Amicus Brief — Texas Industries, Inc. v. Radcliff Materials, Inc.

No. 79-1144

IN THE

Supreme Court of the United

OCTOBER TERM, 1980

TEXAS INDUSTRIES, INC.,

Petitioner,

Vv.

RADCLIFF MATERIALS, Liwe.,

JIMCO, INC., and OKC DREDGING, INC.,

Respondents.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

BRIEF OF WESTVACO CORPORATION

_AS AMICUS CURIAE

LESLIE H. ARPS

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM

919 Third Avenue

New York, New York 10022

(212) 371-6000

Attorney for Amicus Curiae

‘ Westvaco Corporation

Of Counsel:

KENNETH A. PLEVAN

JOHN M. NANNES

SHEPARD GOLDFEIN

RICHARD M. SCHWARTZ

THOMAS R. LONG

RALPH R. FERNEY

TABLE OF CONTENTS

PAGE

I eo a ee I et es iii

Interest of the Amicus Curiae ...........cccccccceees l

A. In re Corrugated Container Antitrust

Litigation, M.D.L. 310 (S.D. Tex.).......... 2

S, \ MeL Sus aus eh sean ee cktcn 2

eee sore 3

B. Franklin Container Corp. v. International

Paper Co., No. 77-3204 (E.D. Pa.)..........

Or IN oc tot pind ba corew aad ae dak 4

ead Sh Sa ak So ad BN one wo 4 48 DEK OS Dae

I. Federal Courts Have the Power to Recognize

Contribution in Antitrust Cases................ 4

II. Contribution and Claim Reduction Promote

ek EIR, SES IRS IG Si Ry CORE a A OO 7

A. This Court and Other Federal Courts Permit

Contribution to Ensure Fairness ............ 7

B. Contribution and Claim Reduction Will

Promote Fairness By Eliminating Settlement

Coercion and “Sweetheart” Deals........... 9

III. Contribution and Claim Reduction Promote

Policies Underlying the Antitrust Laws.......... 12

A. Contribution Deprives Violators of the Fruits

OF Teer TORE COMGmet o.. occ ccnccasees 12

c.) e O O. ss w claca'b wa waliness 12

as > PE I on ri is Waard ba wae 13

li

PAGE

IV. Contribution and Claim Reduction Will Not

Complicate Antitrust Cases.................00. 15

A. Contribution Will Not Add New Issues to

Antitrust Price-Fixing Cases................ 15

B. Contribution Will Not Present Procedural

Manageability Problems ................... 16

Re e258 hd o's Si wok bon als b Guero ale Nike a ccaea 17

iii

TABLE OF AUTHORITIES

Cases: PAGE

Alexander & Baldwin, Inc. v. Peat, Marwick, Mitchell

& Co., 385 F. Supp. 230 (S.D.N.Y. 1974) ........... 14

Arth Main Street Drugs v. Beer Distributors, Inc., 26

Fed. R. Serv. 2d 87 (N.D. Ind. 1978)............... 10

Board of County Commissioners v. United States, 308

eee EK MP cass Ke Kuda Eee lnk s bet 4

Cackling Acres, Inc. v. Olson Farms, Inc., 541 F.2d

242 (10th Cir. 1976), cert. denied, 429 U.S. 1122

1g ERIS CRP Yi co ry SRSA = SR OR ec 12, 13

Calderone Enterprises Corp. v. United Artists Theatre

Circuit, Inc., 454 F.2d 1292 (2d Cir. 1971), cert.

oc te Be Ey 7p. RR aS 1]

City of Atlanta v. Chattanooga Foundry & Pipeworks,

127 F. 23 (6th Cir. 1903), affirmed, 203 U.S. 390

Baa Ee REE CS, CR sa ee eae 6

Clearfield Trust Co. v. United States, 318 U.S. 363

Re ierlarira Sa cuicinw so MAA cutee mes vedeineouu 4

Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S.

ck lee AER Sn SURE eee EOE EM ERE a, ae

Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978).... 10

In re Coordinated Pretrial Proceedings In Antibiotic

Antitrust Actions, 410 F. Supp. 680 (D. Minn. 1975). 10

In re Corrugated Container Antitrust Litigation, 84

i A EUs TUR bk occ sch be bindcen eon 10

In re Corrugated Container Antitrust Litigation, 1979-1

Trade Cases (CCH) 4 62,690 (S.D. Tex. 1979) ....... 10

In re Corrugated Container Antitrust Litigation, 80

F.R.D. 244 (S.D. Tex.), mandamus denied, No. .

FOP GG Mee FETE oi Sab wk nea hbbnveeibceupee 10

iV

PAGE

co Ee ee BUR Re St. en a ee eee reer ee 6, 7

Edmonds v. Compagnie Generale Transatlantique, 443

Bed RR cs coh Pads Canes d SERS eee e SS ee 8

In re Fine Paper Antitrust Litigation, 446 F. Supp. 759

Rees EGS aa we cde hin os a bales as hw eeak o Raa 9

In re Folding Carton Antitrust Litigation, M.D.L. 250

Pe Ree MG wits is 4 od 69 OA ks ew ah wb 10

Funk v. United States, 290 U.S. 371 (1933) ........... 6

Globus, Inc. v. Law Research Service, Inc., 318 F.

