Appendix — United States ex rel. Brensilber v. Bausch & Lomb Optical Co.

Supreme Court brief1943

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PAGE

Statement under Rule 13 ...................... 1-2

EN Sarda kane eh Oe kdeeis awcae tune tan 3-10

Order to show cause dated Jan. 2 ae 11-12

Affidavit of Whitney North Seymour .......... 13-16

Affidavit of M. Herbert Eisenhart ............ 17-31

Affidavit of Carl L. Bausch .................. 32

Affidavit of Theodore B. Drescher ............ 33

Affidavit of E. Herman Anthes .............. 34-36

Affidavit of Russel E. Craytor .............. 37-38

Notice of motion dated January ©, FOOD 2c ccnces 39-40

Affidavit of Karl A. Bauer .................. 41-45

Order to show cause, dated January 14, 1942 .. 46-48

Affidavit of Whitney North Seymour ........ 49-53

Notice of rejection, dated January 14,1942 .... 54

Affidavit of Jack Kemp Busby .............. 55-56

Order to show cause dated January 14, 1942 .... 57-59

Affidavit of Joshua D. Jones ................ 60-63

Answering affidavit of Emanuel Thebner ...... 64-76

Corroborating affidavit of Murray Brensilber .. 77

rere 78-85

Indictment of defendants (C 107—169) ...... 86-111

Bill of particulars (C 107—169) as to Bausch

EE aah ceeige VeewG bo aKeW en Saeubee turers 112-193

ee... ccduebdecnudededeustusdnecaactuecaeus

Bill of complaint in equity and exhibits attached

Cheveek .cccecsccvces

Consent decree in equity

eee eee eee ee eee eres ee

Replying affidavit of Whitney North Seymour ..

Order declaring amended complaint a nullity ....

Order and judgment of dismissa] dated January 24,

1942 and February 2, 1942 respectively

Notice of appeal .......

Stipulation as to record

Clerk’s certificate ......

eee eee eee eee eee eee ereeee

eee ee eee eee ee eeeeeeeee

Proceedings in U. 8. C. C. A., Second Circuit

Opinion, per curiam .

Judgment ...

Clerk’s certificate

Order allowing certiorari

—7027

(omitted in printing)

PAGE

249-253

254-258

259-262

——

United States Cirrnit Court of Appeals

FoR THE SECOND CIRCUIT

»s

UNITED STATES OF AMERICA on the relation of MURRAY BREN-

SILBER and EMANUEL THEBNER, and MURRAY BRENSILBER

and EMANUEL THEBNER, in their own behalf,

Plaintiffs-Appellants,

—against—

Bavuscu & Loms Optica, Company, CarL ZEISS, INc., M. id.

EISENHART, CARL L. BAUSCH and THEODORE B. DRESCHER,

Defendants-Respondents.

_ —

—

Statement Under Rule 13.

This action was commenced in the United States District

Court for the Southern District of New York by filing a

complaint on December 17, 1941. Copies of the summons

and complaint were served on Bausch & Lomb Optical Co.

and the individual defendants by the United States Marshal,

Western District of New York, at Rochester, N. Y.

The names of the parties are as herein above given.

There has been no change of parties in this action since

the commencement thereof.

The defendants were not arrested nor was any bail taken.

No property was attached.

No trial has been had in this action.

No question was referred to a commissioner, master or

referee.

Defendants moved before answering, in the District Court

for summary judgment in defendants’ favor, pursuant to

rule 56 and for an order under rule 12 of the Federal rules

of Civil procedure, on papers served on or about January

6, 1942 and January 14, 1942 respectively. All motions were

heard simultaneously by Hunorable Alfred ©, Coxe, Dis-

trict Judge on the 16th day of January 1942.

Statement Under Rule.

Order for judgment granting defendants’ summary judg-

ment and directing that judgment be entered for the defen-

4 dants, dismissing the complaint on the merits together with

the costs and disbursements of the action was entered in the

office of the Clerk of the District Court on January 24, 1942

and judgment dismissing the complaint of the plaintiffs

upon the merits with costs in favor of the defendants was

filed and entered in the office of the Clerk of the District

Court on February 2, 1942. A further order declaring

plaintiffs’ amended complaint a nullity was entered in the

Office of the Clerk of the District Court on the 24th day of

January 1942.

The appeal herein was taken on February 6, 1942 and a

5 supersedeas and cost bond was duly filed herein.

: a :

Original Complaint.

UNITED STATES DISTRICT COURT

SOUTHERN DIsTRIcT or NEw YoRK

, ™ 7

——

UNITED STATES OF AMERICA on the relation of MURRAY BREN-

SILBER and EMANUEL THEBNER, and MURRAY BRENSILBER

and EMANUEL THEBNER, in their own behalf,

Plaintiffs,

—against—

BauscH & LoMB OpTicaAL COMPANY, CARL ZEIss, INc., M. H.

EISENHART, CARL L. BAuscH and THEODORE B. DRESCHER,

Defendants.

—-> 8

Plaintiffs complaining of the defendants respectfully al-

lege as follows:

First: That the plaintiffs are and at all times herein

mentioned were, and each of them is, a citizen of the United

States of America and of the State of New York, and each

of them is a resident of the State of New York.

Second: The plaintiffs bring this action in behalf of the

United States of America and in their own behalf by virtue

of and pursuant to United States Revised Statutes Sections

3490-3494 (31 U. S. (, 231-235) under which said statutes

this action arises. The matter in controversy exceeds, ex- 9

clusive of interest and costs, the sum of $3000.00.

Third: Upon information and belief that the defendant,

Bausch & Lomb Optical Company is a New York Corpora-

tion and has maintained and now maintains an office and

place of business in the Borough of Manhattan, City of New

York within this Southern District of New York, and has

Original Complaint.

transacted business and now transacts business within sa

District.

Fourth: That upon information and belief, Carl Zei

Inc. is a New York Corporation and has maintained a1

now maintains its principal office in the Borough of Ma

hattan, City of New York within this Southern District

New York, and has transacted business and now transac

business within said District.

Fifth: Upon information and belief, M. H. Eisenha

Carl L. Bausch and Theodore B. Drescher, are and each

them is and was at the times herein mentioned, associat

with Bausch & Lomb Optical Company and Car] Zeiss In

and has held and at the present time hold the position of |

officer and director of each of said corporations and we

and are actively engaged in the management, direction a

control of the affairs and policies of said corporations.

Sixth: Upon information and belief that the said Baus

& Lomb Optical Company and Car! Zeiss Inc. are and we

at the times herein mentioned engaged in the business

manufacturing and selling of various instruments, amo

others, periscopes, range finders, altimeters, bore-sigh

bombsights, torpedo directors, sights for guns and ot]

scientific optical instruments (except binoculars) used

direct and control the firing of modern instruments of w

fare, hereinafter referred to as “military optical inst

ments”.

Seventh: That upon information and belief the Unit

States Government purchased such military optical inst

ments for use on battleships, cruisers and submarines, a

for use with aircraft and artillery.

—

1 said

Zeiss

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s Inc.,

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Original Complaint.

Eighth: The defendant, Bausch & Lomb Optical Com-

pany, from on or about April 28, 1921, and the defendant

Car] Zeiss Inc. from the date of its incorporation on or about

December 11, 1925, and the individual defendants since the

time they became officers and directors of said corporation to

on or about March 29, 1940, together with other persons to

the plaintiffs unknown, have been continuously engaged

during and throughout the periods of time aforesaid, in an

unlawful combination and conspiracy, not to sell directly

or indirectly military optical instruments for use in the

United States of America and the Government of the United

States of America by either of them without the consent of

the other and in the case of sales made by consent to the

United States Government, to fix, maintain and control ar-

bitrary, artificial and unreasonable prices and terms of sale

of such military optical instruments, and agreed between

them chat quotations of prices by either of them could be

made cniy with the consent of the other, and that if either

of them were requested to make or made bids for the sale

of military optical instruments to the United States Gov-

ernment, that such quotations and such bids would contain

a markup over the regular price up to 20% of said regular

price, and in case such bid were successful, the excess was

to be paid by the successful bidder to the other contracting

party.

Ninth: That upon information and belief to the end and

purpose aforesaid and to carry out and promote the unlaw-

ful combination and conspiracy by and between them, the

said corporate defendants entered into certain written agree-

ments on or about April 28, 1921, and supplemental and

modifications thereof on or about June 27, 1925, on or about

October 28, 1925, on or about November 26, 1926, and on or

14 |

15 |

Original Complaint.

about December 24, 1926, wherein and whereby the said cor-

porate defendants bound themselves not to sell such mili-

tary optical instruments directly or indirectly to the United

States Government unless the parties have come to an agree-

ment regarding the conditions of sale, and a royalty or

percentage of the gross sales price of each military optical

instrument sold to the United States Government by either

of them to be paid to the other, and agreed, among other

things, that neither of them would make or give quotations

or bids for sales of military optical instruments without the

consent of the other, and that the price quoted should be

agreed upon between them, and that on all such bids by

either of them to the United States Government, such bids

and quotations would contain a markup over the regular

price up to 20% over the regular price, which excess in

case such bid were successful, was to be paid by the suc-

cessful bidder to the other contracting party.

Tenth: That upon information and belief, between April

28, 1921 and March 29, 1940 the combination and conspiracy

hereinbefore alleged has been operated and carried out in

part within the Southern District of New York and said

corporate defendants have by their concerted action afore-

said, sold, shipped and delivered military optical instru-

ments to the Government of the United States at arbitrary,

artificial and unreasonable and noncompetitive prices agreed

upon by the defendants, and said defendants received pay-

ments from the United States Government for the sale and

delivery of such military optical instruments which they

divided between them in accordance with their said agree-

ments.

Eleventh: Upon information and belief that in pursu-

ance of said conspiracy, combination and agreements by

Original Complaint.

the defendants, they severally at various times between

May 1921 and March 1940, did submit to the Government

of the United States bids for contracts for the manufacture

and sale and the sale of military optical instruments and

other articles and materials to be used by the United States

Government in the War, Navy and other departments and

bureaus of the Government at prices that pretended to be

and were represented to be, and which the Government of

the United States and the officer and officers authorized to

accept such bids and enter into such contracts for manufac-

ture and sale, and the sale and delivery of such military

optical instruments, articles and materials for which bids

were submitted and contracts therefor and sales and de-

livery thereof made, believed to be the normal, prevailing

and competitive prices of such military optical instruments,

articles and materials, but which in fact were not the nor-

mal, prevailing and competitive prices therefor but were

about 20% in excess of the normal, prevailing and competi-

tive prices for such military optical instruments, articles

and materials, and the officer or officers authorized to accept

such bids and enter into such contracts of sale and make

such purchases on behalf of the Government of the United

States, the Treasury, War and Navy Departments, respec-

tively, without knowledge of the conspiracy, combination

and agreement aforesaid entered into by the defendants, ac-

cepted various bids submitted by the defendants severally

ut various times, the exact dates of which are presently un-

known to the plaintiffs, for manufacture and sale and the

sale of military optical instruments and other articles and

materials to the Government of the United States in the

War and Navy Departments thereof, and said officer or

officers on behalf of the Government of the United States,

its Treasury, War and Navy Departments, did make vari-

Original Complaint.

ous purchases from time to time, the exact dates of which

are unknown to the plaintiffs, of such instruments, articles

and materials to be supplied to the War and Navy Depart-

ments in large quantities and amounts, the exact prices,

amounts and particulars of which are presently unknown

to the plaintiff.

