Petition — Kaplan v. Burroughs Corp.
Supreme Court brief1980
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APR 24 1980
MIGHAEL RODAK, JR., CLERK
In the Supreme Court
OF THE
United States
OcroBer TERM, 1979
No. 79-1681
Stuart M. Kaptan, as Truster in BANKRUPTCY
FoR PauMER Data CorporaTION
doing business as computerminal,
Petitioner,
VS.
Burroucus Corporation,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
to the United States Court of Appeals
for the Ninth Circuit
- Anioto & ALioro
JosePH M. Auroto
STEvEN J. CANNATA
111 Sutter Street, Ste. 2100
San Francisco, California 94104
(415) 434-2100
Attorneys for Petitioner
POWNE-PERNAU WALSH © 1045 SANSOME ST. ¢ S.F., CA 94111 © (415) 981-7882
SUBJECT INDEX
Page
: ; peeae Gr ee Gomtts DEPOW «8... ec el, 2
ee ne a 5 oh gs 00:0 5,0'0 mas ve oes 2
Questions presented for review .......................055. 2
Statutes involved ............... Rae Rh ah wale hoo oh 3
Ne eis wah gaauh wes 3
re eS awk caw dle oa 3
B. Course of the proceedings below .................... 3
SL 5
ty. sh wackonaeces Viiv... ©
@. *: Statement of the facts .........5.............05. 6
ES 42
ee vid vpiels onde ess 45
4 %
os
TABLE OF AUTHORITIES CITED
Cases
Page
Ag-Chem Equipment Co., inc. v. Hahn, Inc. (8th Cir. 1973)
A a ig de awh Reais RNA ale: SN
Audrey D. Hanson d/b/a Hanson Paint and Glass v. Pittsburg
Plate Glass Industries, Inc. (5th Cir. 1973) 482 F.2d 220.... 43
Beacon Theatres v. Westover (1959) 359 U.S. 500 .......... 42, 43
Belliston v. Texaco (10th Cir. 1972) 455 F.2d 175 ........... 43
Berkey Photo, Inc. v. Eastman Kodak (2d Cir. 1979) 603 F.2d ae
eae 9: 2s Sees et Pe Bey ay chats Moe Winnie os
Carlyle Michelman v. Clark Schwebel Fiber Glass Corp. (2d
Ce Re ee is aia pn eats Sh 44
a. Oil Service Co. v. Sinclair Refining Co. (6th Cir.
Te A eee enna eee eer Cory rae 44
Davis v. Marathon Oil Co. (6th Cir. 1975) 528 F.2d 395 ..... 44
DeFilippo v. Ford Motor Co. (3rd Cir. 1975) 516 F.2d 1313.. 44
Poaeeey v. Continental Oil Co. (5th Cir. 1978) 579 F.2d Ms
E.A. McQuade Tours, Inc. v. Consolidated Air Tour Manual
Committee (5th Cir. 1972) 467 F.2d 178 ................. 43
Elder-Beerman Stores Corp. v. Federated Dept. Stores (6th
a ee IE Ee oo iss v's Da Be Ant ane sd wing ge x 43
Engine Specialties v. Bombadier Limileil (1st Cir. 1979) ..... 44
Ford Wholesale Co., Inc. v. Fibreboard Paper Products Corp.
(OU Cie, DET GY SOO BOs TIE i ee es. 44
Fuchs Sugars & Syrups, Inc. v. Amstar Corp. (2d Cir. 1979)
MM ok are Sa gly pig a ear kgs we gid bok aoe 44
Gough v. Rossmoor Corp. (9th Cir. 1978) 585 F.2d 381 ...... 44
GTE Sylvania, Inc. v. Continental, 537 F.2d 980 ............ 44
Hallmark Industry v. Reynolds Metal Co. (9th Cir. 1973) 489
MS es a ent te ae eR aha Cares Wale xia 5 43
Harrison v. Prather (5th Cir. 1970) 435 F.2d 1168............ 43
Hawaiian Oke v. Seagram (9th Cir. 1969) 416 F.2d 71 ....... 44
Herald Co. v. Albrecht (1971) 452 F.2d 124................ 43
Household Goods Carriers’ Bureau v. John Terrel, et al. (5th
Ce PS St BE AE ea eo ccc Gees x cr aan geo 8 43
Household Goods Carriers’ Bureau v. Terrell (5th Cir. 1971)
EE oer ce CPR RO ARREAS ctr earn
Hoys v. Solomon (5th Cir. 1979) 597 F.2d 958.............. 44
lii
TABLE OF AUTHORITIES CITED
CasEs
Page
— England v. Chrysler Corp. (9th Cir. 1974) 493 F.2d
Kestenbaum v. Falstaff (5th Cir. 1975) 514 F.2d 690 ........ 44
Magnus Petroleum Co., Inc. v. Shelly Oil Co. (7th Cir. 1979)
UR edi RS I ain er id ae od Pe, een ae 44
Martin B.
1977) 510° rane - ky ae tae = ove 44
Oreck v. Whirlpool Corp. (1977) 563 F.2d 54 ............... 44
Pitchford v. Pepi, Inc. (3rd Cir. 1976) 531 F.2d 92 ........... 44
REA v. Ford Motor Co. (3rd Cir. 1974) 497 F.2d 577 ........ 44
Refrigerated Food Line, Inc. v. Republic Industries, Inc. (8th
OM £8 OD RR pee 28 ee See eae 44
“Gn wna.
Siegel v. Chicken Delight, Inc. (9th Cir. 1971) 448 F.2d 43... 43
Sitkin Smelting & Refining Co., Inc. v. FMC Corp. (3rd Cir.
SET ee ee i OU io ee ca te oka a 44
Spectrofuge Corp. v. Beckman Instruments, Inc. (5th Cir.
8) tae Poi a 44
= M. Kaplan v. Burroughs Corp. (9th Cir. 1979) 611 F.2d
OSGI ARS 2 Pua oe eo! bre oy yet kG te AUR S Bh PME Dany aan 44
Tennant v. Peoria & P.U. Ry. (1944) 321U.S.29.. ......... 42
Venzie Corp. v. U.S. Mineral Product Co., Inc. (3rd Cir.
MPMI eis
bi Wise Company v. Aeroquip (5th Cir. 1972) 468 F.2d
Mii ON ARE Pk. SE 2 alg vi ik hear eee Cen Es oes lea 43
Wen Mar Enterprises, Inc. v. Alexander Motor Co., et al.
Cig: 190D) GG Fe US oo ke ae kc ee 7 ere ie 43
Constitution
United States Constitution, Seventh Amendment ......... 2, 3, 42
Statutes
ID UBAn See COE ik CY
15 U.S.C. section 15 (Clayton Act) ............0...5..... ae
Se SRD III onthe os cee k ale Sow woes oa eer ek: 2
In the Supreme Court
OF THE
United States
October TERM, 1979
No.
Stuart M. Kapian, as TRusTEE IN BANKRUPTCY
FOR PauMER Data CorPpoRATION
doing business as computerminal,
Petitioner,
Vs.
BurrouGus CorporaTION,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
to the United States Court of Appeals
for the Ninth Circuit
Petitioner, Stuart M. Kaplan, as Trustee in Bank-
ruptcy for Palmer Data Corporation doing business as
Computerminal Corporation, prays that a Writ of Certi-
orari issue to review the judgment of the United States
Court of Appeals for the Ninth Cireuit which affirmed, on
different grounds, the opinion of the District Court grant-
ing judgment notwithstanding the verdicts of two juries.
2
OPINIONS OF THE COURTS BELOW
The opinion of the District Court granting a fourth
trial de novo is attached hereto as Appendix A to this
Petition.
The opinion of the District Court vacating its order
for a fourth trial de novo and granting judgment not-
withstanding the verdicts of two juries is reported at
426 F.Supp. 1328 (N.D. Cal. 1977), and is attached as
Appendix B to this Petition.
The opinion of the Court of Appeals affirming the
District Court’s judgment notwithstanding the verdict of
the juries is reported at 611 F.2d 286 (9th Cir. 1979),
and is attached as Appendix C to this Petition.
JURISDICTION
The judgment of the Court of Appeals for the Ninth
Circuit was entered on November 23, 1979. A timely peti-
tion for rehearing was filed on December 14, 1979, and
denied on January 25, 1980.
The jurisdiction of this Court is invoked under
28 U.S.C. § 1254.
QUESTIONS PRESENTED FOR REVIEW
Whether petitioner was denied its right to trial by jury
as guaranteed by the Constitution of the United States
and the decisions of this Court?
Whether, especially in the absence of any issue regard-
ing the rulings of the District Court on evidence or
instructions, this petitioner was denied his right to jury
trial as guaranteed by the Seventh Amendment?
3
STATUTES INVOLVED
Section 1 of the Sherman Act (15 U.S.C. §1) provides,
in pertinent part:
“Every contract, combination in the form of a trust
or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with nations,
is declared to be illegal . . .”
Amendment VII to the Constitution of the United States
(U.S. Const. Amend. VII):
“Amendment VII—Civil Trials
“In suits at common law, where the value in contro-
versy shall exceed twenty dollars, the right of trial
by jury shall be preserved, and no fact tried by a
jury, shall be otherwise reexamined by any Court of
the United States, than according to the rules of the
common law.”
STATEMENT OF THE CASE
A. Nature of the Case
This is a private antitrust suit brought by the petitioner
under Section 4 of the Clayton Act (15 U.S.C. $15) to
recover damages caused by reason of the respondent’s
viclation of Section 1 of the Sherman Act (15 U.S.C. $1).
B. Course of the Proceedings Below
The Complaint was filed in March 1971.
The first trial commenced in February, 1974, before a
jury. In March, 1974, after a four week trial, the jury
returned a unanimous verdict in favor of the petitioner
and assessed damages in the amount of $1,270,000. The
_ judgment was entered on March 13, 1974. In May, 1974,
the District Court denied the respondent’s motion for
4
judgment NOV, denied the respondent’s motion for a new
trial on the issue of liability, but granted the respondent’s
motion for a new trial on damages.
The trial on damages commenced in October, 1974, before
a jury. Prior to the trial, the District Court advised the
parties that if it appeared that the damage issue could
not be justly tried without the evidence relating to liability,
a new trial de novo would be ordered. In November, 1974,
after a two week trial on the damage issue, the jury
returned a verdict against the petitioner. In February,
1975, the District Court ordered a new trial de novo, and
assigned the third trial to another judge.
The third trial commenced in January, 1976, before a
jury. In February, 1976, after a five and one-half week
trial, the jury returned a unanimous verdict in favor of
the petitioner and assessed damages in the amount of
$1,162,000. The judgment was entered on February 6, 1976.
In April, 1976, the District Court denied the respondent’s
motion for judgment NOV, but granted the respondent’s
motion for a new trial de novo because the experience of
the first Judge “might be repeated were this Court now
merely to set aside only the part of the verdict relating to
damages.” In April, 1976, the petitioner filed a Petition for
Writ of Mandamus and/or Prohibition in the Court of
Appeals to vacate the order granting a fourth trial. In
June, 1976, the Court of Appeals denied the petition. In
July, 1976, the petitioner filed a Petition for Writ of Cer-
tiorari in this Court. In October, 1976, this Court denied
the Petition. In February, 1977, one month prior to the
March trial date for the fourth trial and one year after the
dieig a. teal he ant od rr <’
ae ta
5
return of the verdict in the third trial, the District Court
vacated its order granting a new trial de novo and entered
judgment in favor of the respondent notwithstanding the
verdicts of the juries.
In November, 1979, the Court of Appeals, specifically
not relying upon the factual reasoning and analysis used
by the District Court, but instead making its own factual
analysis, affirmed the District Court’s judgment notwith-
standing the verdicts.
C. Statement of the Facts
1. The Parties
Respondent Burroughs Corporation is a Michigan cor-
poration engaged inter alia in the business of manufactur-
ing and selling computers and operating computer service
centers which lease computer time to industrial and busi-
ness firms. In the latter part of 1969 and early 1970, Re-
spondent operated a data processing center in San Fran-
cisco.
Petitioner Stuart M. Kaplan is the Trustee in Bank-
ruptey for Palmer Data Corporation, a California corpo-
ration, and the successor in interest to Computerminal
Corporation, a Delaware corporation. During the relevant
period Computerminal and subsequently Palmer Data Cor-
poration operated a data processing business in San Fran-
cisco in competition with Burroughs, its supplier.
Cubit Systems Corporation, the co-conspirator, was a
subsidiary of Purity Stores and, like Burroughs and Com-
puterminal, operated a data processing center.
6
2. Statement of the Facts
Computerminal was incorporated in the State of Dela-
ware in February of 1969 (DX AV; RT 936) with a capital
investment of $750,000. (RT 1320a). From its inception,
Leonard J. Palmer was the president and a director of
Computerminal. (RT 933).
Palmer first became involved in an executive capacity
in the data processing industry in 1960. (RT 867). At that
time he became Western Regional Manager of Recording
and Statistical Company (hereinafter “R & S”). In that
position he was in charge of the R & S San Francisco based
data center (which ultimately was taken over by Bur-
roughs). During the three years that Palmer managed the
San Francisco data center for R & S, annual revenues in-
creased from $180,000 to $1,000,000. (RT 868). Burroughs
representatives conceded at trial that “Mr. Palmer built
R&S up.” (RT 451).
In late 1963, Palmer was hired by Burroughs “to estab-
lish for Burroughs a national chain of data processing or
batch processing computer centers.” (RT 871). During the
time that Palmer was with Burroughs he authored a com-
prehensive service manual setting forth management and
financial techniques in relation to data processing centers,
entitled “Service Center Organization and Control,” which
was published and distributed by Burroughs. (RT 872-73;
PX 45).
In late 1964, after leaving Burroughs, Palmer co-founded
Computer Service Centers, Inc, (“C.S.I.”) a company
formed to develop a national network of batch data proe-
essing centers. (RT 877). Shortly efter its formation, Pal-
7
mer became president and within four years expanded the
company to nine data centers in operation in various parts
of the country with annual revenues of approximately $4.5
million. (RT 878).
While Palmer was still with C.S.L, and before he came
to San Francisco to start Computerminal, he was president
of ADAPSO, the trade association for data processing
firms throughout the United States with a membership of
approximately two hundred and ten firms. (RT 907).
In March of 1969, Computerminal leased premises in San
Francisco and computer equipment including a Burroughs
manufactured B-2502 computer which was at that time
recognized to be one of the “world’s great computers” as
well as one of Burroughs’ best and newest products. (RT
943, 981, 2147; PX 22).
In June of 1969, Computerminal had already secured
batch processing business which was “well ahead of the
position” Palmer had projected for the company at that
point. (RT 944:45; 1070; DX AF).
Shortly after Computerminal commenced operations in
San Francisco, Burroughs in September of 1969 ae-
quired a data processing center in San Francisco from the
Univac Division of Sperry Rand Corporation (hereinafter
“Univae”) (RT 117; PX 21), thereby becoming a direct
competitor as well as a supplier of Computerminal. Bur-
roughs paid Univac $75,000 for the physical assets of the
data center but “not one penny for a customer account.”
(RT 306, 117-118; PX 21).
‘This data center was the R & S center which Palmer “had built
up.” (RT 451).
8
Almost immediately after Burroughs commenced oper-
ations in competition with Computerminal, Burroughs
viewed Computerminal as a “substantial competitive
threat” to Burroughs’ San Francisco operation. (RT 175-
Meaty
Indeed, as of January of 1970, Burroughs had already
lost two batch processing customers to Computerminal.
(PX 20; RT 156; 189). In addition, Burroughs was unable
to deter the steady migration which had commenced during
the Univac operation of key personnel from their data
center to Computerminal. (PX 3). Immediately prior to
Burroughs’ purchase of the Univac operation, Leonard
Palmer “had recruited 5 key management people” from
Univac’s data center. As a matter of fact the developer of
Churin language which was the programming language
utilized for most of the batch programs processed at the
Univac and subsequent Burroughs’ center had gone to
Computerminal. (RT 149-151; PX 3).
In a Burroughs interoffice memorandum dated January
15, 1970 from L. O. Brown, the manager of Burroughs’
national network of data centers, to R. O. Bailey, Bur-
roughs’ Vice President, Browne noted the competitive
threat of Computerinal in the following manner:
“The decision of these two key managers to join L. J.
Palmer’s staff, presents us with a more difficult prob-
lem than if they had resigned to join a non-competitor
or for that matter any competitor other than Com-
puterminal. * * * As the situation developed Lombardi
and Meredith’ are the only 2 remaining employees
*“Lombardi and Meredith” referred to in the foregoing memoran-
_ are the two key managers who decided “to join L. J. Palmer's
staff.”
9
who have adequate systems programming and proc-
essing knowledge of certain batch customer jobs to
assure proper processing results.
“It should also be recognized that the systems design
of practically every batch program was done either
by Lombardi, Meredith or Churin, and all of these in-
dividuals are now on Palmer’s staff.
“His (Palmer’s) track record to date has demon-
strated his ability to secure the most capable manage-
ment talent from the entire organization.” (PX 3).
