common carrier subject to the laws to regulate commerce from aiding in the construction of branches or short lines so located as to become feed- ers to the main line of the company so aiding in such construction or from acquiring or owning all or any part of the stock of such branch lines, nor to prevent any such common carrier from acquiring and owning all or any part of the stock of a branch or short line constructed by an independent company where there is no substantial competition between the company owning the branch line so constructed and the com- pany owning the main line acquiring the property or an interest therein, nor to prevent such common carrier from extending any of its lines through the medium of the acquisition of stock or otherwise of any other common carrier where there is no sub- stantial competition between the company extending its lines and the company whose stock, property, or an interest therein is so acquired. Nothing contained in this section shall be held to affect or impair any right heretofore legally acquired: Provided, That nothing in this section shall be held or construed to authorize or make lawful anything C-3 heretofore prohibited or made illegal by the antitrust laws, nor to exempt any person from the penal pro- visions thereof or the civil remedies therein provided. Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the Civil Aeronautics Board, Federal Com- munications Commission, Federal Power Commission, Interstate Commerce Commission, the Securities and Exchange Commission in the exercise of its jurisdic- tion under section 79] of this title, the United States Maritime Commission, or the Secretary of Agricul- ture under any statutory provision vesting such power in such Commission, Secretary, or Board. CLAYTON ACT § 15, 15 U.S.C. § 25: § 25. Restraining violations; procedure The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of this Act, and it shall be the duty of the several United States attorneys, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise pro- hibited. When the parties complained of shall have been duly notified of such petition, the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition, C-4 and before final decree, the court may at any time make such temporary restraining order or prohibi- tion as shall be deemed just in the premises. When- ever it shall appear to the court before which any such proceeding may be pending that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned whether they reside in the district in which the court is held or not, and subpoenas to that end may be served in any district by the marshal thereof. Appendix D Crossan R. Andersen Howard J. Parker Martin J. Kaplan Carolyn D. Wulfsberg Antitrust Division U.S. Department of Justice 300 N. Los Angeles Street Los Angeles, California 90012 Telephone: (213) 688-2506 Attorneys for Plaintiff United States District Court Central District of California Civil No. 76-3988-LTL United States of America, i Plaintiff, VS. Coca-Cola Bottling Company of Los Angeles; Arrowhead Puritas Waters, Inc.; Aqua Media, Ltd.; and A. M. Liquidating Co., Defendants. } STIPULATION It is stipulated by and between the undersigned parties, plaintiff United States of America, and de- fendants Coca-Cola Bottling Company of Los Angeles, Arrowhead Puritas Waters, Inc., Aqua Media, Ltd. and A. M. Liquidating Co., by their respective attor- neys, that: D-2 1. A final judgment in the form hereto attached may be filed and entered by tie Court upon the motion of any party or upon the Court’s own motion, at any time after compliance with the requirements of the Antitrust Procedures and Penalties Act [15 U.S.C. § 16] and without further notice to any party or other proceedings, provided that plaintiff has not withdrawn its consent, which it may de at any time before the entry of the proposed final judgment by serving notice thereof on defendants and by filing that notice with the Court. 2. In the event plaintiff withdraws its consent or if the proposed Final Judgment is not entered pur- suant to this Stipulation, this Stipulation shall be of no effect whatever and the making of this Stipulation shall be without prejudice to plaintiff and defendants in this or any other proceeding. Dated: /s/ Hugh P. Morrison, Jr. Hugh P. Morrison, Jr. Acting Assistant Attorney General /s/ Richard J. Favretto Richard J. Favretto /8/ Charles F. B. McAleer Charles F. B. McAleer /8/ Raymond P. Hernacki Raymond P. Hernacki Attorneys, Department of Justice Crossan R. Andersen Howard J. Parker /8/ Martin J. Kaplan Martin J. Kaplan D-3 /s/ Carolyn D. Wulfsberg Carolyn D. Wulfsberg Attorneys, Department of Justice For Defendants Coca-Cola Bottling Company of Los Angeles and Arrowhead Puritas Waters, Ine. /8/ Don T. Hibner, Jr. By: Don T. Hibner, Jr. Sheppard, Mullin, Richter & Hampton For Defendant Aqua Media, Ltd. /s/ Dale E. Fredericks By: Dale E. Fredericks Sedgwick, Detert, Moran & Arnold For Defendant A. M. Liquidating Co. /s/ Karen L. Witte By: Karen L. Witte Cooley, Godward, Castro, Huddleston & Tatum D.4 United States District Court Central District of California Civil No. 76-3988-LT'L United States of America, ) Plaintiff, VS. Coca-Cola Bottling Company of Los Angeles; Arrowhead Puritas Waters, Inc.; Aqua Media, Ltd.; and A. M. Liquidating Co., Defendants. | FINAL JUDGMENT Plaintiff, United States of America, having filed its complaint on December 23, 1976, defendants having filed their respective answers thereto, plaintiff's mo- tion for a preliminary injunction having been heard and granted by the Court, the Court having entered findings of fact and conclusions of law, and the par- ties by their respective attorneys of record, having each consented to the preparation and entry of this Kinal Judgment, and without this Final Judgment constituting evidence or an admission by any party with respect to any issue consented to; Now Therefore, upon the consent of each of the parties hereto and upon a determination by this Court that entry of this Judgment will be in the public interest, it is hereby D-5 Ordered, Adjudged And Decreed as follows: I This Court has jurisdiction of the subject matter of this action and of each of the parties hereto, The Jomplaint states a claim upon which relief may be granted against defendants Coca-Cola Bottling Com- pany of Los Angeles and Arrowhead Puritas Waters, Ine, pursuant to Section 7 of the Clayton Act (15 U.S.C. § 18), Defendants Aqua Media, Ltd, and A. M. Liquidating Co. are proper parties defendant to this action pursuant to the general equity powers of this court. II In this Final Judgment the following definitions shall apply: A. “Arrowhead” means defendants Arrow- head Puritas Waters, Inc. and Coca-Cola Bottling Company of Los Angeles, and its subsidiaries ; B. ‘‘Aqua Media” means defendant Aqua Media, Ltd.; C. ‘Group A Assets” means those properties, equipment, inventory, customer contracts, and other items listed or deseribed in Exhibit A attached hereto; D, “Group B Assets” means those properties, equipment, inventory, customer contracts, and other items listed or deseribed in Exhibit B attached hereto; KE. ‘*Restrictive Covenants” means those cov- enants not to compete given by Aqua Media and D-6 Jaren F. Leet to Arrowhead pursuant to the Asset Purchase Agreement. i. “High purity industrial water service” means the provision of high purity water purifi- cation service for commercial and industrial applications and includes the provision and/or sale of certain goods and/or equipment used incident to and in conjunction with such service. High purity industrial water service includes, but is not limited to, bulk water service, deioniza- tion exchange tank service, mobile demineraliza- tion service, reverse osmosis service, and the provision and/or sale of deionization and/or reverse osmosis equipment used incident to and in conjunction with such service and any com- bination of the preceding services and equipment. High purity industrial water service is provided to customers which require water purified to a high degree by the total or substantial removal of minerals, organic compounds or other dis- solved matter; G. “Person” means any individual, partner- ship, association, firm, corporation, or other legal or business entity; H. “Purchaser” shall mean any one or more persons acquiring assets pursuant to this Final Judgment ; I, “Southern California” shall mean Imperial, Kern, Los Angeles, Orange, Riverside, San Ber- nardino, San Diego, San Luis Obispo, Santa ——EeoeoeeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeeeeeeeeeeeeeee eee a D-7 Barbara and Ventura Counties in the State of California; and J. The term “Northern California” means that part of California exclusive of “Southern California.” IlI The provisions of this Final Judgment applicable to Arrowhead and Aqua Media, respectively, shall also apply to the directors, officers, agents, employees, subsidiaries, partnerships, successors, and assigns of each, and to all other persons in active concert or participation with any of them who receive actual notice of this Final Judgment by personal service or otherwise. IV Any divestiture made pursuant to this Final Judg- ment shall be made to one or more purchasers who shall reasonably demonstrate to the plaintiff and/or the Court, as hereinafter provided, that at the time of divestiture (1) the assets acquired shall be capable of being operated as a going business or businesses, (2) that the purchaser(s) has the potential to com- pete effectively with Arrowhead, and (3) that the proposed divestiture will effectively restore competi- tion to the high purity industrial water service market in both Northern California and Southern California. V A. Arrowhead is ordered and directed to com- pletely divest itself within one vear from the date of this Final Judgment of all of its right, title, in- D-8 terest and obligations in either the Group A or Group B Assets in substantial conformance with the de- scription in Exhibits A and B respectively in this Final Judgment. In the event Arrowhead submits to the plaintiff an executed contract of divestiture with a bona fide purchaser in substantial accord with the provisions of this Final Judgment, which divestiture cannot reasonably be completed within said one year period, then such period shall be extended for a rea- sonable time not to exceed six (6) months within which to complete said divestiture. The application of the provisions of Paragraphs XII to XIX and XXI of this Final Judgment shall be delayed for a like period. For the purpose of this provision, an agreement for divestiture shall be in substantial accord or conformance with the provisions of this Final Judgment if the assets to be sold are at least equal to ninety (90) percent of the assets described in Schedule A. Vi Arrowhead shall utilize its best efforts to sell the assets and to make known promptly the availability of the assets by the ordinary and usual means. In the event that the divestiture ordered herein has not been completed within sixty (60) days from the entry of this Final Judgment, such best efforts shall in- clude without limitation: A. Arrowhead shall prepare a brochure sep- arately describing Group A Assets and Group B Assets, the operations carried on by Arrowhead therewith, and the divestiture ordered and di- rected by this Final Judgment; D-9 B. Arrowhead shall forward said brochure to each person requesting same, to each prospective purchaser known to Arrowhead, and to each company listed in Exhibit D attached hereto; C. Arrowhead shall employ the services of an investment banker, business opportunity broker or similarly qualified person to assist in the di- vestiture ordered and directed by this Final Judgment ; D. Arrowhead shall cause an advertisement offering the assets for sale to be published (1) in the national edition of The Wall Street Jour- nal for at least seven days during each six month period following the entry of this Final Judg- ment, and (2) for a reasonable period in at least two additional trade or business publications of national circulation, including one circulated to the water treatment trade; E. Arrowhead shall direct a person holding a senior management position with Arrowhead or a parent thereof to devote his best efforts and a substantial portion of his time to promote and complete the divestiture directed and ordered by this Final Judgment; F. Arrowhead shall furnish to all bona fide prospective purchasers all necessary information regarding the assets and the operations carried on by Arrowhead therewith, including revenue and cost data and other available information similar to that provided to Arrowhead by Aqua Media, Inc. prior to the Asset Purchase Agree- D-10 D-11 ment dated July 20, 1976. Arrowhead shall approved by the plaintiff or the Court, Arrowhead permit prospective purchasers to make such shall make available to each purchaser at such pur- inspection of the assets as may be reasonably chaser’s option: necessary for the above-stated purpose. Arrowhead shall not be required to submit any such infor- mation or materials to anyone unless the recipient thereof executes an affidavit requiring recipient to keep such information and/or materials con- fidential, not to reproduce the same, and to return the same to Arrowhead in the event a sale to such recipient is not consummated. G. Prior to the twelfth (12) month after entry of this Final Judgment, Arrowhead shall design and successfully test an accounting sys- tem capable of producing actual cost data, and shall also provide pro forma income, balance sheet and operating statements addressing the assets to be divested had such assets actually been operated as an independent, going business. After the sixth (6) month following entry of this Final Judgment, the plaintiff may petition the Court for an order that such accounting sys- tem be designed and implemented at an earlier date. Upon such petition plaintiff shall have the burden of proving that such accounting system and financial statements would facilitate the sale of such assets. Vil 1. Arrowhead’s existing engineering, market- ing and installation information and assistance sufficient to allow said purchaser effectively to compete in the high purity industrial water serv- ice market. Such