Supp. 955 (S.D.N.Y. 1970), affirmed, 442 F.2d 1346

(2d Cir.), cert. denied, 404 U.S. 941 (1971).......... 14

Glus v. G.C. Murphy Co., 629 F.2d 248 (3d Cir.),

petition for cert. filed sub nom. Retail Wholesale &

Department Store Union v. G.C. Murphy Co., 49

U.S.L.W. 3252 (Sept. 22, 1980) (No. 80-461) ........ 5,8

Gomes v. Brodhurst, 394 F.2d 465 (3d Cir. 1968)....... 8, 11

In re Government Auto Fleet Sales Antitrust Litigation,

Bae FB, BE CE OR TOTO ss oa vest dwindcace 9

Grogg v. General Motors Corp., 72 F.R.D. 523

SE Ts SE cs Reka ae bee hye aes ekbheteneas 5

In re Gypsum Cases, 386 F. Supp. 959 (N.D. Cal. 1974) 10

Heizer Corp. v. Ross, 601 F.2d 330 (7th Cir. 1979)... .5, 8, 14

Hooley v. Red Carpet Corp. of America, 1975 Trade

Cases (CCH) ¢ 60,285 (D. Ore. 1975), appeal

dismissed, 549 F.2d 643 (9th Cir. 1977) ............. 10

Illinois v. City of Milwaukee, 406 U.S. 91 (1972) ...... 4,5

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) ...... 12

Jeffrey v. Southwestern Bell, 518 F.2d 1129 (Sth Cir.

PAGE

Judson v. Peoples Bank & Trust Co., 17 N.J. 67, 110

Pict De 6 cCabs 3 ad Canc hn bhad cee bane 11

Kline v. Coldwell, Banker & Co., 508 F.2d 226 (9th Cir.

1974), cert. denied, 421 U.S. 963 (1975) ............ 10, 11

Kohr v. Allegheny Airlines, Inc., 504 F.2d 400 (7th Cir.

1974), cert. denied, 421 U.S. 978 (1975) ........... 5, 8,9

Martello v. Hawley, 300 F.2d 721 (D.C. Cir. 1962) ..... 8

McKenna vy. Austin, 134 F.2d 659 (D.C. Cir. 1943)..... 11

Mid-West Paper Products Co. v. Continental Group,

SE ., Foe Fae Sts OS Cie. TOT cin ss ceenven ban aes 11

Moragne v. States Marine Lines, Inc., 398 U.S. 375

SOU sh 3 vk Va saben k RE wv ohas oe eae ess 4

National Society of Professional Engineers v. United

ee Sheth OE Ce aa. oo vod cclde coebehkan 7

Olson Farms, Inc. v. Safeway Stores, Inc., 1979-2

Trade Cases (CCH) 4 62,995 (10th Cir.), en banc

rehearing granted and pending (Dec. 27, 1979)....... 13, 14

Perma Life Mufflers, Inc. v. International Parts Corp.,

SOR Roce Se Ce bak ccc ub haa Re eaea eae, 6

Pfizer Inc. v. Government of India, 434 U.S. 308

CRUE ssa ova vk sends oO lined ckea Caen aca eee 12

Professional Beauty Supply, Inc. v. National Beauty

Supply, Inc., 594 F.2d 1179 (8th Cir.), en banc

rehearing denied (April 17, 1979) ............... 8, 13, 14

Reading Industries, Inc. v. Kennecott Copper Corp..,

ST? FT, BURR. TEFO CA. FPR os k's ba ceas dees 11

Reiter v. Sonotone Corp., 442 U.S. 330 (1979) ........ 10

Royal Indemnity Co. v. United States, 313 U.S. 289

CRUNEED es ot. udp ou Cede EU ale b> La ha oe ee ce 4

vi

PAGE

Shapiro v. General Motors Corp., 472 F. Supp. 636 (D.

I arias es sas Gas cow ab a woe o.6 dW ows 60 bb 11

Sola Electric Co. v. Jefferson Electric Co., 317 U.S.

EE ee i a. aaa o eb heh dene ube bso s 6

Southern Construction Co. v. Pickard, 371 U.S. 57

ERIE eS Ge, an ee a 16

Story Parchment Co. v. Paterson Parchment Paper

re ees ibn xb ad een cs epee es 15

Textile Workers Union v. Lincoln Mills, 353 U.S. 448

he ee eo oe pi Cause edad eee ebae 4

United States v. Associated Press, 52 F. Supp. 362

(S.D.N.Y. 1943), affirmed, 326 U.S. 1 (1945)........ 6

United States v. Reliable Transfer Co., 421 U.S. 397

EE SIEIGES 1S CASTS SESS SDR ee vO a Fe es by AT

Wassel v. Eglowsky, 399 F. Supp. 1330 (D. Md. 1975),

affirmed, 542 F.2d 1235 (4th Cir. 1976) ............. 5

Zenith Radio Corp. v. Hazeltine Research, Inc., 401

REESE EET, PRES aE ne en 6

Federal Rules of Civil Procedure:

et ee he.) kbs o's a chi vied 00 6 otal 16

ool L a bulls s o/s wuls ss a'endddaeee dso 16

ae a Ss eben cd eee oboe 16

Other Authorities:

Corbett, Apportionment of Damages and Contribution

Among Coconspirators in Antitrust Treble Damage

Actions, 31 Fordham L. Rev. 111 (1962)............ 13

Easterbrook, Landes & Posner, Contribution Among

Antitrust Defendants: A Legal and Economic

Analysis, 23 J.L. & Econ. 331 (1980) (forthcoming). . 12

Vii

PAGE

Friendly, In Praise of Erie—And of The New Federal

Common Law, 39 N.Y.U. L. Rev. 383 (1964) ....... 4

J. Garrett, Antitrust Compliance (1978) .............. 15

Handler, The Shift from Substantive to Procedural

Innovations in Antitrust Suits, 71 Colum. L. Rev. 1

STE 637s dak cn tbok Vode nk nae lidt eka eek 10

Jacobson, Contribution Among Antitrust Defendants:

A Necessary Solution To A Recurring Problem, 32

Sd. Fey Bey SEO LEE S WCAE hac Seb eebiwlinews 12

Janofsky, The “Big Case”: A “Big Burden” on Our

Coors, Gb A.B.AS. GO CGO. occ ascsvaiccwcvcs 11

Legal Times of Washington, Dec. 15, 1980 at 1, col. 1 . 9

Manual for Complex Litigation, § 1.46 (1978)......... 10

Note, Contribution In Private Antitrust Actions, 93

See, 5 TUOW BG Cis vis os wh ateccicc cds 12, 13, 14, 15

Note, Contribution in Antitrust Treble Damage

Atte, 6:3 Cam Gs WO CA ae ik ln wine cc 14, 16

Panel Discussion: Private Actions—The Purposes

Sought And The Results Achieved, 43 Antitrust L.J.

