Petitioners Reply Brief — American Cyanamid Co. v. Melamine Chemicals, Inc.

No. 83-1085

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FEB *4 \984

IN Tht ALEXAND&s L. STEVAS.

Supreme Court of the United States

OCTOBER TERM, 1983

>

AMERICAN CYANAMID COMPANY,

Petitioner,

against

MELAMINE CHEMICALS, INC. et al.

Respondents

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

REPLY BRIEF FOR PETITIONER

AMERICAN CYANAMID COMPANY

SANPORD M. LITV ACK

KinnttH BE. NewMan*®

Prtter R. CHateetz

JOHN P. DEAN

Joun D. Wort ann. 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 Company

* Counsel of Record.

—_$_{__————_—_——_—

TABLE OF CONTENTS

PAGI

BARLE OF AU THR ee goecsssseconulaae ii

REPLY TO RESPONDENTS’ ARGUMENTS ........... |

1. The Decision Below Cannot Reasonably Be Nar-

rowed As Respondents Urge ...............0cccccccsceceeees 2

A. The Second Circuit Explicitly Decided The

Case In Terms Of Broad Application ........... 3

B. The So-Called “Narrow” Holding That Courts

May Disregard The Parties’ Understanding Of

Their Own Consent Decree Is Itself A Ruling

Which Warrants This Court's Attention ....... 5

II. The Decision Below Is Not Interlocutory With Re-

spect To The Issues Presented On This Petition .. 7

III. As The Government Suggests, The Clear Error Of

The Decision Below Warrants Summary Reversal. 8

INFN | cssirscsnvenicovessovetbercamuanpenhenelstatateaaaeias 10

(ii)

TABLE OF AUTHORITIES

Cases

Abbott Laboratories vy. Gardner, 387 U.S. 136 (1967)

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980)

Central Trust Co. v. Creditors’ Committee, 454 U.S. 354

EEE iia a snuustasens\coassecetcosceecensenece

Cohen v. Beneficial Loan Corp., 337 U.S. 541 (1949)

Gillespie v. United States Steel Corp., 379 U.S. 148

Te RaLiialal dodacacekeseshalbbsoteaesssetacstetseescassesnpeoceres

Hughes v. United States, 342 U.S. 353 (1982) 0.0.0...

Marshall v. Occupational Safety & Health Review, 635

SC UE CE, POMP) cosstssescesencvsosesseusenosecssosstvosens

N.L.R.B. v. Brandman Iron Co., 368 U.S. 399 (1962)

N.L.R.B. v. Las Vegas Sand & Gravel Corp., 368 US.

CG ic osss Setcbenscasns guvvsesssonccsesseeeseseevnssbosbss

Shenandoah Valley Broadcasting, Inc. vy. ASCAP, 375

III CTL sls 1s csc ac senppboeénshesacsopkeaoxaseatouununns

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

United States vy. Atlantic Refining Co., 360 US. 19

(ART SIONS 2 EE Setachieeuseieietics

United States v. General Motors Corp., 323 U.S. 373

SIE TENS Aiaoaiishcasddaddubsetessecatstanvieasnesaosenousduhaccnancosenmiuces

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

PAGE

3.6

6,7

(iil)

PAG

Constitution

RE yy ae a | enone es ies pen Ue ae tm Eee 7

Statutes

Fe a acc RED CU DURAD: astécccccdscecctcvntnitisaebinnincansties 4

Other Authorities

Dabney, Antitrust Consent Decrees: How Protective An

Umbrella? 68 Yait LJ. 1391 (1989) wo. 6

Donovan and McAllister, Consent Decrees In The En-

forcement Of Federal Anti-Trust Laws, 46 Hvry. L.

BROS IS EIDE. codes ces chencedcudducacounceaessieumebecemumcouss 6

IN THE

Supreme Court of the United States

OCTOBER TERM, 1983

No. 83-1085

i >

AMERICAN Cy ANnanip CoMpany,

Petitioner.

against

Mit asine Cresic ars, INC. et al.