assistance shall include the provision of engineers and other qualified operat- ing or management employees to assist in the establishment of management, plant operations, and field service engineering systems, and in solving operational problems as they may arise; 2. Any information utilized by Arrowhead in purchasing raw materials and parts in its high purity industrial water service business sufficient to allow said purchaser to compete effectively in the high purity industrial water service market. For a period of one year after the divestiture, if such raw materials and parts are not available to the purchaser at substantially the same price and terms as to Arrowhead, Arrowhead will sell said raw materials and parts to purchaser at Arrowhead’s direct cost. 3. A list of all employees of Arrowhead’s In- dustrial Water Division, together with their job description, annual compensation, accrued sick leave and accrued vacation pay. Purchaser shall A. Arrowhead is ordered and directed to the best of its ability to cooperate with each purchaser. Sub- ject to any limitation in a contract of divestiture have the right, but not the obligation, to offer employment to each such employee. D-12 B. The cost of all mformation and assistance pro- vided by Arrowhead to the purchaser prior to com- pletion of the divestiture shall be included in the purchase price. If within one year after divestiture . Arrowhead, pursuant to this paragraph, provides to the purchaser additional information and/or assist- ance the cost of which has not been specifically in- cluded in the purchase price, such information and/or assistance shall be provided at a price set forth in each contract of divestiture that does not exceed Arrowhead’s costs incurred in providing such serv- ices. C. Arrowhead shall have no obligation hereunder to furnish information or assistance to the purchaser if substantially the same information or assistance is available at a price which does not exceed the price set forth in the contract of divestiture either by em- ploying a consulting firm or the necessary personnel. Arrowhead shall not be obligated to furnish to the purchaser customer information unless the service contract of said customer was acquired by the pur- chaser. Arrowhead shall not be obligated to hii additional personnel in order to comply with the pro- visions of this paragraph. Vill The divestiture ordered and directed by this Final Judgment shall be made in good faith and shall be absolute and unqualified, and except upon written approval by the plaintiff or the Court, Arrowhead shall accept no lien, mortgage, deed of trust or other D-13 form of security on or interest in any portion of the assets sold. Arrowhead shall take no action which will impair or impede the divestiture ordered by this Final Judgment. IX Any contract of sale pursuant to this Final Judg- ment shall require the purchaser to file with this Court its representation that it intends to continue the business of high purity water purification service in Northern California and Southern California, if assets are there acquired, and agree to submit to the jurisdiction of this Court for that limited purpose. x Each sixty (60) days following the entry of this Final Judgment until divestiture has been completed, or until the end of twelve (12) months from the date of entry .of this Final Judgment, whichever first occurs, Arrowhead shall file with this Court and serve upon plaintiff and Aqua Media an affidavit describing in detail the fact and manner of its efforts to accom- plish the divestiture ordered by this Final Judg- ment. Such reports shall be supplemented by such additional information as the plaintiff may reasonably request. XI At least thirty (30) days in advance of the antici- pated closing date of each contract of divestiture pur- suant to this Final Judgment, Arrowhead shall sub- mit to plaintiff and Aqua Media the name of the proposed purchaser and all pertinent information re- D-14 specting the proposed divestiture together with such additional information as plaintiff may reasonably request in writing. Within twenty (20) days after Arrowhead has supplied all the requested informa- tion, plaintiff will advise Arrowhead and Aqua Media in writing of plaintiff's approval or objections to the proposed divestiture. If plaintiff objects to the pro- posed divestiture, then such contract(s) of divesti- ture shall not be conswnmated unless (1) plaintiff notifies Arrowhead in writing of any subsequent ap- proval or unless (2) the Court approves after a hearing at which Arrowhead shall have the burden of proving that the proposed divestiture will effec- tively restore competition to the high purity industrial water service markets in Northern California and Southern California, if