CRP ONTE oan anc ekaNs ROR ERIENS ER Rect TIO AE eis 13

Panel Discussion: Varied Approaches to Antitrust

Compliance, 48 Antitrust L.J. 53 (1980)............ 15

Polinsky & Shavell, Contribution and Claim Reduction

Among Antitrust Defendants: A Policy Analysis, 33

Stan. L. Rev.__ (1981) (to be published)......... 11, 12, 15

Recent Developments, Contribution Among Antitrust

Defendants, 33 Vand. L. Rev. 979 (1980) ........... 14

Rowe, On Fostering Fights, N.Y. Times, Aug. 6, 1980

GEE cdetivigeccevhcicesel ee bel 10

Vili

PAGE

Rudnitsky & Blyskal, Getting into Those Deep Pockets,

Pn CPUs A RE ci dipes bee cvdebes’ 9

Senate Comm. on the Judiciary, Hearings on S.1468

Before the Subcomm. on Antitrust, Monopoly and

Business Rights, The Antitrust Equal Enforcement

Act of 1979, 96th Cong., Ist Sess. 45 (1979) ........ 11

No. 79-1144

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

TEXAS INDUSTRIES, INC.,

Petitioner,

RADCLIFF MATERIALS, INC.,

JIMCO, INC., and OKC DREDGING, INC.,

Respondents.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

BRIEF OF WESTVACO CORPORATION

AS AMICUS CURIAE

Westvaco Corporation (“Westvaco”) submits this Brief as

amicus curiae with the consent of all parties hereto.' Westvaco

urges this Court to recognize the right of contribution for

defendants in antitrust cases and the corollary right of claim

reduction.

INTEREST OF THE AMICUS CURIAE

Westvaco is a defendant in Jn re Corrugated Container

Antitrust Litigation, M.D.L. 310 (S.D. Tex.) (“M.D.L. 310”),

and in Franklin Container Corp. v. International Paper Co.,

No. 77-3204 (E.D. Pa.) (“Franklin Container”). In these vari-

' All letters requesting and granting consent to the filing of this Brief have

been filed with the Clerk of the Court.

2

ous actions, Westvaco has alleged (i) cross-claims for contribu-

tion for any damages attributable to other defendants which

Westvaco might be required to pay, and (ii) affirmative de-

fenses of “claim reduction” asserting that plaintiffs, by settling

with any other defendants, have reduced their claims against

Westvaco by the amount of damages fairly allocable to such

defendants.

A. In re Corrugated Container Antitrust Litigation, M.D.L.

310 (S.D. Tex.)

M.D.L. 310 is the consolidation pursuant to 28 U.S.C.

§ 1407 of (i) forty-four class actions, and (ii) eighteen opt-out

non-class actions.’ All actions seek treble damages.

1. Class Actions

The class actions allege that thirty-seven corrugated con-

tainer manufacturers named as defendants participated in a

nationwide conspiracy to fix, raise, maintain and stabilize the

prices of corrugated containers and sheets. Class plaintiffs have

claimed their damages run into billions of dollars. Thirty-five

defendants paid over $320 million to settle these claims.’

After more than three months of trial before a jury, West-

vaco entered into a settlement with class plaintiffs on Septem-

ber 3, 1980 by paying $975,000, which was the approximate

amount it would have cost Westvaco to complete the trial. By

its terms, Westvaco’s settlement agreement reduced plaintiffs’

claims against any other defendants by the amount of damages

which could be allocable to Westvaco, i.e., claim reduction.‘

2 These are cases where the plaintiffs opted out of the class. Westvaco is a

defendant in 11 of these cases.

> See pages 9-11, infra.

‘ The Westvace ‘ilement agreement was the only one incorporating such a

feature. The sole uefendant which did not settle the class actions and which

was subsequently found by the jury to have been a member of the alleged

conspiracy now faces enormous damage exposure in the absence of contribu-

tion or claim reduction.

3

The setilement was preliminarily approved on September 16,

1980.°

2. Opt-out Actions

The eighteen opt-out actions also allege a conspiracy to fix

the prices of corrugated containers and sheets. Discovery in

these actions is scheduled for completion by May, 1981. Stipu-

lations of dismissal have been filed on behalf of two of thirty-

seven corrugated container manufacturers named as defendants

in one or more of these actions. Westvaco has not settled any

of the actions. In each of these actions, in the absence of

contribution or claim reduction, an individual defendant may

uitiinately be responsible for damages caused by all of the

defendants.

B. Franklin Container Corp. v. International Paper Co., No.

77-3204 (E.D. Pa.)

Franklin Container, a purported class action, alleges that

fourteen manufacturers of corrugated containers named as

defendants conspired to depress the selling prices of corrugated

containers while simultaneously maintaining the prices of liner-

board. Six defendants, not including Westvaco, have settled for

injunctive relief and damages. Without contribution or claim

reduction, each individual defendant may be forced to bear the

consequences not only of its own acts but those of all other

defendants.

This Court’s resolution of the case at bar in all likelihood

will determine the legal sufficiency of Westvaco’s contribution

cross-claims in the M.D.L. 310 opt-out cases and in Franklin

Container.

* It was agreed that upon preliminary approval Westvaco would seek the

dismissal of Westvaco Corp. v. Adams Extract Co., cert. granted, 48

U.S.L.W. 3820 (June 16, 1980) (No. 79-972). Certiorari had been granted in

that case on the question whether defendants in antitrust cases may assert

rights of contribution. Westvaco’s motion to dismiss was granted, cert.

dismissed, 49 U.S.L.W. 3288 (Oct. 20, 1980).