In addition, Burroughs regarded Computerminal as the
only data center in the Bay Area which Burroughs was
concerned about. (RT 139:40; 174-75). Indeed, Burroughs
itself anticipated that, on the competitive merits, Com-
puterminal would end up with most if not all of Burroughs’
customers:
“We have reviewed all of the batch accounts in an at-
tempt to determine which accounts would be most vul-
nerable to Computerminal solicitation, based on the
knowledge of the jobs by theif employees. It is very
difficult to make a precise forecast of what the impact
would be of an aggressive effort on the part of L. J.
Palmer’s organization to pick up these accounts, but
we feel we are quite exposed to the loss of more than
half of the existing batch accounts. This could see us
dropping from a present batch revenue base in excess
of $400,000 annually to something between $125,000
and $150,000 per year.” (PX 3).
As a matter of fact, Browne stated that he did not fore-
close the possibility of Computerminal taking “all of the
customers away” from Burroughs. (RT 206).
10
Confronted with the competitive threat of Computermi-
nal . ad, in fact, believing that Burroughs could not ade-
quately compete against Computerminal even with the
“total corporate resources” of Burroughs, (RT 144-45),
Burroughs embarked upon a plan which it later identified
as “Plan X”’.
The basic thrust of “Plan X” was “to dispose of the
batch processing before Computerminal took any addi-
tional customers from us.” (RT 777).
Jim Lowe, Burroughs’ Western Regional Manager,
agreed that if Burroughs “did not sell these customers,
[that] Burroughs would lose them to competition.” (RT
547).°
Burroughs designated the program to dispose of the
batch processing accounts as “Plan X”. (RT 103; 190;
PX 6).
The sole purpose of Plan X was attested to by Browne:
“Q. So you came on the plan, Plan X, the whole
idea of which was to sell them before we lose them
anyway; correct?
A. Yes. Plan X was to sell the batch customers.”
(RT 192). (See also RT 454-55).
As an initial step to prevent customers from going to
Computerminal, Burroughs induced its batch customers to
enter into new “contracts”. As stated by Browne to Bailey
in an interoffice memorandum dated February 9, 1970 (PX
4):
“It seemed most important at that time to firm up
contracts with these customers, including price in-
‘Lowe identified the “competition” which would acquire these
ee — as “in all probabikty’—Computerminal. (RT 547,
-74).
a
11
creases, to ward off further attempts to steal these
accounts by Palmer.”
These “contracts” provided in pertinent part as follows:
“1, This agreement shall continue in effect for a
period of one (1) year from the date of acceptance
and shall be renewed for successive periods of one year
each, unless terminated at the end of the initial period,
as provided in paragraph ‘2’ below.
“2. Hither party may terminate this agreement at
the expiration of the original, or any subsequent one-
year period by giving written notice of such termina-
tion to the other party at least 90 days prior to the
expiration of such one-year period. All accrued obli-
gations shall survive any such termination.” (PX 2).
However, the “contracts” also provided that they would
be considered “void” if “not accepted by both parties within
thirty (30) calendar days.” (PX 2).
Therefore, in order to “bind” the customers and prevent
them from going to Computerminal on the one hand but
permit Burroughs to disavow the existence of the same
“contracts” on the other, Burroughs plotted to defer ac-
ceptance until after the sale of the customers and then to
simply back-date the “contracts’’.
Thus, Browne suggested to Bailey that Burroughs:
“Not accept the contracts until we have completed our
negotiations for the sale of this business. (PX 4).
“ ... Iam inclined to feel that our best plan for now
is to hold up acceptance of these contracts until we
have firmed up the deal for the disposition of the batch
processing.” (PX 4).
12
It is undisputed Burroughs did not accept these contracts
within the thirty (30) day contractual time period, and the
Burroughs executives knew that these contracts were there-
fore not valid or binding on the parties. (RT 142; 243).
in addition to using this method to “ward off further at-
tempts to steal these accounts by Palmer,” Burroughs also
charged higher prices. Browne attested to this fact:
“Q. Therefore, the question again, sir, you believed
the contracts were invalid; nonetheless, you charged
the customers the higher prices that were contained in
those contracts?
A. Yes.” (RT 244).
“The Court: Supposing that a customer had come
around and asked Burroughs to give back the differ-
ence between the lower rates and the higher rates on
the theory that the old contract was still in existence.
What would you have told him?
The witness: And we had not returned these con-
tracts to him within the thirty days, I would have
thought he would probably have a pretty good ground
to ask for that.” (RT 461).
Burroughs recognized that Computerminal was the best
staffed, best equipped and most centrally located data cen-
ter in the Bay Area and the “most logical” candidate for
servicing Burroughs’ batch accounts. (RT 220-21; PX 4;
7). Nonetheless, during March of 1970, Burroughs repre-
sentatives met with Cubit Systems Corporation, a sub-
sidiary of Purity Stores. (PX 6). On March 18, 1970, dur-
ing one such meeting with Cubit representatives, Cubit
presented Browne and Lowe with an offer for Burroughs’
13
batch processing customers. (PX 20). Browne indicated to
the Cubit representatives at this meeting that their offer
was “completely unacceptable.” (PX 20; RT 585-86).
Nevertheless, one day later on March 19, 1970, during
a meeting with representatives of Computerminal, Browne
represented to Palmer that he “had a signed offer for our
(Burroughs’) asking price on the batch processing business
from a major corporation.” (PX 7; RT 584-85; 1020). Dur-
ing this same meeting, Browne also represented to Palmer
that Burroughs had “signed contracts” with its batch cus-
tomers. (RT 1034).
Throughout the course of his various meetings with Bur-
roughs, Palmer questioned what in fact Burroughs was
attempting to sell (RT 1047) and insisted on inspecting
these contracts; none, however, were produced by Bur-
roughs, with the meaningless exception of a blank contract.
(RT 253; 1023, 1018-1019).
On March 20, 1970, Browne submitted an offer to Com-
puterminal. (PX 7; DX GY; RT 570-71; 1032-33). Palmer,
dissatisfied with Burroughs’ refusal to produce the con-
tracts they claimed to possess so as to afford him an oppor-
tunity to ascertain whether the customers had agreed to an
assignment or whether he could simply compete for them,
submitted a counter-offer on or about March 22, 1970, (PX
20; DX HA; RT 1038) subject to verification of the pur-
ported contracts and ratification by the client involved.
(RT 577-79). Palmer’s offer was declined by Burroughs.
Palmer’s caution in insisting on the verification of the
batch contracts was well founded. Burroughs’ duplicity in
14
this regard was revealed during trial by Browne in re-
sponse to questions by the Court:
“The Court: You mean he could take your work
(sic) but if he didn’t want to take your word he would
have to look at it, wouldn’t he?
The Witness: No, sir, he could have had the con-
tract or he could have checked it with the customer.
He had two sources of checking it.”
“The Court]: How could he find out, from the cus-
tomer, whether there was a contract in view of the
fact that the customer didn’t know that Burroughs
had failed to sign? How could he find that out from the
customer?
The Witness: Well, I was suggesting, sir, that he
would ask the customers, ‘Are you having your work
processed by Burroughs?’
The Court: That isn’t the question. How could he
find out there was a contract?
The Witness: He couldn’t.
The Court: All right. So the only person he could
find out from was you or looking at the contract; isn’t
that right?
The Witness: Yes, sir.
The Court: And you didn’t show him the contract,
did you?
The Witness: No, sir.
The Court: And you were asking for him to take
your word for something you knew wasn’t true; isn’t
that right?
The Witness: No, sir.
The Court: You knew the contract wasn’t signed;
isn’t that right?
i
15
The Witness: I knew the contract wasn’t signed.
The Court: And you were asking him to take your
word for it that the contract was signed; isn’t that
correct? Yes or no.
The Witness: Yes, I guess we were.” (RT 475-77).
Because Burroughs did not have valid contracts to
assign, and the fact that the computer programs and
documentation of each account were the property of the
individual batch account (RT 547, 554), Palmer expressed
to Lowe that he could not “see what it is here you folks
are trying to sell, or what you expect me to buy.”
(RT 1047). Nonetheless Burroughs made it clear to Palmer
that the sale of its batch operation was an “all or nothing”
proposition (RT 564-65; 1014) and that “whoever paid
the money was going to get the customers.” (RT 568).
In April of 1970 Cubit System, Inc. agreed to pay
Burroughs $257,000 in exchange for Burroughs’ delivery
of its batch customers to Cubit. At the time of the agree-
ment Cubit was not located in San Francisco but was
located in Burlingame, California. (PX 10). Sixty-five
per cent (65%) of the processing revenue derived by
Cubit was performed on behalf of its corporate parent.
(PX 6; 20). As a ruse and in order to secure the neces-
sary financing, Cubit “purchased” a “used and fully
depreciated Burroughs B-300 computer system.” Cubit
and Burroughs agreed that the invoice to be submitted
to the bank providing the financing “be made up in a
manner as to indicate total purchase price of the computer
as $257,000.” (PX 9). Burroughs willingly participated
in this arrangement and the invoice submitted to the bank
16
did not disclose the “purchase” of the batch customers.
(RT 107; 114-15). Browne conceded at trial that the
invoice was “inaccurate”, (RT 104; 107); that the invoice
was a “misrepresentation” of the actual transaction,
(RT 109); that the computer which Burroughs and Cubit
represented to the bank as having a market value of
$257,000, in fact had a book value of “zero” (RT 106-07),
and was “fully depreciated”. (PX 20).
The agreement between Burroughs and Cubit further
provided that in the absence of contractual rights to
assign the batch customers to Cubit, individual client
approval of this transaction would be _ solicited by
Burroughs and Cubit through joint visits with individual
customers. (PX 10). The agreement with Cubit provided
for a reduction of the $257,000 payment if “$300,000 of
annualized revenue (is) was not delivered to Cubit.”
(PX 10).
The agreement was executed on April 13, 1970 by Cubit
and on April 17, 1970 by Burroughs. Pursuant to the
agreement Burroughs had sixty days from that date to
secure the permission and consent of the customers to
transfer their processing to Cubit.
Threats, coercion, intimidation and misrepresentation
were all used to insure the delivery of the customers to
Cubit. They began with the joint visits and escalated
into the outright threat of cancellation of the customer’s
processing to, as Browne said, “motivate most of the
clients to sign Exhibit ‘C’ in favor of Cubit without fur-
ther delay.” (PX 14).
wee
17
If the purpose of the joint visits was not a matter of
common sense, Jim Lowe of Burroughs testified to the
obvious:
“Q. All right. Now, isn’t it true at or about this
time that what Cubit in effect was doing was going
to pay Burroughs—they were going to spend their
money paying Burroughs to get the customers rather
than spending it on their own sales force to go out
and get the customers or compete for them?
A. I believe that’s an accurate conclusion, yes.”
(RT 587).
Throughout the course of the third trial Burroughs’
representatives were obviously unwilling to say what
Burroughs really “sold” to Cubit. First, it was undisputed
that prior to the completion of the Cubit transaction,
Burroughs had not executed contracts with their batch
accounts. Secondly, and notwithstanding Burroughs’ rep-
resentations that it was selling the documentation and
programs for each batch account, (RT 555), James Lowe
testified that the customer owned the documentation and
programs. (RT 547; 554). Burroughs’ inept inability to
articulate the substance of its sale was demonstrated at
trial:
“Q. Is it your testimony, sir, that the Burroughs
contract that you sought to transfer to Cubit was the
Univac contracts and not the contracts that these
customers signed in January? Is that your testimony ?
A. No, we assumed the Univae contracts, so they
were now the contracts which we had assumed, and
the connotation that they were the Univac contracts,
I am not sure that I understand that, but I am talking
about the contracts we assumed from Univac; those
18
are the contracts which I felt in my mind we were
transferring to Cubit.
The Court: Now, Mr. Brown, did you discuss
with Cubit the rate at which the services were to be
performed for the customer?
The Witness: I’m sure we did.
The Court: And was the rate to which you referred
the rate in the Univac contract?
The Witness: No, sir.
The Court: So you weren’t transferring Univac
contracts, were you?
The Witness: I don’t really know, Your Honor.
The Court: Well, now, answer the question in the
light of the previous question I put to you.
The Witness: It would seek like we were trans-
ferring the contract that Burroughs executed with
these customers in about January of 1970.
The Court: But Burroughs didn’t execute anything
in January of 1970, did it?
The Witness: I guess I should have said again the
contracts which customers signed in January of 1970.
The Court: And which were not signed by
Burroughs in January, 1970; is that correct?
The Witness: Yes, sir.
The Court: So you really repudiate the testimony
you have been giving up to now, don’t you?
The Witness: It would seem it’s in conflict.”
(RT 275-76).
Embarking upon their joint visits, Burroughs and Cubit
decided to initially approach the larger batch accounts.
(PX 20; RT 589-90). During these first visits, three repre-
sentatives from Burroughs and two representatives from
50 TE ALS
19
Cubit were in attendance. (RT 590). Every one of the
large accounts was upset upon being informed of Bur-
roughs’ decision to abandon the batch business and its
attempt to transfer their processing to Cubit. (RT 618).
After one visit, all of the larger accounts refused to give
their consent during these first visits and subsequent joint
visits were necessitated. (RT 618-19).
Burroughs and Cubit then jointly visited these recalci-
trant accounts a second time. During these second joint
visits and pursuant to a pre-conceived approach, Bur-
roughs advised the customers, among other things, that
“most of the key personnel at the data center would be
transferring to Cubit.” (RT 593; PX 20).
This latter representation was false as conceded by
Lowe during trial:
“Q. Well, at that time the key employees at the
Burroughs Center in San Francisco were yourself,
Mr. Charlton and Mr. Bohannon, isn’t that so?
A. Well, we were in management and sales, so I
guess we would be termed key; but there were other
key employees.
Q. But you three were the highest in that center,
were you not?
A Fes,
Q. It is true, is it not, that none of you went to
Cubit?
A. That’s correct.
Q. And none of you intended to go to Cubit?
A. That’s correct.” (RT 594).
In addition, Burroughs made these representations to the
batch customers knowing full well that there would be an
20
erosion of personnel due to the transfer of the data center
operation from San Francisco to Cubit’s location in
Burlingame.
Throughout the course of these visits, and subsequent
visits as well as telephone calls to the batch customers,
Burroughs never disclosed to these customers that Cubit
had paid a quarter of a million dollars to Burroughs for
their sponsorship (RT 620-21) and that Burroughs had a
financial interest in the transfer of the account’s processing
to Cubit, or that Burroughs believed Computerminal to be
the best data center to process their work,
In addition, Burroughs conceded that its presence with
Cubit on these joint visits lent credibility to Cubit who no
one had heard of, including Browne. Browne testified :
“Q. You admit, will you not, sir, that you believe
that Cubit had a substantial advantage by having you,
the supplier of both Cubit and Computerminal, by
having you go and accompany them to each of these
customers; didn’t you?
A. Yes, I think that would be an advantage.” (RT
278).
“Q. And do you believe that your presence there
with Cubit indicated to the customers that you were
there in support of Cubit?
A. I would think so, yes.” (RT 292).
Due to its initial inability to transfer the customers,
Burroughs accelerated the pressure on the customers not-
withstanding Browne’s earlier statement that he “was not
concerned about our ability to obtain transfer agreements
21
from the customers . . . because the customers really do
not have any satisfactory alternative at this time.” (PX 7).
The next course of action by Burroughs was to notify
the remaining recalcitrant customers that in the absence
of their acquiescence to go to Cubit within ten days,
Burroughs would terminate their batch processing.
In a memorandum to Lowe from Browne dated May 1,
1970, Browne states:
“In line with our conversation this afternoon I am
attaching a draft of the letter, which I suggested you
deliver personally to each of the batch processing
clients who have not yet signed Exhibit ‘C’.
“This letter gives the client formal notification that
Burroughs’ contractual liability to process their work
ends as of June 30, 1970. This should motivate most
of the clients to sign Exhibit ‘C’ in favor of Cubit
without further delay.” (PX 14).
The draft of the letter referred to in the foregoing
memorandum states in pertinent part:
“Gentlemen :
“... Before announcing our intent to discontinue batch
processing in our San Francisco Data Center, we
located a Data Center, who in our opinion, is thor-
oughly reliable, experienced and financially sound to
assume the responsibility for processing the batch
work for our existing customers.”
‘Burroughs made this representation without mentioning that
Cubit had paid $275,000 for these accounts (RT 620-21 ); that Bur-
roughs personnel, specifically Browne and Lowe felt that Com-
puterminal was the “most logical candidate to process these ac-
counts” (RT 221; PX 4) given Computerminal’s experience, loca-
tion, technical capability and location (RT 773-74); and that Cubit
was not “in as favorable a position to take on this business as
Computerminal.” (PX 7).
22
“The Batch Processing Contract previously pre-
sented to you to formalize a new relationship between
your firm and Burroughs would have replaced the
prior agreement between the Center and your firm
when the Center was operated by R&S (Univac). The
replacement agreement will be returned to you pro-
vided Burroughs receives the returned and duly
executed Exhibit C transferring said agreement to
Cubit Systems Corporation by May 15, 1970. In the
absence of this agreement to substitute Cubit Systems
Corporation as the performing party, Burroughs must
deem its arrangement for processing to be terminated
and null and void after June 30, 1970.” (Jbid.)