assets are there acquired. XII If Arrowhead has not notified the plaintiff and Aqua Media within nine (9) months following the date of entry of this Final Judgment that it has en- tered into a contract of divestiture, each party shall notify the other in writing of the name and descrip- tion of not more than three persons it wishes to nominate as a possible trustee. The parties shall seek to agree upon one of the nominees to serve as a trustee for the divestiture ordered by this Final Judg- ment, and if they are unable to agree, the Court may select a trustee from said nominees after hearing the parties as to the qualifications of the candidates. D-15 XIII If Arrowhead is unable to complete the divestiture required by this Final Judgment within the period prescribed in Paragraph V_ above, the Court shall appoint a trustee to serve for a maximum period of fifteen (15) months except as hereinafter provided. XIV The trustee’s main endeavor shall be to accomplish prompt and full divestiture of the assets described in Paragraph XVI of this Final Judgment, as one or more going businesses in accordance with the pro- visions of Paragraph IV of this Final Judgment in order effectively to restore competition to the high purity industrial water service market in both Northern California and Southern California and to further the public interest. XV The trustee shall perform at the expense of Arrow- head under a schedule of court-approved fees, in- centive compensation and costs to be fixed at the time of the trustee’s appointment. The trustee shall have the right at any time to petition the Court, with prior written notice thereof to all parties, for further fees and/or incentive compensation for prompt accom- plishment of the purposes of the Trust. XVI After consulting with the parties, the trustee shall select assets consistent with the description of assets D - 16 in Exhibit C together with such other assets as the trustee may deem necessary to enable the trustee to sell one or more going high purity industrial water service businesses and thereby effectively restore com- petition to the high purity industrial water service market in Northern California and Southern Cali- fornia. Should the trustee select assets in excess of, or inconsistent with, the description of assets in Exhibit C, any party may petition the Court. Upon such petition the moving party shall have the burden of proving that the trustee’s selection of assets is contrary to the purposes of the Trust. XVII A. The trustee shall have all such powers as are necessary and proper to accomplish divestiture in accordance with the provisions of this Final Judg- ment. Subject to the provisions of this paragraph, the trustee shall have authority to manage, control, operate and sell by any reasonable means the assets selected for divestiture. Subject to the provisions of this paragraph, the trustee may require Arrowhead to convey all rights, titles, interests and obligations in the selected assets or any portion thereof to any purchaser. Such conveyance shall be absolute and unqualified. B. The trustee shall have the power to manage the assets selected for divestiture only after the con- clusion of the sixth month of the term of the Trust. If the trustee elects at any time to manage such assets, the trustee shall notify Arrowhead thereof in D-17 writing. Should Arrowhead object to the exercise of the trustee’s management powers, it shall have ten (10) days from receipt of such notice within which to petition the Court. Upon such petition, Arrow- head shall have the burden of proving that manage- ment by the trustee will not facilitate the sale of such assets. Once the trustee assumes such management powers, the trustee may require Arrowhead to con- vey all rights, title, interests and obligations in the selected assets or any portion thereof to the trustee. Such conveyance shall be absolute and unqualified. C. The trustee shall have the power to conduct a sale of the assets selected for divestiture upon sealed or public bids after reasonable notice to the parties describing the method of sale. Such sale shall convey the assets so as to be operated as one or more going businesses and shall be subject to the provisions of paragraph XIX of this Final Judg- ment. Aqua Media shall have the right to bid at any such sale. D. The trustee’s authority shall include without limitation : 1. The right of access to Arrowhead’s finan- cial, accounting, production, customer and other records related to any asset owned or in the possession or control of Arrowhead which the trustee may deem necessary to assist in the se- lection of assets or otherwise; 2. The power to retain investment bankers, business opportunity brokers, accountants, ap- praisers, consultants, attorneys