4

Summary of Argument

This Court in the exercise of its federal common-law powers

should recognize rights of contribution and claim reduction in

antitrust cases to ensure fairness in the apportionment of

damages among defendants.

Contribution and claim reduction will promote fairness by

preventing antitrust violators from going “scot free” and

eliminating “sweetheart” deals and settlement coercion. Contri-

bution and claim reduction will encourage fair settlements

based on the merits of the case.

Contribution promotes the disgorgement and deterrence ob-

jectives of the antitrust laws by ensuring that antitrust violators

will be held accountable for their acts.

Contribution will not complicate antitrust price-fixing cases

by adding new substantive issues or presenting procedural

manageability problems. Furthermore, claim reduction will

simplify the proof in antitrust cases.

ARGUMENT

I,

Federal Courts Have the Power to Recognize

Contribution in Antitrust Cases

This Court may recognize rights of contribution in areas of

federal concern by virtue of its power to fashion federal

common-law rules to govern problems which “lie in the

penumbra of express statutory mandates.” Textile Workers

Union v. Lincoln Mills, 353 U.S. 448, 457 (1957).°®

° See Illinois v. City of Milwaukee, 406 U.S. 91, 103 (1972); Moragne vy.

States Marine Lines, Inc., 398 U.S. 375, 392-403 (1970); Clearfield Trust Co.

v. United States, 318 U.S. 363, 367 (1943); Royal Indem. Co. v. United

States, 313 U.S. 289, 296 (1941); Board of County Comm’rs v. United States,

308 U.S. 343, 349-52 (1939). See generally Friendly, In Praise of Erie — And

Of The New Federal Common Law, 39 N.Y.U. L. Rev. 383 (1964).

5

Rules governing the availability of contribution are fre-

quently judicial in origin. Thus, in the absence of statutory

provisions, contribution rights have been judicially recognized

in many federal cases, including admiralty,’ securities,* employ-

ment discrimination,’ and airline disaster cases.'° Remedies

provided by Congress “are not necessarily the only federal

remedies available,” and “there is a federal common law” in

areas of special federal concern. J/linois v. City of Milwaukee,

supra, 406 U.S. at 103.

Antitrust is clearly an area of special federal concern in

which rights of contribution are cognizable as a matter of

federal common law. The substantive liability of an antitrust

defendant is determined by the provisions of the Sherman Act

in conjunction with common-law principles, as this Court has

repeatedly recognized:

Congress, however, did not intend the text of the

Sherman Act to delineate the full meaning of the statute

or its application in concrete situations. The legislative

history makes it perfectly clear that it expected the courts

to give shape to the statute’s broad mandate by drawing

on common-law tradition.

National Society of Professional Engineers v. United States,

435 U.S. 679, 688 (1978) (footnote omitted). As Judge Learned

” Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106, 111 (1974).

See also United States v. Reliable Transfer Co., 421 U.S. 397, 411 (1975).

8 Heizer Corp. v. Ross, 601 F.2d 330, 332-33 (7th Cir. 1979); Wassel v.

Eglowsky, 399 F. Supp. 1330, 1367 (D. Md. 1975), affirmed, 542 F.2d 1235

(4th Cir. 1976).

% Glus v. G.C. Murphy Co., 629 F.2d 248, 252-54 (3d Cir.), petition for cert.

filed sub nom. Retail Wholesale & Dep’t Store Union v. G.C. Murphy Co.,

49 U.S.L.W. 3252 (Sept. 22, 1980) (No. 80-461); Grogg v. General Motors

Corp., 72 F.R.D. 523 (S.D.N.Y. 1976).

‘0 Kohr v. Allegheny Airlines, Inc., 504 F.2d 400 (7th Cir. 1974), cert.

denied, 421 U.S. 978 (1975).

6

Hand stated, “Congress has incorporated into the Anti-Trust

Acts the changing standards of the common law, and by so

doing has delegated to the courts the duty of fixing the

standard for each case.” United States v. Associated Press, 52

F. Supp. 362, 370 (S.D.N.Y. 1943), affirmed, 326 U.S. 1 (1945).

See also Funk v. United States, 290 U.S. 371, 382 (1933).

As a result, federal courts have routinely resolved issues

ancillary to application of the Sherman and Clayton Acts

through exercise of federal common-law powers. Thus, it was

the federal courts that applied principles of joint and several

liability to the antitrust laws by analogizing violators to joint

tortfeasors. City of Atlanta v. Chattanooga Foundry & Pipe-

works, 127 F. 23, 26 (6th Cir. 1903), affirmed, 203 U.S. 390

(1906). See also Zenith Radio Corp. v. Hazeltine Research,

Inc., 401 U.S. 321, 343-48 (1971) (effect of release in antitrust

cases); Perma Life Mufflers, Inc. v. International Parts Corp.,

392 U.S. 134, 137-40 (1968) (availability of in pari delicto

defense in antitrust cases).

In Sola Electric Co. v. Jefferson Electric Co., 317 U.S. 173

(1942), this Court stated:

When a federal statute condemns an act as unlawful, the

extent and nature of the legal consequences of the con-

demnation, though left by the statute to judicial deter-

mination, are nevertheless federal questions, the answers

to which are to be derived from the statute and the federal

policy which it has adopted.

Id. at 176.

There is no indication in the legislative history of the Sher-

man Act or the Clayton Act that Congress considered the

question of contribution.'' Accordingly, for all of the foregoing

reasons, judicial resolution of the issue is appropriate.

'! The Clayton Act expressly provides that persons who violate the Sher-

man Act shall be subject to civil liability. This Court is not being asked to

imply a private cause of action within the meaning of Cort v. Ash, 422 U.S.

