Petition — American Cyanamid Co. v. Melamine Chemicals, Inc.

Supreme Court brief1984

Ask Donna

What actually matters in this document.

Text

83-1085

No. 83- or ne Court, U.S.

-ED

IN THE JAN $ 1984

Supreme Court of the United Breteg oss

ERK

OCTOBER TERM, 1983

AMERICAN CYANAMID COMPANY,

Petitioner,

—against—

MELAMINE CHEMICALS, INC. ef al.,

Respondents,

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR CERTIORARI

SANFORD M. LITVACK

KENNETH E. NEWMAN*

PETER R. CHAFFETZ

JOHN P. DEAN

JOHN D. WORLAND, JR.

30 Rockefeller Plaza

New York, New York 10112

(212) 307-4100

DONALD F. TURNER

1666 K Street N.W.

Washington, D.C. 20006

Attorneys for Petitioner

American Cyanamid Compan,

* Counsel of Record.

QUESTIONS PRESENTED

Where the parties to an 18-year-old consent decree ask that the

decree be vacated because basic changes in industry conditions

have made it obsolete and anticompetitive, and the district court

so finds:

(a) Must the parties make any further showing in

order to obtain relief from the decree?

(b) More specifically, under those circumstances, must

the court adjudicate liability issues underlying the original

complaint in the case before deciding whether the motion

to vacate the decree should be granted?

PARTIES TO THE PROCEEDING

The petitioner herein is the American Cyanamid Company

_ (*Cyanamid”), the defendant in the original case, United States

v. American Cyanamid Company, 60 Civ. 3857 (S.D.N.Y.).*

Respondent Melamine Chemicals, Inc. (*MCI"), a company

jointly owned by Ashland Oil, Inc. and First Mississippi Corpora-

tion, was not a party to the original action or the 1964 consent

judgment, but was allowed to intervene in 1982 to oppose termina-

tion of the judgment. Another company, Dart Industries, Inc.

(“Dart”), was also permitted to intervene in the district court but

did not participate in the appeal. The United States of America

was the plaintiff in the case, and is made a respondent herein

pursuant to this Court’s Rule 19.6.

* Pursuant to this Court's Rule 28.1, the following are non-wholly-

owned subsidiaries or affiliates of Cyanamid:

Arizona Chemical Company; B. Braun-Dexon G.m.b.H.; Brew-

ster Phosphates (a partnership); Cyanamid Fothergill Limited;

Cyanamid Iberica, S.A.; Cyanamid India Limited; Cyanamid

Italia S.p.A.; Cyanamid-Ketjen Katalysator B.V.; Cyanamid

(Pakistan) Limited; CYRO Industries (a partnership); Cyana-

mid Portugal Limited; Cyanamid Taiwan Corporation;

Cyanamire S.p.A.,; Cyaneka S.A.; Decorative Boards (Pty)

Limited; Laminate Industries (Pty) Limited; Societe Anonyme

Formica; Formica Espanola S.A.,; Sonnies Plastics Pty. Limited;

Lederle (Japan) Ltd.; Lederle ( Nigeria) Limited: Mitsui-Cyan-

amid, Ltd.; Societe des Sutures Chirurgicales Robert & Car-

riere—Lederle; TDF Tiofine B.V.; YuBan-Cyanamid, Inc.

TABLE OF CONTENTS

1 | RR

PARTIES TO THE PROCEEDING ....0........cecccesecseseeees

TO MP ances snccsccrccesescszencscasososccsese

IIE iis cs denicsiecseniinscceenevtadasocsntasseesinnsccene®

inal iciianetincaascantadenentnsertectinnbocssencenseeee

CONSTITUTIONAL PROVISIONS INVOLVED ........

I GE OU A onsccncsccescccccccccccscseccesesccccers

REASONS WHY THE WRIT SHOULD BE

inn RSSTL dda ebestaieeabgndesenoyndunnsantencetesceccencopens

I. The Decision Below Affects All Consent Decrees And

Prejudices The Rights Of All Consent Decree Parties

A. The Decision Fundamentally Changes Prior Consent

B. The Ruling Of The Second Circuit Undercuts The

Advantages Of Consent Decree Settlements ..........

Il. The Parties’ Agreement To End The Decree Should

Limit, Not Expand, The Scope Of Judicial Inquiry ...