This letter which informed the batch accounts that unless
they executed the consent to substitution form by May 15,
1970, Burroughs would simply deem its commitment to
process their accounts null and void after June 30, 1970,
was sent to each account on May 4th or 5th. (RT 285).
Accordingly, the batch customer had ten days to consider
his alternatives. The effect of an abrupt termination of a
company’s batch processing was attested to by Michael
Stumpf, a marketing representative for Computerminal
with substantial experience in the batch processing business
(RT 490) :
“Q. Now, in your opinion, in your experience, if
vou gave a person, a customer, if you advised them
that you were going to cut off their work, stop their
work, and you gave them a week in which to make a
decision to do something about it, would you, in your
opinion, consider that to be applying pressure to that
customer ?”
a * 2
23
“The Witness: A week could be destructive, yeah.
Mr. Gillam: Could I have the answer read back?
The Court: ‘A week would be destructive.’
Mr. Gillam: Thank you.” (RT 531-32).
Lowe’s efforts during trial to lend a different interpre-
tation to the clear import of the letter sent to the cus-
tomers were unavailing given the literal meaning of the
letter itself. (RT 754).
The ability to use the threat of cancellation was the
basic reason Burroughs did not sign the “contracts” with
their customers. Under the contracts, the earliest that
Burroughs could notify the customers of an intention to
terminate services was “at least 90 days prior to the ex-
piration of.such one year period,” (PX 2)—or, October
of 1970, as Browne testified.
“Q. And you understood, under this agreement,
that you could not terminate your arrangement with
a customer until ninety days before the end of the
first year; correct?
A. Yes.
Q. And this was accepted by this customer Janu-
ary 12, 1970, so ninety days before January 12, 1971,
would be November—sometime in October, correct;
correct?
A. Yes, yes.” (RT 127)
. 2 *
“Q. Now, the contracts themselves that these cus-
tomers signed, first of all, it was your belief that you
had to accept them within thirty days for them to be
valid.
We already went over that.
A. Yes, that’s my opinion.
24
Q. And you also understood it was your belief that
if you accepted them the only way you could terminate
them was ninety days before the end of the year, right?
A. Yes.
- € *
Q. First, I am putting on the board January ’70
then a dash January ’71, the usual term of the con-
tract was for a year, right?
A. That’s right.
Q. Okay.
And you could terminate this contract with the
customers if you gave them notice ninety days before
the end of the year, pointing to January of '71, right?
A. That’s correct.
And if you didn’t, the contract was automatically
renewed for another year.
Q. Okay.
So that means that you had to, if you wanted to
terminate it, you had to tell them October, early Octo-
ber or late September, I am putting that ninety days,
which would be—I am drawing a line and putting
October or September of ’70.
I put that on the board, too.
So if you wanted to terminate that contract you
had to advise them in October or September of 1970,
right, and then—isn’t that correct?
A. Yes.
Q. And then that would give them time to change
data centers, right?
A. Yes.” (RT 230-32).
Thus, Browne was forced to admit that one of the rea-
sons Burroughs did not sign the contracts was so that
25
Burroughs would not be “bound” by the termination re-
quirements:
“Mr. Alioto: Q. Was it not your belief, Mr.
Brown, that if you—in fact, if Burroughs signed those
contracts with those customers they could not tell
the customers—Burroughs could not tell the customers
that as of June 30th Burroughs was finished?
A. Mr. Alioto, I didn’t really know precisely—
The Court: Now please don’t argue with him. The
question is if Burroughs had signed the contract, that
may be a conditioned contract, but if they had signed
the contract, then could Burroughs have terminated
the arrangement as of June, 1970?
Mr. Alioto: 770.
The Witness: And the answer to that question,
sir, is very simple, and the answer is no.
+ *
Q. And that’s why Burroughs didn’t sign the con-
tracts, right?
A. That was one of the reasons.” (RT 235-36).
Burroughs learned in mid-1970 that Computerminal was
competing for the business of these same customers. Pal-
mer testified that Computerminal had previously operated
under the assumption that the batch customers were con-
tractually bound to Burroughs and had therefore refrained
from competing for these accounts. (RT 990-91). However,
upon learning of the joint visits by Burroughs and Cubit,
Palmer correctly surmised that the joint visits signified
Burroughs’ intentions to resign the accounts, that the
accounts were now “the subject of free and open compe-
tition” and he retracted his previous instructions to his
sales force and “now instructed my people that they were
to compete.” (RT 1060).
26
In a memorandum dated April 16, 1970, Browne made
plain Burroughs’ past and present intent toward Com-
puterminal:
“It has now come back to me through the grape vine
that Len Palmer has launched an all out campaign
to pick up the choice batch accounts before we can
effect transfer of these contracts to Cubit Systems
Corporation. I would recommend that you and/or Irv
get in touch with Palmer and indicate to him the fol-
lowing:
* * *
“3. Attempts by he and his organization to pick
up the contracts we have with the batch customers
while we are negotiating transfer of these contracts to
Cubit Systems Corporation will be viewed by us with
great concern and will cause us to take a dim view of
our future relations including the B5500 deal.” (PX
11).
At the close of this same memorandum, Browne states:
“Tf we do not take a firm stand with Palmer at this
time, it is my opinion that we may have a serious prob-
lem in transferring the majority of these batch con-
tracts to Cubit Systems Corporation. A major
shrinkage in the transfer of these batch processing
accounts to Cubit will result in a substantial reduction
in the total purchase price we have negotiated with
Cubit for this package deal.” (PX 11).
Browne also stated in prior testimony (which was used
at trial to impeach him), his reason for recommending “a
firm stand with Palmer”:
“Q. Why, in your opinion, did you believe that
you had a serious problem in this transfer if Bur-
roughs didn’t take a strong or firm stand with Pal-
mer?
27
A. It was my opinion that an all out campaign to
knock off these batch accounts by Computerminal
would create a serious problem for us in transferring
the majority of the accounts to Cubit.
Did you give that answer?
A. Yes.
Q. To that question, so that is one of the reasons
why you didn’t tell or advise Computerminal that you,
Burroughs, was going out in the field to make these
visits with Cubit, correct?
A. That’s one of the reasons.” (RT 296).
Further, Browne admitted that he was of the view that
if Computerminal began to compete against Cubit, it would
create é
“fear and distrust in the minds of these c..stomers in
terms of Cubit’s ability to handle their batch proc-
essing work satisfactorily.” (RT 297).
Concerned with the possible impairment of its deal with
Cubit, Burroughs augmented its pressure on the batch
accounts. Following the letter which imposed a ten day
ultimatum, Burroughs visited the eustomers a third time.
(RT 332). However, unlike the earlier joint visits, Browne
was personally in attendance during these visits. (RT 332).
The purpose for having Browne in attendance during
these meetings was to convey to the customers that “a
high executive of Burroughs” had flown to San Francisco
from Burroughs’ headquarters in Detroit to personally
meet with the customers. (RT 604). The major accounts
were still doubtful of Cubit’s ability to process their work
and greatly agitated by Burroughs’ abrupt termination
of their batch process operation. (PX 20; RT 598: 618).
Burroughs sought to convince them otherwise (RT 358:
28
598) even though—as Burroughs admitted—the batch
accounts “probably” did not know “who Cubit was at this
time.” (RT 588).
Indeed, Lowe flatly stated that Cubit was the most
capable data center in the Bay Area. (RT 804; 824).
This particular representation as well as Burroughs’ other
remarks were contrary to what Burroughs otherwise knew
and believed.
Browne himself testified with respect to the compara-
tive strengths of Cubit or Computerminal:
“So that in terms of comparing Computerminal and
Cubit as of this time, you believed that Computerminal
had better physical facilities, it had a better location
and it had better personnel and organization, is that
right?
A. Yes.
Q. All right.
Now, in terms of which—to which of those two
people your customers would go, was it not your
opinion at that time that the best interests of
your customers would be served if they went to
Computerminal?
A. Yes.
At that moment in time we felt Computerminal was
probably in a better position to process the work.”
(RT 259).
Lowe testified :
“Mr. Alioto: Q. Well, this morning we went over
where you today admitted that you stated, at least
to one customer, that you believed Computerminal—
I mean, that Cubit was the most capable, correct?
A. Correct.
29
Q. And that was during the time, after you
testified yesterday, that you believed at all times
Computerminal was the best?
A. Yes.” (RT 825-26).
Plaintiff’s Exhibit 7, an interoffice memorandum from
Browne to Bailey dated March 23, 1970 states in regard
to Cubit:
“While the other prospect (i.e., Cubit) is most inter-
ested in this business, I do not feel that they are in
as favorable a position to take on this business as
Computerminal. They would have a more difficult job
in getting all of the customers to accept their offer
to process the batch work.” (See also RT 565).
During the course of these visits whenever the customer
questioned Burroughs’ representatives as to the opera-
tional capability and/or financial viability of Computer-
minal (a reasonable question in light of Burrough’ posi-
tion as a supplier of Computerminal), the Burroughs’
representatives would either change the subject or simply
greet the inquiry with silence. (PX 20; RT 618-19). In
addition, Burroughs’ representatives did not state their
view that Computerminal was the most experienced and
equipped data center and “the most logical candidate for
their business.” (RT 12-13; 289-292; PX 20).
The ten day deadline imposed by Burroughs’ letter for
the customers to consent to the substitution of Cubit
expired on May 15, 1970. (PX 15, 17). Lowe testified that
the large accounts necessitated three to four visits plus
the termination letter before Burroughs was able to secure
their consent to the substitution of Cubit. (RT 691). In
30
addition, Burroughs was in “daily contact by phone with
many of these users.” (RT 741).
Jenkel Davidson, one of the large accounts “was
shocked” that Burroughs was abandoning its batch proe-
essing accounts.” (PX 20). Burroughs over the course
of three joint visits informed Jenkel Davidson that
Burroughs “had put a lot of careful thought into the
decision and had looked around for a company capable
of doing good business, with financial stability.” (PX 20;
RT 596). Burroughs did not disclose to this client the
fact that Cubit had paid money to process this account or
that Burroughs had promised to deliver the account upon
the payment of an acceptable price. (RT 620-21; 568). Lowe
testified that Jenkel Davidson required three visits,
including one visit which Browne had flown in from
Detroit to attend. (RT 603-04). Faced with the prospect
of an immediate and complete termination of its batch
processing, Jenkel Davidson signed the consent to sub-
stitute Cubit three days before the May 15th deadline
imposed by Burroughs’ threat of cancellation letter.
(RT 603-04).
John F. Forbes’ reaction to Burroughs’ decision “was
very adverse.” (PX 20). They were upset that Burroughs
had recently raised its price and were even more upset
that the additional work Burroughs had promised at the
time the price was raised had not been done. (PX 20;
RT 605). This account required three visits including one
in which Browne was present. (RT 605-07). Three days
prior to the May 15th deadline, they consented to the
transfer. (RT 606-07). A representative of John F. Forbes
31
testified that Burroughs “threatened to terminate their
services” (RT 732) and the threat of an immediate can-
cellation of its batch processing was cause for concern
because Forbes would not be able to “fill our clients with-
out it, and we would eventually run out of money to pay
our payroll.” (RT 732). When Forbes representatives
questioned the legal ability of Burroughs to terminate its
processing services in light of the notice requirements
contained in the “new contracts”, Lowe informed them
that Burroughs was not bound by these unexecuted con-
tracts. (RT 730-32). A Forbes representative also stated
that the joint visit of Cubit and Burroughs indicated that
if Forbes “didn’t go to Cubit” its batch processing would
be “interrupted”. (RT 735).°
Norris, Beggs & Simpson also informed Burroughs of
their displeasure in response to Burroughs’ notification of
its intention to abandon the batch processing business. (RT
609; PX 20). When Norris, Beggs & Simpson during a
third visit by Burroughs representatives raised a question
as to Computerminal’s financial condition, Browne and
Lowe who were in attendance, “said nothing” in response
‘In the first trial of this action, John C. Bria, data povuinn
manager of Crocker McAllister Leasing, Inc., another o the large
batch customers, stated that his company was “upset” at “the sur-
prise of suddenly somebody dropping out of the business and leav-
ing us with unknown alternatives” . . . that “we hadn’t at tHat time
had a sufficient opportunity to examine.” (RT 952, March 4, 1974).
Bria understood the harsh business realities of a situation in which
the only recourse Crocker had if Burroughs chose to terminate its
services was legal action based on its contract with Burroughs
which would be meaningless given the fact that during that time
McAllister would go down the tubes because we didn’t have any
data processing capability and our whole company was set up with
the requirement these runs come from the computer ever (sic)
month” and this constituted “pressure”. (RT 960, March 4, 1974).
32
(RT 611-613) even though both were of the view that Com-
puterminal was “financially able.” (RT 613).° Sometime
after receipt of Burroughs’ cancellation letter and subse-
quent to a third visit on May 12, 1970, Norris, Beggs &
Simpson executed the consent to substitute Cubit. (RT
613-14).
The Consent to Substitution forms submitted to the
batch customers referred to the assignment of a purported
contract executed between Burroughs and the customer.
(DX GS). Accordingly, Burroughs had made a misrepre-
sentation “in the very consents to substitution signed by
each customer in light of Burroughs’ failure to execute
the contracts until after the transfer of all the [B]atch
[P]rocessing customers.” (RT 813; PX 19).
Immediately after the joint visits by Burroughs and
Cubit, Computerminal was unable to secure additional
batch accounts, and even its own customers began to ques-
tion Computerminal’s financial viability. (RT 490-93).
Michael Stumpf, Computerminal marketing representative
testified with respect to the business difficulties encountered
by Computerminal after the Burroughs-Cubit joint visits:
“Q. After the joint visits between Burroughs and
Cubit in the marketplace, did you observe any situa-
tion in the marketplace which was different from your
past experiences?
A. I think the only place I can specifically say I
observed it—you know, I felt it—that was in the peo-
ple they had called on together.
*Browne specifically attended this meeting with Norris, Beggs &
Simpson because he was aware that Burroughs may “lose (this
account’ to Computerminal” and he sought to “convince them not
to go to Computerminal.” (RT 356-63).
33
Q. What was it that you observed or felt?
A. On the people they had called on together, it
was a pretty cold situation. I don’t think they were
responding like businessmen would. There was a lot of
guns. That’s the people they called on specifically.
“The rest of it, the lack of success of us as an organ-
ization and me personally, is a little more complicated.
There was a coldness in the marketplace, yes. I don’t
know what that means, but we weren’t getting
anywhere.
Q. Now, had you experienced such a situation ever
before in your 11 years experience in this kind of
business?
A. I could honestly say no.” (RT 490).
Stumpf further testified that subsequent to these visits,
the customers sensed “the arrestment of our growth” (RT
492), and that “things at Computerminal begin to go
downhill.” (RT 533).
The inability to obtain new accounts was also unique to
Leonard Palmer. Palmer testified that his past experience
with previous companies as well as Computerminal in
soliciting new business prior to the implementation of
“Plan X” and the joint visits had been “quite positive”.
(RT 1073). Subsequent to the joint visits by Burroughs and
Cubit, Palmer testified that “we never got one single
account of any material significance” and his “experience
in that regard was unique.” (RT 1073-74: 1180).
Palmer also stated that subsequent to the joint visits
in May of 1970, Computerminal’s own customers began
to question its financial stability (RT 1184); that such
inquiries became frequent in occurrence (RT 1081); that
34
such inquiries had never occurred prior to the joint visits ~
by Burroughs and Cubit (RT 1183-84); and that such
inquiries were “unique” (RT 1708-09).
In a corporate report to Computerminal’s shareholders
dated June 26, 1970, the report notes:
“Several of the accounts that were projected to start
in the period July-August have declined proposals,
e.g., Norris, Beggs and Simpson, and Forbes and Com-
pany. The major reason given was concern regarding
the future of CompuTerminal.” (PX 24).
Prior to the joint visits by Cubit and Burroughs, Palmer
had never been questioned as to the financial stability of
his company (RT 1081), but subsequent to said visits,
such inquiries became frequent in occurrence. (RT 1887).
The seeds of uncertainty planted by Burroughs with
respect to the Computerminal’s viability spread quickly
throughout the business community. It was not unusual
given the nature of the batch processing business for
industry information or gossip to be widely disseminated
within a short period of time. Browne testified that the
industry “grapevine is pretty active” (RT 222); that he
believed the fact of Burroughs and Cubit’s joint visits
would get “out into the trade” given the nature and
existence of this “grapevine” (RT 279-80); that the fact
of these joint visits “would get back to Computerminal
through the trade” specifically from customers. (RT 294).
The impact upon a young company such as Computermi-
nal in being precluded from competing for these accounts
was not lost upon Burroughs. Indeed during trial, Browne
testified to the importance of additional revenue to a young
company like Computerminal:
39
“Mr. Alioto: Q. And you knew that as a young
company additional revenue, meaning customers, was
important to Computerminal?
A. Yes. I would assume so.
Q. Well, you knew so, didn’t you?
A. Yes.
Q. All right.
As it applied to Computerminal?
A. Yes.
Q. Okay.
And didn’t you also know that if you took steps to
prevent Computerminal from competing on the merits
for that additional revenue that it would injure Com-
puterminal in its formative stages of just beginning?