(footnote continued on following page)

7

Contribution and Claim Reduction

Promote Fairness

The old common-law rule against contribution unfairly

forces a defendant to bear the consequences not only of his

own acts but also those of his joint tortfeasors. As will be

demonstrated below, the obvious inequity of the common-law

rule has led federal courts to permit contribution in order to

ensure fairness. Contribution and claim reduction in antitrust

cases will ensure that antitrust violators do not escape “scot

free,” and will promote fairness by eliminating settlement

coercion and “sweetheart” deals.

A. This Court and Other Federal Courts Permit Contribution

to Ensure Fairness

In Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S.

106 (1974), this Court permitted contribution between joint

tortfeasors in maritime noncollision cases to ensure fairness in

the allocation of loss:

[A] “more equal distribution of justice” can best be

achieved by ameliorating the common-law rule against

contribution which permits a plaintiff to force one of two

wrongdoers to bear the entire loss, though the other may

have been equally or more to blame. See The Max Morris,

[137 U.S. 1 (1890)], at 14.

417 U.S. at 111.

A year later, this Court held that the elimination of potential

unfairness required judicial adoption of a rule providing for

66 (1975), or its progeny. In such cases, the Court has examined legislative

history to determine whether subjecting a party to implied civil liability for

violating a statutory standard of conduct is consistent with congressional

intent. In contrast, the question here is simply whether contribution may be

asserted against parties whom Congress has expressly intended to be subject

to civil liability under the antitrust laws.

8

“just and equitable” allocation of damages. United States v.

Reliable Transfer Co., 421 U.S. 397, 411 (1975). By 1979 this

Court observed in Edmonds v. Compagnie Generale Trans-

atlantique, 443 U.S. 256, 271-72 n.30 (1979), that a tortfeasor

“(njormally . . . may seek contribution from another concur-

rent tortfeasor. . . . Contribution remedies the unjust enrich-

ment of the concurrent tortfeasor.”

The principle of “equal distribution of justice,” Cooper

Stevedoring, supra, 417 U.S. at 111, through elimination of

unfairness in the allocation of damages has been applied by

federal courts in a steady movement toward recognition of

‘contribution rights in numerous areas."?

In Professional Beauty Supply, Inc. v. National Beauty

Supply, Inc., 594 F.2d 1179 (8th Cir. 1979) (“Professional

Beauty Supply”), the first appellate court ever to consider the

contribution issue in an antitrust context held unequivocally

that fairness requires the application of contribution. The

court, in relying (id. at 1183) upon Cooper Stevedoring, recog-

nized that contribution in treble-damage actions was necessary

to ensure fundamental fairness and to prevent antitrust viola-

tors from going “scot free”:

The fact that one tortfeasor may be held liable for all the

damages arising from the antitrust violation necessarily

means that other joint tortfeasors may go “scot free.”

There is an obvious lack of sense and justice in a rule

which permits the entire burden of restitution of a loss for

which two parties are responsible to be placed upon one

'2 See, e.g., Heizer Corp. v. Ross, 601 F.2d 330, 331-33 (7th Cir. 1979)

(contribution in federal securities fraud cases). See also Glus v. G.C. Murphy

Co., supra, 629 F.2d 248 (contribution in discrimination cases); Kohr v.

Allegheny Airlines, Inc., supra, 504 F.2d 400 (airline disaster cases); Gomes

v. Brodhurst, 394 F.2d 465 (3d Cir. 1968) (Virgin Islands negligence cases);

Martello v. Hawley, 300 F.2d 721 (D.C. Cir. 1962) (District of Columbia

negligence cases).

9

alone because of the plaintiff’s whim or spite, or his

collusion with the other wrongdoer.

594 F.2d at 1185-86 (citation Omitted).

B. Contribution and Claim Reduction Will Promote Fairness

By Eliminating Settlement Coercion and “Sweetheart”

Deals

The following examination of a common pattern in antitrust

class actions involving multiple defendants demonstrates the

abuses resulting from the absence of contribution and claim

reduction.

First, there is the commencement of a grand jury investiga-

tion of an entire industry. Prior to the completion of such

investigation but after it becomes public, numerous treble-

damage class actions are brought against substantially all mem-

bers of the industry whether or not they are under investiga-

tion.'?

Second, the grand jury returns an indictment against a

relatively small number of industry members, but the civil

actions continue against all defendants whether indicted or

not.'*

'3 See, e.g., In re Fine Paper Antitrust Litigation, 446 F. Supp. 759

(J.P.M.L. 1978); In re Government Auto Fleet Sales Antitrust Litigation, 328

F. Supp. 218 (J.PM.L. 1971). See generally Rudnitsky & Blyskal, Getting

into Those Deep Pockets, Forbes 59, 62 (Aug. 4, 1980).

'* Compare United States v. International Paper Co., Crim. No. H-78-11

(S.D. Tex. 1978) (nine corporate and nine individual felony indictees) and

United States v. Boise Cascade Corp., Crim. No. H-78-12 (S.D. Tex. 1978)

(five corporate and 17 individual misdemeanor indictees) with In re Corru-

gated Container Antitrust Litigation, M.D.L. 310 (S.D. Tex.) (37 corporate

defendants). All defendants that stood trial in the criminal cases were

acquitted. Indeed, treble-damage actions sometimes continue even after the

government concludes that there is no basis for criminal or civil charges. See

Legal Times of Washington, Dec. 15, 1980 at 1, col. 1.

10

Third, prior to a ruling on class certification, plaintiffs enter

into “ice-breaking” or “sweetheart” deals with some defen-

dants, often those which are most culpable. '*

Fourth, a large class is certified, and in the absence of

contribution and claim reduction, all non-settling defendants

are thereafter faced with enormous potential liability. '®

Fifth, as a consequence, a settlement stampede ensues. With

each successive settlement in the absence of contribution and

claim reduction, the exposure of non-settling defendants in-

creases because the damages allocable to settling defendants

remain in the case. Accordingly, plaintiffs demand higher and

higher settlement amounts having little or nothing to do with

the merits of the claims.'’? As a result, multimillion dollar

settlements have become commonplace. '*

'S See Manual for Complex Litigation, § 1.46 (1978); Appendix A to this

Brief (“App. A”). See also In re Corrugated Container Antitrust Litigation,

1979-1 Trade Cases (CCH) 4 62,690, at 77,882 (S.D. Tex. 1979).