A. There Is No Genuine Case Or Controversy For The

I saicemanscnrvnbebasconese

B. The Judicial Role Envisioned By The Second Circuit

Conflicts With The Contractual Nature Of Consent

a csnutinieusbonennseess

C. In a Government Case, Failure To Accord Proper

Weight To The Parties’ Agreement Intrudes On The

Constitutional Authority Of The Executive Branch

ei caecicercdteonnensabaneinsesconssotesesaseccncees

TABLE OF AUTHORITIES

PAGE

Cases

Black v. Central Motor Lines, Inc., 500 F.2d 407 (4th

McURs WOMEN coxccssadhanbschustsadeved sabamtinucbucdteltdebeiahart as 15

Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723

RUINED SusevtancnSincscninepuiledenckseleny lena aera ee aac 15, 16

Brown Shoe Co. v. United States, 370 U.S. 294 (1962) 6

Buckeye Coal & Ry. v. Hocking Valley Ry., 269 U.S. 42

GREE sclibcrscccecnniniccstnnisiensentdesitenccatetdaiaeumdees 15, 16

Chrysler Corp. v. United States, 316 U.S. 556 (1942) 8

Citizens For A Better Environment v. Gorsuch, 718 F.2d

POT Wein: ts ROUEN sshscniprechstuctecsocisioenbunisbiaimnuiavasion 10

Confiscation Cases, 74 U.S. (7 Wall.) 454 (1868) ...... 19

Environmental Defense Fund v. Costle, 636 F.2d 1229

Sees Gals SOD ” incschcicesctdcensbtcavuctianenteniegnaaadtiin 8

Premed ©. Cm, FOR TIT: BE CIGD haciiccsccseeccscncntcnnes 16

Ford Motor Co. v. United States, 335 U.S. 303 (1948) 8

Fruehauf Corp. v. FTC, 603 F.2d 345 (2d Cir. 1979) 6

Fuller v. Volk, 351 F.2d 323 (3rd Cir. 1965) o..0..0.... 15

Horn v. Eltra Corp., 686 F.2d 439 (6th Cir. 1982) .... 15

Hughes v. United States, 342 U.S. 353 (1952) ............ 8, 16

Liverpool S.S. Co. v. Commissioners of Emigration, 113

RAN Gi WUE sractccasencesetaeesebtarckciecumbiaicaaemcos tal 14

Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) 19

Maryland v. United States, 103 S.Ct. 1240 (1983) ..... 19

McClune v. Shamah, 593 F.2d 482 (3rd Cir. 1979) ... 15

Nashville, Chattanooga & St. Louis Ry. v. United States,

SEa MAM Se CED | ciscaccstcntoconnsacnnntidaiceuiiccmsiinatcn 14

Non-Commissioned Officers Ass'n v. Army Times Pub-

lishing Co., 637 F.2d 372, mod. on other grounds, 650

oe ek fs) ee ee Cee 15

Philadelphia Welfare Rights Org. v. Shapp, 602 F.2d

1114 (3d Cir. 1979), cert. denied sub nom., Thorn-

burgh v. Philadelphia Welfare Rights Org., 444 US.

BE CI piace concsscbexaxscap Ain snaceneniasbeaktoniiacacinbiatnbaoane

Sam Fox Publishing Co. v. United States, 366 U.S. 683

E PUNIN D <ecnhanicaaara tain sa cciahin cute sabe kadacemaeesseuenmcodbiseneeaavoems

SEC v. Clifton, 700 F.2d 744 (D.C. Cir. 1983) ...........

Swift & Co. v. United States, 276 U.S. 311 (1928) ....

United States v. Agri-Mark, Inc., 512 F. Supp. 737 (D.

IPS IED cath hs cetbarsakcttgracladesibaiaekibassieaiontaniinonabetiotie

United States v. American Brands, Inc., 1983-1 Trade

i I CUCM, Os HONEY kccchintbaconnchensdestcanbessees

United States v. Armour & Co., 402 U.S. 673

Sg gh RRR ca lee ae RAE ce PY Rc OAD 8, 15

United States v. Associated Milk Producers, 394 F.

Supp. 29 (W.D. Mo. 1975), aff'd, 543 F.2d 113 (8th

Cir.), cert. denied sub nom., National Farmers Org. v.

United States, 429 U.S. 940 (1976) concccccccccccccccceeeees

United States vy. Atlantic Refining Co., 360 U.S. 19

SOUT © ac lostas ics dces ceilidh tncasditnddninaiatnssaduviebiicaiideciiidesaudelen

United States v. Bausch & Lomb Optical Co., 321 US.

PURE an IIT? cil stinaciedcsaccinindeiebhsacctapileumvebaiiiaa iaiedddeubdaucold

United States v. Bechtel Corp., 648 F.2d 660 (9th Cir.),

cert. denied, 454 U.S. 1083 (1981) ....cccccccccccceceeeees

United States v. Carrols Development Corp., 454 F.

I SUE EDWG: Oa UPOUED | kecscctsoesiccnssacseschncrroreeine

United States v. E.l. du Pont de Nemours & Co., 366

ee UN os cehimmsancnaicaibiomtasasens

United States ex. rel. Texas Portland Cement Co. v.

BE te GR RTC HUPRIED . coccccchanasadeisinkeereeiccesuene

United States v. General Electric Co., 1977-2 Trade Cas.

en cesbencueen

United States v. General Motors Corp., 1983-2 Trade

eR. ee Cie Te FO) cccssctnccesdensecancossirstorens

United States v. Gillette Co., 406 F. Supp. 713 (D. Mass.

NUTUTTEY cshsuansecseieiascisiisasdecbisinadadisbsicaitinsasebbenaciesdiiebaiainbsigaticeseadds

PAGE

United States v. Hartford-Empire Co., 573 F.2d 1 (6th

RED ciicdesassninutsancsiaacn anette eae 16

United States v. ITT Continental Baking Co., 420 US.

Be CUO ecssetacinncpcesccdansinmncchaie ae ti 8, 16, 17

United States v. National Broadcasting Co., 449 F. Supp.

BR2T CO OE FOTO: cele 11

United States v. National Lead Co., 332 US. 319

IUED « essdicdipectnienscehinnivagiesinniacac nate Te oe 18

United States v. Owens-Corning Fiberglass Corp.

1983-1 Trade Cas. § 65,247 (N.D. Ohio, 1982) ....... 11

United States v. Swift & Co., 286 U.S. 106

GD eentcinddnsttilocenists ascmcgci els eer 7, 8, 17, 18

United States v. Swift & Co., 1983-1 Trade Cas. © 65,250

SOR WEN OI ce eee 11

United States v. Swift & Co., 1975-1 Trade Cas.

wee GOR On BORON ee ot 11

United States Steel Corp. v. Fraternal Ass'n of Steel

Haulers, 601 F.2d 1269 (3d Cir. 1979). 8

Valley Forge Christian College v. Americans United. 454

Pe NE LOD ertaditinece soe ee 14

White v. Roughton, 689 F.2d 118 (7th Cir. 1982), cert.

denied, 103 S.Ct. 1524 (1983) ooocccccccccccccccccceseeeseseeees. 8

Constitution

Pr Os GN OD pecs ccscatnancnm een ee 2, 19

anes ON, ON OD i 2, 14, 15, 16

Statutes

Pe Ween OE US CUNUIND cctcdaicecssevsdeeanreaincan ieee: 3

1S U.S.C. $§ 16(b-h) (1982) onc cccceccccccccccseeseesoe 10

Sey ess OP OED saticgemmmicanscnnecaee 3

ae UR. BUSSE) CER so 2

Other Authorities

949 ANTITRUST & TRADE REG. REP. (BNA) (January

iy WUNIIIED cistebatnisssnmsctactpestacsnasacs Sean ee 9

4 TRADE REG. Rep. (CCH) $45,070 (1983) wo...

H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974) ....