Respondents.

ON PETITION FOR \ WRIT OF CERTIORARI TO THE LNITED STATES

COURT OF \PPEALS FOR THE SECOND CIRCUIT

REPLY BRIEF FOR PETITIONER

AMERICAN CYANAMID COMPANY

Petitioner American Cyanamid Company (“Cyanamid”™) sub-

mits this reply brief in response to the briefs filed by Respondent

Melamine Chemicals, Inc. (“MCI”) and the Justice Department

in connection with Cyanamid’s petition for a writ of certiorari.’

REPLY TO RESPONDENTS’ ARGUMENTS

At the urging of a non-party competitor, which seeks to perpet-

uate a fortuitous subsidy under a twenty-year-old Government

antitrust consent decree, the Second Circuit reversed the judg-

ment of the district court terminating that decree. Th@ issue now

before this Court is whether the Second Circuit's decision to

reinstate the decree over the wishes of both parties to it, and in the

1. Cyanamid’s Rule 28.1 statement contained in its original petition

remains accurate

face of the district court's reasoned conclusion that changed cir-

cumstances have caused the decree to become harmful to compe-

tition, presents sufficiently well-detined and important legal issues

to warrant this Court's consideration.

In its petition, Cyanamid showed that the question raised—the

proper scope for judicial inquiry when the parties jointly seek to

modify or eliminate a consent decree—is an important and recur-

ring one. Cyanamid also showed that in answering that question

the Second Circuit held that the absence of conflict between the

parties obliges the court to adjudicate liability under the original

complaint, thereby creating by judicial fiat a new and Constitu-

tionally unauthorized quasi-adversarial proceeding.

In their papers opposing the petition, both respondents have

contended that the decision below turns on certain language pecu-

liar to this consent decree, and is therefore too narrow to justify

review by this Court. We show here that both the broad language

used by the court of appeals and the result it reached belie respon-

dents’ efforts to narrow its application to the facts of this case.

The Decision Below Cannot Reasonably Be Narrowed As

Respondents Urge.

The Government agrees with Cyanamid that the decision

below is clearly erroneous; it differs only as to the scope of the

precedent that has been set. It is perfectly understandable that

the Government would hope that this decision will not be found

generally applicable to joint motions to terminate or modify con-

sent decrees. It has presumably taken that position in other

district court proceedings subsequent to the Second Circuit opin-

ion ( Brief For the United States, hereinafter “U.S. Brief,” at 9, n.

9) and would of course wish to continue to do so if this petition

were denied. However, such considerations, understandable

though they may be, do not lead to a correct description of what

the court below has done in this case.

A. The Second Circuit Explicitly Decided The Case In

Terms Of Broad Application.

In arguing that the court of appeals’ decision rests only upon a

provision in the decree itself, respondents either ignore or seek to

brush aside that portion of the opinion (at pages A15-17) where

the court holds in unambiguous terms that although Supreme

Court consent decree decisions have “tended to apply principles of

contract law,” those precedents should not control where the

parties are in agreement (A12-13). It flatly stated:

[1]t is appropriate for the court to look beyond the words

of the decree itself in situations such as this, where the

parties jointly seek a modification of the decree.

(A15S-16).

Having thus decided that the standard of review applicable toa

modification motion may be found outside the language of the

decree, the court of appeals ruled that “the ceria used for

determining a Clayton Act violation are applicable here” (A17).

This conclusion followed, in the view of the Second Circuit,

because “the purpose of Part XI” was to address the Govern-

ment’s Clayton Act concerns (A17). In other words, the court

held that because the relief in Part XI related to an alleged

Section 7 violation, the mandatory annual purchases could not

later be terminated on consent of the parties until it is determined

whether any Section 7 violation exists. The district court's

assessment of the present-day competitive effect of that remedy

was held to be insufficient because it did not include a detailed

legal analysis as though the court had presided over the trial of a

Section 7 case (A17-21).