A. Yes....” RT 197-98).
“Mr. Alioto: Q. My question is, did you not be-
lieve Mr. Brown, that Computerminal needed the ad-
ditional revenue to cover their start-up expenses to get
their business going?
A. Yes. I believed that.
Q. You believed that. All right. And believing that,
you, nonetheless, made this visit to Norris Beggs in
order to convince Norris Beggs not to go to Compu-
terminal, correct?
A. Yes.” (RT 360).
Lowe also recognized the importance of this revenue to
Computerminal and during his unsuccessful efforts to
induce Palmer to pay for Burroughs’ sponsorship, Lowe
continuously “presented the batch business of Burroughs
Corporation as being that segment of business which would
get us (i.e, Computerminal) over the hill.” (RT 1242).
36
In July of 1971, due to the v »rsening financial condition
precipitated by Burroughs’ efforts to prevent Compu-
terminal from competing for the batch accounts, Compu-
terminal, in a corporate reorganization, sold its assets
and ongoing business to a successor corporation, Palmer
Data Corporation. (RT 1100; 1103; 1105; 1121; DX B).
“One of the principal reasons why Burroughs was able
to effectuate its plan was the uniqueness of the Burroughs
users vis-a-vis the customers. In effect, the customers were
locked into Burroughs users and could not inexpensively,
readily and easily transfer their business to batch
processors using other equipment.”
“Now, this whole idea of these customers, this was
limited, was it not, to Burroughs users? In other
words, data centers using Burroughs?
Mr. Gillam: Objection. No foundation for that.
The Court: I will allow him to answer the question,
if it’s true.
The Witness: I believe it was, yes.
Mr. Alioto: Q. Why was that so?
A. Because of the compatibility of programs and
equipment.” (RT 815).
And:
“Ts it not true that, as far as you were concerned
the available market of purchasers—
The Court: Purchaser?
,
Mr. Alioto: Purchasers of—‘purchasers’ of the
customers, the customers in San Francisco, Burroughs’
batch center, were just those centers who used
Burroughs’ equipment?
Mr. Gillam: Your honor, might I ask counsel to
rephrase it to use a word other than ‘market.’ The
37
question is to whom Burroughs went to try and sell
its customers is one thing, but to say to people to
whom they meant, I think it inappropriate.
The Court: Well, an economically distinguishable
branch of business.
“The Witness: J only contacted users of Bur-
roughs’ equipment.
Mr. Alioto: Q. And there was a purpose and rea-
son for doing that?
A. Because of the compatibility of equipment.”
(RT. 817-818).
“And whereas it was necessary to reprogram when moving
from one make of machine to another, this was not so when
moving from one Burroughs machine to another”;
“A. If you mean by that, sir, the programs that
were running on the B-300’s?
Q. Yes.
A. Could they run on the B-2500 that Computer-
minal had?
Q. Yes. Would they have to be reprogrammed?
A. Not necessarily. They could be run by the use
of a translator or an immulator, which we would pro-
vide.” (RT 837, 838).
Palmer testified as follows:
“Now, if you can simulate, which is to say, the prob-
lem definition remains the same, the systems design
remains the same, all you want to do is interpret an
instruction from one computer speaking French to
another computer speaking English, now you simply
simulate that and—assuming all representations are
correct, you have no reprogramming expense, or mini-
mum reprogramming expense.” (RT. 1287, 1288).
38 39
In addition, there was no “interchange” of simulators. Mr. Alioto. Q. What is it?
Palmer testified as follows: ' “A. If a customer is already using Burroughs, he
“Mr. Alioto: Q. Now, would the Burroughs Cor- would have the whole reprogramming, redocumenta-
poration, for example, have a deck of cards that would tion and redefinition.” (RT. 1280, 1281).
make a Burroughs machine act like an IBM machine, “The Court: Under those circumstances J take it
or vice versa? for granted that people do not change ordinarily on
Would IBM have a deck of cards that would make an annual basis from one data center to another?
an IBM machine act like a Burroughs machine? “The Witness: Nor from one computer to another
A. I understand. There was some work being done internally, and the specified phrase in the industry is
in that area. I don’t know what the current status of ‘locked in.” (RT. 1282, 1283).
it is. * 7 .
The Court: We were asking about 1969-1971. ~ “If you have to do the whole thing over, you have
Mr. Alioto: 1969, ’70, ’71. Do you know of any the maximum reprogramming expense. If you have to
existence of that, for example, if a customer were being do simply the recoding over, you have a much lesser
processed by a data center using IBM— reprogramming expense.
A. Yes. “Now, if you can simulate, which is to say, the prob-
Q. —if that customer wanted to come over to Com- lem definition remains the same, the systems design
puterminal, which used Burroughs equipment— . remains the same, all you want to do is interpret an
A. Yes, sir. instruction from one computer speaking French to
another computer speaking English, now you simply
simulate that and—assuming all representations are
correct, you have no reprogramming expense, or mini-
mum reprogramming expense.” (RT. 1287, 1288).
Q. —did Burroughs have a deck of cards that you
could put into your B-2500 to make the B-2500 act like
an IBM machine?
A. Yes. [sic] The answer is they did not.” (RT
1300, 1301). “As a consequence of this uniqueness, the petitioner’s
officer specifically took this factor into account when ex-
And, not only was there no “interchange” of simulators,
ploring the potential of the market”:
but also in order to move from a Burroughs computer to
another make of computer one would have to redocument
and redesign as well as reprogram. Palmer testified as
“The Court: ... Did you look around as to the
business possibilities ?
The Witness: Yes.
And with two views, Your Honor. That's what I
wanted to express clearly. When you look at a move
into an area there are two ways to look at it. One is
that there is a business opportunity which is already
follows:
“(The Court]: Is there any difficulty in the cus-
tomer going from a center that his IBM equipment to,
say, a center that has Burroughs equipment?
The Witness: Yes, there is.
40
established and may become available to you; and
another is the view that you have to create the op-
portunity.
What I am trying to say is that there would be a big
difference if there were no customers anywhere in the
area utilizing a data center equipped with a Burroughs
computer, although there might be many customers
utilizing data centers with other kinds of equipment.
That would be one situation.
Another situation is where a large number of cus-
tomers or a number of customers exist which are util-
izing the services of a data center equipped with
Burroughs equipment and which, for some reason or
other, you feel will probably be available to you. Those
are two different situations, and they go directly to
how you proceed, which is why I am stressing this
point. I am sorry, it goes directly to how one pro-
ceeds.” (RT 925, 926).
And:
“Mr. Alioto: Q. Prior to the time that you set
up Computerminal in San Francisco, you came to San
Francisco, did you not, and investigated the market?
A. Yes.
Q. And in that investigation, what were the kinds
of things that you were looking for?
41
That is to say, clients either using data center
services or not using them, but on other equipment
or no equipment other than Burroughs.
Q. What did you physically do? I mean how does
one go and investigate a market?
A. Yes.
The Court: What kinds of people did you talk to?
The Witness: I spoke with all of the folks at the
Univae center that I had known before. J generally
ascertained the level of business that was being done
with respect to clients’ utilizing Burroughs equipment
in a data center.” (RT 1056, 1066).
“Mr. Alioto: Q. Then how did you make your
evaluation of what the market would yield to
Computerminal starting up?
A. What opportunity it would yield?
Q. Yes.
A. Yes. If Univae was on the verge, or close to
resigning, those batch processing accounts utilizing
Burroughs’ equipment, which I must say seemed very
logical to me, /hen we had a base of business, and an
opportunity to compete for a base of business that was
already utilizing Burroughs’ equipment and that
was a significant consideration in my opinion.”
(RT 1065-1067).
The Witness: J was looking for the size in terms
or revenue of the two areas of the market I have testi-
fied to earlier; one, that section of the market which
would be clients using data processing services on
Burroughs’ equipment and data center which, at that
time, was Univac, and secondly, the genera! climate
of the market with respect to new accounts.
Finally, the fact that customers would become econom-
ically “locked in” was a principal reason why Burroughs
was able to execute Plan X. First, Browne initially noted
in an interoffice memorandum when he was attempting to
“sell” the customers to the plaintiff that “the customers
42
really do not have any satisfactory alternative.” (PX 8).
And the plethora of evidence on the merits of the case,
as noted in the plaintiff-appellant’s brief, demonstrates
the efforts to restrain the plaintiff from competing and
coerce the customers, without the slightest concern of
other processors using equipment other than Burroughs
equipment.
REASONS FOR GRANTING THE WRIT
The reasons for granting the writ are as follows:
1. The decision below is contrary to the letter and
spirit of the Seventh Amendment to the Constitution;
2. The decision below is contrary to the letter and
spirit of this Court’s decisions in Beacon Theatres v.
Westover, 359 U.S. 500 (1959) and Tennant v. Peoria &
P.U. Ry., 321 U.S. 29 (1944) ;
3. The decision below is the ultimate threat to the
public policy favoring the private enforcement of the
antitrust laws;
4. The decision below eradicates any deterrent effect
which the antitrust laws and trials by jury may have
otherwise had—indeed, the decision below is but a dramatic
example of the extraordinary and alarming number of
antitrust jury verdicts which have been vacated in the
last decade; and
5. The decision below substantially contributes to the
crowding of the courts by ensuring and guaranteeing to
antitrust defendants that they need not be concerned
43
about going to trial or about any possible finality other-
wise associated with jury verdicts.
In Beacon Theatres, supra, this Court explicitly stated
that the jury in antitrust cases was “an essential part of
the congressional plan for making competition rather than
monopoly the rule of trade.” Yet, over the past decade,
so many cases have vacated jury verdicts and either
granted judgment NOV or new trials that no putative anti-
trust violator could possibly believe that it would or could
ever be held accountable. See:
Wen Mar Enterpises, Inc. v. Alexander Motor Co., et al.
(9th Cir. 1969) 416 F.2d 15; Household Goods Carriers’
Bureau v. John Terrell, et al. (5th Cir. 1969) 417 F.2d 47;
Harrison v. Prather, (5th Cir. 1970) 435 F.2d 1168; House-
hold Goods Carriers’ Bureau v. Terrell (5th Cir. 1971) 452
F.2d 152; Belliston v. Texaco (10th Cir. 1972) 455 F.2d
175; Siegel v. Chicken Delight, Inc. (9th Cir. 1971) 448 F.2d
43; Herold Co. v. Albrecht, 452 F.2d 124 (1971); Elder-
Beerman Stores Corp. v. Federated Dept. Stores, (6th Cir.
1972) 459 F.2d 138; E.A. McQuade Tours, Inc. v. Consoli-
dated Air Tour Manual Committee, (5th Cir. 1972) 467
F.2d 178; Weather Wise Company v. Aeroquip, (5th Cir.
1972) 468 F.2d 716; Ag-Chem Equipment Co., Inc. v. Hahn,
Inc. (8th Cir. 1973) 480 F.2d 482; Audrey D. Hanson
d/b/a Hanson Paint and Glass v. Pittsburg Plate Glass
Industries, Inc. (5th Cir. 1973) 482 F.2d 220; Hallmark
Industry v. Reynolds Metal Co. (9th Cir. 1973) 489 F.2d
8; Scott Medical Supply Co. v. Bedsole Surgical Sup-
plies, Inc. (Sth Cir. 1974) 488 F.2d 934; John M. England
44
v. Chrysler Corp. (9th Cir. 1974) 493 F.2d 269; Ford
Wholesale Co., Inc. v. Fibreboard Paper Products Corp.
(9th Cir. 1974) 493 F.2d 1204; Champion Oil Service Co.
v. Sinclair Refining Co. (6th Cir. 1974) 502 F.2d 709; Ven-
ete Corp. v. U.S. Mineral Product Co., Inc. (3rd Cir. 1975)
021 F.2d 1309; Kestenbaum v. Falstaff, (5th Cir. 1975) 514
F.2d 690; Defilippo v. Ford Motor Co. (8rd_ Cir. 1975) 516
F.2d 1313; Davis v. Marathon Oil Co. (6th Cir. 1975) 528
F.2d 395; Carlyle Michelman v. Clark Schwebel Fiber Glass
Corp. (2d Cir. 1976) 534 F.2d 1036; Pitchford v. Pepi, Inc.
(3d Cir. 1976) 531 F.2d 92; Spectrofuge Corp. v. Beckman
Instruments, Inc. (5th Cir. 1978) 575 F.2d 256; Sithin
Smelting & Refining Co., Inc. FMC Corp. (8rd Cir. 1977)
975 F.2d 440; GTE Sylvannia, Inc. v. Continental, 537 F.2d
980; Oreck v. Whirlpool Corp. 563 F.2d 54 (1977 ); Martin
B. Glauser Dodge Co. v. Chrysler Corp. (3rd Cir. 1977)
070 F.2d 72; Dougherty v. Continental Oil Co., (5th Cir.
1978) 579 F.2d 954; Gough v. Rossmoor Corp. (9th Cir.
1978) 585 F.2d 381; Hoys v. Solomon (5th Cir. 1979) 597
F.2d 958; Stuart M. Kaplan v. Burroughs Corp. (9th Cir.
1979) 611 F.2d 286; Engine Specialties v. Bombadier Limi-
leil (1st Cir. 1979); Refrigerated Food Tine, Inc. v. Re-
public Industries, Inc. (8th Cir. 1979) 605 F.2d 412; Berkey
Photo, Inc. v. Eastman Kodak (2d Cir. 1979) 603 F.2d
263; Fuchs Sugars & Syrups, Inc. v. Amstar Corp. (2d
Cir. 1979) 602 F.2d 1025; Magnus Petroleum Co., Inc. v.
Shelly Ow Co. (7th Cir. 1979) 599 F.2d 196; REA v. Ford
Motor Co. (3rd Cir. 1974) 497 F.2d 577; Hawaiian Oke
v. Seagram (9th Cir. 1969) 416 F.2d 71.
45
CONCLUSION
For the reasons stated, this writ should be granted and
the judgment of the Court of Appeals for the Ninth Circuit
reversed.
Dated: April 23, 1980
Respectfully submitted,
Auroto & ALIoTo
Josepu M. Atroto
Steven J. CanNnatTA
Attorneys for Petitioner
(Appendices follow)
Appendices
ota -€
Appendix A
United States District Court
Northern District of California
(71-479 SAW
Edward Walsh, Trustee in Bankruptcy for |
Palmer Data Corporation,
vs. - ‘
Burroughs Corporation,
[Filed April 28, 1976]
OPINION
Wrzansx1, Senior District Judge.
Defendant has filed motions to set aside the jury's
general verdict in favor of plaintiff in the amount of
$1,162,000 (before trebling and attorney’s fees), and to
enter judgment for defendant non obstante veredicto.
In connection with these motions, the appropriate course’
is to view the evidence in every way most favorably to
plaintiff.
From that approach, it appears that a jury could
reasonably have found the following facts.
Defendant’s supervisory employee, Browne, acting
within the scope of his authority over batch data com-
A-2
puter operations, proposed in 1969 that defendant, a
national manufacturer of computers and the operator of
a batch data computer center in San Francisco, should
abandon its San Francisco operations and salvage from
that center the value which inhered in the good will of
those who were its customers, by selling the accounts of
those customers to some other batch data computer center
which operated Burroughs machines.
The outstanding prospective purchaser was Compu-
terminal, Inc., of which Palmer was the president.
Browne and another Burroughs employee, Lowe, ap-
proached Palmer with an offer to sell the so-called cus-
toners’ contracts for $150,000. There were in fact no
contracts because the written draft contracts for 1970
had never been executed by Burroughs, and there had
not been that mutuality of understanding expressed by
the acts of the parties which created what are sometimes
called contracts by conduct. Moreover, those arrange-
ments which Burroughs had with its customers did not
impliedly nor expressly contemnlate that Burroughs could
delegate performance of computer service to other cen-
ters except with the express consent of the customers.
Palmer, therefore, concluded that Burroughs had nothing
to sell, and so, after investigation, declined to make the
purchase.
Angered by this turndown, Browne intemperately wrote
a memorandum to his chief, Bailey, indicating a punitive
attitude toward Computerminal. Bailey has left Bur-
roughs and has not been located by either party to this
case. We do not know his attitude nor that of any other
high Burroughs official.
SN NS
—
A-3
However, we do know that Browne approached another
computer operator, Cubit, Ine., which had never served
the general publie in the City of San Franciseo but had,
in its capacity as a subsidiary of Purity Stores, Ine., done
computer work in Burlingame, a city in the Bay Area
about 20 miles from San Franciseo. After (liscussions,
Cubit agreed to pay $150,000 for the Burroughs aceounts
and for an old model B-300 Burroughs computer. Beeause
Burroughs wanted to keep secret the faet that it was
being paid for its customer list, and because Cubit wanted
to get-a large loan from a bank, Cubit, with Burroughs’
connivance borrowed $150,000 from a bank by falsely rep-
resenting that the proceeds of the loan would be used
by Cubit exclusively to buy the B-300 Burroughs com-
puter.
Then Browne and Lowe, as representatives of Bur-
roughs, jointly with representatives of Cubit visited each
of the customers of Burroughs and informed them that
Burroughs was transferring its computer operating busi-
ness,in the San Francisco area to Cubit, and solicited the
customers to use Cubit’s center. In this connection, the
representatives of Burroughs expressly or impliedly rep-
resented that these customers had binding annual con-
tracts with Burroughs, and that Burroughs’ delegation
of performance to Cubit was permissible under such con-
tracts. Both of those representations were false, and
Burroughs’ representatives knew (or should have known)
at least that the so-called contracts had never been ac-
cepted by Burroughs.