S. Rep. No. 298, 93d Cong., Ist Sess. 6-7 (1973) .......

Axinn and Stoll, U.S. v. American Cyanamid—Consent

Decree Modification Standards, 190 N.Y.L.J. 93

rads lca eiecntaaenengaat

Hon. W. F. Baxter, Statement Before the Subcommittee

on Monopolies and Commercial Law, Committee on

the Judiciary, United States House of Representatives,

IE RUN discstbeccalicteitictinpsinnnstasneifudiadsdcsanbiaatinieseerise

Nelson, Court Complicates DOJ Modification of Anti-

trust Decree, Legal Times, October 31, 1983, 1,

SGT -an dca ncaahaes bascinaiisensitiinmusanireeseseipnicencvasiahereatacainedinnen

No. 83-

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

AMERICAN CYANAMID COMPANY,

Petitioner,

-against-

MELAMINE CHEMICALS, INC., et al.,

Respondents.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

> _

PETITION FOR CERTIORARI

Petitioner respectfully prays that a writ of certiorari issue to

review the judgment of the United States Court of Appeals for

the Second Circuit entered in this action on October 5, 1983.

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Second Circuit, Nos. 83-6041, 83-6053 (2d Cir. October 5, 1983),

is reported at 719 F.2d 558. The district court rendered two

decisions which are in issue, one granting intervention to MCI

and Dart, and one terminating the consent judgment. These are

reported at 556 F. Supp. 357 (S.D.N.Y. 1982), and 556 F. Supp.

361 (S.D.N.Y. 1983), respectively. The consent decree underly-

ing this matter was entered on August 4, 1964 and may be found

at 1964 Trade Cas. 171,166. All three opinions in the lower

courts, as well as the district court’s 1983 judgment, the com-

plaint, the 1964 decree and the Government’s principal submis-

sion to the district court on the motion for termination are printed

in the separately bound Appendix to this petition.

JURISDICTION

Cyanamid seeks review of the judgment of the United States

Court of Appeals for the Second Circuit entered on October 5,

1983. This petition for a writ of certiorari was filed within 90 days

of that date. The Court's jurisdiction is invoked pursuant to 28

U.S.C. §1254(1) (1982).

CONSTITUTIONAL PROVISIONS INVOLVED

The ruling below raises issues under Article III, Section 2, of

the Constitution, which limits the judicial power of the federal

courts to “cases” and “controversies,” and under Article II, Sec-

tions | and 3, which entrusts the faithful execution of the laws to

the Executive Branch of the Government.

STATEMENT OF THE CASE

On August 4, 1964, the United States and Cyanamid entered

into a consent decree settling a Government civil antitrust action

filed in 1960. Eighteen years later those parties jointly asked the

district court to terminate the decree. The district court found the

decree to be obsolete, anticompetitive and not in the public inter-

est, and it therefore granted the parties’ request. On an appeal

brought by a competitor of Cyanamid that had intervened in the

district court proceedings, the court of appeals reversed, holding

that it was error for the district court to terminate the decree

without first adjudicating whether Cyanamid’s 1956 acquisition

of Formica Corporation violates Section 7 of the Clayton Act, as

alleged in the Government's original suit.

The Original Monopolization Suit Against Cyanamid

In its 1960 civil complaint (A-87-99) the Government charged

that Cyanamid had obtained an illegal monopoly over the manu-

facture and sale of melamine’ in violation of Sections | and 2 of

the Sherman Act, 15 U.S.C. §§ 1-2, and Section 7 of the Clayton

Act, 18 U.S.C. § 18.

According to the complaint, Cyanamid was the sole seller of

melamine in the United States at the tiine. It not only accounted

for 100 percent of U.S. sales, but had 86 percent of all domestic

production and 50 percent of production worldwide (A-92). The

Government claimed that Cyanamid built and maintained its

monopoly through its control over what was then the only com-

mercially feasible melamine manufacturing process, one that

used dicyandiamide (“dicy”) as the raw material. (Cyanamid

owned both the entire North American supply of dicy and all

necessary patents for making melamine from dicy.) Cyanamid

was further accused of dividing world markets with members of

an international melamine cartel, thereby insulating the United

States market from all foreign competition. Finally, the com-

plaint alleged that.Cyanamid’s acquisition of the Formica Corpo-

ration, a major user of melamine, four years earlier violated

Section 7 of the Clayton Act (A-95).

The 1964 Consent Decree

In August, 1964, before trial, Cyanamid and the Government

settled the case by entry of the consent decree here in issue ( A-68-

86). Under that decree, Cyanamid agreed, among other things:

to divest its principal melamine factory; to limit the amount of its

own production of melamine; to,make dicy available to all inter-

ested purchasers; to license if cite technology; and to

purchase annually from outside sources, with a preference to

domestic companies, an amount of melamine equal to its previous

1. Melamine, a white crystalline powder, is used in the manufacture

of numerous products, including plastic laminates, dinnerware and

automotive parts.

year’s usage for the manufacture of laminates in the United

States (A-81).

Over the years, some of the decree provisions were fully com-

plied with and others expired. Of those provisions that remained

in effect as of 1982, all resistance to termination of the judgment

focused on the mandatory purchase requirement set forth in Part

XI of the decree.

The Government's And Cyanamid’s

1982 Request For Termination

On August 6, 1982, upon the completion of a fifteen-month

investigation by the Department of Justice, the parties to the

decree jointly asked the district court to terminate the remaining

provisions. In explaining its reasons for supporting the motion,

the Government told the district court that, “the circumstances

under which the markets for melamine and melamine-containing

products operate are completely different from those which

obtained in the pre-complaint period.”’ Specifically, the dicy

process, which was at the root of Cyanamid’s alleged monopoly

power, had become obsolete, thereby depriving Cyanamid of its

former technological advantage over competitors. Also over the

years, new competitors, including a number of highly efficient

foreign suppliers, had entered the domestic market. As a result,

by 1981 Cyanamid’s market share had fallen from the 100 per-

cent alleged in the complaint to a mere 11.7 percent. MCI

(successor to one of the post-1964 entrants) had become the

largest domestic seller with 49.2 percent of sales, while foreign

suppliers accounted for the remaining 38.1 percent of the mar-

ket. The Government concluded, based upon these and other

2. The provisions of the decree and their status as of 1982 are sum-

marized in the district court opinion at A-28-31.