The court of appeals’ reasoning in this portion of its opinion is

indistinguishable from the “purposes of the decree” approach this

Court emphatically rejected in United States v. Armour & Co.,

402 U.S. 673 (1971). Thus, the Second Circuit has simply

resurrected an old mistake, which this Court should again set to

rest. The modification or termination on consent of an old

decree, even the entry of which is a discretionary act, should be no

occasion for the courts to create a new type of adjudicative

proceeding

MCTI's contention, that ¢ yanamid’s arguments would limit the

court's role to that of a “rubber stamp” or render the Antitrust

Procedures and Penalties Act (“APPA™), 1S U.S.C. §§ 16 (b-h)

(1982), unconstitutional (Brief In Opposition submitted by

MCI. hereinafter “MCI Brief,” at 5. n. &), is incorrect. Cyana-

mid maintains only that whatever the proper role for the court

may be in ruling on a joint motion to terminate or modify a

decree. it is plain error to impose an adjudicative standard that is

qualitatively different from and more demanding than that of the

APPA. As we have already pointed out, hundreds of decrees

have been modified or terminated under the approach followed by

the district court in this case (petition at 9-12). Although the

APPA does not apply here, both the Government and the district

court determined to treat this matter in accordance with the

standards and procedures required by that statute, which they

unquestionably fulfilled. No more should be required.’

> The nature of the remand proceedings mandated by the Second

Circuit illustrates the perversity of its ruling. Since both the Govern-

ment and Cyanamid agree that the decree is anticompetitive and should

be terminated, on remand MCI will presumably seck to assume the role

of prosecutor in support of the continuation of this decree, with the

Government and Cyanamid in opposition.

3 In fact, the Constitutional issues are more pointed in this context

than when the court is asked to enter a new consent decree (petition

at 19). In that situation, the Government ts invoking judicial processes

in aid of its enforcement decision. Consequently, a court may more

properly refuse to put its imprimatur on a proposed new decree that it

considers to be the product of impropriety oF inadequate consideration,

so long as it does not intrude on the prosecutorial discretion of the

Executive Branch. On the other hand. when the Government moves to

terminate a decree it no longer considers deserving of enforcement, a

court that refuses to terminate must either direct the Government to

continue to police compliance with the decree or itself assume the

prosecutorial function —in either case an affirmative invasion of the

Executive Branch’s role

B. The So-Called “Narrow” Holding That Courts May

Disregard The Parties’ ( aderstanding Of Their Own

Consent Decree Is Itself A Ruling Which Warrants This

Court's Attention.

Even if the court of appeals had, as respondents contend, rested

its decision entirely on an interpretation of Part XI of this decree.

its handling of that provision demonstrates the breadth of its

holding. not its narrowness.

As noted, only MCI attempts to justify the appellate court's

outright reyection of the interpretation of that provision urged by

the parties who drafted it and found by the district court to be

factually correct... Both Cyanamid and the Government have

repeatedly explained—to the district court, to the court of appeals

and to this Court-—that the drafters of the decree recognized the

difficulty of modification at the sole request of the defendant

under the standard set out in United States v. Swift & Co., 286

LS. 106 (1932), and therefore agreed upon a special standard to

apply in the event of Cyanamid’s unilateral application. How-

ever, at MCI's urging, the Second Circuit construed the termina-

tion language of Part XI as preclusive, making the so-called

4. MCT's tortured textual analysis of the decree is wrong at every

turn. First, the proviso in question simply does not say, as MCI baldly

insists, that relief from the purchase requirement may “only” be granted

if Cyanamid makes the specified showing (MCI Brief at 3). The actual

language requires termination upon a certain showing by Cyanamid.