Twelfth: Upon information and belief that at various

times between May 1921 and March 1940, the defendants

severally and from time to time, the exact dates being at

present unknown to the plaintiffs, presented for payment

and approval to various officers of the Civil, Military and

Naval service of the United States, bids, claims, invoices,

bills, vouchers and statements and accounts against the

United States for purchases of military optical instruments

and other articles and materials upon the aforesaid bids,

contracts and sales in large sums of money, the exact amount

of which is at present unknown to the plaintiffs, the defen-

dants knowing that such bids, claims, invoices, bills, vouch-

ers, statements and accounts were excessive, false, ficti-

tious and fraudulent by reason aforesaid, and in that said

defendants added to the normal, prevailing and competitive

prices, an amount equal to about 20% arbitrarily pursuant

to the conspiracy, combination and agreement between the

defendants aforesaid, and said claims, bills, statements and

accounts were respectively paid and satisfied.

Thirteenth: That upon information and belief the in-

dividual defendants and each of them participated in and

aided and abetted in the matters and things herein alleged.

Fourteenth: Upon information and belief, 20% of the

amount of such bids, claims, invoices, bills, statements and

accounts which contained the 20% added to the regular

price that were presented by the defendants and which

Original Complaint.

they caused to be presented for payment and approval and

obtained payment thereof from the Government of the

United States, the Treasury, Navy and War Departments,

respectively in the year 1938 amounted in the aggregate, and

was equal to about the sum of $8,000,000. in which said

sums the defendants are indebted to the United States Gov-

ernment, and various sums of money in other years, the

exact amount of which is at present unknown to the plain-

tiffs, which said sums the defendants are indebted to the

United States Government.

Fifteenth: Upon information and belief that prior to

March 1940 and at the time of the commission of the acts

and conduct complained of in paragraphs “Eleventh” and

“Twelfth” hereof, the corporate defendants manufactured,

distributed and sold the greater part of all the military

optical instruments manufactured and sold in the United

States of America and in foreign countries.

Sixteenth: That upon information and belief the agree-

ments, acts and conduct of the defendants constituted a

fraud upon the United States of America and were and are

against the Public Volicy, and were a violation of the Re-

vised Statutes of the United States, §§3490-3494 (U.S.C.

231-235).

Seventeenth: That upon information and belief the afore-

said agreements by and between the defendants herein, and

the aforesaid acts and conduct constituted also an unlawful

combination and conspiracy in violation of the Statutes

of the United States and more particularly the Act of Con-

gress of July 2, 1890 entitled “An Act to Protect Trade and

Commerce Against Unlawful Restraints and Monopolies”

(U.S.C. Title 15, See. 1) and the Amendments thereof.

Original Complaint.

Eighteenth: Upon information and belief the defendants

are not and were not at the times herein mentioned, nor

any of them, in the military or naval service of the United

States or in the Militia called into or actually employed in

the service of the United States.

Nineteenth: By reason of the premises, and the acts

and conduct of the defendants and the Statutes of the

United States in such case made and provided, the defen-

dants are indebted to the Government of the United States

in the sum of about $20,000,000. in which amount the Gov-

ernment of the United States sustained damages and the

defendants shall forfeit and pay to the United States the

sum of $2,000. for each of said transactions and in addition

29 double the amount of damages sustained by the Government

of the United States, and of which amount of damages and

forfeitures the plaintiffs herein are entitled to receive one-

half of such forfeitures and amount of damages which they

shall recover and collect, and all costs the Court may award

against the said defendants.

WHEREFORE plaintiffs demand judgment against the de-

fendants for the sum of double the amount of said damages

aforesaid, to wit, $40,000,000., and in addition thereto the

amount of forfeitures and penalties as ascertained and de-

termined by this Court, which shall be at least in the sum

of $2,000. together with the interest on said sums and the

30 costs of this action.

EMANUEL THEBNER,

Attorney for Plaintiffs,

Office & P. O. Address,

111 John Street,

Borough of Manhattan,

City of New York.

Order to Show Cause Dated January 6, 1942.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

ip,

UNITED STATES OF AMERICA on the relation of MURRAY

BRENSILBER and EMANUEL THEBNER, in their own behalf,

Plaintiffs,

—against—

Bavuscu & LOMB OPTICAL COMPANY, CARL ZEIss INC., M. H.

EISENHART, CARL L. BAUSCH and THEODORE B. DRESCHER,

Defendants.

»™

On the summons and complaint and upon the Marshal’s

returns herein, all filed in this Court, and upon the annexed

affidavits of Whitney North Seymour, M. Herbert Eisenhart,

Carl L. Bausch, Theodore B. Drescher, E. Herman Anthes

and Russell E. Craytor, sworn to this 5th day of January,

1942, let the plaintiffs herein and each of them show cause

before this Court, at a stated term for the hearing of motions

to be held in Room 506 of the United States Court House,

Foley Square, in the Borough of Manhattan, City, County

and State of New York, on the 16th day of January, 1942,

at 10:30 o'clock in the forenoon of that day, or as soon

thereafter as counsel can be heard, why an order should not

be entered herein,

(a) Dismissing this action and the complaint herein

as against the defendants Bausch & Lomb Optical (om-

pany, M. H. Eisenhart, Carl L. Bausch and Theodore

B. Drescher, on the ground that the venue of this action

as to the said defendants has been improperly laid in

the Southern District of New York;

Order to Show Cause Dated January 6, 1942.

(b) Dismissing this action and the complaint herein

as against the said defendants, on the ground that the

complaint fails to state a claim against these defendants

upon which relief can be granted ;

on the ground that the complaint and affidavits herein

show that there is no genuine issue as to any material

fact herein and that these defendants are entitled to

judgment against the plaintiffs as a matter of law;

and for such other and further relief as to this Court may

seem just and proper, together with the costs of this motion.

Sufficient cause appearing therefor, it is

ORDERED that the time of the defendants Bausch & Lomb

Optical Company, M. H. Eisenhart, Carl L. Bausch and

Theodore B. Drescher to answer the complaint herein be

and the same hereby is extended to and including ten (10)

days after entry of an order disposing of this motion; and

it is

FURTHER ORDERED that service of a copy of this order and

the affidavits annexed, at the office of Emanuel Thebner,

attorney for plaintiffs, 111 John Street, Borough of Man-

hattan, City, County and State of New York, on or before

six o’clock P. M. on January 7th, 1942, be deemed sufficient

service hereof.

Dated, New York, N. Y., January 6th, 1942.

ALFRED C. COXE,

United States District Judge.

AFFIDAVIT OF WHITNEY NORTH SEYMOUR AN-

NEXED TO ORDER TO SHOW CAUSE DATED

JANUARY 6, 1942,

UNITED STATES DISTRICT COURT 37

SOUTHERN DIstrict or New YorkK

(sap TITLE]

<i»

STATE OF NEW YORK,

CouNTY OF NEW YORK, 88. :

WHITNEY Nortu SEYMOUR, being duly sworn, deposes and

says: 38

I am an attorney and counsellor at law and a member

of the firm of Simpson Thacher & Bartlett, attorneys for

the defendants Bausch & Lomb Optical Company, M. H.

Eisenhart, Carl L. Bausch and Theodore B. Drescher in

this action, on whose behalf the annexed motion is made.

This affidavit is submitted by me on behalf of the said

defendants in support of an application for an order to

show cause why an order should not be made dismissing the

complaint herein on the grounds: (1) that the venue of this

action has been improperly laid in the Southern District

of New York, (2) for failure to state a claim against these

defendants upon which relief can be granted, and (3) for

summary judgment on the ground that the complaint and

affidavits herein show that there is no genuine issue as to

any material fact herein and that defendants are entitled

to judgment against plaintiffs as a matter of law. The

grounds for this motion are more fully set forth in the

annexed affidavits of M. Herbert Eisenhart, Carl L. Bausch,

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 6, 1942.

Theodore B. Drescher, E. Herman Anthes and Russell E.

Craytor. The reasons why it is desirable and necessary that

this motion be brought on by order to show cause rather

than the usual notice of motion, are as follows:

Rule 12 of the Federal Rules of Civil Procedure provides

in effect that the service of any motion provided for in Rule

12 automatically extends the time for answering the com-

plaint until ten days after disposition of the motion. The

same Rule provides for motions to dismiss the complaint

because of improper venue and for failure to state a claim

upon which relief can be granted. It is not clear that affi-

davits may be considered on a motion to dismiss on the

latter ground in this District. These moving defendants

believed that the Court should be provided upon this motion

with certain additional facts demonstrating the absence of

merit in this action, and it was, therefore, deemed advisable

to move as well for summary judgment under Rule 56b.

Although it is clear under that Rule that the motion for

summary judgment can be made before answering, the Rule

does not provide for an extension of time to answer upon the

making of the motion, nor is it entirely clear that by joining

the motion for summary judgment with the motion to

dismiss the complaint these defendants secure for all pur-

poses the benefit of the automatic extension provisions of

Rule 12, since Rule 12g refers only to consolidation of

motions made under that Rule. Therefore, this application

for an order to show cause is made out of an abundance of

caution as an application under Rule 6 to extend the time

of these defendants for answering the complaint herein,

and, for the reasons set forth below, to permit service of

these motion papers in less than the ten days required by

Rule 56c, if necessary.

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 6, 1942.

These defendants were served in Rochester, N. Y., with

the summons and complaint herein by a Deputy United

States Marshal for the Western District of New York, on

December 26, 1941. Their time for answering would expire

on January 15, 1942 unless otherwise extended. With the

holiday period and the time spent in preparing these papers,

it has been impossible to make this motion returnable until

January 16, 1942, since Rule 56 requires ten days’ notice

of the motion for summary judgment. Under Rule 56c the

plaintiffs herein should be served with the order to show

cause and affidavits herein on January 6, 1942, if possible.

It would have been difficult, if not impossible, for these

defendants to have moved more promptly. It is respectfully

requested that, in the event that this order to show cause

is not signed in time for service thereof and of the papers

upon which it was granted on the aforesaid January 6, 1942,

this Court specify such subsequent date for the service of

the same as it considers adequate and proper, and to that

extent shorten the time necessary for the motion under

Rule 56.

This motion is made in good faith and not for purposes

of delay. I verily believe from my investigation of the facts

and circumstances of this action that there are good and

sufficient defenses thereto, and have so informed these de-

fendants. On behalf of my firm, I represented these defen-

dants in the anti-trust litigation with the Government,

referred to in the annexed affidavit of M. Herbert Eisenhart,

and I am familiar with many of the facts set forth in said

affidavit. My information leads me to believe that the Court

will find this action not maintainable as a matter of law

and without merit as a matter of fact.

No previous application for similar relief has been made.

eee ee Y

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 6, 1942.