3. Memorandum Of The United States In Response To Motion Of

American Cyanamid Company To Terminate The Final Judgment

Herein, filed August 6, #982 at A-59. That document is the official

statement by the Justice Department of its reasons for seeking to end the

melamine decree and is reprinted in full at A-55-67.

4. Market share figures presented in the various submissions to the

district court were summarized in the Response Of American Cyanamid

developments unanticipated in 1964, that the decree had become

anticompetitive under present market conditions and should be

terminated.

Three competitors, including MCI, opposed termination,

although they advanced inconsistent theories as to the likely

results of terminating the decree.’ Two of those companies

obtained leave to intervene, over the objection of Cyanamid and

the Government, while the third participated as amicus curiae.

The court received factual and legal submissions from the parties,

the intervenors and amicus ind all presented their arguments ata

hearing held October 27, 1982. In an opinion issued January 10,

1983, the court vacated the decree.

The Decision Of The District Court

In considering the motion, the district court’ recognized that

the Department of Justice has “broad discretion” in controlling

the course of its antitrust litigation, including consent decree

matters, and that, “[a]bsent abuse of discretion, the Govern-

ment’s conclusion that a decree should be vacated should be given

great weight” (A-39). Here, the court found, the Department

had carefully examined the relevant facts and the opponents’

contentions and had otherwise discharged its public interest

responsibilities fully and conscientiously (A-39).

Even so, the district court de lined to “rubber stamp” the

Department's recommendation and made its own assessment of

the likely effects of ending the decree (A-39). Based on the

record before it, the court agreed that “[s]ince the Consent

Company To Comments Opposing Termination Of The Final Judg-

ment, filed October 25, 1982 at 14.

5. As summarized in the opinion of the district court, MCI argued

that it was dependent on continuing subsidy from Cyanamid, and might

leave the market absent the decree. The other two opponents of termi-

nation, makers of melamine products, argued that termination of the

decree would give MC/ monopoly power. (See A-34-35).

6. The matter was decided by the Honorable Charles L. Brieant of

the Southern District of New York, the district judge who had adminis-

tered the decree for the previous ten years and personally presided over

—— prior proceedings concerning its meaning and application (A-

27-28).

Decree was entered, profound and complex changes have taken

place in the melamine production industry” (A-31-32). Further,

the court determined that the primary continuing effect of the

decree was simply to force Cyanamid to subsidize MCI (A-32-

34). Ending that subsidy, the court concluded, could be expected

to enhance competition by causing MCI to compete more vigor-

ously (A-39-40). Finally, the court found that aggressive compe-

tition from numerous importers assured ample supplies to all

melamine users (A-38, A-40). Thus the court found no competi-

tive justification for retaining the decree, holding:

Where, as here, the conditions which the decree was

designed to remedy no longer exist, the decree should be

terminated, especially where it operates against the com-

petitive designs of antitrust legislation.

(A-41, citations omitted).

The Decision Of The Second Circuit

In reversing the district court's decision, the court of appeals

did not address the basic finding that, as a factual matter, the

decree now “operates against the competitive designs” of the

antitrust laws. Instead, because the single provision fastened upon

by the intervenors related to the Clayton Act Section 7 claim in

the Government's 1960 complaint, the Second Circuit treated the

appeal as though it were from a litigated judgment on the merits

in a Section 7 action. It held that the trial court had erred in

vacating the consent decree without properly adjudicating

whether a “Section 7 violation presently exists,” based upon “the

factors for analyzing the legality of a vertical merger set forth by

Brown Shoe, Fruehauf,* and other applicable cases” (A-21).On

remand, the district court was directed to “determine the relevant

markets and the market shares of the acquiring and acquired

firms’ shares in those markets” (A-18), and to apply what the

Second Circuit called “the standard framework for analysis of the

legality of a vertical merger” (A-19).

7. Brown Shoe Co. v. United Siates, 370 U.S. 294 (1962).

8. Fruehauf Corp. v. FTC, 603 F.2d 345 (2d Cir. 1979).

In part, the court of appeals found the Section 7 standard to be

consistent with certain language in Part XI of the decree—a

proviso for ending the purchase requirement upon a showing by

Cyanamid that competition would not be injured.” In the main,

however, the Second Circuit went out of its way to make clear

that district courts should apply a substantive liability test when-

ever the parties agree that a decree should be terminated. The

court recognized that in refusing to permit the parties to vacate

the decree of their own accord, it was rejecting normal contract

principles for consent decree administration, but nonetheless held

that.

it is appropriate for the court to look beyond the words of

the decree itself in situations such as this, where the par-

ties jointly seek a modification of the decree.

A-15-16. In short, it was because the Government and Cyana-

mid were in agreement that the court thought it proper to insist

upon adjudication of the issues raised in the complaint as a pre-

condition to vacating the decree.

9. Tothe extent the court of appeals attempted to rest its decision on

that proviso, it rejected the understanding shared by both the parties

who drafted the decree and the district court charged with administer-

ing it as to what the language in question means. Part XI states in part:

at any time after ten (10) years from [ November 1964], Cyana-

mid may petition to this Court to be relieved from this provi-

sion, such relief to be granted upon a showing by Cyanamid

to the satisfaction of this Court that the effect of such relief will

not be substantially to lessen competition or tend to create a

monopoly .. ..

A-81. The parties explained that they had inserted this language only

to permit termination of the purchase requirement, on Cyanamid’s uni-

lateral application, upon a lesser showing than would otherwise be

required under United States v. Swift & Co., 286 U.S. 106 (1932).