'6 See, e.g., In re Corrugated Container Antitrust Litigation, 80 F.R.D. 244

(S.D. Tex.), mandamus denied, No. 78-3684 (5th Cir. 1978). See also Kline v.

Coldwell, Banker & Co., 508 F.2d 226, 234-35 (9th Cir. 1974), cert. denied,

421 U.S. 963 (1975); Arth Main St. Drugs v. Beer Distribs., Inc., 26 Fed. R.

Serv. 2¢ 87 (N.D. Ind. 1978); Hooley v. Red Carpet Corp. of America, 1975

Trade Cases (CCH) € 60,285, at 66,112 (D. Ore. 1975), appeal dismissed, 549

F.2d 643 (9th Cir. 1977). Cf. Reiter v. Sonotone Corp., 442 U.S. 330, 345-46

(1979) (Rehnquist, J., concurring); Coopers & Lybrand v. Livesay, 437 U.S.

463 (1978). See generally Rowe, On Fostering Fights, N.Y. Times, Aug. 6,

1980, at A-21.

'7 See App. A. See also In re Corrugated Container Antitrust Litigation, 84

F.R.D. 40, 41 (S.D. Tex. 1979). See generally Handler, The Shift from

Substantive to Procedural Innovations in Antitrust Suits, 71 Colum. L. Rev.

1, 9 (1971).

'§ See, e.g., In re Folding Carton Antitrust Litigation, M.D.L. 250 (N.D.

Ill. 1979) ($218 million settlement from 24 defendants); Jn re Coordinated

Pretrial Proceedings In Antibiotic Antitrust Actions, 410 F. Supp. 680 (D.

Minn. 1975) ($180 million from five defendants); Jn re Gypsum Cases, 386 F.

Supp. 959 (N.D. Cal. 1974) ($67 million from seven defendants).

11

Sixth, in addition, certain small defendants confident of

their innocence are nevertheless frequently forced by economic

pressures to submit to plaintiffs’ blackmail demands to avoid

being crushed.'®

Recognition of rights of contribution and claim reduction

will end this undisputed reign of terror in massive antitrust

actions. Contribution coupled with claim reduction will permit

each defendant to negotiate a fair settlement. See Gomes v.

Brodhurst, 394 F.2d 465, 467 (3d Cir. 1968); Judson v. Peoples

Bank & Trust Co., 17 N.J. 67, 93, 110 A.2d 24, 36-37 (1954)

(Brennan, J.), quoting McKenna v. Austin, 134 F.2d 659 (D.C.

Cir. 1943). See also United States v. Reliable Transfer Co., 421

U.S. 397, 408 (1975) (“a rule of fairness in court will produce

fair out-of-court settlements”). ?°

'? Green Bay Packaging Co., Inc. (“Green Bay”), one of the small defen-

dants in M.D.L. 310, had resolved to vindicate its innocence at trial because

it believed it had done nothing wrong. After other defendants settled,

however, Green Bay, a family-owned business, was faced with the loss of its

line of credit unless it resolved its contingent liability. To remain viable, Green

Bay had no choice but to accept plaintiffs’ demand for $5,557,500.00 (App.

A). As George Kress, the founder and president of Green Bay, stated:

The effect of this extortive settlement practice upon a small, family-

owned and managed business is catastrophic. We were threatened with

the loss of over 50 years of effort, and coerced into paying an exorbitant

settlement rather than being afforded the privilege of ultimately proving

our corporate innocence.

Senate Comm. on the Judiciary, Hearings on S.1468 Before the Subcomm. on

Antitrust, Monopoly and Business Rights, The Antitrust Equal Enforcement

Act of 1979, 96th Cong., Ist Sess. 45 (1979). See also Mid-West Paper

Products Co. v. Continental Group, Inc., 596 F.2d 573, 587 (3d Cir. 1979);

Jeffrey v. Southwestern Bell, 518 F.2d 1129, 1131 (Sth Cir. 1975); Kline y.

Coldwell, Banker & Co., 508 F.2d 226, 234 (9th Cir. 1974), cert. denied, 421

U.S. 963 (1975); Calderone Enterprises Corp. v. United Artists Theatre

Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir. 1971), cert. denied, 406 U.S. 930

(1972); Reading Indus., Inc. v. Kennecott Copper Corp., 477 F. Supp. 1150,

1159-60 (S.D.N.Y. 1979); Shapiro v. General Motors Corp., 472 F. Supp. 636,

659 (D. Md. 1979). See generally Janofsky, The “Big Case”: A “Big Burden”

on Our Courts, 66 A.B.A.J. 848, 849 (1980).

20 See generally Polinsky & Shavell, Contribution and Claim Reduction

Among Antitrust Defendants: A Policy Analysis, 33 Stan. L. Rev.__ (1981)

(to be published), an earlier draft of which was prepared at Westvaco’s

(footnote continued on following page)

12

Il.

Contribution and Claim Reduction Promote Policies

Underlying the Antitrust Laws

The treble-damage remedy of the Clayton Act advances three

goals. First, it provides a means by which victims of antitrust

violations may be compensated for their injuries. Second, it

deprives violators of the antitrust laws of the fruits of their

illegal conduct (“disgorgement”). Third, it serves to deter

future violations (“deterrence”). See Pfizer Inc. v. Government

of India, 434 U.S. 308, 314 (1978); Illinois Brick Co. v. Illinois,

431 U.S. 720, 746 (1977).

Contribution does not affect the right of a plaintiff to be

compensated because under joint and several liability a plain-

tiff may collect a judgment entirely from any defendant found

to have violated the antitrust laws. Accordingly, courts consid-

ering whether contribution should be recognized have focused

upon the disgorgement and deterrence obiectives of the anti-

trust laws.