WHEREFORE, it is respectfully requested that an order to

show cause, in the form annexed hereto, be signed bringing

this motion on for hearing on January 16, 1942, extending

the time of these moving defendants to answer the complaint

herein until ten days after the entry of an order upon said

motion, and, in the event that service of the said order to

show cause and the papers upon which it was granted cannot

be made on January 6, 1942, as required by Rule 56c of the

Federal Rules of Civil Procedure, providing that the same

be served at such subsequent time and place as to the

Court may seem just and proper; and that the motion herein

be granted.

(Sworn to by Whitney North Seymour, January 5th, 1942.)

~~"

—

AFFIDAVIT OF M. HERBERT EISENHART ANNEXED

TO ORDER TO SHOW CAUSE DATED JANUARY

6, 1942.

UNITED STATES DISTRICT COURT 49

SOUTHERN DISTRICT OF NEW YORK

—

[SAMB TITLB]

STATE OF NEW YORK,

COUNTY OF MONROE, 88. :

M. Hersert EIspNHART, being duly sworn, deposes and

says: 50

I am the President and General Manager and a director

of the defendant Bausch & Lomb Optical Company (herein-

after sometimes called “Bausch & Lomb” for brevity) and

also an individual defendant in this action. This affidavit

is submitted in support of a motion made on behalf of said

defendant Bausch & Lomb and the individual defendants to

dismiss the complaint herein and for summary judgment

in favor of said defendants upon the various grounds set

forth in the order to show cause by which this motion is

made returnable. The motion is brought on by order to

show cause because I am advised by counsel and believe that

it is desirable that an extension of time to answer the com-

plaint be obtained during the consideration of this motion

by the Court and until ten days after the decision hereon.

The reasons for proceeding by order to show cause are more

fully stated in the affidavit of Whitney North Seymour,

Esq., of counsel for these defendants, which is annexed

hereto.

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

The grounds of this motion may be summarized as follows:

52 I. The venue of this action has been improperly laid

in the Southern District of New York and this action

may not properly be maintained against these moving

defendants in this District.

II. The complaint fails to state a claim against these

defendants upon which relief can be granted.

III. No cause of action in fact exists against these

defendants under United States Revised Statutes, Sec-

tions 3490-3494 (31 U. S. C. A. §$231-235) under which

58 this action purports to be brought.

For convenience this affidavit will proceed with reference

to these grounds of the motion.

Bausch & Lomb Optical Company and the individual de-

fendants M. Herbert Eisenhart, Carl L. Bausch and Theodore

B. Drescher are not and have not been found within the

jurisdictional limits of this Court nor is any of them a

resident or inhabitant of the Southern District of New York.

Bausch & Lomb Optical Company owns and operates a large

54 manufacturing plant at Rochester, New York, in which mili-

tary optical instruments, ophthalmic goods, scientific instru-

ments and other products are manufactured. The executive

office of the Company is at Rochester, New York. While

the Company maintains a small office in the City of New

York for limited purposes, it is believed that the facts here-

inafter set forth and those set forth in the annexed affidavits

of E. Herman Anthes and Russell E. Craytor show that

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

the maintenance of this office is not sufficient to lay the

venue of this action in this District.

I am a resident and inhabitant of the City of Rochester,

New York, residing at No. 1316 East Avenue, in that City.

The defendant Carl L. Bausch is a resident and inhabitant

of the City of Rochester, New York, residing on Parsons

Lane, in that City. The defendant Theodore B. Drescher is

a resident and inhabitant of the City of Rochester, New

York, residing at No. 99 Pelham Road, in that City. The

City of Rochester is within the jurisdictional limits of the

United States District Court for the Western District of

New York and is not within the jurisdictional limits of the

United States District Court for the Southern District of

New York. Service of process in this action was made on

these moving defendants in Rochester, New York, on Decem-

ber 26, 1941, by a Deputy Marshal of the United States

District Court for the Western District of New York. Refer-

ence is made to the Marshal’s return upon said service of

process in the files of this Court with the same force and

effect as if set forth in full herein.

The small office maintained by Bausch & Lomb at 30

Rockefeller Plaza, in the Borough of Manhattan, City of

New York, is primarily used for the purpose of displaying

scientific and ophthalmic instruments manufactured by it

at Rochester, New York. All substantial orders for such

products are transmitted to the executive office of the Com-

pany at Rochester for approval and acceptance. No officer

or director of Bausch & Lomb is connected with that office

nor are any of the ordinary corporate activities of the Com-

pany carried on there. These individual moving defendants

perform no official functions in that office. The employees

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

of the Company who make that office their headquarters

are under the supervision of the heads of their respective

departments at Rochester, with the exception of the small

clerical staff which is under the control of Mr. Anthes.

This office has no connection whatever with the portion

of the Bausch & Lomb business involved in this action—the

manufacture and sale of military optical instruments. In

sum, the office is used chiefly to perform promotional func-

tions for certain departments of the Bausch & Lomb busi-

ness ; final and important decisions are all made at Rochester.

It is submitted that this fragment of the Company’s opera-

tion does not permit the conclusion that the Company is

found in this District.

So far as is known, no attempt was made by the Marshal

of this Court to effect service on the defendant Bausch &

Lomb Optical Company by serving Mr. Anthes or anyone

else employed in the said office of Bausch & Lomb in the

City of New York.

This objection to the maintenance of this suit against these

defendants in this Court is not a mere technical objection

designed to delay or impede justice. For reasons stated

later, this action is wholly without merit, and justice requires

its final dismissal. But, in any event, it is essential that

this action should not proceed in this Court if the venue is

improperly laid here because personal participation in these

proceedings in New York and further absence from their

official duties in Rochester would seriously impede the

services which these defendants are rendering to national

defense. Prior to the outbreak of the European war in 1939,

Bausch & Lomb was actively engaged in the manufacture of

military optical instruments for the United States Army

and Navy. Thereafter the demands by the United States

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

Government on Bausch & Lomb for military optical equip-

ment became steadily more heavy. Those demands are still

increasing. Bausch & Lomb, its executives and employees

have done and are doing everything in their power to meet

the needs of the armed forces. As President of the Company

my time and energies are spent largely in discharging the

executive responsibilities in connection with the production

of these products for national defense. The defendants Carl

L. Bausch and Theodore B. Drescher, who are also officers

of the Company, are directly charged with responsibility for

various phases of production of instruments for national

defense. Their whole time is required at Rochester for this

purpose. Employees of Bausch & Lomb Optical Company

familiar with the past history of transactions in military

optical instruments are all located in Rochester, and are

spending their full time there on the production of military

optical instruments for the United States Government. Any

interference with this work must be avoided. Proper regard

for the requirements of military secrecy seem to me to

prevent detailed presentation of the precise nature and im-

portance of the work now being done by these defendants.

However, I earnestly submit that time spent by them during

the current emergency in preparing this case for trial,

answering interrogatories or in appearing as witnesses would

interfere seriously with matters of great importance to the

defense program. While any proceedings requiring atten-

tion of those concerned with production for defense would

interfere with matters of importance to defense, proceedings

requiring attendance at a distance from their place of busi-

ness would be particularly disruptive. Accordingly even if

there were not other grounds for dismissal, the action should

—

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

be dismissed for improper venue against all these moving

defendants.

The joinder of Car] Zeiss, Inc., a New York corporation

with its principal place of business within this District,

cannot aid plaintiffs in attempting to lay the venue in this

District. As will appear later, the agreements upon which

plaintiffs purport to rely, copies of which are part of the

records of this Court, show on their face that they were

made not with Car] Zeiss, Inc. but with Carl Zeiss of Jena,

Germany, not named as a defendant in this action and not

within the jurisdiction.

65 Il.

I have been advised by counsel and believe that on its

face this complaint states no cause of action against these

defendants and dismissal is sought on this ground. No

useful purpose would be served by presenting any part of

the legal argument here. I am advised by counsel and

believe that the Statute under which this action purports to

be brought was not aimed at nor does it cover even trans-

actions of the character falsely and erroneously alleged in

the complaint.

III.

66 The Court should dismiss this complaint and grant sum-

mary judgment in favor of these moving defendants under

Rules 12 and 56 of the Federal Rules of Civil Procedure

because no cause of action under the Statute invoked by

plaintiffs exists in fact against these moving defendants.

The complaint is made up largely of false and erroneous

conclusions of law and of fact, many of them in direct con-

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

tradiction of facts which this Court may notice in the files

of the Court. There is no genuine issue as to any material

fact herein and the moving defendants are entitled to judg-

ment as a matter of law.

On March 26, 1940, the Anti-Trust Division of the Depart-

ment of Justice procured the return of an indictment (C-

107—169) in this Court against these moving defendants

for alleged violations of the Sherman Anti-Trust Act and

the Wilson Tariff Act, and covering the same subject matter

as is now covered by the complaint in this action. Refer-

ence is made to the original indictment in the files of this

Court for its scope and nature with the same force and effect

as if fully set forth herein, but these defendants do not

concede the correctness of all of the charges made in that

indictment. The defendants originally pleaded not guilty to

this indictment. On May 27, 1940, these defendants applied

through counsel to Judge Goddard in open Court for leave

to change their pleas of not guilty to pleas of nolo contendere.

The Court was urged to permit this change of plea and to

accept pleas of nolo contendere by counsel for these defen-

dants and also by Hon. Samuel 8. Isseks, Special Assistant

to the Attorney General, representing the Anti-Trust Divi-

sion of the Department of Justice. As the stenographic

transcript of the proceedings shows, counsel for these

defendants stated to the Court on that occasion that the

primary reason for this change of plea was to permit these

defendants to proceed with their defense work for the Army

and Navy without the interruption which would have been

entailed in preparing for and participating in the trial of

Affidavit of M, Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

the criminal proceeding. In the course of the proceedings

before Judge Goddard, Judge Goddard asked Mr. Isseks

whether any charge of fraud on the part of these defendants

was involved, and Mr. Isseks replied: “No, sir, there is no

charge of fraud against the defendants in connection with

the acts complained of in the indictment.” Judge Goddard

accepted the pleas and, with the consent of these defendants,

imposed fines totalling $40,000 upon them. This indictment

was returned and disposed of after a thorough investigation

by representatives of the Department of Justice, and the

statement by Government counsel before Judge Goddard

seems quite inconsistent with the charges of fraud made in

this complaint.

Following the entry of nolo pleas and by agreement be-

tween counsel for these defendants and the Anti-Trust divi-

sion, a consent decree was entered on July 9, 1940, in

an equity suit (Civil Action No. 9-404) instituted in this

Court on July 8, 1940, and covering the same matters

charged in the indictment. Reference is made to the com-

plaint in that action and to the consent decree entered

therein with the same force and effect as if fully set forth

herein, but the defendants do not concede the correctness of

all of the allegations in the Government’s complaint.

The present action was instituted by service of process by

a Deputy Marshal of the Western District on these defen-

dants at Rochester, New York, on December 26, 1941. This

was approximately a year and a half after the entry of the

consent decree just mentioned and after much publicity had

been given to the proceedings of the Anti-Trust Division

against Bausch & Lomb. The parallel between the dates men-

tioned in the present complaint and in the complaint in the

Government’s equity case indicates that this action was

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

not instituted without an examination of the files of this

Court and a study of the papers on file in the Government’s

proceedings. Yet, for reasons of their own, plaintiffs have

seen fit to distort the earlier charges made by Government

counsel and in important respects to make allegations which

are directly contrary to statements made by those who were

proceeding without hope of individual pecuniary benefit.