They made clear, and the district court agreed, that they did not intend

this language to make it more difficult for the parties jointly to set aside

the entire decree. (See A-34).

REASONS WHY THE WRIT SHOULD BE GRANTED

Introduction

This petition presents an extremely important federal question.

The significance of the consent decree as a law enforcement tool

was recognized by this Court fifty years ago in its landmark

Swift’ decision. Since then, the Court has decided a number of

cases that provide the basic guidelines for the interpretation and

enforcement of consent decrees by the district courts. Virtually

all of the rules governing consent decree administration have

come directly from this Court. Many of the leading consent

decree decisions have been antitrust cases, but the principles

articulated in those cases have been applied to decrees in all

areas,’ as will the holding of the Second Circuit below, if allowed

to stand.

In Swift, the Court addressed the question whether, and by

what standard, a defendant may unilaterally seek relief from a

consent decree. Subsequently, the Court established rules to be

applied where the Government seeks to modify a decree without

the defendant's consent” and, in a series of decisions, for resolving

disputes between the parties as to the meaning or scope of a

consent decree.”

The question presented here—the standard to be applied in

perhaps the most common situation in the district courts, i.e.,

where the parties are in agreement that relief from the decree is

10. United States v. Swift & Co., 286 U.S. 106 (1932).

ll. See, e.g., SECv. Clifton, 700 F.2d 744 (D.C. Cir. 1983) (secur-

ities law); White v. Roughton, 689 F.2d 118 (7th Cir. 1982), cert

denied, 103 S.Ct. 1524 (1983) (civil rights law); Environmental

Defense Fund v. Costle, 636 F.2d 1229 (D.C. Cir. 1980) (environmen-

tal law); Philadelphia Welfare Rights Org. v. Shapp, 602 F.2d 1114

(3d Cir. 1979), cert. denied sub nom., Thornburgh v. Philadelphia

Welfare Rights Org., 444 U.S. 1026 (1980) (social security and welfare

law); United States Steel Corp. v. Fraternal Ass'n of Steel Haulers,

601 F.2d 1269 (3d Cir. 1979) (labor law).

12. Ford Motor Co. v. United States, 335 U.S. 303 (1948);

Chrysler Corp. v. United States, 316 U.S. $56 (1942).

13. United States v. ITT Continental Baking Co., 420 U.S. 223

(1975); United States v. Armour & Co., 402 U.S. 673 (1971): United

States v. Atlantic Refining Co., 360 U.S. 19 (1959); Hughes v. United

States, 342 U.S. 353 (1952).

need-d-— has not yet been addressed by this Court. The purported

solution offered by the Second Circuit, however, drastically

changes long-standing principles of consent decree administra-

tion in a way that cannot be reconciled with this Court's prior

decisions.

The Decision Below Affects All Consent Decrees And Prejudices

The Rights Of All Consent Decree Parties.

This Court needs no reminder that the consent decree has

become a widely-used law enforcement mechanism, not only in

the antitrust field, but in the law of taxation, land and natural

resource management, civil rights and securities regulation,

among others. Thousands of decrees are now on the dockets of the

federal courts, and, while statistics are not available for every law

enforcement agency, it is well known that nearly ninety percent of

all judgments obtained over the years by the Antitrust Division of

the Department of Justice were entered on consent. The same is

true for actions brought by the Securities and Exchange Commis-

sion.'* Any change in the way consent decrees are to be adminis-

tered will necessarily have far ranging effects.

A. The Decision Fundamentally Changes Prior Consent

Decree Practice.

Over the years, the federal courts have processed and granted

“literally hundreds” (A-63 n.1) of joint requests for modification

or termination of antitrust consent decrees. The Second Cir-

cuit’s ruling, directing the district courts to adjudicate liability

issues as in a litigated case, sharply conflicts with prior practice in

such matters, which recognized that the consensual nature of the

14. For securities cases see SEC v. Clifton, 700 F.2d 744, 748 (D.C.

Cir. 1983). For antitrust consent decrees see 949 ANTITRUST & TRADE

Rec. Rep. (BNA) Fl, F2, F8 (January 31, 1980). In the antitrust area

alone, it has been stated that there are approximately 1,300 Government

consent decrees currently in force. Statement of William F. Baxter,

Assistant Attorney General, Antitrust Division, Before the Subcommit-

tee on Monopolies and Commercial Law, Committee on the Judiciary,

United States House of Representatives, March 10, 1983 at 15.

proceedings made adjudication inappropriate. Just the day

before the Second Circuit's decision came down, another court of

appeals ruled that, because the district court's role in consent

decrees is “fundamentally different from its duty in trying a case

on the merits,” it would be improper to condition modification of

a decree on “detailed findings that the Act had been violated in

various ways.” Citizens For A Better Environment v. Gorsuch,

718 F.2d 1117, 1125 (D.C. Cir. 1983). That court stressed that,

“it is precisely the desire to avoid a protracted examination of the

parties legal rights which underlies consent decrees.” /d. at 1126.

No different approach has ever been proposed for consent

decrees in the antitrust area, and Congress specifically rejected

any such notion when it imposed procedures for approving new

decrees under the Antitrust Procedures and Penalties Act.'° The

legislative history of that Act makes clear that the courts are not

to engage in substantive proceedings that are inconsistent with

the nature and purpose of the consent decree as a settlement

device.” Cases under the APPA have limited the courts’ public

interest inquiry accordingly:

The balancing of competing social and political interests

affected by a proposed antitrust consent decree must be

left, in the first instance, to the discretion of the Attorney

General. . . . The court's role in protecting the public

interest is one of insuring that the government has not

breached its duty to the public in consenting to the decree.

The court is required to determine not whether a particu-

lar decree is the one that will best serve society, but

whether the settlement is “within the reaches of the public

interest.” ... More elaborate requirements might under-

mine the effectiveness of antitrust enforcement by consent

decree.

1S. 15 U.S.C. §§ 16(b-h) (1982) (hereinafter referred to as the

“APPA”™).