Not content with initial visits of explanation to their
customers, the Burroughs representatives pursued in
A-4
some, but not all, cases customers two, three, or more
times, and in a few cases sent letters, until all but two
of the customers consented to have their work done by
Cubit. At no time did the Burroughs representatives ex-
plain to customers that for this transfer Burroughs was
being paid, nor that Computerminal had, in its B-2502
Burroughs machine, better equipment than Cubit had,
nor that Computerminal was physically closer to cus-
tomers and in that respect might be a more satisfactory
center. One customer, Arnstein of Forbes, indicated that
he felt that his company’s best interests were not being
considered.
Had Burroughs not supported Cubit, it is probable that
since Computerminal had in April 1970 the best service
to offer to batch data process customers in San Fran-
cisco, the former Burroughs customers would in many
instances have taken their work to Computerminal. But
as a result of Burroughs’ visits and follow-up letters in-
cluding, in a couple of instances in May 1970, a threat
from Burroughs to leave the former customers without
any service after July 1970, all but two of Burroughs’
customers went to Cubit, and of those two one went to
Computerminal and the other ceased to have its batch
data work done by any Burroughs center.
During the conferences of representatives of Burroughs,
representatives of Cubit, and customers of Burroughs,
the representatives of Burroughs never expressly com-
mented on Computerminal. Yet the praise of Cubit car-
ried with it an inference that no other center would in
Burroughs’ view be equally satisfactory in handling the
Burroughs’ customers’ work,
Ae ED
RIE EAT PO EM a
AS
However, despite plaintiffs argument, there is in the
evidence no basis for an express nor an implied disparage-
ment of Computerminal as a competent computer center
generally, So there was nothing adverse to Computerminal
to be carried on a “grapevine” to prospective potential
eustomers of Computerminal who had not previously
dealt with it or with Burroughs. Even if, as a Compu-
terminal salesperson, Stumpf, testified, the demand for
the services of Computerminal suddenly fell off after
April 16, 1970, that drying-up cannot be traced to, and
was not caused by, any Section 1 violation by Burroughs.
If there had been no April 16, 1970 eontract between
Burroughs and Cubit, if it remained in business, Compu-
terminal in 1970 and in each succeeding year through
1975 would have had $275,000 of gross receipts from Bur-
roughs’ former customers.
The incremental costs of sccuring those gross reecipts
would have been on the view most favorable to plaintiff:
(1) large suns for key-punch machines and operatives;
(2) Some amount for other additional personnel, even
if the jury found, as it might have, that Computerminal
on April 16, 1970, already had on hand a reasonable ex-
cess capacity to take care of new business, on an opti-
mistie prognosis. That is, on April 16, 1970, in the light
of reasonable expectations of the gradually increasing
business which would be likely to flow to a newly-started
business, Computerminal had more floor space than it
was currently utilizing, more machine time on the B-2502
than it was currently utilizing, and more personnel than
it was currently utilizing. The jury could have found
that such stand-by capacity with respect to premises, to
A-6
machines, and to personnel was not obviously wasteful,
nor economically improper but was just justifiable as a
bait for future business and as an immediately available
resource in the light of plausible needs in the near future.
(3) Some allowance for “simulation” (that is, the cost
incurred in giving additional program instructions to a
B-2502 Burroughs computer to enable it to perform work
which had been originally performed pursuant to pro-
grams designed for a B-300 Burroughs computer); and
(4) Some amount for the temporary rental of a B-300
Burroughs computer.
No matter how those deductions from gross receipts
are calculated from Palmer’s own testimony, the resulting
potential net earnings from the former Burroughs cus-
tomers could not reasonably be found likely to have a
reach of $1,162,000 in the years April 16, 1970 through
December 31, 1975,
And, as already noted, there is no causal basis for al-
lowing plaintiff any damages on account of its failure
to get wholly new customers never serviced by Burroughs
nor by Computerminal. :
From the foregoing analysis it follows that the verdict
must be set aside on two wholly independent grounds.
First, there was no evidence to show directly, or to
Support indirectly, an inference, that Burroughs dispar-
aged Computerminal as a center, At most, there could
have been an inference that to its own customers Bur-
roughs had indicated that for their special purposes as
current contractual customers of Burroughs, with pro-
grams already designed and utilized, Computerminal was
POEL RO oe,
A-7
not so satisfactory as Cubit. There is no inferential or
other basis for the claim that Burroughs disparaged the
availability, competence, financial ability, or other quali-
ties of Computerminal generally as a bateh data eom-
puter center operating in San Francisco with or without
a Burroughs machine, or in any aspect whatsoever, except
in comparison with Cubit as an outlet for Burroughs’
customers. Ifence, it was improper to have admitted evi-
denee as to damage with respeet to possible receipts from
Such potential new customers. It was improper to have
charged with respect to such an clement. of damages.
[See the full text of the charge, attached hereto as an
appendix.] And it is not possible, in the absence of a
special verdict and of special questions, to know how
much of the $1,162,000 figure in the general verdict is
properly attributable to those errors. Quite possibly, in
the light of the arguments of counsel, approximately half
is so attributable.
Second, independently of the heretofore recited set of
errors, the verdict is excessive even if by legerdemain or a
tour de force it could he hypothetically related solely to
damages allegedly caused by the Burroughs interference
with Computerminal’s getting Burroughs’ customers. One
difficulty would be that Palmer himself admitted that he
never wanted more than five or so of the eighteen or
twenty customers, and Computerminal did, despite the
alleged interference by Burroughs with the free choice of
its customers, get one of those customers, and, moreover,
Zusman, without contradiction, testified that his concern
felt free to go to Computerminal, and did consider Com-
puterminal on its merits, but preferred Cubit. However,
A-8
those are not the main points. The main points are that
in Palmer’s own testimony there is not evidence to show
that Computerminal’s net earnings from the suppositi-
tious business which it might have had a chance to get
from Burroughs’ customers and which it might have
wanted to handle, would have amounted, after making
deductions which Palmer himself ultimately conceded had
to be made, to $1,162,000 from April 16, 1970 to December
31, 1975. Such a figure is grossly inflated on plaintiff’s
own testimony.
It would, of course, be possible to set aside only so
much of the verdict as relates to damages and to permit
the verdict as to liability to stand.
But experience in two earlier trials in this very case
shows that this is a dangerous course. Judge Weigel first
set aside so much of a jury verdict of $1,200,000 as in-
volved damages, but, preserving that part of the verdict
which related to liability, conducted a second trial on
damages. The second jury returned a verdict of no dam-
ages. Whereupon Judge Weigel set aside both that second
verdict and the remaining part of the first verdict. It is
easily foreseeable that Judge Weigel’s experience might
be repeated were this court now merely to set aside only
the part of the verdict relating to damages.
Moreover, it is clear to one who has sat for five weeks
as a judge hearing evidence in this case that the facts
relating to liability and to damage, as well as to causation,
are inextricably interwoven.
Nor would there be any material saving of time nor of
expense in such a partial setting aside of a verdict.
ING oe
7
*
3
4
A-9
Nor does justice demand that plaintiff be allowed to
keep so much of its verdict as may relate to liability.
While this court has reviewed scrupulously the record to
search out what is the most favorable analysis from
plaintiff’s view of the evidence, the court has not said,
and does not now say, that taken as a whole the evidence
is sufficient to withstand the defendant’s motion to set
aside the verdict in every aspect on the ground that it is
against the overwhelming weight of the evidence as to
liability. However, it is unnecessary for the court to pass
on such a contention, inasmuch as the verdict is fatally
vulnerable on the issues of causation and damages.
However, out of an abundance of caution, this court
adds that it does regard the overwhelming weight of the
evidence as indicating first, that despite Browne’s sugges-
tion that measures be taken against Computerminal, au-
thorized officers of Burroughs never had a specific intent
to destroy Computerminals batch data business; second,
that if Burroughs coerced any of its customers, it did not
coerce the vast majority of them; third, that Burroughs
merely sought to salvage something from its San Fran-
cisco center; fourth, that there was inherent in Bur-
roughs’ San Francisco business a goodwill item of sub-
stantial value which flowed not from firm contracts but
from the warranted expectations of continued patronage,
and such an item of good will was recognized by Palmer
himself in connection generally with batch data computer
centers, for when he came to value Computerminal he
testified that there should be included in the value the
expectation of business to be received, and he did this
although the expectations were with respect to merely
A-10
potential customers with whom Computerminal had never
had business relations; fifth, that Burroughs in its mis-
representations did not have any anti-competitve intent,
but merely a greedy intent to get as much as possible
from its salvage operations, together with a prudential,
if somewhat duplicitous, intent to avrid firm written con-
tracts until it could sell them; and sixth, that Compu-
terminal was legally committed to withdraw from the
batch data computer business as promptly as possible
after the Solomon Brothers and Hutzler deal collapsed,
and so under no circumstances could damages be allowed
for any period after July 1970. Motion for judgment
n.0.v. denied. Motion to set aside verdict granted.
Charles E. Wyzanski, U.S.D.J.
Apr 28, 1976
leita cele
A-il
Appendix to Appendix B
INSTRUCTIONS TO THE JURY
[2862] THIS COURT: Good morning, members of the
jury.
Ladies and gentlemen, vesterday before counsel argued
I gave you some instructions, and I am now going to
complete my instructions, and | shall first deal with
points of law as to which what I say binds you. There-
after, and I will make it quite plain when the break
occurs, I shall turn [2863] from points of law to what
seem to me to be analytically the factual problems in
the case. When I come to this analytical part, whatever
I say you are wholly free to disregard. I shall try to he
fair to both parties in the analysis, but when a judge
deals with factual questions even by way of analysis or
illustration, the jury is not bound by what the judge says.
The only reason that I will engage in this analysis
is because this is a case which has lasted five wecks, is
in its essence very complicated, and falls within a field
Where perhaps IT have had an experience which is worth
laying before you for such appraisal as you see fit. In
that analysis, however, I no more bind you than counsel
bind you by their arguments. I will make it quite plain
when I come to the analysis as distinguished from the
instructions which are binding upon you with regard to
the law. :
You recall that yesterday when IT began the instruc-
tions to you, I cireulated to you the pretrial order in
A-12
this case and I read it to you while you had it in your
hands. That pretrial order was signed by counsel for
plaintiff and counsel for the defendant and by one of the
regular judges of the United States District Court for
the Northern District of California. I had no more to
do with it than you had. But, that is a pretrial order
which becomes binding upon you as upon me, as well as
upon the parties. Neither you nor I has [2864] any right
as the pretrial order stands in its unamended form, to
go outside the scope of that pretrial order in considering
what are the issues in this case. That doesn’t mean that
we can’t subdivide the issues, but we can’t bring into the
case entirely new issues, new parties or anything which
is not fairly within the coverage of the pretrial order.
The parties engaged in their pretrial discovery and in
their preparation of this case in the light of the pretrial
order. I made my rulings during the case in the light of
the pretrial order, and your verdict and my charge should
be within the scope of that pretrial order.
Now, I need not remind you, I think, that anything that
counsel has said or that I have said or will] say about
the credibility of witnesses is merely intended to help
you and does not control you. You are the persons who
are to decide which witnesses to believe, which exhibits
to believe, if you believe any of them. You are not re
quired to believe anything, it’s entirely up to you. And
as I said to you, there is no rule of law which tells you
that one kind of testimony in this case is better or worse
than another kind. And the standards that you will apply
in judging the truthfulness of witnesses are primarily
the standards of common sense and ordinary experience,
1 Ne eT BSS LB Te an
A-13
Now, I have already said to you also that there are,
as both sides agree, no problems now of whether inter-
state [2865] commerce is involved in this ease. So far
as you and I are concerned, the parties have agreed that
insofar as interstate commerce is a fact necessary to
prove with respect to jurisdiction or with respect to sub-
stance, there is an agreement to treat the fact as though
it has been adequately proved. Don’t bother about inter-
state commerce at all. From now on forget it.
It’s also agreed between the parties, as you can tell
from the pretrial order, that there are three main issues
in this case. First: Did the Defendant Burroughs Cor-
poration violate Section 1 of the Sherman Act by engag-
ing in a combination, conspiracy or contract in restraint
of trade, as that term is used in the Statute called the
Sherman Act, an act passed in 1890.
The second issue is whether if there were such a vio-
lation, was that violation the proximate cause, was it a
substantial cause, not necessarily the only cause, of in-
jury to the plaintiff. And the plaintiff in this case is the
trustee in bankruptey Walsh, successor by operation of
law to Palmer Data Corporation, which, in turn, acquired
any claim that Computerminal Corporation had with re-
spect to antitrust or any other dispute.
You will not have to bother at all with the fact that
the plaintiff’s name is Walsh. You and I aren’t the slight-
est concerned with how he got this claim, but the claim
[2866] that he makes is in essence a claim which orig-
inally was Computerminal’s and which passed by assign-
ment through an intermediate step to Walsh,
A-14
The third issue in this case is whether if there was
a violation of Scction 1 of the Sherman Act by Bur-
roughs Corporation, and if that violation was a substan-
tial cause of injury to Computerminal Corporation, what
are the recoverable damages. On each one of those three
issues, the burden of proof rests upon the plaintiff. The
burden of proof is the burden of persuasion, it does not
mean persuasion to a moral certainty or beyond a rea-
sonable doubt, it merely means persuasion ?m the sense
that you have concluded that it is more probable than
not that the plaintiff has proved Item 1, Item 2, Item 3.
The plaintiff gets absolutely zero unless he proves one
plus two plus three. It will not do to succeed on one and
not on another. All three of those items are essential
for a recovery by the plaintiff, insofar as the plaintiff
bears the burden of proof and if in your view that proof
ought to include some item, if the item is missing then
the plaintiff is to be blamed, not the defendant.
If in your view in order to satisfy the burden of proof,
for example, certain customers or certain officers or cer-
tain other persons knowledgeable in one way or another
by observation or in any relevant way are not here,
and in your view ought to be there on the issues where
the plaintiff [2867] bears the burden of proof, you can-
not fault the defendant for the failure to bring these
people. It is the plaintiffs obligation to bring the proof
which satisfies you with respect to each of these issues.
Now, I’m going to turn to a general discussion, still
as a matter of law, of the Sherman Act, and I think it
is very necessary that you bear what I say in mind here
carefully in your minds, because <here was some argu-
Ri Dee EEO EID
Pe eseee,. a
A-15
ment which I think was in a direction contrary to what
I am going to say, and what I am saying is binding
on you.
When Congress passed the Sherman Act in 1890 it did
not purport to deal with the whole field of unfair com-
petition. I am not referring to the fact that it didn’t deal
with local as well as interstate matters. What IT aim say-
ing to you is that Congress in the Sherman Act dealt
with only some but not all kinds of unfair competition.
For example, Congress didn’t deal with breaches of
contract in ordinary cases. Congress did not deal with
fraud, in ordinary cases. Congress did not deal with in-
terference with advantageous business relations, in ordi-
nary cases. Congress did not even deal with all unfair
methods of doing business in interstate commerce. It
was not until much later in the administration of Wood-
row Wilson that Congress endeavored to reach unfair
methods of doing business in interstate commerce, and
then when it did it left [2868] the supervision of them
to a commission, an administrative body, the Federal
Trade Commission. There are some kinds of unfair means
of doing business which are plainly unfair, some kinds
of unfair, competition which are plainly unfair which are
not covered by the Sherman Act.
There are many reasons for that. The Sherman Act
in some of its aspects carries criminal penalties as well
as civil sanctions. You are not dealing with the criminal
side of this. Moreover, there are certain kinds of civil
advantage which I am not going to discuss with you,
because they are not your concern, but they are advan-
tages which a plaintiff gets in this kind of proceeding
A-16
which he would not get in an ordinary unfair competition
suit either in the federal or state courts.
So what you are here dealing with is a very special
kind of statute. It has two main parts to it on the side
of what is outlawed or forbidden or regarded as a vio-
lation, and one section has to do with combinations and
contracts in restraint of trade, and that’s covered by
Section 1.
And the other part with which you are not the slight-
est bit-concerned, is Section 2 which relates to monopoliz-
ing or attempting to monopolize commerce. Now this case
has nothing to do with Section 2 of the Sherman Act.
The pretrial statement makes it quite plain that what
we are dealing with here is a claim of the violation of
[2869] Section 1 of the Sherman Act, which is directed
at combinations, contracts and conspiracies in restraint
of commerce. I am not going to spend any time talking
to you about what the word “combination” means, or
the word “contract” means, because I think it is quite
plain to you at once that the words “combination” and
“contract” involve the participation of more than one
person.
If there is a restraint of trade participated in by more
than one person and one of the persons has a purpose
to accomplish the restraint and get the support of an-
other person, it doesn’t make any difference whether that
other. person shares the first person’s purpose, motive or
the like, it is sufficient that one of the parties to the
combination has the specific intent and the other cooper-
ates willy nilly. But the real difficult problem, and it’s so
difficult that nine justices of the Supreme Court wouldn’t
A-17
agree on the point, is to define accurately the phrase
“restraint of trade.”