Among these significant contradictions are the following,

which furnish positive demonstration of the irresponsibility

of plaintiffs’ fantastic charges:

1. Paragraph “Fifth” of the present complaint alleges

that the individual defendants Eisenhart, Bausch and Dres-

cher are officers and directors of Carl Zeiss, Inc., as well as

of Bausch & Lomb. Both in the indictment and in the com-

plaint in the equity action it is alleged specifically that

these individual defendants have official connection only with

Bausch & Lomb. No claim was made by the Government

that they were officers or directors of Carl Zeiss, Inc. The

fact is that none of these individual defendants has or has

ever had any connection with Carl Zeiss, Inc.

2. Paragraphs “Eighth” and “Ninth” of the present com-

plaint allege that the defendant Bausch & Lomb, on or

about April 28, 1921, and the defendant Carl Zeiss, Inc.,

from on or about December 11, 1925 (together with the

individual defendants alleged to be, but not in fact, officers

or directors of Carl Zeiss, Inc.), entered into a conspiracy

to defraud the United States Government, in effect, by hav-

ing whichever corporate defendant made bids for the sale

of military optical instruments to the United States Govern-

ment add 20% to the amount of such bids and, if successful,

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

pay such 20% to the other corporate defendant. Paragraph

“Ninth” makes it clear that plaintiffs rely upon written

agreements dated on or about April 28, 1921, June 27, 1925,

October 28, 1925, November 26, 1926, and December 24, 1926.

Copies of agreements bearing the same dates were annexed

to the complaint in the Government’s equity suit in which

the consent decree was entered, the dates of November 26,

1926 and December 24, 1926, applying to the same agree-

ment. It is apparent, therefore, that this action is based on

the same agreements which were alleged in the Government's

equity suit. I respectfully ask that the copies of agreements

annexed to the Government’s complaint be deemed incorpo-

rated by reference herein, with the same force and effect as if

fully set forth herein. I know of no other agreements bearing

upon the subject matter. An examination of said agreements

in the files of this Court shows that the allegations in the

instant complaint with respect to them are false in the

following material particulars:

(a) None of these agreements was made between Bausch

& Lomb Optical Company and the defendant Carl Zeiss,

Inc. All were made with Carl Zeiss, of Jena, Germany.

Indeed, the agreement of April 28, 1921, was made more

than four years before the incorporation of the defendant

Carl Zeiss, Inc. Carl Zeiss, Inc. had nothing to do with

any of these agreements, nor has Bausch & Lomb had any

dealings with Carl Zeiss, Inc. in connection with the sub-

ject matter of these agreements.

(b) Paragraphs “Eighth” and “Ninth” of the complaint

allege in effect that the agreements referred to required

Bausch & Lomb to add 20% to all bids which it made to the

-——

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

United States Government on military optical instruments.

No such provision or requirement is included in the agree- 79

ments. Yet the damages claimed in this case in astronomical

amounts are predicated upon the existence of such a require-

ment in the agreements and the exaction by Bausch & Lomb,

pursuant to such a requirement, of 20% on all bids made

by it to the United States Government, with the use by

defendants of false and fraudulent documents to obtain

payment from the United States. The 1925 amendment to

the 1921 agreement was in terms revoked by the 1926 agree-

ment, and, in any event, it had no possible relation to bids

by Bausch & Lomb to the United States Government.

Accordingly, it appears from the papers on file in this g0

Court in connection with the proceedings by the Government

(the theoretical partial beneficiary of plaintiffs’ action)

that the charges in this complaint are untrue in material

particulars. The fundamental basis of this action, the Zeiss

agreements, wholly fail to support the charges made.

Not only are material allegations of the complaint shown

to be false by reference to the records of this Court and

the statements heretofore made, but the charges are utterly

false in fact. There was not only no requirement in the

agreement between Bausch & Lomb and Carl Zeiss, of Jena,

that Bausch & Lomb should inflate its bids on military

optical instruments to be supplied to the United States

Government by 20%, or any other amount, to be paid to

Carl Zeiss, of Jena, but there was no such inflation of bids.

The price to be charged to the United States Government by

Bausch & Lomb on military optical instruments manu-

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

factured by it for the Government was decided upon by

Bausch & Lomb alone without the participation or consent of

any other organization. Bids made by Bausch & Lomb to

the United States Government for such military optical in-

struments did not include 20% or any other artificial sum

to be paid by Bausch & Lomb to Carl Zeiss, Inc., as charged

in the complaint. The only payments made by Bausch &

Lomb were the royalty payments provided for in the agree-

ments, and are not material here. These did not exceed 7%,

and, in any event, were paid to Car] Zeiss, of Jena, and not

to Carl Zeiss, Inc. No possible claim of fraud is or could

be made in connection with such payments.

In order to assist in the development of new and improved

military optical instruments for the United States Govern-

ment, sample instruments of foreign manufacture have occa-

sionally been imported for examination and testing. Since

Bausch & Lomb had manufacturing rights under designs

and patents of Carl Zeiss, of Jena, for such equipment in

the United States, the Army and Navy generally contracted

with Bausch & Lomb for sample Zeiss military optical in-

struments. In such cases, the prices quoted by Car] Zeiss,

of Jena, to Bausch & Lomb were determined independently

by Car] Zeiss, of Jena, and the contract prices between the

Army and Navy and Bausch & Lomb were determined in-

dependently by the latter, Bausch & Lomb assuming respon-

sibility for the satisfactory character and performance of

the instruments. Bausch & Lomb paid Carl Zeiss, of Jena,

nothing beyond the net amount of its quotations for these

instruments. On one occasion, in 1927, a contract was made

between the United States Government and N. V. Neder-

landsche Instrumenten Compagnie, of Venlo, Holland, a

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

subsidiary of Carl Zeiss, of Jena, for the importation of a

sample military optical instrument. The contract price

included 5% which was paid to Bausch & Lomb, as exclu-

sive American licensee under the patents of Carl Zeiss, of

Jena, covering this instrument. It was understood that

Bausch & Lomb would assist the United States authorities

in straightening out whatever questions might arise regard-

ing the design and performance of the instrument and would

undertake the manufacture of such further instruments of

similar character as might be desired by the United States

Government.

At no time was there any occasion when the 20% bid

provision of the 1925 agreement—which, by its terms, was

inapplicable to bids by Bausch & Lomb to the United States

—was invoked in any transaction with the Government of

the United States, to which Bausch & Lomb was in any way

a party. The allegations in Paragraph “Eleventh” of the

complaint are utterly false and untrue.

The complaint alleges in the language of the Statute

(Paragraph “Twelfth”) that at various undisclosed times

the defendants presented for payment and approval to vari-

ous officers of the Civil, Military and Naval Service of the

United States, bids, claims, invoices, bills, vouchers, state-

ments and accounts against the United States knowing

that such documents were excessive, false, fictitious and

fraudulent. I categorically deny those allegations. At no

time did Bausch & Lomb, or anyone on its behalf, submit

to any person or officer in the Civil, Military or Naval Ser-

vice of the United States any claim upon or against the

Government of the United States, or any department or office

thereof, which was false, fictitious or fraudulent in any

respect. I want to make it clear that the sweeping character

Affidavit of M. Herbert Eisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

of this denial does not depend on the form of words of the

charge or of this answer. Bausch & Lomb is proud of its

record of assistance to the military authorities of the

United States and of the trust which has been reposed in

it by them. Reflections on its integrity in such dealings are

utterly without foundation. The fact that for a period it

had certain agreements with Carl Zeiss, of Jena, which

resulted in great benefits in the improvement of military

optical instruments supplied to the United States Govern-

ment and which were subsequently attacked as violating the

anti-trust laws, furnishes no support for the charges so reck-

lessly made in this suit.

89 These moving defendants settled the charges of violation

of the anti-trust laws in good faith so that they could pro-

ceed with work necessary to national defense without inter-

ruption. In the course of those proceedings, a Special

Assistant to the Attorney General stated in open court, after

full investigation, that no charge of fraud was involved.

These defendants believed at the time of the settlement, and

now believe, that upon a trial of the charges of violation of

the anti-trust laws they had defenses available to them but

they considered that it was their duty to proceed with their

work for national defense rather than to seek personal

vindication. These and other defenses peculiar to this action,

90 such as the statute of limitations, and others, are still avail-

able to them and are reserved; but, regardless of the merits

of the anti-trust proceeding, a matter which ought not now

to be revived, it should require no formal trial of the issues

to convince this Court that this action is utterly without

merit or foundation in fact. In view of the facts and circum-

stances set forth in this and in the accompanying affidavits,

these defendants are advised and believe that this action is

Affidavit of M. Herbert Hisenhart Read in Support of

Order to Show Cause Dated January 6, 1942.

not maintainable, and they respectfully submit that they

should not be required to interrupt their work for national

defense to defend an action of this character.

I respectfully ask that the annexed order to show cause

be signed so that the time of these moving defendants to

answer will be extended during the consideration of this

motion and so that, if necessary, the time for the motion

under Rule 56 may be shortened and that, upon the return

of this motion, the motion be granted in all respects.

(Sworn to by M. Herbert Eisenhart, January 5th, 1942.)

AFFIDAVIT OF CARL L. BAUSCH ANNEXED TO

ORDER TO SHOW CAUSE DATED JANUARY 6, 1942.

UNITED STATES DISTRICT COURT

94 SOUTHERN DIstRIcT oF NEW YORK

[SAME TITLE]

STATE OF NEW YORK,

COUNTY OF MONROE, 88. :

Car_ L. BauscH, being duly sworn, deposes and says:

95 1. I am one of the individual defendants named herein

and am Vice-President in Charge of Engineering and Re-

search and a director of the Defendant Bausch & Lomb

Optical Company.

2. I ama resident and inhabitant of the City of Rochester,

New York, residing on Parsons Lane, in that City.

3. Service of process in this action was made upon me

in Rochester, New York, on December 26, 1941, by a Deputy

United States Marshal of the United States District Court

for the Western District of New York.

96 4. I have read the foregoing affidavit of M. Herbert

Eisenhart, sworn to January 5, 1942, in support of this

motion. The statements therein are true and I adopt them

as my own and ask the Court to consider said affidavit as

my own in support of this motion, without repeating again

all of the matters therein set forth.

(Sworn to by Carl L. Bausch, January 5th, 1942.)

—

AFFIDAVIT OF THEODORE B, DRESCHER ANNEXED

TO ORDER TO SHOW CAUSE DATED JANUARY

6, 1942,

UNITED STATES DISTRICT COURT

SOUTHERN DIstTRICT OF NEw YorK

[SAMB TITLB]

™

—

STATE OF NEW YORK,

COUNTY OF MONROE, 83. :

THEODORE B. DreESCUER, being duly sworn, deposes and

says: 98

1. I am one of the individual defendants named herein

and am Vice-President in Charge of Manufacture and a

director of the defendant Bausch & Lomb Optical Company.