16. See H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974); S. Rep.

No. 298, 93d Cong., Ist Sess. 6-7 (1973).

United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir.),

cert. denied, 454 U.S. 1083 (1981) (citations omitted )."

Where, as here, consent decree parties have jointly sought

modification or termination of an existing decree, the courts have

previously taken an approach similar to the one followed under

the APPA and by the district court in this case: they have limited

their role to ascertaining that there was a rational basis for the

parties’ request, and, in Government cases, that the Department

of Justice had fulfilled its responsibility to represent the public in

good faith.”

Although the Second Circuit acknowledged that the APPA

“provides useful guidance to the courts in deciding how modifica-

tion procedures should be addressed” (A-16 n.7), it ignored both

the APPA public interest standard and cases applying a like

standard to joint requests for modification or termination. It

approached the question from an entirely different direction,

focusing exclusively on issues of substantive liability and creating

a greatly enlarged and totally unprecedented role for the courts.

Legal commentators have already begun to recognize the sig-

nificance of this departure:

The Second Circuit's reversal and remand to the lower

court to reconsider the decree termination in light of

17. Accord, e.g., United States v. Agri-Mark, Inc., §12 F. Supp. 737

(D. Vt. 1981) (court function “not to determine whether this is best

possible settlement” ); United States v. Carrols Dev. Corp., 454 F. Supp

1215 (N.D.N.Y. 1978) (not court's duty to obtain “best possible settle-

ment”); United States vy. National Broadcasting Co., 449 F. Supp. 1127

(C.D. Cal. 1978) (parties must show only “an acceptable result”);

United States v. Gillette Co., 406 F. Supp. 713 (D. Mass. 1975)

(“Court cannot provide the best of al! possible worlds”); United States

v. Associated Milk Producers, 394 F. Supp. 29 (W.D. Mo. 1975), aff'd.

534. F.2d 113 (8th Cir.), cert. denied sub. nom., National Farmers Org

v. United States, 429 U.S. 940 (1976) (court must “accommodate a

balancing of interests” )

18. See, eg. Umted States vy. American Brands, Inc., \983-| Trade

Cas. * 65,276 (S.D.N.Y. 1983); United States v. General Motors Corp.,

1983-2 Trade Cas. © 65,614 (N_D. IIL 1983): United States v. Owens-

Corning Fiberglass Corp., \983-| Trade Cas. © 65,247 (N.D. Ohio,

1982); United States v. Swift & Co., 1983-1 Trade Cas. © 65.250 (N.D

Il. 1980), United States v. General Electric Co.. 1977.2 Trade Cas

* 61,659 (E.D. Pa. 1977); United States v. Swift & Co. 1975-1 Trade

Crs. © 60.201 (N_D. TIL 1975)

existing legal precedent carries additional significance

because it establishes a strong judicial role in reviewing

petitions to terminate consent decrees. ... [T]he district

court saw its function as determining only whether [the]

public interest was served. The Second Circuit envisioned

a much greater judicial responsibility: consideration of

whether the decree’s purpose, derived from the language

of the decree, the complaint that precipitated the decree,

and the statute that gave rise to the complaint, had been

fulfilled. After American Cyanamid, this determination

must be made by the court independent of government

assertions and assurances. *

In the remaining portions of this petition we show that this new

approach is grossly unfair to consent decree defendants, totally

unsuitable as a basis for handling this or any other consent decree

question and flatly contrary to Supreme Court precedent.

B. The Ruling Of The Second Circuit Undercuts The

Advantages Of Consent Decree Settlements.

In insisting upon formal adjudication of liability issues, the

Second Circuit ruling eliminates one of the traditional advan-

tages of consent decree settlement: the flexibility, where the other

party agrees, to adjust or eliminate the terms of the settlement

agreement as conditions change. The importance of that

flexibility is established by the hundreds of decrees that have been

changed or terminated on consent over the years, including many

landmark antitrust decrees.” The melamine decree itself was

modified on three prior occasions, with Government consent, to

accommodate market and technological developments (A-27-

28). Reducing this flexibility, as the adjudicative standard

impose: by the Second Circuit obviously does, can only increase

the burdens on the Government and the courts in dealing with

19. Axinn and Stoll, lS. v. American Cyanamid —Counsent Decree

Modification Standards, \90 \.Y .L.J. 93 (1983) 1, col. 1, at 30, col. 3

(emphasis added). For another commentary predicting that the Second

Circuit's decision will have a “significant impact” on consent decree

modification standards, see Nelson, Court Complicates DOJ Modifica-

tion of Antitrust Decree, Legal Times, October 31, 1983, 1, col. 2

20. For a partial survey of the large number of modifications and

terminations of antitrust consent decrees, see 4 TRADE REG. REP

antiquated decrees, and discourage future defendants from enter-

ing into long-term settlement obligations.

That the approach of the Second Circuit also inflicts real injus-

tice on current consent decree defendants is well illustrated by

Cyanamid’s experience in this case. When Cyanamid, after oper-

ating for some years under a decree that had become obsolete and

punitive, decided to seek an end to its strictures, it followed nor-

mal procedures and took its case first to the Department of Justice

rather than moving for relief directly in court. The Department's

Antitrust Division investigated the matter for fifteen months,

during which it analyzed industry changes, canvassed the views of

many other firms, and made repeated requests for information

and documentation from Cyanamid before agreeing to support

termination of the decree.’

Despite this record, the court of appeals has now held that the

investigatory work and good faith recommendation of the

Department of Justice—not to mention the substantial efforts

already invested by the district judge—are irrelevant. It has

remanded for Cyanamid to litigate, in effect, a private Section 7

claim maintained by its largest competitor as the sole avenue of

release from the Government decree. It is hard to imagine a more

prejudicial or unexpected transformation of the settlement con-

tract than for the court to strip the Government of control of its

side of the bargain and allow a non-party competitor to become

the enforcer of the decree. Unless this Court intervenes, every

consent decree defendant faces the risk that someday its settle-

ment with the Government will be turned by unforeseen adversa-

ries into a weapon of private commercial advantage.