What every: informed judge and justice would tell you
is that it doesn’t mean every restraint of trade. Ever
since the time that as he then was Associate Justice,
Kdward Douglas White in 1911 decided the Standard
Oil and American Tobacco cases, it has been clear that
the only restraints of trade which the act applies to are
unreasonable restraints of trade. That doesn’t help you
very much, but at least you know that there are some
kind of restraints of trade which are [2870] covered and
some that aren’t. Mr. Justice Brandeis helped us a little
bit more a half a dozen years later when he told you
that you look at all the surrounding circumstances under
which the restraint operates, and he pointed out what
everybody always quotes him as saying, that every con-
tract binds and restrains and it cannot be true that every
contract is an impermissible restraint of trade.
let me give you an example not unlike one I gave you
the other day, perhaps a little closer to the problem here.
A owns a business. X wants to buy it, Y wants to buy
it, Z wants to buy it. A makes a contract to sell it to X.
There were no other facts but those I have told you.
Can it be that that contract is an impermissible restraint
of trade? Of course it is a restraint which prevents Y
from buying the business, because A is selling it to X,
it’s a restraint which prevents Z from buying the busi-
ness, because A is selling it to X. But if you said that
this was an impermissible restraint of trade then A
couldn’t sell the business to anybody. So it must be a
reasonable restraint of trade, if all that is involved in
A-18
the situation is that a person who owns a business and
enters into a contract to sell it to one of a number of
difference persons and other persons are thereby, as it
were, restrained from buying it. But now let me add
another possible fact to the hypothetical case I have put.
[2871] Suppose that A is a very important factor in
the market and has, let us say, 30 percent of the busi-
ness. And let us suppose that X has 30 percent of the
business, and Y and Z each have 20 percent of the busi-
ness. And under these circumstances A, without giving
Y and Z an opportunity to bid on the situation sells his
30 percent: to X who already has 30, and the new AX
company has 60 percent of the market, under those cir-
cumstances where the sale promotes or might be thought
to promote an attempt to monopolize the market and
to subject Y and Z to competition by an overwhelmingly
strong antagonist, it very well might be that there is
an impermissible unreasonable restraint of trade in that
combination.
Now, with respect to restraints of trade I have to give
you some general background, rather briefly, but in order
that you may understand what this phrase “specific in-
tent” means, which was used to you in argument and
which I shall have to use in my charge.
First, let me tell you what the words “specific intent”
as used in connection with Section 1 of the Sherman Act
mean. Specific intent as there used means an intent either
to monopolize or to exclude from the market, or engage
in that kind of anticompetitive conduct which, as it were,
freezes somebody out of the market or squeezes in a way
which indicates something more than normal competition,
A-19
speaking generally, or a wrongful act of a defendant
Which might not possibly injure a [2872] competitor.
But I told you quite a few moments ago that the Sher-
man Act doesn’t cover every wrongful act. It doesn’t
cover every breach of contract. It doesn’t cover every
fraudulent act. It doesn’t cover every kind of interference
with advantageous contractual relations. It doesn’t cover
every kind of disparagement. It doesn’t cover every kind
of unfair method.
In order to satisfy the phrase “specific intent” as J
said to you a moment ago, there must be, when specific
intent is required, an intent to monopolize or to exclude
from the market or to freeze out of the market or to
squeeze by a peculiarly anti-competitive method. Merely
injuring is not enough. Breaches of contract injure, or
may. Frauds injure, or may.
Now, there are certain situations in which the plaintiff
in order to succeed in a Sherman Act proceeding is not
required to prove specific intent, because by a series of
prior cases and rulings the courts have reached a con-
clusion that when you engage in a conduct of a certain
kind there is an implied specific intent to monopolize, to
exclude, to freeze, to squeeze, or whatever you like.
For example, if dominant forces, dominant enterprises
in a given market agree to fix and maintain prices that
is what is called-in a Latin phrase a per se violation.
That is on its face. and by itself it is a violation of the
[2873] law, and no matter what intent the parties had,
it is a violation of the antitrust laws, provided that they
are dominant enterprises in a market. Never mind what
the reasoning back of it is, just accept what I tell you,
A-20
that under those circumstances specific intent need not
be proved by the plaintiff in order to succeed.
If he proves a price agreement along dominant enter-
prises in the market, that’s enough, provided he also
shows, of course, that that action was a substantial cause
of damage to him.
Now, there are other cases in which it would not pos-
sibly be open to a jury to find that there was a specific
intent, and there are intermediate cases where specific
intent must be proved by the plaintiff, or if it isn’t proved
by direct evidence it must be reasonably implied from
the total factual situation, including the position of the
defendant in the market and the nature of the conduct.
That was a very abstract statement, and I am going to
try to make it more concrete for you.
Suppose that in a particular market, and I’m going to
tell you what a market is in a moment, the defendant has
a dominant controlling position, and the defendant is a
manufacturer of a particular kind of product, let us say
shoe machinery. If the defendant refuses to sell such
shoe machinery to people who want to buy it but only
will [2874] agree to iease it on rental terms so that
nobody can acquire the machinery except as a lessee,
under those circumstances no matter what the intention
of the manufacturer is the law implies that because of
the dominant position which the machinery manufacturer
has, and because of the interference with the freedom of
choice of the proposed user of the machine there is a
sufficient implied intent, and nothing need be proved be-
yond the position of the manufacturer in the market and
;
j
S
'
&
Brees
A-21
the form in which the manufacturer makes his product
available exclusively by lease and never by sale.
There are situations which are quite different from
that. But before I deal with them I am now going to
interrupt my general train to drop a footnote to explain
what the term “market” means, which T have been using
frequently and which you have heard counsel use.
The word “market” may mean any identifiable branch
of trade or commerce which has that kind of character
which those who are in that trade or branch would recog-
nize as creating a sufficient unity of demand and supply,
so that there is, as it were, a market. And let me come
right to the point of this case.
[2875] It is up to you to conclude that in this case
there is a separate market for batch customers who use
computer services or you may conclude that there is no
such separate market and there is, in fact, only a market
which includes all computer services, whether given on
the basis of remote terminals or on the basis of batch
deliveries.
The plaintiff has the burden of satisfying you that
there is not only the larger market but, indeed, a smaller
market, to wit, a market in which the demand and supply
relate to batch data services rendered by computer
centers. In other words, there can be a large market and
a small market. _
The plaintiff also has the burden of proving what is
geographically the scope of the market. Of course, you
could have a batch data market which covered the whole
of the United States. You could have a batch data market
A-22
which covered the whole of the West. You could have a
batch data market which covered just the City of San
Francisco. You could have a batch data market. which
covered the Bay Area, including the various counties
adjacent to San Francisco.
The plaintiff has the burden of satisfying you with
respect to what are the appropriate markets. There may
be more than one appropriate market,
If in what you find to be an appropriate market there
are a number of different ways of satisfying the demand
in that market, you will, of course, take it into account.
[2876] For example, with respect to batch data services
in the Bay Area, you can take into account what centers
there are that render such service by one or another
type of machine.
It would be an impermissible restraint of trade if there
is, in a given market, a dominant company which coerces
customers and interferes with their freedom of choice. If
there is coercion by a dominant force in the market, the
plaintiff need not prove any further specific intent because
the coercion, by itself, implies a specific intent either to
monopolize or to exclude from the market or, as it were,
to freeze or squeeze.
But, let us take another possibility, hypothetically con-
sidered, in order to make clear to you what the law is.
Suppose that a dominant force in the market makes
false representations. By themselves, those are not sufficient
facts to bring about a violation of Section T of the Sher-
man Act and to constitute an unreasonable restraint of
trade. It is only under those circumstances when the
PRET eH
A-23
~
plaintiff proves that the defendant, in addition to being
an important force in the market and in addition to hav-
ing made false representations, did it with the specific
intent to monopolize that market or to exclude the plain-
tiff from that market or to freeze the plaintiff out of the
market or to squeeze that plointiff in an anticompetitive
manner.
[ think I recognize how difficult this problem is; and
[2877] that is one of the reasons that after T get through
with my statements on the law, I am going to offer you
an analysis which you aro free to accept or reject.
What I have told you so far is a rule of law.
Now, if I turn from the problems raised by the first
issue, that is, did the defendant violate Section I of the
Sherman Act, IT must help you in one aspect of law
which is local and not the Act of Congress but the acts
of the California Legislature and the California Courts.
You will surely remember that there was a great deal
of testimony with respect to what kinds of pieces of
paper and what kinds of contracts, if any, there were in
1970 which bound or did not bind customers to the Bur-
roughs Data Center being operated in San Francisco. The
question as to whether there were any contracts and, if
there were contracts, they were as has been said, assign-
able or delegable with respect te performance is the
reason T need now explain to you a question of law of
California and not a question of Congressional law.
With respect to this phase of the case, the burden of
proof is not upon the plaintiff, the burden is upon the
defendant. The defendant has the burden of proving that
A-24
there were contracts and that they were delegable, assign-
able, with respect to performance.
It seems to be generally agreed that, on their face,
these pieces of paper stated that they did not become
contract [2878] unless they were approved in Detroit by
the home office of Burroughs Corporation. So, no matter
what Mr. Browne or anybody else may have said on the
witness stand, it is the position in this litigation at this
stage, taken by Burroughs, itself, that there were no
written contracts which were in force and effect in 1970,
before late in April or thereabout. They were signed
in the home office in Detroit by Mr. Baily or someone
there. But the defendant argues here that even though
there were no written contracts in 1970, there were con-
tracts by conduct.
Now, the law, with respect to this, is that it isn’t neces-
sary that contracts of this kind be in writing. Contracts
of this kind can arise by conduct or orally or by the
relationship of the parties in many different ways. And
it is a question of fact for the jury as to whether, indeed,
the relationship between Burroughs’ center and its cus-
tomers in 1970, in January, February, March, and so
forth, shows that these customers and Burroughs, by
their conduct, intended to he bound.
Now, it has been suggested that the relationship was
an ongoing relationship. On the other hand, you are
entitled to take into account that the parties may or may
not have thought that they wanted the protection of a
written agreement and they didn’t intend to be bound
unless they got a written agreement. That is a question
of fact for you.
A-25
It may be that some of the customers, certainly not
[2879] all of them, were charged different rates in 1970
from 1969 and they paid these higher rates and thus
showed that they intended to be bound even without any
signed approval from Detroit.
I am not trying to tell you whether the conduct did
or did not amount to a contract by conduct instead of a
contract in writing. It is all a question of fact for you.
The burden with respect to it, unlike the burden on
most of_the issues on this case, rests upon Burroughs, as
defendant. If Burroughs does prove to your satisfaction,
by a preponderance of the evidence, that there were con-
tracts by conduct, Burroughs then has the burden of
proving too that those were contracts which could be prop-
erly satisfied by Burroughs’ getting the performance of
the contracts done by somebody who was competent but
who was not necessarily in the employ of Burroughs.
This has been referred to by the parties and the wit-
nesses as though it were an assignable contract. That
isn’t exactly the right term, but it is a convenient one.
Was performance under these contracts delegable to
somebody else? Could it be assigned to someone else? The
plaintiff says no. And you will remember that Mr. Palmer
said that, in his view, these contracts were not properly
performable except by either the original computer center
party or somebody who took over the business as a whole.
The position of the defendant is that contracts of
[2880] this kind, whether in writing or arrived at by
conduct, may be performed by anybody who is a reason-
ably decent, trustworthy workman-like operator of a
computer center.
A-26
In that connection, the defendant calls to your atten-
tion the testimony of the degree to which this business
has been assigned in the past and the evidence with
respect to the assignment of business to various com-
panies, including some not parties to this case, including
the one, for example, that was testified to by Kalt.
I am not taking any position on this matter. It is for
the jury.
I have tried to give you an illustration earlier in the
case, as you will remember, but the illustration of the
pencil factory and the opera singer, Madame Wagner, is
perhaps no longer necessary to have you recall. It would
be sufficient for you to think whether, after you have
listened to all the testimony, you do or do not have a
view that the defendant has proved that this kind of work
may properly be delegated to any competent workman-
like, trustworthy enterprise.
After that excursion into the problem of contracts and
their assignability, I now come back to the main issue in
the case and turn to the question which is raised in re-
gard to the plaintiff’s claim that there was a substantial
impact, as the plaintiff calls it.
In other words, did the defendant, if it violated [2881]
Section I of the Sherman Act, substantially cause injury
to the plaintiff.
Now, it isn’t necessary, in order to sz tisfy its burden
of proof, for the plaintiff to show that the defendant was
the only cause of the injury. What the plaintiff must
show by a preponderance of the evidence was and is that
the defendant’s wrongful conduct was a substantial cause
of the injury.
A-27
Now, I would like to draw sharply your attention to
something which I am not sure was brought out very
clearly in the argument.
The types of injury to which reference was made and
on which at least the plaintiff sought to calculate damages
are of two different sorts. One is the injury with respect
to, as it is claimed, the loss of the opportunity to earn
money from Burroughs’ customers, who were having their
data processed at the Burroughs’ center, The other
claimed damage and injury was with respect to concerns
which had never been customers of either Burroughs or
of Computerminal.
If you come to the conclusion that there has been a
violation of Section I of the Sherman Act, you may, as I
will point out a little later in my analysis, treat these
two classes of possible, theoretical customers as having
a different kind of relationship, if any, to the alleged
violation.
T now come to the third main issue which you may or
[2882] may not arrive at.
You recognize I have to charge you on every issue
raised. It doesn’t mean that you have to consider every
issue raised. You cannot find for the plaintiff unless you
consider! all of these issues, but you can find for the
defendant without considering them.
This isn’t a temptation to you to take the short cut.
I am just telling you that the fact is that if vou don’t
find any liability on the part of the defendant, if you don’t
find any violation of the Sherman Act by the defendant,
you don’t have to consider anything else,
A-28
Now, what about the rules of law with respect to dam-
ages? The plaintiff does have the burden of satisfying
you by a preponderance of the evidence of the fact of
damage, but it is recognized in many cases binding upon
you and me that if you are satisfied that the plaintiff
has borne the burden of proving the fact of damage, a
considerable latitude is allowed with respect to the extent
of damages.
If the defendant has, indeed, violated the Sherman Act
and that violation has been a substantial cause of a par-
ticular kind of injury to a particular group of customers
or through a particular group of customers, then if the
plaintiff has also shown the fact of damage with respect
to either or both of those kinds of customers, the de-
fendant runs the risk that those figures cannot be very
precisely ascertained hecause it is [2883] its wrongdoing,
hypothetically, which has created the uncertainty.
Now, there is one other point that I must instruct you
on with respect to damages. Notice carefully that on this
point the defendant bears the burden of proof, not the
plaintiff, just as with respect to the problem in connec-
tion with contracts and their assignability and whether
or not they exist by conduct as well as by written agree-
ment, the defendant has the burden of proof.
Before I come to state this issue, I want, in order to
sharpen it, to distinguish another somewhat similar but
different problem.
If a company is economically ailing and it is possible
that it would have gone out of business through its poor
management, or the like, the defendant does not get the
benefit of that as an excuse for paying less in damages,
BRR Fe
A-29
If I may give you a homely and frequent illustration,
if the defendant, in a personal injury situation, were to hit
a man who had had a heart attack and the man was
seriously injured, the defendant has to pay for the injury
even though, if the man had had no heart attack, the
injury might not have been so serious.
You take, in a personal injury or other tort action,
including an antitrust action, the plaintiff as he is. And
if the defendant injures a weak and sickly corporation
and the injury is worse than it would be if it were a
healthy [2884] corporation, that is no excuse in mitigation
of damages.
However, what the defendant claims here is something
different. And I am not saying that the claim is sound,
I am just placing it in front of you for your considera-
tion, reminding you that on this issue the defendant has
the burden of proof.
The defendant says that in this particular case the
plaintiff was under a contract to go out of business and,
therefore, the period of damage cannot last longer than
the period during which the plaintiff had contracted to
stay in business or had contracted that it would go out
of business. Obviously, if a corporation were created by
the legislature to be not a perpetual corporation but a
corporation which was to last ten years and you injured
the corporation in its ninth year, the only damages which
the corporation could get would be what it would have
lost in earning power in the tenth year. You couldn’t
take into account the twelfth, fifteenth, or nineteenth year
as you may in the case of a corporation which had per-
petual life.
A-30
Now, it is the claim of the defendant in this case that
as a result of negotiations originated perhaps by Mr.
Wessel—it is up to you whether you agree with this—
but it is the defendant’s contention that there were nego-
tiations between Mr. Wessel and Mr. Leidersdorf and Mr.
Coleman, representing either himself or Mrs. Coleman or
both, and there were [2885] contributions made in the
Winter of 1969-1970 under which there was an express
agreement that if the remote batch business didn’t work
out within the period of time contemplated, the whole of
the business of Computerminal, batch data as well as
everything else, would-be abandoned and there was a
subscription, according to the defendant, made on that
basis and accepted on that basis by Computerminal and
that there, therefore, was, in the defendant’s view, a con-
tract of termination; so that there could not have been,
no matter what the defendant did, any interference with
the operations or possible revenues of the plaintiff be-
yond the period of time which the defendant was to
remain in business, the plaintiff having agreed, in the
defendant’s view, to go out of business, as it turned out,
when there was a failure of financing, and going out of
business would have occurred, in any event, according to
the defendant, in the Summer of 1970.