2. Tama resident and inhabitant of the City of Rochester,

New York, residing at 99 Pelham Road, in that City.

3. Service of process in this action was made upon me

in Rochester, New York, on December 26, 1941, by a Deputy

United States Marshal of the United States District Court

for the Western District of New York.

4. I have read the foregoing affidavit of M. Herbert

Eisenhart, sworn to January 5, 1942, in support of this

motion. The statements therein are true and I adopt them

as my own and ask the Court to consider said affidavit as

my own in support of this motion, without repeating again

all of the matters therein set forth.

(Sworn to by Theodore B, Drescher, January 5th, 1942.)

100

101

102

—

AFFIDAVIT OF E. HERMAN ANTHES ANNEXED TO

ORDER TO SHOW CAUSE DATED JANUARY 6, 1942.

UNITED STATES DISTRICT COURT

SOUTHERN DIstTRict oF NEW YoRK

”™

[SAME TITLE]

STATE OF NEW YORK,

COUNTY OF NEW YORK, 838.:

E. HERMAN ANTHES, being duly sworn, deposes and says:

I am employed by Bausch & Lomb Optical Company, one

of the defendants in this action. | reside at 2 Poplar Road,

Larchmont, New York. Bausch & Lomb Optical Company

(hereinafter sometimes called “Bausch & Lomb” for brevity )

is a large manufacturer of optical, ophthalmic and other prod-

ucts. Its manufacturing plant is located in Rochester, New

York, in the Western District of New York, and its execu-

tive offices are located there. For several years I have been

in charge of a small office conducted by Bausch & Lomb

under its name at 30 Rockefeller Plaza, New York, N. Y.

This assignment was due to the fact that I had been for

some years directly connected with the Scientific Instru-

ments Department of Bausch & Lomb at Rochester, New

York. The lease for this office was executed by Bausch &

Lomb at its executive offices in Rochester, New York. The

rent for the office is paid by Bausch & Lomb at Rochester,

New York.

Among the products manufactured by Bausch & Lomb

are scientific instruments (including balopticons, micro-

projectors, microscopes, binoculars, magnifying glasses, etc. )

—

Affidavit of E. Herman Anthes Read in Support of Order

to Show Cause Dated January 6, 1942.

and ophthalmic products and instruments (including perim-

eters, binocular ophthalmoscopes, light sense testers and

other equipment for the examination of the eye). The office

at 30 Rockefeller Plaza provides an operations base for the

promotional and soliciting activities engaged in by the staff,

but it is essentially a display room for the various products

manufactured by Bausch & Lomb, some of which are enumer-

ated above. Price lists and other literature of Bausch &

Lomb make it clear that orders are not valid until accepted

at the offices of the Company at Rochester, New York. When

educational or scientific institutions, or dealers, or other

prospective purchasers of scientific instruments desire to

order such instruments from Bausch & Lomb the orders 104

therefor are transmitted by me to Bausch & Lomb at

Rochester, New York, for acceptance. In each year in the

months of August and September, perhaps twelve or fifteen

microscopes are, as a special favor, sold to resident medical

students, and from time to time binoculars, magnifying

glasses and other incidental scientific instruments may be

sold to individuals out of the small inventory which is

maintained at the office solely as a matter of accommodation

for such individual customers.

The office staff, including myself, consists of sixteen em-

ployees of whom five constitute a clerical force under my

immediate supervision. The clerical workers are paid out 105

of a local bank account, which is also used for other petty

cash disbursements. The average balance in this account is

$2,000 or $3,000. The other employees whose base of opera-

tions is this office are paid by Bausch & Lomb from Rochester,

and as to these employees I have no authority to hire or

discharge. Excluding two employees whose function it is

to demonstrate the display equipment maintained in the

103

106

107

108

Affidavit of E. Herman Anthes Read in Support of Order

to Show Cause Dated January 6, 1942.

showrooms, five of the staff are concerned with the scientific

instruments field. Their duties consist of promoting the use

of Bausch & Lomb instruments, servicing instruments in

use and general promotion activities with respect to scientific

instruments. All substantial orders received in the course

of their activities are forwarded to Bausch & Lomb for

acceptance.

Two other employees who make their headquarters in this

office are concerned with ophthalmic products and instru-

ments and the annexed affidavit of Mr. Craytor sets forth

their activities. It appears therefrom that except for occa-

sional sales from the small inventory maintained in the

office as an accommodation, their branch of the office like-

wise exists largely for promotional and informational pur-

poses.

Neither I nor any of the other employees of Bausch &

Lomb at this office is an officer or director of Bausch &

Lomb Optical Company. No directors’ or stockholders’

meetings of Bausch & Lomb are held at this office and all

other normal corporate activities of Bausch & Lomb are

carried on at its office in Rochester, New York. Neither I

nor any of the other employees have any general adminis-

trative or discretionary supervision over the general business

of Bausch & Lomb, nor is any general business of that Com-

pany transacted from such office. Several years ago, to

facilitate sales to the Department of Public Education in

the City of New York, I was given a power of attorney

authorizing me to sign bids and contracts and to accept pay-

ments therefor. However, the regular procedure is for such

contracts to be finally passed on at the office of the Company

at Rochester, New York.

(Sworn to by E. Herman Anthes, January 5th, 1942.)

AFFIDAVIT OF RUSSELL E. CRAYTOR ANNEXED TO

ORDER TO SHOW CAUSE DATED JANUARY 6, 1942.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF New YorK 109

—

([SAMB TITLE]

> a

STATP OF NEW YORK,

COUNTY OF NEW YORK, 88.:

RUSSELL E, Craytor, being duly sworn, deposes and says:

I am employed by Bausch & Lomb Optical Company of

Rochester, New York. I reside at 167-10 Crocheron Avenue, 110

Flushing, New York.

I make my headquarters at the office at 30 Rockefeller

Plaza, New York, N. Y., described in the annexed affidavit

of Herman Anthes, but I am not under his supervision. I

am directly responsible to Ben A. Ramaker, Sales Manager

of Bausch & Lomb Optical Company, whose office is at

Rochester, New York. My duties consist of visiting whole-

sale and retail users or prospective users of Bausch & Lomb

ophthalmic products to promote the further use of such

products. I travel extensively in the State of New York and

in other nearby states in connection with these activities.

One of the Bausch & Lomb employees who also makes his 111

headquarters at the office at 30 Rockefeller Plaza is engaged

in activities similar to mine. From time to time, retailers

give me orders for ophthalmic products, but no such orders

are executed by me or at said office. In the case of all

retail orders, the retail source of the order indicates to me

What wholesaler to have the order placed through and the

~—7

Affidavit of Russell E. Craytor Read in Support of Order

to Show Cause Dated January 6, 1942.

order is then placed through such wholesaler. On occasion,

when the retail order is of such a character that it is not

carried in wholesale stock and must be procured from the

Bausch & Lomb factory, this same procedure of placing the

order through the wholesaler is followed. I seldom have

occasion to take direct orders from wholesalers, but on those

occasions when I do take such orders, they are transmitted

to Bausch & Lomb at Rochester for acceptance and execu-

tion. A small amount of representative ophthalmic equip-

ment and instruments is maintained at the office at 30

Rockefeller Plaza. This is kept there for purposes of display

and it is only on relatively infrequent occasions that parts

113 for and individual ophthalinic instruments may be sold

directly from this small supply to individual customers,

although such sales are made from time to time.

112

(Sworn to by Russell E. Craytor, January 5th, 1942.)

Notice of Motion.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YoRK

”™

—_

[SA4MP TITLD]

SIR:

PLEASE TAKE NOTICE that on the summons and complaint

and upon the Marshal’s returns herein, all filed in this

Court, and upon the annexed affidavit of Karl A. Bauer,

sworn to the 6th day of January, 1942, a motion will be

made at a Stated Term for the hearing of Motions to be held

at Room 506 of the United States Court House, Foley

Square, in the Borough of Manhattan, City, County and

State of New York, on the 16th day of January, 1942, at

10:30 o'clock in the forenoon of that day, or as soon there-

after as counsel can be heard, for an order (a) under

Rule 12 of the Rules of Civil Procedure dismissing this ac-

tion and the complaint herein as against the defendant,

Carl Zeiss, Inc., on the ground that the complaint fails to

state a cause of action against this defendant upon which

relief can be granted, and (b) granting summary judgment

under Rule 56 of the Rules of Civil Procedure on the ground

that the complaint and affidavits herein show that there is

no genuine issue as to any material fact therein, and that

the defendant is entitled to judgment as a matter of law,

and for such other and further relief as may be just and

proper, together with the costs of this motion.

115

116

117

; eg

Notice of Motion.

Dated, New York, N. Y., January 6, 1942.

Yours, etc.

1 1 8 ? ’

JOSHUA D. JONES,

of GirrorD, Woopy, CARTER & Hays,

Attorneys for Defendant, Carl

Zeiss, Inc.,

Office & P. O. Address,

One Wall Street,

Borough of Manhattan,

New York, N. Y.

To:

119

EMANUEL THEBNER, Esq.,

Attorney for Plaintiffs,

111 John Street,

New York, N. Y.

Affidavit of Karl A. Bauer Read in Support of

Motion.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YorRK

[SAME TITLE]

STATE OF NEW YORK,

COUNTY OF NEW YORK, 88.:

Kaki A. BAvER, being duly sworn, deposes and says: I

am president of the defendant, Carl Zeiss, Inc., and submit

this affidavit in support of a motion made on behalf of said

defendant, Car] Zeiss, Inc., to dismiss the complaint herein

and for a summary judgment in favor of the said defendant

upon the grounds set forth in the notice of motion herein.

I have been advised by counsel and believe that on its

face the complaint states no cause of action against the de-

fendant, Car] Zeiss, Inc., as the statute under which this ac-

tion purports to be brought does not cover or apply to trans-

actions of the character falsely and erroneously alleged in

the complaint.

The complaint should be dismissed and summary judg-

ment granted in favor of the defendant, Carl Zeiss, Inc.,

under Rules 12 and 56 of the Rules of Civil Procedure be-

cause the complaint is made up largely of false and errone-

ous conclusions of law and fact, practically all of which

are directly contrary to facts which this Court may take

cognizance of as they are in the files of this court.

On March 26, 1940, the Anti-Trust Division of the De-

partment of Justice procured the return of an indictment

121

122

123

we eaten o

124

125

126

Affidavit of Karl A. Bauer Read in Support of Motion.

(File C-107-109) in this court against the defendants in this

action, including the defendant, Carl Zeiss, Inc., for al-

leged violations of the Sherman Anti-Trust Act and covering

the same subject matter as is now covered by the complaint

in this action. Reference is made to the original indict-

ment in the files in this court for its scope and nature with

the same force and effect as if fully set forth herein, al-

though deponent does not concede the correctness of the

charges therein against the defendant, Carl Zeiss, Inc.

The defendant, Carl Zeiss, Inc., originally pleaded not

guilty to the indictment. On March 5, 1941, this defendant

applied, through counsel, to Judge Libell in open court

for leave to change its plea of not guilty to a plea of nolo

contendere. This application was consented to by the Hon-

orable Samuel 8S. Isseks, Special Assistant to the Attorney

General, representing the Anti-Trust Division of the De-

partment of Justice. Judge Libell accepted the plea and

fined the defendant, Carl Zeiss, Inc., the sum of $1,000.