21. The Government's agreement was conditioned upon Cyana-

mid’s dedicating its remaining melamine-related patents to the public,

which Cyanamid has done. In addition, during the two-and-one-half

years since Cyanamid first approached the Government, C yanamid has

spent many millions of dollars complying with the decree by purchasing

vast quantities of unwanted and unneeded melamine from MCI. By the

time Judge Bricant rendered his decision, just the storage costs for that

excess inventory had reached $40.000 per month Affidavit of Robert

P. Kreahling. sworn to December 20, 1982, 10. 20 (See A-43)

The Parties’ Agreement To End The Decree Should Limit, Not

Expand, The Scope Of Judicial Inquiry.

This Court has previously observed that, “a decree, which

appears by the record to have been rendered by consent, is always

affirmed, without considering the merits of the cause.” It

therefore makes no sense at all to hold, as the Second Circuit has,

that when the parties seek to end a decree by consent, the court

should then proceed with a plenary adjudication of the merits of

the original complaint. We show here that. both the Constitution

and this Court's prior consent decree rulings preclude such a

result.

A. There Is No Genuine Case Or Controversy For The

Lower Court To Decide.

The ruling of the Second Circuit, that a consent decree cannot

be dissolved at the request of its signatories until the district court

determines whether a violation of law “presently exists,” directly

contravenes the Constitutional limitation on the judicial power to

adjudication of “the legal rights of litigants in actual controver-

sies.” Valley Forge Christian College v. Americans United, 454

U.S. 464, 471 (1982) (quoting Liverpool S.S. Co. v. Commis-

sioners of Emigration, 113 U.S. 33, 39 (1885)); U.S. Consr.,

art. III, § 2, cl. 1.

The parties to the melamine consent decree are not in dispute

with respect to, and do not wish to litigate, the issues raised by the

Government's 1960 complaint. They settled that case almost

twenty years ago, “without trial or adjudication of any issue of

fact or law herein, and without this Final Judgment constituting

evidence or an admission by either party hereto with respect to

any such issue .. .” (A-68). The sole matter that has been

presented to the courts is the parties’ request, also by agreement,

that the injunction to which they consented in 1964 come to an

22. a & Co. v. United States, 276 U.S. 311, 324 (1928) (quot-

g Nashville, Chattanooga & St. Louis Ry. v. United States, 113 U.S.

261, 266 (1885)) (emphasis added).

end. Thus, in directing the district court to rule upon antitrust

issues which are not in controversy between the parties, the court

of appeals has ordered a judicial inquisition that Is clearly beyond

the authority of Article IIIT courts

The willingness of intervenors to Oppose termination of the

decree does not remedy the case and controversy problem, for two

reasons. First, “it is axiomatic that “intervention will not be per-

mitted to breathe life into a ‘non-existent’ lawsuit.” McClune v.

Shamah. $93 F.2d 482, 486 (3rd Cir 1979) (quoting Fuller v.

Volk. 351 F.2d 323, 328 (3rd Cir. 1965)). Accord United States

ex. rel. Texas Portland Cement Co. ¥ McCord, 233 U.S. 157

(1914). Accordingly, a settlement between the original parties

has been held to terminate the action and bar subsequent inter-

vention. Horn v. Eltra Corp., 686 f 2d 439 (6th Cir. 1982) (no

intervention after settlement): Non-Commissioned Officers Ass'n

vy Army Times Publishing Co., 637 F.2d 372, mod. on other

grounds., 650 F.2d 83 (Sth Cir. 1981) (no intervention after

consent decree entered); Black v Central Motor Lines, Inc., 500

F.2d 407 (4th Cir. 1974) (consent judgment terminates the

action for intervention purposes ) Therefore, since the Clayton

Act issues raised by the Government's 1960 complaint were set-

tled in 1964, intervenors cannot now resurrect them.

A second reason why the claims of intervenors do not cure the

defect in the Second Circuit's remand order is the rule that stran-

gers to a consent decree lack standing to enforce it

[A] well-settled line of authority from this Court estab-

lishes that a consent decree is not enforceable directly

or in collateral proceedings by those who are not parties to

, -

Blue Chip Stamps vy. Manor Drug Stores, 421 U.S. 723, 750

(1975)." Here, the only issue ts whether the 1964 decree should

continue to be enforced, and the only voices urging continued

enforcement are those of non-parties to the settlement.

23. Citing United States v. Armour & Co., 402 US. 673 (1971),

and Buckeye Coal & Ry. ’ Hocking Valley Ry., 269 U.S. 42 (1925).

The Second Circuit held that this “rule against enforcement by

third parties does not apply” because MCI had been allowed to

intervene (A-15n.6). That, of course, simply begs the question.

The court cannot confer standing, where it otherwise would not

exist, simply by granting a motion to intervene. Article III

requires an active dispute between adversary parties who have the

requisite standing to sue. See generally Flast v. Cohen, 392 US.

83 (1968). Thus, the Second Circuit's remand order commands

the very type of proceeding which the rule referred to in the Blue

Chip Stamps case forbids: one in which persons not parties to a

decree are given a forum to perpetuate and enforce a public

consent decree to further their private, commercial interests.“

B. The Judicial Role Envisioned By The Second Circuit

Conflicts With The Contractual Nature Of Consent

Decrees.

Because the Second Circuit's approach gives no weight to the

agreement of the parties that their settlement should come to an

end, it directly conflicts with the longstanding rule that consent

decrees should be treated basically as contracts, “without refer-

ence” to the legal theories that prompted the complaint. United

States v. 1TT Continental Baking Co,, 420 U.S. 223, 237 (1975).

Accord United States v. Armour & Co., 402 U.S. 673 (1971);

United States vy. Atlantic Refining Co., 360 U.S. 19 (1959);

Hughes v. United States, 342 U.S. 353 (1952). The holding

below cannot be squared with what this Court has termed the

24. That result is also irreconcilable with the rule that private party

intervention is improper in Government antitrust cases. See, e.g., Sam

Fox Publishing Co. v. United States, 366 U.S. 683, 689 (1961); United

States v. Associated Milk Producers, 543 F.2d 113 (8th Cir.), cert.

denied sub nom., National Farmers’ Org. v. United States, 429 U.S. 940

(1976); United States v. Hartford-Empire Co., 573 F.2d 1 (6th Cir.