but does not preclude relief on other bases, or speak at all to the standard

applicable when both parties seck to end the entire decree pursuant to

Part XV. No provision, other than Part XV (in which the court was

given continuing jurisdiction to modify or terminate) could conceivably

have been thought necessary for what the parties now seek

Furthermore, MCI's reference to other provisions of the decree, in

Part XU. is misleading and inaccurate. Those are not. as MCI asserts,

“modification” clauses at all (MCI Brief at 11). Unlike Part X1, those

sections have nothing to do with changing or ending the decree. but

merely provide a mechanism for Cyanamid to make certain otherwise

prohibited acquisitions without resort to the court. If the Government

gave its consent to a particular acquisition under Part XIII, the provi-

sion itself would remain in effect

8. The parties’ account of their intent in drafting Part XI as they did

is Not only consistent with the language they used, i is consistent also

with the advice of what was, in 1964, the leading commentary on con-

sent decree practice

6

\

Section 7 standard set forth therein the sole basis for terminating

the purchase requirement, even where both parties seek relief

from the entire decree.

The substitution of a new decree interpretation at the appellate

level is precisely what this Court forbade in United States v.

Atlantic Refining Co., 360 US. 19, 23-24 (1959), where it

Stated:

We ... hold that where the language of a consent decree in

its normal meaning supports an interpretation; where that

interpretation has been adhered to over many years by all

the parties, including those government officials who drew

up and administered the decree from the start; and where

the trial court concludes that this interpretation is in fact

the one the parties intended, we will not reject it simply

because another reading might seem more consistent with

the Government's reasons for entering into the agreement

in the first place. :

Thus, even as respondents would construe the Second Circuit's

ruling, it is directly in corflict with consent decree law as enunci-

ated by this Court.

Respondents try to minimize the importance of the decision by

focusing on the allegedly unusual nature of the provision at issue.

That is not the relevant inquiry, however, for the court of appeals”

de novo approach to decree interpretation was not limited to

modification provisions and therefore would apply equally to any

provision of any decree that might come before a district court.

To illustrate, under the Second Circuit's rationale, the district

court in United States v. Armour & Co., supra, would have been

free on its own motion or at the request of a third-party to expand

that decree’s prohibition on engaging in certain lines of business,

The reported cases indicate rather strongly that, absent

special language establishing more liberal standards than are

implicit in the usual retention-of-jurisdiction clause, neither

plaintiff nor defendant in an antitrust case can realistically

expect to achieve the unilateral modification of a consent decree.

Dabney, Antitrust Consent Decrees: How Protective An Umbrella’. 68

Yat LJ. 1391, 1396-97 (1959) (footnotes omitted, emphasis added ).

See also, Donovan and McAllister, Consent Decrees In The Enforce-

ment Of Federal Anti-Trust Laws, 46 Harv. L. Rev. 885 (1933).

even though it could not do so at the urging of the Government.

Similarly, by the reasoning of the decision below, the calculation

of dividends under the consent decree in United States v. Atlantic

Refining Co., supra, or the issue of whether a voting trust was

permissible under the decree in Hughes v. United States, 342

U.S. 353 (1952), would turn, not on the intent of the parties or

the language of the decree itself, but on a court's independent

views of how best to effectuate the law enforcement “purposes” of

the original litigation.

In short, even the purportedly narrow construction of the deci-

sion below urged by respondents blunts neither of the two justifi-

cations Cyanamid has already advanced for granting certiorari.

For a court to “construe” a decree provision as to which the

parties have no dispute both contravenes the Constitution's case

and controversy limitation on Article III jurisdiction and denies

the contractual essence of the decree. As already shown, it is also

improper on both of those scores to require the parties to litigate a

case they settled by consent years ago. These arguments have

met with no answer from the respondents, and clearly deserve this

Court's attention.”

The Decision Below Is Not Interlocutory With Respect To

The Issues Presented On This Petition.

Both respondents suggest that review may be premature

because the Second Circuit's decision is interlocutory and, “pro-

ceedings on remand may still result in termination of this decree”

(U.S. Brief at 10). The point is not well taken. The precedents

6. The suggestion that Cyanamid’s Constitutional arguments were

not raised below is curious indeed. While that contention, even if true,

would not be grounds for denying review of a Constitutionally defective

jurisdictional decision, Cumaal has in fact argued at every level that a

joint request to terminate a consent decree does not place the original

complaint in issue and that the Government's support jor the request is

entitled to great weight. See, e.g. Brief for Deftendant-Appellee and

Cross-Appellant American Cyanamid Company, as submitted on the

appeal to the Second Circuit, at 15-20, Argument I.