Paragraph “Fifth” of the complaint alleges that the de-

fendants, M. H. Eisenhart, Car] L. Bausch and Theodore

B. Drescher, are officers and directors of Carl Zeiss, Inc.

This is not the fact. Neither of these three men were ever

at any time officers, directors or employees of Carl Zeiss,

Inc. and were never at any time connected with the defen-

dant, Carl Zeiss, Inc. in any capacity whatever.

Paragraph “Sixth” of the complaint alleges that Carl

Zeiss, Inc. is engaged in selling periscopes, range finders,

altimeters, boresights, bombsights, torpedo directors, sights

for guns and other scientific optical instruments (except

binoculars) used to direct and contro] the firing of modern

instruments of warfare, referred to as “military optical in-

struments”. This is not a fact. Carl Zeiss, Inc. was in-

corporated in 1925 and never at any time in the history of

T ,

Affidavit of Karl A. Bauer Read in Support of Motion.

its existence did it deal or was it concerned with the sale

of any such instruments as are listed or any other instru-

ment of any sort that would answer the description of mili-

tary optical instruments. Its business is altogether con-

fined to the sale of cameras, telescopes, microscopes and

optical instruments as used in civil businesses. It never

at any time carried any such instruments. The only charge

against the defendant, Carl Zeiss, Inc., made by the gov-

ernment in the Anti-Trust suit was that the defendant, Carl

Zeiss, Inc., had declined from importing, selling or dealing

in such instruments because of certain agreements made

between Carl Zeiss, Jena, and Bausch & Lomb Optical

Company.

Paragraphs “Eighth” and “Ninth” make it clear that 128

plaintiffs rely upon certain written agreements dated on or

about April 28, 1921, June 27, 1925, September 28, 1925,

November 26, 1926 and December 24, 1926. Copies of these

agreements were examined by me at the time of the filing

of the indictment against the defendant, Car) Zeiss, Inc., and

they were all made between Bausch & Lomb Optical Com-

pany and Carl Zeiss, Jena. The agreement of April 28,

1921, upon which plaintiffs particularly rely, was made

four years before Carl Zeiss, Inc. was incorporated. Carl

Zeiss, Inc. never at any time had anything to do with any

of these agreements, nor has Carl Zeiss, Inc. had at any

time any dealings with Bausch & Lomb Optical Company

in connection with the subject matter of these agreements.

Since the entry of the plea of nolo contendere on March

5, 1941, neither the defendant, Carl Zeiss, Inc., nor any

officer in connection with it has ever been approached by

the Government of the United States in connection with

the sale of military optical instruments by Bausch & Lomb

Optical Company or any other concern in the United States

127

129

130

131

132

Affidavit of Karl A. Bauer Read in Support of Motion.

dealing with such instruments. No consent decree or other

arrangements have been made by the defendant, Carl Zeiss,

Inc., with the government or any official on its behalf with

respect to the dealings in such instruments. Deponent is in-

formed and believes that the agreements under which the

indictment of the Sherman Anti-Trust Act was brought are

in the possession of Bausch & Lomb Optical Company or

Carl Zeiss, Jena, and that copies are on file in the proceed-

ings brought by the United States Government against

Bausch & Lomb Optical Company and that these can be

furnished to the court by the attorneys representing the

other defendants on the hearing of this motion.

An examination of the agreements will disclose that

no such provisions are contained in the agreement as they

are alleged in paragraphs “Eighth” and “Ninth” of the

complaint.

Accordingly it appears from the papers on file in this

court that the charges in this complaint are untrue in ma-

terial particulars. The fundamental basis of the action that

Carl Zeiss, Inc. was a party to the agreement or dealt

in the material covered by the complaint wholly fails to

support the charges made.

The absurdity of making Carl Zeiss, Inc. a party to this

action is apparent from an examination of paragraph

“Tenth”, which alleges that between April 28, 1921 and

March 29, 1940, the defendants received payments from the

United States for the sale and delivery of such military op-

tical instruments, when in truth and fact the defendant,

Carl Zeiss, Inc., never sold or delivered a military optical

instrument to any person in the United States of America,

including the United States Government. The same fact

applies to paragraphs “Eleventh”, “Twelfth”, “Thirteenth”,

“Fourteenth” and “Fifteenth” as the defendant, Carl Zeiss,

Affidavit of Karl A. Bauer Read in Support of Motion.

Inc., never at any time bid for any government contract for

the importation into the United States of any military

optical instrument or its sale, manufacture and delivery in

the United States.

Deponent respectfully submits that this action should be

dismissed as to the defendant, Carl Zeiss, Inc.

(Sworn to by Kar] A. Bauer, January 6th, 1942.)

133

136

137

138

Order to Show Cause Dated January 14, 1942.

UNITED STATES DISTRICT COURT

SOUTHERN District oF NEw YORK

File No. Civ. 17-11

-™

[SAME TITLE]

”

Upon the summons and complaint and Marshal’s returns

herein and upon the order to show cause, dated January 6,

1942, signed by Honorable Alfred C. Coxe, and the affidavits

annexed thereto, and upon the annexed affidavit of Whitney

North Seymour, sworn to the 14th day of January, 1942, and

the purported amended complaint, Let the plaintiffs herein

and each of them show cause before this Court, at a Stated

Term thereof to be held in Room 506, in the United States

Court House, Foley Square, Borough of Manhattan, City,

County and State of New York, on the 16th day of January,

1942, at 10:30 o'clock in the forenoon of that day, or as soon

thereafter as counsel can be heard, why an order should

not be entered herein

1. As an additional ground for relief in connection

with the motion made returnable by said order to show

cause dated January 6, 1942, striking as sham and false

the complaint in this action pursuant to the provisions

of Rule 11 of the Federal Rules of Civil Procedure and

directing the institution of appropriate disciplinary

action against the plaintiffs herein for wilful violation

of said Rule.

2. (a) Determining that the purported amended com-

plaint of the plaintiffs herein, of which a copy was de-

—

said

Order to Show Cause Dated January 14, 1942.

livered to the attorneys for the defendants Bausch &

Lomb Optical Company, M. H. Eisenhart, Carl L.

Bausch and Theodore B. Drescher on January 13, 1942,

is a nullity.

(b) Denying leave to the plaintiffs herein to amend

their complaint in accordance with said purported

amended complaint.

or in the event that said motion designated 2(a) and (b) be

denied, and the complaint is amended in accordance with

purported amended complaint,

3. (a) Dismissing this action and the amended com-

plaint herein as against the defendants Bausch & Lomb

Optical Company, M. H. Eisenhart, Carl L. Bausch and

Theodore B. Drescher on the ground that the venue of

this action as to the said defendants has been improp-

erly laid in the Southern District of New York.

(b) Dismissing this action and the amended com-

plaint herein as against the said defendants on the

ground that the amended complaint fails to state a

claim against these defendants upon which relief can

be granted.

dants upon the ground that the complaint and amended

complaint, the affidavits annexed to said order to show

cause dated January 6, 1942, and the affidavit hereto

annexed show that there is no genuine issue as to any

material fact herein and that these defendants are

entitled to judgment as against the plaintiffs as a matter

of law,

139

140

141

142

148

Order to Show Cause Dated January 14, 1942.

and for such other and further relief as to this Court may

seem just and proper, together with the costs of this action.

Sufficient cause appearing therefor, it is

ORDERED that the plaintiffs be and they hereby are stayed

from taking any further proceedings in this action until

final decision upon this motion and the motion made return-

able by said order to show cause, dated January 6, 1942;

and it is further

ORDERED that service of a copy of this order and the affi-

davit annexed thereto at the office of Emanuel Thebner,

attorney for the plaintiffs, 111 John Street, Borough of Man-

hattan, City, County and State of New York, on or before

9:00 P. M. on January 14th, 1942, be deemed sufficient

service hereof.

Dated, New York, N. Y., January 14th, 1942.

ALFRED C. COXE,

United States District Judge.

_7—V—“"

AFFIDAVIT OF WHITNEY NORTH SEYMOUR AN-

NEXED TO ORDER TO SHOW CAUSE DATED

JANUARY 14, 1942.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

145

—

[SAME TITLE]

™

STATE OF NEW YORK,

COUNTY OF NEW YORK, 88.:

WHITNEY NorTH SEYMovwR, being duly sworn, deposes and

_* 146

I am an attorney and counsellor-at-law and a member of

the firm of Simpson Thacher & Bartlett, attorneys for defen-

dants Bausch & Lomb Optical Company, M. H. Eisenhart,

Carl L. Bausch and Theodore B. Drescher in this action.

This affidavit is submitted in support of a motion for the

relief set forth in the annexed order to show cause by which

this motion is made returnable.

On December 26, 1941, copies of the summons and com-

plaint in this action were served upon the defendants Bausch

& Lomb Optical Company (hereinafter sometimes called

“Bausch & Lomb” for brevity), M. H. Eisenhart, Carl L.

Bausch and Theodore B. Drescher, at Rochester, New York.

On January 6, 1942, an order to show cause was signed by

Honorable Alfred C. Coxe bringing on a motion on behalf

of these defendants to dismiss the complaint for improper

venue, failure to state a cause of action and also for sum-

mary judgment in favor of the defendants. The motion was

made returnable by said order to show cause on January

147

, 7]

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 14, 1942.

16, 1942. I respectfully refer to said order to show cause

and the affidavits annexed thereto with the same force and

effect as if they were fully set forth herein.

At 5:30 P. M. on January 13, 1942, a representative of

the office of Mr. Emanuel Thebner, attorney for the plain-

tiffs, delivered to the office of my said firm a copy of a

paper purporting to be an amended complaint in this action.

A copy of said purported amended complaint is annexed

hereto, and, without conceding the correctness of any of

the statements made therein, I respectfully ask that it be

considered upon this motion and upon the motions brought

on by the earlier order to show cause as an admission by

149 ~«Othe *~piaintiffs and for all purposes except as an amended

complaint. As promptly as possible said purported amended

complaint will be returned to the office of the attorney for

the plaintiff with a notice, copy of which is annexed hereto,

stating that said document is a nullity and does not comply

with Rule 15(a) of the Federal Rules of Civil Procedure.

Plaintiffs apparently now recognize, as was demonstrated

by the affidavits in support of the motion brought on by

the said order to show cause, dated January 6, 1942, that

the complaint in this action is false in materia] particulars

and that the defendants’ motion addressed to it must be

granted. In an effort to avoid decision on that motion, plain-

150. «(tiffs have served a purported amended complaint, without

obtaining leave of the Court. Said purported amended com-

plaint was not properly served as an amendment of the

complaint as of course under Rule 15(a) because it was

served after the service of defendants’ motion to dismiss

148

and for summary judgment. Accordingly, plaintiffs have

wholly failed to comply with the requirements of Rule 15(a)

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 14, 1942.

and the purported amended complaint is a nullity and defen-

dants are entitled to a decision to that effect.

Since no amendment of the complaint has been made or

authorized, defendants’ original motion to dismiss and for

summary judgment will be heard on the return of the order

to show cause dated January 6, 1942. It is of extreme im-

portance to the defendants that this action should be finally

disposed of as promptly as possible without further harass-

ment or annoyance to them.