1978). The statutory scheme of the antitrust laws envisions that private

parties will pursue any claims they may have exclusively in private

litigation, Sam Fox Publishing Co. v. United States, supra, 366 US. at

689, and that “the United States... must alone speak for the public

interest” in public antitrust litigation. Buckeye Coal & Ry. v. Hocking

Valley Ry., supra, 269 U.S. at 49.

“basic import™ of those precedents, since it requires the district

court to maintain a decree which no longer has the parties’ con-

sent solely on the basis of its underlying “purpose,” as inferred

from legal theories in a twenty-four-year-old complaint that were

never proved applicable to the case at bar.

The Second Circuit acknowledged Armour’s holding that the

decree itself “cannot be said to have a purpose” (A-12, quoting

402 U.S. at 681), and is only the “embodiment of the intent of the

parties” (A-12), but sought to limit that rule to situations where

the parties are in dispute:

In each of those cases, a danger existed that the defendant

might be penalized for conduct not prohibited by the

decree... . Here, that danger is not present since the

government is not claiming that Cyanamid is engaging in

conduct in violation of the decree. Rather, the government

and Cyanamid are in agreement as to the termination of

the decree.

When the facts of a given case do not lend themselves to

easy resolution by viewing the decree as akin to a contract,

courts have turned to the quasi-judicial nature of consent

decrees and have resorted to equitable considerations.

A-13. Stated otherwise, the Second Circuit found this case not

susceptible to “easy resolution” on a contractual basis precisely

because the parties are in agreement. But that reasoning is trans-

parently fallacious, and the court's attempt to support its ruling

on the ground that a consent decree is “quasi-judicial” and in part

a “judicial act” does not withstand scrutiny.

The “judicial act™ theory, explicated by Justice Cardozo in the

Swift * opinion, only confirmed the power of the court to modify a

consent decree in the face of changed circumstances. Nothing in

Swift (or any subsequent decision) suggests that the court can or

should enforce a decree which both parties believe has outlived its

25. United States v. [TT Continental Baking Co., supra, 420 US.

at 236

26. United States v. Swift & Co., 286 U.S. 106 (1932).

usefulness. In fact, Swift itself squarely rejects the Second Cir-

cuit’s unspoken premise, that the parties’ consent, once given,

may not be withdrawn:

The consent is to be read as directed toward events as they

then were. It was not an abandonment of the right to exact

revision in the future, if revision should become necessary

in adaptation to events to be.

United States v. Swift & Co., supra, 286 U.S. at 115”.

If revision is possible even where one party objects, it should, if

anything, be more freely available when both parties agree.

Under the Second Circuit's analysis, however, when the parties

agree their wishes become entirely irrelevant, and the decree

becomes not “quasi-judicial” but exclusively judicial. This Court

should grant review to correct this misapplication of its prior

decisions.

C. Ina Government Case, Failure To Accord Proper

Weight To The Parties’ Agreement Intrudes On The

Constitutional Authority Of The Executive Branch.

Cyanamid does not purport to speak for the interests of the

Department of Justice. However, as explained above (pp.1 2-13),

Cyanamid relied upon that agency's authority in proceeding as it

did, and in dedicating its patents as a condition for release from

the decree. The failure of the Second Circuit to accord any weight

to the Government's recommendation—and it is plain from the

type of proceedings required on remand that it did not—is

another clear error which warrants this Court's attention.

27. The district court emphasized this principle, stating:

It is of course clear that an antitrust consent decree should only

endure so long as, and contain only such remedial measures

necessary to ensure competition. See United States v. Bausch

& Lomb Optical Co., 321 U.S. 707 (1944); United States v.

National Lead Co., 332 U.S. 319 (1947). An antitrust remedy

is designed to restore competition not to punish a defendant.

United States v. E.1. du Pont de Nemours & Co., 366 US. 316,

326 (1961)

A-41.

As stated in Marbury v. Madison, 5 U.S. (1 Cranch) 137, 170

(1803), it is not “the province of the court. . . to inquire how the

executive, or executive officers, perform duties in which they have

a discretion.” This Court has long reconized that the

prosecutorial discretion of the Executive Branch to control its

cases, and specifically to dismiss them, continues even after judg-

ment has been entered. The Confiscation Cases, 74 U.S. (7

Wall.) 454 (1868). These principles have always been applied to

antitrust consent decree matters, affording the Department of

Justice a degree of discretion that is completely at odds with the

Second Circuit approach.” By making the termination of a con-

sent decree turn on the application of substantive liability rules,

the decision below denies the Department (as well as the district

court) any discretion at all.

We submit that whether a consent judgment deserves contin-

ued enforcement by the Department of Justice is intrinsically a

question relating to the “execution of the laws”"—even more so

than the entry of a new decree, which three Justices of this Court

recently characterized as a matter “clearly for nonjudicial discre-

tion.” Maryland v. United States, 103 S.Ct. 1240, 1243 (1983)

(Rehnquist, J., joined by Burger, C.J. and White, J. dissenting

from summary affirmance of a new consent decree). See US.

Const., art. II]. Accordingly, the Department’s good faith

determination, that further enforcement of the decree is inappro-

priate, should have been respected.

28. E.g.. Sam Fox Publishing Co. v. United States, 366 U.S. 683,

689 (1961) (court should not question Government's judgment absent

“bad faith or malfeasance”); Swift & Co. v. United States, 276 US.

311, 332 (1928) (Attorney General's discretion over consent decrees

“includes the power to make erroneous decisions as well as correct

ones )

CONCLUSION

For the reasons stated herein, American Cyanamid Company

respecifully requests this Court to issue a writ of certiorari to

review the decision

Circuit.

* Counsel of record

of the Court of Appeals for the Second

Respectfully submitted,