8

are clear that this Court will review an interlocutory decision on

an important issue of law that is fundamental to the further

conduct of the case. Catalano, Inc. v. Target Sales, Inc., 446

U.S. 643 (1980); Gillespie v. United States Steel Corp., 379 US.

148 (1964); United States v. General Motors Corp., 323 US.

373 (1945). The issue presented here is clearly important for

the reasons discussed at 8-19 of the petition, and it is hard to

imagine a decision more fundamental to the further conduct of

the case. The Second Circuit has directed the district court to

define the relevant markets and “to apply the factors in Brown

Shoe, Fruehauf, and other applicable cases” (A21). The sum-

mary of those factors in the court's opinion (A19) clearly indi-

cates the burdensome scope of the proceeding that has now been

ordered.

The Catalano case is squarely in point. There, this Court

reviewed and reversed summarily an interlocutory court of

appeals’ ruling that a horizontal agreement on credit terms was

subject to a “rule of reason” analysis rather than a rule of per se

illegality, even though the agreement might have been found

unlawful on remand after an exploration of allt the facts pertinent

to a rule of reason analysis.

The ruling below is final and ripe for review in every meaning-

ful sense. The issue of what standard should apply when both

parties urge termination of a consent decree is intrinsically a

threshold question that as now been decided and will not likely

be revisited on remand. See Cohenv. Beneficial Loan Corp., 337

U.S. 541 (1949). See also Abbott Laboratories v. Gardner, 387

U.S. 136 (1967); Marshall v. Occupational Safety & Health

Review, 635 F.2d 544 (6th Cir. 1980). Review by this Court can

bring this matter—already pending for so many years—to a

prompt close.

As The Government Suggests, The Clear Error Of The

Decision Below Warrants Summary Reversal.

Finally, the Government has suggested summary reversal

(U.S. Brief at 10, n. 10). Cyanamid concurs, because the deci-

sion of the Second Circuit—in requiring adjudicative proceed-

ings, in rejecting the parties’ interpretation of their own decree

provisions and in adopting a new interpretation that is contrary to

9.

the parties’ original intention—embodies clear legal error of the

type that has given rise to summary reversal in the past. See,

e.g.. Central Trust Co. v. Creditors’ Committee, 454 U.S. 354

(1982) (summary reversal granted where the Second Circuit

adopted an exception to the Bankruptcy Reform Act of 1978

which was a “wholly judicial creation”); V.L.R.B. v. Brandman

Iron Co., 368 U.S. 399 (1962) and N.L.R.B. v. Las Vegas Sand

& Gravel Corp., 368 U.S. 400 (1962) (summary reversal of

Sixth and First Circuit decisions which, sua sponte, re-worded

the terms of two separate consent decrees); Shenandoah Valley

Broadcasting, Inc. v. ASCAP, 375 U.S. 39 (1963) (summarily

reversing a Second Circut ruling, on a matter arising under the

ASCAP antitrust consent decree, because that ruling ignored a

prior decision of this Court on the same issue).

10

CONCLUSION

For the reasons stated herein and in the petition for a writ of

certiorari, Cyanamid respectfully urges that the Court either

grant the writ or reverse summarily.

Dated: February 23, 1984

New York, New York

Respectively submitted,

SANFORD M. Litvack

Kinnetu E. Newwant®

Pieter R. Chatters

Joun P. Dian

Joun D. Wort ann, Jr.

30 Rockefeller Plaza

New York. New York 10112

(212) 307-4100

Donatp F. TURNER

1666 K Street N.W.

Washington D.C. 20006

Attorneys for Petitioner

American Cyanamid Company

* Counsel of record.