It is clear from the annexed form of purported amended

complaint that the original complaint in this action is false

in material particulars and that the signing of that com-

plaint by the attorney for the plaintiffs under the cireum-

stances is a direct violation of Rule 11 of the Federal Rules

of Civil Procedure. The flagrant violation of that Rule by

the plaintiffs herein, both of whom are members of the Bar

of this Court, requires that the complaint should be stricken

as sham and false under the Rule and that appropriate dis-

ciplinary proceedings should be instituted against the plain-

tiffs.

The plaintiffs should not be allowed to avoid the inevitable

dismissal of the complaint by any proceedings on their

part seeking to delay disposition of the motion to dismiss

and for summary judgment. The language of the purported

amended complaint varies the cause of action so completely

and it so plainly fails to state a cause of action against

these defendants that even if an application for leave to

amend were made, it must necessarily be denied. Accord-

ingly, by this motion defendants seek not only a determina-

tion that the purported amended complaint is a nullity but

also relief against any dilatory attempt on the part of the

plaintiffs to avoid final adverse disposition of this litigation.

151

152

153

154

155

156

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 14, 1942.

Even if the complaint were to be deemed amended (which

for the reasons stated would be improper), it is clear that

it would have to be dismissed and summary judgment

granted to defendants upon the grounds set forth in the

order to show cause annexed hereto. Accordingly, that relief

is sought in the alternative, but only in the event that

grounds 2(a) and (b) of this motion are denied.

This motion should be made returnable concurrently with

the motion brought on by said order to show cause dated

January 6, 1942, so that final disposition of the litigation

may be had. Convenience of the Court indicates that both

motions should be considered together, since the papers

on both motions must be examined on each. In view of the

fact that the purported amended complaint was only served

upon my firm on January 13, 1942, it is impossible to give

the ordinary notice of motion and still have this motion

returnable concurrently with the motions brought on by said

order to show cause dated January 6, 1942. Accordingly, I

respectfully request that the annexed order to show cause

be signed, so that said motions may be heard and determined

together on the return day of the original order to show

cause herein. I also request that such order to show cause

contain a stay of further proceedings on the part of the

plaintiffs pending the return of this motion, so that no

further steps may be taken on their part to avoid final

decision in the litigation. The moving defendants do not

waive their objections to the bringing of this action in this

District. On the contrary they insist upon that objection

and this motion is made to prevent evasion by plaintiffs of

prompt decision of that question and the other questions

presented by this motion made returnable by the order to

show cause dated January 6, 1942. Ground 1 of the present

Affidavit of Whitney North Seymour Read in Support of

Order to Show Cause Dated January 14, 1942.

motion is an additional ground for dismissal which the Court

is asked to consider in connection with the defendants’

earlier motion. The violation of Rule 11 by plaintiffs, to

which attention is called by that ground, has now become

so apparent that it ought not to be overlooked by the Court.

No previous application has been made for the relief

sought herein.

WHEREFORD I respectfully request that an order to show

cause in the form annexed hereto be signed and that this

motion be granted so far as may be appropriate.

(Sworn to by Whitney North Seymour, January 14th, 1942. )

AMENDED COMPLAINT ANNEXED TO ORDER TO

SHOW CAUSE DATED JANUARY 14th, 1942 HAS

BEEN PRINTED HEREIN AT PAGE 73.

157

158

159

: i

Notice of Rejection.

UNITED STATES DISTRICT COURT

SOUTHERN District OF NEw YORK

160 si

—

[SAMB TITLE]

—

SIR:

PLEASE TAKE NOTICE that the undersigned hereby return

and reject as a nullity the annexed purported amended com-

plaint in this action because said purported amended com-

plaint and the service thereof do not comply with Rule 15(a)

of the Federal Rules of Civil Procedure in that said pur-

ported amended complaint was not served before a respon-

161 sive pleading to the complaint was served and neither leave

of the Court nor written consent of the adverse party was

obtained, and upon the further ground that said purported

amended complaint fails to comply with the requirements

of the Federal Rules of Civil Procedure in any respect.

Dated, New York, N. Y., January 14, 1942.

Yours, etc.,

SIMPSON THACHER & BARTLETT,

Attorneys for Defendants,

Bausch & Lomb Optical Company,

M. H. Eisenhart, Carl L. Bausch and

162 Theodore B. Drescher,

Office and Post Office Address,

120 Broadway,

Borough of Manhattan,

New York, N. Y.

To:

EMANUEL THEBNER, EsqQ.,

Attorney for Plaintiffs,

111 John Street,

New York, N. Y.

T :

Affidavit of Service of Jack Kemp Busby.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEw YORK

File No. Civ. 17-11

163

(SAME TITLE]

STATE OF NEW YORK,

COUNTY OF NEW YORK, 838. :

JACK Kemp Bussy, being duly sworn, deposes and says:

I am an attorney and counsellor at law associated with

the firm of Simpson Thacher & Bartlett, attorneys for the 104

defendants Bausch & Lomb Optical Company, M. H. Eisen-

hart, Carl L. Bausch and Theodore B. Drescher in this

action; that I am over the age of twenty-one years and re-

side at The Hampshire House, 150 Central Park South, in

the Borough of Manhattan, City, County and State of New

York, and that I am not a party to this action; that on the

14th day of January, 1942, at or about 1:20 o’clock in the

afternoon of that day, I served personally upon Emanuel

Thebner, attorney for plaintiffs in this action, at his office

at No. 111 John Street, in the Borough of Manhattan, City,

County and State of New York, an original Notice of Re-

jection, of which a true copy is hereto annexed, to which

was attached a copy of a purported amended complaint 165

of the plaintiffs in this action, said copy being the same

paper which was delivered by a representative of the office

of Mr. Emanuel Thebner at the office of Messrs. Simpson

Thacher & Bartlett at or about 5:30 P. M. on January 13,

1942, by personally giving to and leaving with the said

Emanuel Thebner the aforesaid original Notice of Rejec-

166

167

168

Affidavit of Service of Jack Kemp Busby.

tion herein with the aforesaid copy of purported amended

complaint annexed thereto.

Deponent further says that at the same time and place

as aforesaid he served personally upon said Emanuel Thebner

the order to show cause of Hon. Alfred C. Coxe herein, dated

January 14, 1942, to which was annexed the affidavit of

Whitney North Seymour, verified January 14, 1942, a true

copy of the aforesaid purported amended complaint and of

the aforesaid Notice of Rejection, by personally exhibiting

to the said Emanuel Thebner the aforesaid order to show

cause, affidavit of Whitney North Seymour, copy of pur-

ported amended complaint and copy of Notice of Rejection,

and personally leaving with the said Emanuel Thebner true

copies thereof.

(Sworn to by Jack Kemp Busby, January 14th, 1942.)

—

Order to Show Cause Dated January 14, 1942.

UNITED STATES DISTRICT COURT

SOUTHERN District or New YorkK 169

UNITED STATES OF AMERICA on the relation of MuRRAY BREN-

SILBER and EMANUEL THEBNER, and MURRAY BRENSILBER

and EMANUEL THEBNER, in their own behalf,

Plaintiffs,

—against—

BauscH & Loms OpticaL CoMPANy, CarL ZEIss INc., M. H.

EISENHART, CARL L. BAuscH and THEoporE B. DRescHEr, 170

Defendants.

-s

On the summons and complaint herein and upon the Mar-

shal’s returns herein, the notice of motion herein made by

the defendant, Carl Zeiss, Inc., dated January 6, 1942, re-

turnable the 16th day of January, 1942, for an order under

171

172

173

174

Order to Show Cause Dated January 14, 1942.

Rule 12 of the Rules of Civil Procedure dismissing the ac-

tion and the complaint herein as to the said defendant,

Carl Zeiss, Inc., on the ground that the complaint fails

to state a cause of action and granting summary judgment

under Rule 56 of the Rules of Civil Procedure, and upon the

annexed affidavit of Joshua D. Jones, verified the 14th day

of January, 1942, and the purported amended complaint

herein ;

Let the plaintiffs herein and each of them show cause be-

fore this Court at a Stated Term for the hearing of motions

to be held in Room 506 of the United States Court House,

Foley Square, in the Borough of Manhattan, City, County

and State of New York, on the 16th day of January, 1942, at

10:30 o’clock in the forenoon of that day or as soon there-

after as counsel can be heard, why an order should not be

entered herein granting to the defendant, Carl Zeiss, Inc.,

the relief prayed for in the said notice of motion herein,

dated January 6, 1942, and as an additional ground for

relief in connection with said motion,

(a) Striking out as sham and false the purported amend-

ed complaint and directing the institution of appropriate

disciplinary proceedings of the plaintiffs herein for wilful

violation of the Rules of Civil Procedure of this Court, and

(b) Directing the proposed amended complaint of the

plaintiffs herein, of which a copy was delivered to the at-

torneys for the defendant, Car] Zeiss, Inc., on January 13,

1942, is a nullity, and

the complaint in accordance with the said purported

amended complaint, and

Order to Show Cause Dated January 14, 1942.

(d) In the event that the said motion be denied and

that the plaintiffs’ complaint be amended in accordance with

the proposed amended complaint,

1. Dismissing the amended complaint herein under Rule

12 of the Rules of Civil Procedure on the ground that the

said amended complaint fails to state a cause of action

against the defendant, Car] Zeiss, Inc., and

2. Granting summary judgment under Rule 56 of the

Rules of Civil Procedure on the ground that the said amend-

ed complaint shows that there is no genuiue issue as to any

material fact therein and that the defendant, Carl Zeiss,

Inc., is entitled to judgment as a matter of law, and for

such other and further relief as may be just and proper, to-

gether with the costs of this motion, and suflicient cause ap-

pearing therefor, it is

176

ORDERED that the time of the defendant, Carl Zeiss, Inc.,

to answer the complaint or amended complaint herein be and

the same hereby is extended to and including ten days after

the entry of an order disposing of this motion; and it is

further

ORDERED that service of a copy of this order and the affi-

davit annexed, at the office of Emanuel Thebner, attorney

for the plaintiffs, 111 John Street, Borough of Manhattan, 177

City, County and State of New York, on or before 6:00

P.M. January 14, 1942, be deemed sufficient service hereof.

Dated, New York, N. Y., January 14, 1942.

ALFRED C. COXE,

United States District Judge.

lbs

178

179

180

: |

AFFIDAVIT OF JOSHUA D. JONES ANNEXED TO

ORDER TO SHOW CAUSE DATED JANUARY 14,

1942.

UNITED STATES DISTRICT COURT

SOUTHERN District oF NEW YORK

[aan wer]

~~}

STATE OF NEW YORK,

CouUNTY OF NEW YORK, 838.:

JosHUA D. JONES, being duly sworn, deposes and says:

I am an attorney associated with Gifford, Woody, Carter

& Hays, the attorneys for the defendant, Car] Zeiss, Inc., and

I have personal charge of this action. This action was com-

menced against the defendant, Carl Zeiss, Inc., by the filing

of the summons with the Clerk of this Court on December

17, 1941, and the service of a summons and complaint on

the defendant, Carl Zeiss, Inc., on December 31, 1941.