It is up to the defendant to bear the burden of all of
that, and you don’t have to believe any of it. You don’t
have to believe that Mr. Wessel made any such arrange-
ment or that he had any authority to or that there was
any ratification of it by a subscription or that there was
any firm agreement on the part of the corporation or
that the corporation would have gone out of business
anyway.
A-31
But if you do believe all of those things, if the defend-
ant does persuade you, then that would, of course, impose
[2886] a legal limitation upon the period that the corpo-
ration would have remained in business, regardless of
any wrongdoing, if there were any, of the defendant.
And that is a fact that has to be taken into account in
connection with damages.
Now, I have, I think, said all that I want to say except
one other point of law before I turn to the analysis.
You will bear in mind that the pretrial statement and
Paragraph 19 of the complaint, as well, make it abun-
dantly clear that the wrong here complained of and here
before you for adjudication has to do with an alleged
combination between the defendant Burroughs and Cubit
and/or customers. If there were any such agreement, it
is said to have been one with respect to or having the
effect of interfering with the plaintiff's, Computerminal’s,
rights, not some individual rights.
If there were any such contract, combination, or con-
spiracy, Paragraph 19 of the complaint and the pretrial
statement make it plain that it reached its culmination by
the contract of April 16, 1970. That is the date.
I have said all I am going to say about the law, and
now I am going to turn to problems of analysis. T under-
line as strongly as I can that from now on anything IT
say you may disregard. I am not now hereafter giving
you any instructions on the law.
[2887] This is not entitled to any more weight than
you want to give it. It may or may not help you. You
Inay or may not think it’s fair. I am going to try to be
A-32
fair. As I listened to the arguments, I hope I correctly
understood that there was a threefold thrust by Mr. Ali-
oto on behalf of the plaintiff in his argument to you as to
why he has shown that there was a prohibited unreason-
able restraint of trade by Burroughs.
Now, if I understood him correctly he said, first, there
was a specific intent to destroy Computerminal ; and, sec-
ond, he said that the whole situation was one involving
coercion by Computerminal and Cubit with respect to cus-
tomers which Burroughs already had; and, third, he said
that there were implied and expressed misrepresentations
made by Burroughs which in some cases reached directly
to the Burroughs customers and in other eases some how
or other floated down a grapevine, if you float down a
grapevine, at any rate, went down a grapevine in the
direction of the total potential market of potential cus-
tomers, not only those that Burroughs already had or that
Computerminal already had, but those that might by pos-
sibility show up in the San Francisco area.
Now, let me look at these three different situations
or claimed situations, and they may be cumulative, one
as well as the other, or they may be alternative, one
instead of the other.
[2888] Did the plaintiff show by a preponderance of
the evidence that the defendant had a specific intent to
destroy Computerminal? Well, let’s take the strongest
thing which wasn’t, for some reason, much played upon
in the arguments.
Mr. Browne didn’t have a very lovely attitude toward
the plaintiffs, at least Ly the time the deal fell through,
A-33
and there is no doubt he wrote a rather ill-tempered mem-
orandum. But there is no evidence, is there, that anybody
acted on that memorandum? There is no reason, is there,
to suppose that that particular remark, which surely was
not one of cncouragenient, ever got any approval from
either Mr. Baily or anybody else in real authority at
Burroughs, or that it was followed up in any way what-
soever? And it is pointed out to you by the defendant
that if there were really a specific intent to destroy Com-
puterminal, it’s rather strange that Burroughs didn’t do
what it had a perfect right to do, to recapture the machine
for non-payment of rent. Burroughs allowed unpaid rent
to accumulate until it was over $100,000 and was, as has
been pointed out to you, the real method of financing
Computerminal in the continuation of its business. So it’s
rather hard, isn’t it, to look at this evidence and say that
Burroughs started out with the intent to destroy Compu-
terminal.
But now let’s look at the second of these, as it were,
strings to the bow of Mr. Alioto with respect to restraint
[2889] of trade. You will remember that during the ex-
amination of Mr. Browne and at other stages in the case it
was brought out by Mr. Alioto that Burroughs was in an
ambiguous situation of being both the manufacturer of
machines, and in San Francisco the operator or user of
the machines in a center, and that in its capacity as op-
erator or user of machines, Burroughs was in potential,
if not actual competition with every other user of Bur-
roughs’ machines including, of course, Computerminal
and including Cubit, and the suggestion made to you is
that it was under these circumstances rather coercive for
A-34
Burroughs together with one of its competitors at the
computer center level, i.e., Cubit, to go to customers of
Burroughs and try to persuade them to deal with Cubit
and not to deal with anyone else. It is certainly at least
a ground for careful inquiry when a manufacturer of a
product accompanies one of the users of its product in
going to ultimate customers and urging those ultimate cus-
tomers to use or to take their business to a particular
lessee or purchaser of the manufacturer’s machines. On
its face this could be found but not must be found to be a
restraint and interference with the free market.
However, you are also to take into account not only
that aspect which on its face invites scrutiny, but you
are to realize that in this particular situation the manu-
facturer was not just going around with one user of
machines to see [2890] ultimate consumers, the manufac-
turer was going out of business in its own capacity as a
user in San Francisco of its own machines. The defendant
points out that in its view it was trying to salvage what
it had here in San Francisco. It had made up its mind
to go out of business in San Francisco and it wanted to
get as much as it could for whatever it had in the way
of good will, i.e., customers.
Now, you will remember that early in this charge I
referred to the problem of A who owns a business and
wants to sell it and X, Y and Z are possible purchasers,
and A sells to X and that cuts out Y and Z. And that it
must be permissible for A to sell to somebody, even
though it does have an adverse effect on the people who
want to purchase it, they are restrained but not unrea-
sonably restrained, because if you didn’t let A sell to
;
f
e
f.
EL OE pI ny
A-35
anybody you are really saying you have got to take a
loss, you can’t sell your business.
Now, surely, the antitrust laws don’t prevent Burroughs
in its capacity as the operator of a center in San Fran-
cisco from selling its business. Surely, the antitrust
laws don’t operate to prevent Burroughs selling its cus-
tomer list, and if it has contracts, from selling contracts,
or even the hope of contracts.
So the problem is really whether there was any coercion
in these particular circumstances, or whether what was
going on was merely a salvaging of the business.
[2891] Now, in stating the argument both ways, I hope
you don’t think I am deciding that issue, because that’s
an issue for you, but that’s the problem.
Now, with respect to this, of course, a lot turns on
what went on at those conferences. And remember, who
has the burden of proof to bring the witnesses, Are you
satisfied that you really know what went on at those
conferences? Remember that it’s the plaintiff’s claim that
there were a number of customers who were being
coerced. I hope I don’t misstate it when I say that the
only customer that testified here in person, Mr. Zusman,
didn’t seem to think he had been coerced. And although
Mr. Arnstein of Forbes may have taken a different posi-
tion, all we know about him is what was read in evidence
from some prior testimony of his, not by any means a
complete account of what he testified on that occasion.
We also know, of course, what Mr. Browne said. And
it is perfectly true that Cubit is a named conspirator,
A-36
and you might not expect Cubit to be called, or you might
think Cubit would be ealled, it’s up to you.
Now, let’s look at the third string to the bow, the sup-
posed misrepresentation.
Now, Mr. Alioto in his examination of the witnesses
certainly took quite a little time, and I didn’t mean that
he took too much time, to bring out what was said by
Mr. Browne [2892] and others. But most particularly by
Mr. Browne, and what the correspondence and_ notes,
notices and so forth said about these 1970 pieces of paper
or contracts. I don’t think you and I would give Mr.
Browne a certificate as a representative who understood
the law very well before he testified.
And I don’t think that you or I would be much im-
pressed with his consistency. I certainly made it plain
that I thought he had said one thing one day and another
thing another day. And I am not sure if even now he has
a clear idea, for that matter, [ am not sure that anybody
has a clear idea about what the legal situation is with
respect to those pieces of paper, because until you have
spoken we don’t know whether there were contracts by
conduct.
There may have been a correct representation, there
;
may have been an incorrect representation. We don’t
know until you have spoken whether those contracts were
able to be performed according to their implied intent
by any competent company or not. The plaintiff has the
burden of showing there was a misrepresentation, but if
there were a misrepresentation the defendant could cer-
tainly avoid its effect by showing that it was made in
3
&
i
&
'
,
S
:
;
A-37
good faith. But the defendant would have the burden of
showing that it was made in good faith.
Now, you may remember, going back to where I first
started to tell you about the complexities of the law with
[2893] respect to restraint of trade and telling you that
I didn’t think even all justices of the Supreme Court of
the United States would agree upon it, I did make plain
to you that when you were dealing with alleged fraudu-
lent misrepresentation or alleged bona fide negligent mi.-
representation, there is no violation of the Sherman Act.
There is no restraint of trade prohibited by Section 1,
unless there is, in addition to the misrepresentation,
either a dominant control of the market with an anti-
competitive intent or, alternatively, a specific intent to
monopolize, to exclude, to freeze out of the market, to
Squeeze in some way beyond merely injuring.
Now, I hope you realize the difficulties these problems
are. ‘hey are ones in which the common sense of the
jury perhaps governs much more than is always recog-
nized, because ultimately, frankly, issues of this kind turn
to a large extent upon credibility. You listened to argu-
ments yesterday as to who is truthful, if anybody, and
how truthful. As I listened to the testimony I could not
help thinking of a line which some of you will know, from
Shakespeare’s sonnet, which talks about that not being
love which alters when it alteration finds; that is not
truth which alters when it alteration finds. Or, as Arch-
bishop Whately said, there is all the difference in the
world between putting truth in the first place and the
second. And you are just as good in judging truthful-
ness as any group of people ever wil. be.
A-38
[2894] Now, if you do find that there has been a
restraint, you will then have to deal with the question of
causation. Now, lI, in talking to you about the law, and
before I came to the analysis which you are not required
to follow, noted that there were two different supposed
kinds of customers who would otherwise have given busi-
ness to Computerminal but who were diverted by the
violation of the antitrust laws as claimed.
Now, look at the position of these two classes of cus-
tomers. There is no doubt, of course, that Burroughs was
in touch with its own customers. Burroughs went around
and visited its own customers. But what did Burroughs
say to its customers? Is there a word of explicit kind
indicating that Burroughs ever said anything disparag-
ing about Computerminal. Of course you may disparage
without being explicit. If at the moment I were to praise
Mr. Alioto and to say nothing about Mr. Gillam, I think
in this context you would conclude that I was not only
praising Mr. Alioto but dispraising Mr. Gillam, because
it would be rather unusual, wouldn’t it, in the course of
a matter of this kind for me to single out one lawyer for
praise unless there was some very exceptional situation.
But here we face the rather peculiar situation that if
Burroughs by praising Cubit is supposed to have dis-
praised Computerminal, why isn’t it equally true that
Burroughs was dispraising every other batch data center
in San Francisco. [2895] And has anybody said that
others thought they were being disparaged? Is there any
proof of that?
Now, what ahout the people who weren’t customers of
Burroughs but were potential customers. There are people
cep SEAS
SOUP LO 99 vere
A-39
around San Francisco who have or might have batch
data work to be done. There is no claim that Burroughs
went to see them. But we are told that a grapevine some-
how reached them.
What is traveling on this grapevine? That Burroughs
sent its work to Cubit? Is there anything traveling on
this grapevine about Computerminal? And if it’s travel-
ing on this grapevine does the grapevine also say that
Burroughs has still left its machine with Computerminal
even though Computerminal hasn’t paid all of the rent?
What kind of grapevine is this?
If the grapevine carries the story that Computerminal
isn’t paying its rent, it happens to be true.
Well, I am not going to say anything at all about dam-
ages. I am well aware that about 60 percent of the testi-
mony and more dealt with damages, and maybe almost
as much of the argument. If you didn’t get what the
testimony had to say and what counsel had to Say on
that, I don’t think you will be much enlightened by what
I would say. I tell you once more that in connection with
this case the burden of proof on each of the three main
issues rests on the plaintiff, but there are certain subsid-
iary issues that I have referred to [2895-A] such as the
supposed contracts and the supposed assignment and any
privileges with respect to truth with regard to represen-
tation, and any suggestion that there is a shorter life of
Computerminal because of its supposed contract with
Messrs. Leidesdorf and Coleman are issues as to which
the burden of proof rests upon the defendant,
[2896] I have tried in the analysis to look at the
matter with detachment, but you don’t know whether any-
A-40
body can state a matter so that everybody thinks it is
detached. I hope I have the kind of bias against bias
which I referred to before. I know that, like everybody
else, I am bound to have a certain number of prejudices,
but I do my best to combat it.
In the end, I would say that the reason it is so for-
tunate to have a jury case instead of an nonjury case in
this field is because, as I have repeatedly said, the ulti-
mate test here will turn out, I am sure, to be credibility.
Everyone who comes into a court swears by God to tell
the truth, the whole truth, and nothing but the truth. I
doubt very much whether many people who take the oath
fear Jehovah, but most of them fear jurors.
You may or may not think that someday you will face
St. Peter or, in the inferno, Minos, but you are in the
position, as it were, of the eternal judge of the truth of
this matter. You are engaged in a very solemn under-
taking.
This is not a simple case, and I have not been able to
reduce it to an easy problem because it isn’t easy.
I have been in the habit of saying, for many, many
years, that when my children were young and I was
already a judge, at the end of a jury case, I would go
home and tell my children, as best I could, what were the
facts in the case and try to get from them a judgment
as to how the case should be [2897] decided. In one sense,
it worked very well. Both my children have become law-
yers.
I am not suggesting that your children will become
lawyers, but if you do this job before you in the spirit
2 NREL IME Dee
. A-41
of imagining that you are to tell your children or grand-
children about this case and what you decided, if you
have that sense of consciousness that you would have
when you were in the position of instructing the young,
I have very little doubt that you will reach a sound
verdict.
Mr. Clerk, will you please pass the two forms to the
Foreman, number one? I don’t know whether he is the
Foreman or not.
You will see one form is for plaintiff and one form is
for defendant. If you find for the plaintiff, you put in a
figure in dollars. You don’t give us any real reasons or
anything of that sort, you just put down the figure. If you
find for the defendant, you just fill out the form without
any figure.
You, of course, are required to be unanimous, the six
of you.
Needless to say, when you go into the jury room, you
may start with a difference of opinion. Listen attentively
to one another. You are just as good a jury as ever is
going to sit on this case. It is very important that you
be decisive. After all, it has taken a month of your time,
a month and more, [2898] and a great deal more of Coun-
sel’s time, and a month of the Judge’s time, not to men-
tion the parties’ and the witnesses’ time. It has been an
expensive business no matter how it comes out,
Nobody is going to compel you to reach a verdict
against your conscience,
It may very well be that you ean return a verdict in
a very short time. Mayhe vou can’t, but, as T have indi-
A-42
cated, if you can’t do it quickly, I intend to hold you. If
you do it quickly, that is all right, but I am not urging
you to avoid staying overnight. That is up to you to act
conscientiously.
Is there anything else, gentlemen?
Mr. Alioto: No, Your Honor.
Mr. Gillam: No, Your ITonor.
The Court: Will you please retire to consider your
verdict under the circumstances usual in this Court, what-
ever they may be.
Appendix B
No. C 71-479 SAW
United States District Court,
N. D. California.
Stuart M. Kaplan as Trustee in ak.
ruptcy for Palmer Data Corporation
d/b/a CompuTerminal
v.
Burroughs Corporation.
Feb. 4, 1977.
FINDINGS OF FACT AND OPINION
WYZANSKI, Senior District Judge.
This case is reduced to one issue: whether there is evi-
dence to support a jury verdict that defendant has violated
Section 1 of the Sherman Anti-Trust Act, 15 U.S.C. §1,
as distinct from any question of state tort law.
In George R. Whitten, Jr., Inc. v. Paddock Pool Build-
ers, Inc., 508 F.2d 547 (1st Cir., 1974) that distinction igs so
sharply drawn and so cogently explained that it is unnec-
cessary for any district judge again to tread the path
of legal analysis, public policy, and historical considera-
tions there set forth by Chief Judge Coffin. The recent,
January 25, 1977 decision by The Supreme Court of The
United States in Brunswick Corporation v. Pueblo Bowl-
'O-Mat, Inc., 1976, ........ TA ted » 97 S.Ct. 690, 50 L.Ed.2d
701 applied cognate principles in a closely allied matter.
B-2
Hence a distict court judge’s function is primarily to apply
those principles to a particular case.
Here there have been three jury trials of plaintiff’s’
complaint that defendant has injured his assignor by al-
leged restraints of trade in violation of Section 1 of the
Sherman Anti-Trust Act, 15 U.S.C. $1. Plaintiff’s pleading
and the pre-trial orders (shown in the charge appended
hereto) make it clear that plaintiff does not claim that
defendant has engaged in any per se violation, such as
price-fixing or attempts to control the market by invidious
practices. What plaintiff relies on is a series of defendant’s
actions, including an alleged conspiratorial contract and
combination with Cubit, Inc., said to have been aimed at the
destruction of CompuTerminal’s business.