A. Contribution Deprives Violators of the Fruits of Their

Illegal Conduct

In numerous situations, the absence of contribution permits

antitrust violators to go “scot free” or to obtain “sweetheart”

deals not commensurate with damages they may have caused.

1. “Scot Free” Violators

If a plaintiff for any reason whatsoever does not name all

antitrust violators as defendants, such violators go “scot free”

in the absence of contribution. For example, in Cackling

instigation. Compare Note, Contribution In Private Antitrust Actions, 93

Harv. L. Rev. 1540, 1560-61 (1980), and Jacobson, Contribution Among

Antitrust Defendants: A Necessary Solution To A Recurring Problem, 32 U.

Fla. L. Rev. 217, 236-38 (1980) with Easterbrook, Landes & Posner, Contri-

bution Among Antitrust Defendants: A Legal and Economic Analysis, 23

J.L. & Econ. 331,__ (1980) (forthcoming).

13

Acres, Inc. v. Olson Farms, Inc., 541 F.2d 242 (10th Cir. 1976),

cert. denied, 429 U.S. 1122 (1977), plaintiffs elected not to sue

certain large co-conspirators to avoid disrupting business rela-

tionships, and, as a consequence, a single defendant was held

liable for the damages caused by all of the co-conspirators. See

Petition for Rehearing at 4 n.2, Olson Farms, Inc. v. Safeway

Stores, Inc., 1979-2 Trade Cases (CCH) 4 62,995 (10th Cir.), en

banc rehearing granted and pending (Dec. 27, 1979),?!

2. “Sweetheart” Deals

The disgorgement objective of the treble-damage remedy

may also be frustrated even if all participants in an allegedly

illegal scheme are named as defendants. Plaintiffs may enter

into “sweetheart” deals with selected defendants for reasons

unrelated to the merits of the claims against such defendants. ??

In the absence of contribution and claim reduction, all dam-

ages allocable to a settling defendant remain in the case for

purposes of damage calculation against non-settling defen-

dants.??

B. Contribution Promotes Deterrence

Contribution promotes the deterrent policies of the antitrust

laws by increasing the certainty that all violators will be forced

to bear the consequences of their conduct.** The effect of no

contribution on deterrence was well expressed in Professional

Beauty Supply, supra, where the court stated:

21

But see Professional Beauty Supply, supra, 594 F.2d 1179.

22 See Settlements by International Paper Co. and St. Regis Paper Co.

(App. A). See also page 10 & note 15, supra.

3 Claim reduction discourages sweetheart settlements by ensuring that

settlements will be based on the merits and will fairly reflect the illegal gains,

if any, located in the coffers of each settling defendant.

*4 See Corbett, Apportionment of Damages and Contribution Among

Coconspirators in Antitrust Treble Damage Actions, 31 Fordham L. Rev.

111, 137 (1962); Panel Discussion: Private Actions — The Purposes Sought

and The Results Achieved, 43 Antitrust L.J. 73, 104 ( 1974). See also Note,

Contribution In Private Antitrust Actions, 93 Harv. L. Rev. 1540, 1544-45

(1980).

14

This possibility of escaping all liability might cause many

to be more willing, rather than less willing, to engage in

wrongful activity. ...

To deny contribution would be to dilute the deterrent

effect of the antitrust laws, since a participant in an

antitrust violation could escape all responsibility for its

wrongdoing.

Id. at 1185. For this reason, contribution is particularly effec-

tive in deterring intentional misconduct. Jd. at 1186. See Olson

Farms, supra, 1979-2 Trade Cases (CCH) 4 62,995, at 79,706-

07 (Holloway, J., dissenting); Recent Developments, Contribu-

tion Among Antitrust Defendants, 33 Vand. L. Rev. 979, 983

(1980).?°

Furthermore, middle level managers are often the persons

whose activities lead to alleged antitrust violations, and their

behavior is more affected by the possibility of detection and its

impact upon their careers than by the magnitude of their

employers’ potential penalties:

The deterrent effect of a determination that those man-

agers violated the antitrust laws would not be tied to the .

magnitude of liability because firm sanctions against such

managers depend primarily upon the fact of violation.

Under such circumstances, allowing contribution would

best deter antitrust violations, for it would increase the

probability that the company will be held liable for those

violations and hence increases the frequency of company

sanctions against overzealous employees.

Contribution In Private Antitrust Actions, supra, 93 Harv. L.

25 See also Heizer Corp. v. Ross, 601 F.2d 330, 334 (7th Cir. 1979);

Alexander & Baldwin, Inc. v. Peat, Marwick, Mitchell & Co., 385 F. Supp.

230, 238-39 (S.D.N.Y. 1974); Globus, Inc. v. Law Research Serv., Inc., 318 F.

Supp. 955 (S.D.N.Y. 1970), affirmed, 442 F.2d 1346 (2d Cir.), cert. denied,

404 U.S. 941 (1971).

15

Rev. at 1546 (footnotes omitted). See Polinsky & Shavell,

Contribution and Clairn Reduction Among Antitrust Defen-

dants: A Policy Analysis, supra, 33 Stan. L. Rev.__ (1981).?*

Accordingly, contribution and claim reduction promote poli-

cies of the antitrust laws by ensuring that antitrust violators will

be held accountable for their conduct.

IV.

Contribution and Cianz Reduction Will Not

Complicate Antitrust Cases

Recognition of rights of contribution and claim reduction

for defendants in antitrust price-fixing cases will neither add

substantive issues nor present manageability problems.