and any other D-18 persons reasonably needed to assist in the pro- motion, analysis, or execution of any sales(s) or in managing, operating, or controlling the assets pursuant to this Final Judgment; 3. The power to implement an accounting system to provide revenue data, cost data and other financial and accounting information re- lating to the selected assets such as would per- mit the trustee to develop a meaningful pro forma operating statement and actual income and balance sheet statements to be used by the trus- tee in implementing this Final Judgment and the sale of the selected assets; and 4, The power to interview and offer employ- ment to officers and employees of Arrowhead’s Industrial Water Division. XVIII A. Pending confirmation of a sale, the price, terms, and other conditions of any offer shall be treated as confidential and not subject to disclosure to a third party without prior approval by the Court. The trustee shall not disclose financial or production information or the identification of particular Ar- rowhead customers to persons other than prospective purchasers and. shall only disclose such information to prospective purchasers after having entered into a nondisclosure agreement with such prospective pur- chasers. B. Arrowhead shall have the right to designate certain financial information disclosed to the trustee D-19 as “secret.” The information so designated shall be limited to that which, if released to a competitor, would grant an unfair competitive advantage and shall be as narrowly restricted as is commercially reasonable. Prior to furnishing information desig- nated as “secret,” the trustee shall give written no- tice to the parties identifying the information and to whom it is to be disclosed. Arrowhead shall have two (2) business days from the receipt of the notice within which to object to such disclosures and to petition the Court to review the intended disclosure. This Court will permit, prohibit or limit such dis- closures within seven (7) days following the dispatch of Arrowhead’s objection. XIX The trustee shall advise the parties of all signifi- cant matters arising in the negotiations. Upon the reaching of an understanding in principle on the basic terms and conditions of a prospective sale and at least forty-five (45) days before any proposed consummation date, the trustee shall advise the Court, with notice to the parties, of the identity of the prospective purchaser or purchasers and _ shall describe the terms and conditions of the prospective sale. Within fourteen (14) days of said notice, any party may file a statement of objections to the pro- posed sale. Such prospective sale shall not be exe- cuted until the parties have had an opportunity to present views and recommendations on any issue pre- sented and to be heard thereon. Such objections shall D - 20 be evaluated by the standard set forth in Para- graph IV, XX Arrowhead shall provide such reasonable assistance as the trustee may request to enable him to sell selected assets. Such assistance shall include, but shall not be limited to: A. Furnishing, without cost, all information regarding selected assets and the operations con- ducted by Arrowhead or Aqua Media, Inc. there- with, including, without limitation, revenue data, cost data, and such other information as shall be requested by the trustee; B. Permitting the trustee or his agents to make any inspection of any assets and operations of Arrowhead utilized in its high purity indus- trial water service business; C. Providing a list of all present and former employees employed by Arrowhead or Aqua Media, Inc. in the industrial high purity water service business, together with last known resi- dence addresses, job descriptions, and annual compensation, to the extent known to Arrow- head. The trustee shall have the right, but not the obligation, to interview privately and offer employment to any such employee; D. Providing, upon the trustee’s request, en- gineers, accountants, or other qualified operating or management employees to assist in the estab- lishment of management, plant operation and field service engineering systems; in solving op- D-21 erational problems which may arise; and in any other manner ; Kk. Providing, upon the trustee’s request, any information utilized by Arrowhead in purchasing, and/or aid the trustee in obtaining, raw materials or parts in connection with the high purity in- dustrial water service business; and F. Selling, upon the trustee’s request, at its out-of-pocket prices, any raw materials or parts used in connection with Arrowhead’s high purity industrial water service businesses. XXI For a period of twelve (12) month [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_1513%3A2. Public record. Not legal advice.