In the first trial, before Judge Weigel, the jury returned
a verdict for plaintiff of actual damages (before trebling)
of over one million dollars. Judge Weigel at first set aside
only that part of the verdict which determined the amount
of damages, but left undisturbed that part which deter-
mined liability. In the second trial, again before Judge
Weigel, another jury determined by its verdict that plain-
tiff had suffered no damages whatsoever. Then Judge Wei-
gel set aside both that second verdict and the surviving
or liability part of the verdict of the first jury. Thereafter,
he transferred the case to me.
In a third trial, lasting over a month, before me, the
jury, after my charge, returned a verdict for plaintiff in
the amount of $1,162,000, before trebling. Orally, in open
1As here used, plaintiff means either Kaplan or his predecessor
trustee in bankruptcy, Walsh.
B-3
court, on April 28, 1976, and by written order dated April
29, 1976, I denied defendant’s motion for judgment not-
withstanding the verdict, but granted defendant’s motion
to set aside the verdict. In an accompanying brief opinion
I stated that as | then viewed the evidence plaintiff had
shown defendant’s liability but had not proved such large
damages as to support the size of the verdict.
By a collateral action, plaintiff unsuccessfully petitioned
the Court of Appeals for the Ninth Circuit to issue a writ
of mandamus to this Court to re-instate either the third
jury’s or the first jury’s verdict. Then plaintiff unsuccess-
fully petitioned the Supreme Court to grant certiorari to
review the judgment of the Court of Appeals. (See Walsh
v. United States District Court, and Burroughs Corpora-
tion, 429 U.S. 859, 97 S.Ct. 160, 50 L.Ed.2d 137.)
His mandamus action having failed, plaintiff moved in
this Court for reconsideration of this Court’s April 1976
action setting aside the third jury’s verdict, and alterna-
tively, moved that this Court “certify”, as his counsel
expressed it, this case to the Court of Appeals. Simulta-
neously, defendant renewed its motion for judgment n. o. v.
and moved for partial summary judgment upon a part of
plaintiff’s claim of damages. On November 15, 1976, during
argument upon these rival motions, counsel and this Court
recognized that in the present posture of this case, no final
judgment having been entered, and no direct appeal having
been taken, this Court was free to reconsider both of its
April 1976 orders—, the one denying defendant’s motion
for judgment notwithstanding the verdict and the other
granting defendant’s motion for a new trial.
B-4
Many months having elapsed since the third jury’s ver-
dict, and the Supreme Court, in Brunswick Corp. v. Pueblo
Bowl-O0-Matic, Inc., 1976, ........ Seu: wecity , 97 S.Ct. 690, 50
L.Ed.2d 701, having held that, in private anti-trust cases
of no merit, it may be appropriate to enter a judgment, on
a defendant’s motion against plaintiff’s damage claim, not-
withstanding the verdict of a jury for plaintiff, this Court
has a perspective on the case. This Court has become
cognizant, in the way that an appellate court might be
aware, that some of the trial judge’s 1976 statements dur-
ing the trial, in the charge, and even in the April 1976
opinion are either erroneous or of doubtful soundness. They
do not reflect as accurately as could an opinion written
after the heat of battle has subsided, what is revealed by
a meticulous, prolonged, and thoughtful study of the rec-
ord and of the governing principles of law.
Written with the advantage of almost a year’s lapse
of time since the third jury’s verdict, this opinion now
addresses itself to what, in the view most favorable to
plaintiff, this record shows.
Looking today at the record in the third jury trial, this
Court, disregarding and withdrawing its earlier and less-
considered statements made in April 1976, now sees the
case, as viewed most favorably to plaintiff, as presenting
the following set of facts.
Plaintiff Kaplan is the successor to plaintiff Walsh as
trustee in bankruptcy for Palmer Data Corporation which
became the assignee of CompuTerminal Corporation.
CompuTerminal planned to enter on a large scale the
remote batch-data center buiness, but meanwhile had begun
- roca ns A
B-5
business in 1969 in San Francisco in conventional batch-
data processing. That is the business of supplying to local
customers a computer service rendered upon machines
operated by, and either owned or leased by, the processor.
The material fed to the computer is derived from a cus-
tomer’s original records, which he may deliver or which the
processor may collect. Before such material is so fed, it is
categorized according to a system devised by the processor
to suit the requirements of the particular customer.
Remote data processing differs from conventional batch-
data processing primarily because the customer has elec-
tronic or like connections with a remote data center, so
that records do not have to be physically transmitted.
Defendant Burroughs Corporation is one of the largest
American manufacturers of computers. It has operated
only once in its history a batch-data center directly serving
those customers who have material to be processed by
computers. This unique entry into the batch-data market
occurred when, invited to do so by UNIVAC, Burroughs
took over an unsuccessful enterprise which had been oper-
ated by UNIVAC, the R & S Division of Sperry-Rand
Corporation. Sperry-Rand had previously acquired this
enterprise from R & S. That enterprise, as lessee, used
some of Burroughs’ machines on which it was hardly earn-
ing the rent. When Burroughs took over the enterprise it
paid to Sperry-Rand $75,000 in cash; it assumed or ean-
celed the Sperry-Rand leases of Burroughs’ B-300 machine
(which rented for $240,000 a year); it took on many of
the enterprise’s employees ; it assumed and fulfilled Sperry-
Rand’s obligations to customers on outstanding service
B-6
contracts; and it spent another $75,000 to “clean up” cus-
tomer programs.
During the time that Burroughs operated its so-called
“conventional” batch-data center in San Francisco, Bur-
roughs had leased to CompuTerminal for use in its bateh-
data center an old type Burroughs machine.
CompuTerminal then had a total of twenty or thirty
customers for whom it had prepared individually appro-
priate systems, and for whom it rendered conventional
batch-data services. It wanted to expand that business,
but it was more concerned with what it regarded as its
long-range, potentially-profitable, major activity—the es-
tablishment of outstanding so-called “remote” batch-data
centers which would occupy elaborate quarters and which
would own and operate forty of the most advanced type of
Burroughs computers, numbered B5500. With those objects
in mind, CompuTerminal had in 1969 leased at high annual
cost elaborate offices in San Francisco; it had engaged a
large stand-by staff of employees; and, it had entered into
a fifty million dollar contract with Burroughs to take on
that company’s new, most advanced machines. Both
CompuTerminal and Burroughs co-operatively gave wide-
spread publicity to this proposed acquisition of new
machines.
At no time did the gross income of CompuTerminal
from rendering batch-data services and from other sources
come close to covering the company’s out-of-pocket
expenses.
During the so-called start-up of CompuTerminal
some substantial losses were predicted, some would have
been foreseeable, and some would have been justifiable in
B-7
the light of entreprenurial risks associated with embarking
upon a new enterprise, which it was hoped would move
from a condition of initial losses in getting going, to a
condition of profitability after the business had acquired
customers, had shaken-down its crew, had achieved a mo-
mentum, and, most important, had embarked on a program
of remote batch-data center operations.
However, in its 1969-1970 start-up period the actual
total losses which CompuTerminal sustained were so
gigantic that they could not be found by any reasonable
jury to have been wholly justifiable. CompuTerminal’s
capital was so depleted that insolvency was imminent by
the end of 1969.
Nor did those who directed CompuTerminal, not even its
president, Palmer, regard the total losses as corresponding
to their advance expectations, or to their retrospective judg-
ment of what was justifiable. CompuTerminal, unable to se-
cure the requisite financing for its proposed remote batch-
data or its existing conventional batch-data processing,
itself canceled its order to acquire from Burroughs the
forty new computers. Two of the principal investors who
had supplied CompuTerminal with additional capital, acting
through their attorney, demanded that if by the summer of
1970 CompuTerminal did not turn the financial corner and
make a profit it should go out of business. There is a dispute
whether this demand was acceded to by CompuTerminal.
But the dispute is immaterial, inasmuch as it is conceded
that the demand was drawn to the attention of both Palmer
and CompuTerminal’s Board of Directors, and that when
CompuTerminal did not turn the corner, within the time
specified in the demand, its directors and shareholders in
B-8
July 1970 voted to assign, and did assign, all the corporate
assets to Palmer Data Corporation.
While CompuTerminal was in its 1969-1970 start-up
period, Burrough’s employee, Browne, who had only au-
thority to survey the San Francisco and like operations, to
observe actual and potential customers’ activities, to solicit
their business, and to make recommendations with respect
to the continued operation by Burroughs of its San Fran-
cisco batch-data center, in a memorandum dated January 19,
1970, advised his superior, Bailey, that, of possible options
open to it, Burroughs should close the San Francisco center,
and should offer, to the best available buyer, the Burroughs
San Francisco business, which,—in effect, meant its good-
will, its customer list, and (so far as there were any),
assignable contracts which the center had had with cus-
tomers. The home office of Burroughs gave Browne approval
to carry out the plan.
The then situation was that over some years there had
been between Burroughs, or its predecessor, UNIVAC of
Sperry-Rand, and twenty or so customers written contracts
with stipulated rates. All of these written contracts had ex-
pired. The customers had signed new forms which spe-
cifically stated that they were not to constitute binding con-
tracts until they were executed by Burroughs at its home
office. No. such executions had occurred. Services were,
nonetheless, continuously rendered as though there had been
executions. Sometimes higher rates had been provided in
these unexecuted forms than in the expired written con-
tracts. The customers paid such higher rates. Some custom-
ers assumed that Burroughs had indeed executed the orig-
B-9
inals,—although in fact no execution by Burroughs oc-
curred until late April 1970.
Browne sought to carry through his approved plan in
February and March 1970 by offering Burroughs’ San
Francisco center to CompuTerminal. Largely because
Palmer, the president of CompuTerminal, did not believe
that the customers of Burroughs were legally bound under
unexecuted contracts, Palmer concluded that Burroughs had
nothing to sell, and refused to buy.
Browne, irritated by Palmer, then wrote, on April 16,
1970, a memorandum to his superior Bailey advising
Bailey to inform Palmer that Burroughs would take a “dim
view” of future relations with CompuTerminal. The uncon-
tradicted testimony is that Bailey did not follow that advice
in that internal office memorandum. No “dim view” was, in
fact, taken by Burroughs, which even continued to allow
CompuTerminal to keep a Burroughs computer which was
subject to immediate recapture for non-payment of rent.
The circumstances, uncontradicted by any specifie evi-
dence or any plausible inference, permit of only one inter-
pretation: Browne’s sole motive and intent in so writing
was to injure CompuTerminal because it would not go along
with Browne’s plan to have it buy the center. There is not
the slightest factual basis for an inference that Browne had
a motive or an intent to restrain commerce, to monopolize
commerce, or to engage in any of those types of misconduct
which were the express or implied objects of the Sherman
Anti-Trust Act.
Nor was Browne’s intent, whatever it was, followed by
any action of Burroughs to carry out that intent.
B-10
When Browne represented to Palmer, and later to Cubit
and to Burrough’s customers that the customers of Bur-
roughs who had signed agreements for renewal contracts
were legally bound, even though Burroughs on its part had
not yet formally executed such agreements, he did not make
a factual or legal misrepresentation. Burroughs in render-
ing the contemplated services at the stipulated prices after
a customer had signed an agreement became, as a matter of
fact and as a matter of law, bound as effectively as if it had
signed the agreement. (My earlier action in leaving the issue
to the jury was erroneous.)
After Palmer rejected the opportunity to buy the Bur-
roughs San Francisco center, tr rowne in March and April
1970 offered the business to Cuvbit. That enterprise was
located in at on the Peninsula, twenty or so miles
from San Francisco. In order to induce Cubit to buy the
business, Browne, acting for Burroughs, (1) offered to sell
to Cubit Burroughs’ entire San Francisco business includ-
ing an old style Burroughs B-300 which had been on the
premises since UNIVAC operated the center; (2) helped
Cubit to get from a bank a loan; and (3) (on a view of the
evidence most favorable to plaintiff) joined Cubit in falsely
representing to the bank that the whole proceeds of the loan
were to purchase the B-300 machine.
If Browne made a misrepresentation to the bank (which
is doubtful if the oral as well as the written evidence be con-
sidered), Browne was acting far outside his actual or osten-
sible authority. Burroughs did not give him, nor appear to
give him, any power to help a purchaser to get funds to buy
the San Francisco center. Helping a potential purchaser
to get a bank loan is not within the normal range of the
B-11
powers of an agent authorized to make sales of property.
Browne’s representations to the bank were not authorized
by, nor ratified by, nor legally attributable to Burroughs.
There is not the slightest factual basis in the bank loan,
or in any other circumstances, for an inference that Browne
or Burroughs or Cubit had an intent to restrain commerce,
to destroy CompuTerminal, to monopolize commerce, or to
engage in any of those types of misconduct which were the
express or implied objects of the Sherman Anti-Trust Act.
The only purpose that Browne or Burroughs had was to sal-
vage what it could from its less than successful San Fran-
cisco operations. The only purpose of Cubit was to enter the
San Francisco conventional batch-data market.
Browne, as a further inducement to Cubit to purchase the
business of Burroughs’ San Francisco center, promised Cu-
bit to introduce Cubit’s representatives to Burroughs’ San
Francisco customers. After Cubit on April 15, 1970 did
agree to buy the center, Browne did make the introductions.
Browne went further by writing two sets of follow-up
letters which indicated that Burroughs was transferring its
San Francisco center to Cubit, that the customers’ accounts
were being assigned to Cubit, and that if the customers did
not agree to the assignment they would be left without
service after seventy days.
Most of Burroughs’ customers were easily persuaded by
Browne’s visits and letters to make the change from Bur-
roughs to Cubit. Some were not. Browne represented, at
least sometimes, that the customer was already bound to
Burroughs by an unexecuted agreement, that Burroughs
had a right to delegate to Cubit performance of that con-
B-12
tract to a competent substitute, and that, in any event, the
agreement was terminable after a specified ninety day
period. Such representations, as a matter of fact and of law,
were true and not false or misleading. (My earlier action in
leaving to the jury the question as to the right of delegation
was erroneous.)
Both Burroughs and the customer having acted upon un-
executed agreements, which were in form the same as those
of earlier years but were often different in rates of pay-
ment, those unexecuted agreements had become binding con-
tracts, but terminable by Burroughs on ninety days’ notice.
(My earlier instruction to the jury on this point was
erroneous. )
Moreover, the services rendered by Burroughs under such
agreements were not “personal”—the duty to perform was
delegable. The services were like those banking services
which a bank customarily performs for a customer in con-
nection with an account in which the customer makes depos-
its and from which he authorizes withdrawals, and which a
bank, when it goes out of business, may delegate for per-
formance by its successor bank. They could be transferred
for performance in connection with the sales of Burroughs’
Service Center’s business, even though some of the infor-
mation may have been confidential.
Although Burroughs had the unqualified right to transfer
to Cubit performance of contracts of customers, without
their consent, when customers objected Burroughs, as a
matter of business policy, did not exercise such right, except
perhaps in one or two instances.
B-13
Pursuant to its sale to Cubit by the agreement effective
April 15, 1970, Burroughs then entirely withdrew from the
business of rendering in San Francisco or elsewhere any
batch-data services. It had no concern with CompuTerminal
or with batch-data customers of any enterprise.
On July 15, 1970 the shareholders of CompuTerminal
voted to sell its whole business to Palmer Data Corporation.
The transfer of assets to, and the assumption of liabilities
by, Palmer Data Corporation followed on July 17, 1970.
All the documents and statements of Palmer and of others
associated with CompuTerminal and Palmer Data Corpo-
ration which were contemporary with the sale and transfer
of the business make only one conclusion plausible: the
transfer was effectuated solely because, quite apart from
Burroughs’ or Browne’s activities, CompuTerminal had lost
almost all its capital through CompuTerminal’s directors’,
officers’ and supporters’ misjudgments of the market pos-
sibilities, of the abilities of Palmer, and of the general eco-
nomic picture. This is underlined by what was repeatedly
written and said by Palmer himself in 1970 and by those
who were investors in and officers or directors of the very
corporation which held the only possible cause of action in
this case. These individuals were connected solely with
CompuTerminal, and in no way with Burroughs. Their
statements were against their own interest, were not con-
tradicted by any statements made before this action was
brought, and, collectively, present an unadorned picture of
failure of CompuTerminal due to factors wholly indepen-
dent of Burroughs.
B-14
Nor is there in the contemporary 1969-1970 documents,
accounts books, statements, or other evidence the slightest
ground for regarding as even a secondary or minor cause
of CompuTerminal’s failure the conduct of Burroughs, or of
Browne, or of anyone associated with the defendant.
Despite this clear picture which the contemporary evi-
dence discloses, Palmer, long after the collapse of Compu-
Terminal, claimed that CompuTerminal had been damaged
by alleged violations by Burroughs of the Sherman Anti-
Trust Act.
As page after page of the transcript vividly portrays,
Palmer at the trial of this case shifted his testimony with
flexibility. Responding to his counsel’s suggestions, he
trimmed his opinions to meet developments as the evidence
in one day’s testimony after another day’s testimony seemed
to make desirable.
Palmer on the witness stand took the position that
CompuTerminal had lost its capital and its potential
profits due to statements made b
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