A. Contribution Will Not Add New Issues to Antitrust Price-

Fixing Cases

Plaintiffs in a price-fixing case must prove violation, impact,

and damages. Story Parchment Co. v. Paterson Parchment

Paper Co., 282 U.S. 555, 560 (1931). In order to recover

damages in a price-fixing case, plaintiffs prove sales by partici-

pants in the alleged illegal activity and the amount of damages

resulting therefrom. Because these issues determine the applica-

*¢ Major corporations have adopted antitrust compliance programs in

which employees are instructed in antitrust principles and directed to con-

form their conduct to the law. Employees who violate antitrust compliance

programs are subject to discipline. See generally J. Garrett, Antitrust Com-

pliance (1978); Panel Discussion: Varied Approaches to Antitrust Com-

pliance, 48 Antitrust L.J. 53 (1980). Furthermore, there are substantial

criminal sanctions under the antitrust laws which apply to both individuals

and corporations.

16

bility of contribution among defendants, an antitrust price-

fixing case will not be complicated by contribution.?’

Opponents of contribution argue that its availability should

turn on whether or not a defendant is an intentional violator,

and from this they argue that contribution would procedurally

complicate antitrust cases by injecting the issue of intent into

treble-damage cases. But a rule of contribution should be

available, irrespective of intent, according to the same standard

as is applied to determine liability to a plaintiff in the first

instance. Any effort to distinguish between intentional and

unintentional violators ignores the basic fairness requiring

‘contribution.** See Note, Contribution in Antitrust Treble

Damage Actions, 6 J. Corp. L. 141, 193-94 (1980).

B. Contribution Will Not Present Procedural Manageability

Problems

The assertion of cross-claims in multi-defendant cases offers

the advantage of consolidating the antitrust and contribution

claims in a single proceeding. Fed. R. Civ. P. 13 permits a

defendant to state a cross-claim “against a co-party arising out

of the transaction or occurrence that is the subject matter. . .

of the original action.” Indeed, this rule permits the single

adjudication of claims that at common law might otherwise

have resulted in separate actions. See Southern Construction

Co. v. Pickard, 371 U.S. 57, 60 (1962).

If contribution from a non-party is appropriate, Fed. R. Civ.

P. 14 provides the mechanism for asserting third-party claims.

In such instances the district court will have the discretion to

have one trial or to order separate trials under Fed. R. Civ. P.

42(b) if it perceives a risk that the antitrust action will become

too complicated.

27 Claim reduction would have the additional salutary effect of simplifying

antitrust cases because a plaintiff need only prove the liability of non-settling

defendants and does not have to prove damages attributable to settling

defendants.

78 See page 14 & note 25, supra.

17

In sum, the achievement of fairness in the allocation of

damages through recognition of rights of contribution and

claim reduction in antitrust cases presents no obstacles to the

administration of justice. In any event, speculative savings of

judicial resources do not warrant the injustices :o antitrust

defendants which otherwise occur.2°

CONCLUSION

For the foregoing reasons, Westvaco requests this Court to

reverse the decision of the Court of Appeals for the Fifth

Circuit and to remand to the district court with instructions to

permit the assertion of contribution and claim reduction.

Dated: December 16, 1980

Respectfully submitted,

LESLIE H. ARPS

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM

919 Third Avenue

New York, New York 10022

(212) 371-6000

Attorney for Amicus Curiae

Of Counsel: Westvaco Corporation

KENNETH A. PLEVAN

JOHN M. NANNES

SHEPARD GOLDFEIN

RICHARD M. SCHWARTZ

THOMAS R. LONG

RALPH R. FERNEY

9 As this Court noted in United States v. Reliable Transfer, supra,

“[p]otential problems of proof in some cases hardly require adherence to an

archaic and unfair rule in all cases.” 421 U.S. at 407.

APPENDIX

A-1

Appendix A

IN RE CORRUGATED CONTAINER

ANTITRUST LITIGATION, M.D.L. 310

Settlements in Class Actions through January 1979

Settling Defendants

(Listed by categories in approx.

order of Settlement)

FELONY INDICTEES

. International Paper

. Champion International

Hoerner Waldorf

. Weyerhaeuser

. Owens-Illinois

. Olinkraft

. Continental Group

N=

NUhw

MISDEMEANOR INDICTEES

Boise Cascade

. Container Corp. of America

. Inland Container

St. Joe Paper

Stone Container

AP wn =

UNINDICTED

St. Regis Paper

Union Camp

. Diamond International

. Dura-Containers

Chesapeake

Longview Fibre

. Willamette Industries/

Western Kraft East/

Corco

Menasha

. MacMillan Bloedel

MacMillan Bloedel

Containers

10. U.S. Corrugated-Fibre Box

11. Green Bay Packaging

MAY RW

© 9

Approximate

Dollar Amount

The % of per % point of

Defendants’ _—_defendant’s

Market market share

8.3 $1.00 million

5.36 $4.50 million

7.83 $5.00 million

5.45 $6.00 million

1.225 $6.00 million

4.22 $6.50 million

2.826 $3.50 million

8.56 $4.00 million

7.29 $4.75 million

2.625 $4.75 million

3.055 $4.75 million

3.97 $ .43 million

3.70 $2.00 million

.50 $2.00 million

375 $2.00 million

1.26 $2.40 million

2.58 $2.50 million

4.18 $2.70 million

1.67 $2.75 million

2.11 $4.00 million

.767 $4.00 million

1.7] $3.25 million

Amount Paid

In Settlement

$ 8,300,000

$24,120,000

$39, 150,000

$32,700,000

$ 7,350,000

$27,430,000

$ 9,891,000

$34,240,000

$34,627,500

$12,468,750

$14,511,250

$ 1,700,000

$ 7,400,000

$ 1,000,000

$ 750,000

$ 3,024,000

$ 6,450,000

$11,286,000

$ 4,592,250

$ 8,440,000

$ 3,069,120

$ 5,557,500