Thereafter on January 7, 1942, I prepared and caused a

notice of motion to be served on Emanuel Thebner, Esq., the

attorney for the plaintiffs, dated January 6, 1942, return-

able before this Court on January 16, 1942, asking for an

order dismissing the complaint herein on the ground that it

did not state a cause of action against the defendant, Carl

Zeiss, Inc., and asking for summary judgment in favor of

the defendant, Carl Zeiss, Inc., under Rule 56 of the Rules

of Civil Procedure on the ground that there was no genuine

issue or any material fact in dispute.

To this notice of motion was attached the affidavit of Karl

A. Bauer, president of Carl Zeiss, Inc., verified January 6,

1942, in which it was stated that the material allegations

a :

Affidavit of Joshua D. Jones Read in Support of Order to

Show Cause Dated January 14, 1942.

of the complaint to the effect that the individual defendants

were officers of Car] Zeiss, Inc.; that Carl Zeiss, Inc. had

entered into a conspiracy with Bausch & Lomb Optical Com-

pany to charge the United States Government excessive

prices on the sale of military optical instruments and had

collected excessive prices for such materials and filed bills,

vouchers and invoices which were false and fictitious, which

allegations were absolutely false, and that Carl Zeiss, Inc.

never at any time manufactured, sold, delivered or dealt

in military optical instruments of any kind and that they

had never at any time sold or did business with the United

States Government in such instruments, and that this was

disclosed in a proceeding brought by the United States 495

Government in this Court against Bausch & Lomb Optical

Company and the defendant, Carl Zeiss, Inc., for violation

of the Sherman Anti-Trust Act.

The original notice of motion, dated January 6, 1942,

and returnable January 16, 1942, with the affidavit of

Karl A. Bauer attached thereto was duly filed with the

Clerk of this Court for the hearing of the motion on the

16th.

Yesterday, shortly after 5:00 o’clock, there wag left at

the office of Gifford, Woody, Carter & Hays, what pur-

ports to be an amended complaint, undated and unverified,

correcting the statements contained in the original com- 183

plaint, the falseness of which had been sworn to in the affi-

davit of Kar] A. Bauer, annexed to the notice of motion.

The plaintiffs have failed to serve any opposing affidavits

in opposition to defendant’s motion for summary judgment

and have served what purports to be an amended com-

plaint, the allegations of which in all respects establish the

truth of the statements made in the affidavit of Karl A.

181

Affidavit of Joshua D. Jones Read in Support of Order to

Show Cause Dated January 14, 1942.

Bauer that the allegations of the original complaint are

184 false.

The purported amended complaint does not correct the

defects in the original complaint, for which it is claimed

that it should be dismissed on the ground that it does not

state a cause of action. In addition to that, it conclusively

establishes that there is no issue to be determined in this

action and that summary judgment should be granted in

favor of the defendant, Carl Zeiss, Inc., as asked for in

the notice of motion, dated January 6, 1942.

Deponent respectfully submits that there is no procedure

under Rule 15 of the Rules of Civil Procedure under which

185 4a plaintiff can serve an amended complaint in answer to a

motion for summary judgment; and further, that under

Rule 11 of the Rules of Civil Procedure, the attorney for

the plaintiff is subject to appropriate disciplinary action for

filing pleadings obviously containing matter which he knows

not to be correct and at least would never have been alleged

if there had been a casual examination of the papers on

file in this Court which formed the basis of the action

against the defendant, Carl Zeiss, Inc.

Attached hereto and marked Exhibit “A” is a copy of the

proposed amended complaint received on January 13, 1942.

No previous application for similar relief has been made.

186

WHEREFORE it is respectfully requested that an order to

shew cause in the form annexed hereto be signed bringing

this motion for a hearing on January 16, 1942 at the same

time and place as the motion, dated January 6, 1942, is re-

turnable, and further extending the time of the defendant,

Carl Zeiss, Inc., to answer the complaint or the proposed

Affidavit of Joshua D. Jones Read in Support of Order to

Show Cause Dated January 14, 1942.

amended complaint herein until ten days after an order up-

on said motion; and further ordered that service of a copy

of this order and the affidavit and exhibit annexed thereto

at the office of Emanuel Thebner, Esq., the attorney for the

plaintiffs, 111 John Street, Borough of Manhattan, City,

County and State of New York, on or before 6:00 o’clock on

January 14, 1942, shall be deemed sufficient service thereof.

187

(Sworn to by Joshua D. Jones, January 14th, 1942.)

AMENDED COMPLAINT ANNEXED TO ORDER TO

SHOW CAUSE DATED JANUARY 14TH, 1942 HAS 188

BEEN PRINTED HEREIN AT PAGE

SIMILAR NOTICE OF REJECTION, DATED JAN-

UARY 14, 1942, HAS BEEN PRINTED HEREIN AT

PAGE 54.

189

Opposing Affidavit of Emanuel Thebner.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

190

[SAMB TITLE]

”™

STATE OF NEW YORK,

COUNTY OF NEW YORK, 88.:

EMANUEL THEBNER, being duly sworn, deposes and says:

I am one of the plaintiffs in the above entitled action and

also the attorney of record for the plaintiffs.

This affidavit is made in answer to the motion of the de-

191 fendants by order to show cause dated January 14, 1942.

The defendants seek by their application: (1) An order

striking out the complaint as sham and false; (2) an order

directing the institution of disciplinary proceedings against

the plaintiffs; (3) declaring the amended complaint to be

a nullity; and (4) denying leave to amend, if leave be

necessary, and in the alternative, if the amendment of the

complaint be deemed proper, then that the Court enter an

order, (a) dismissing the action of the amended complaint

on the ground that the venue is improper; (b) that the

amended complaint does not state a cause of action; and

192 = ground that there is no genuine issue and no cause of action

as to any material fact.

The original complaint in this action filed in this Court on

December 17, 1941 and the amended complaint filed January

14, 1942 are neither sham nor false. The ultimate facts and

conclusions therein set forth are amply supported by the

indictment against the defendants herein by the United

~—

Opposing Affidavit of Emanuel Thebner.

States Grand Jury in and for the Southern District of

New York, at the March 1940 Term (C. 107-169) ; the two

bills of particulars filed by the United States Attorney Gen-

eral in said criminal action; and the complaint in equity

of the United States Government; and the consent decree

entered in said action now on file in this Court (Civil 9-404),

all of which are made a part of this affidavit.

Revised Statutes of the United States §§3490-3494 (31

U. S. C. 231-235) specifically permit the plaintiffs as citi-

zeus to institute and prosecute this action. This action was

in fact instituted by plaintiffs pursuant to said statutes and

in absolute good faith. The plaintiffs verily believe and are

of the opinion that by reason of the unlawful acts of the

defendants, the defendants did, in fact, defraud the Govern- 194

ment of the United States of large sums of money, as de-

ponent verily believes.

Deponent did not wilfully violate any of the provisions of

the Federal Rules of Civil Procedure in any way, shape or

form, and in particular Rule 11. The plaintiffs here and

now state unequivocally that the charge of the defendants

that deponent signed the complaint which is alleged was

false in material particulars and that deponent knew it

to be false, is totally untrue, unfair and unwarranted; and

the request for the institution of disciplinary action against

deponent and the plaintiffs is equally unfair and unwar-

ranted.

193

195

Plaintiffs respectfully submit that the defendants’ con-

tention that the amended complaint is a nullity is totally

without substance and merit. Rule 15A of the Federal

Rules of Civil Procedure entitles the plaintiffs to serve an

amended complaint once as of course within twenty days

after service of the complaint.

j 7

Opposing Affidavit of Emanuel Thebner.

The records of this Court show that the original com-

plaint was served on Bausch & Lomb and the individual

defendants on December 26, 1941, and on Carl Zeiss, Inc.,

on December 31, 1941. Since the plaintiffs had twenty days

thereafter to amend their complaint, once as of course, pur-

suant to said Rule 15A, the time within which to do such

act did not expire until January 15th and January 20th,

1942, respectively.

It is conceded that the amended complaint was duly served

on January 13th, 1942 and was duly filed in the Clerk's office

of this Court on January 14, 1942.

The motions of the defendants are not “responsive plead-

ings” within the provisions of Rule 7A. Therefore, the

197 plaintiffs had the clear right to amend their complaint, once

as of course, withont cbtaining the prior leave of this Court.

This was recognized by Mr. Seymour, defendant’s counsel by

requesting an extension of time to answer and by the order

to show cause dated January 6, 1942 containing such relief.

Mr. Seymour there virtually admits that the defendants, in

their application, have not submitted any responsive plead-

ing. The only responsive pleading to a complaint allowed

under Rule 7A, is an answer, and no answer had been

served.

It is therefore clear that the plaintiffs were within their

rights in serving the amended complaint and that the service

thereof was duly made pursuant to the Federal Rules afore-

said.

Plaintiffs further respectfully submit that in view of the

proper service of the amended complaint in this action, the

defendants’ original motions under the order to show cause

of January 6th, 1942, become academic and should not now

be entertained by this Court.

196

198

. a

Opposing Affidavit of Emanuel Thebner.

Defendants are not entitled to the alternative relief under

the order to show cause obtained by the defendants on Jan-

uary 14th, 1942, being the relief they had applied for by

order to show cause of January 6th, 1942.

Rule 56c of the Federal Ruies of Civil Procedure provides

that a motion for summary judgment must be served at

least ten days before the time specified for the hearing.

Plaintiffs submit that this statutory time allowed the op-

position until the hearing of the motion for summary judg-

ment may not be cut down without the consent of the adverse

party. The plaintiffs do not consent to any lesser time than

that provided for in Rule 56C and do not consent to such

a hearing now.

It is respectfully submitted that plaintiffs are entitled 200

under the Rules of Civil Procedure §§26, 31 and 37, to apply

for examination before trial, discovery and inspection and

pre-trial relief even before answer.

The granting of the ex-parte stay in the order of January

14, 1942 without notice to the plaintiff and without giving

them an opportunity to be heard was prejudicial to them

under the aforesaid respects.

The unfairness of Mr. Seymour in making the charges is

further manifest by the fact in obtaining the order to show

cause, he also procured a stay of this Court on the part of

the plaintiffs from taking any further proceedings in this

action until the final decision upon this motion and the prior

motion made by the order to show cause dated January 6th,

1942.

It is obvious that the effect was to prevent the plaintiffs

and deponent from properly preparing to meet the prior

motion, which is also renewed on this application as for

alternative relief to dismiss the complaint and for summary

judgment.

Mess

199

201

Fe An Ot ORAL AERA Ot TE Ns NEN.

202

208

204

: y

Opposing Affidavit of Emanuel Thebner.

The plaintiffs, therefore, request that the stay be vacated

and that should this Court entertain the application for

alternative relief, notwithstanding the service of the amended

complaint, that the hearing of that application be set for

a date sufficient in advance to give deponent an opportunity

to properly prepare to oppose such application.

The moving papers on this application are entirely inac-

curate in the statements charging falsity to certain of the

allegations of the complaint. In reality it will be noted

from a reading of the affidavit of Mr. Herbert Eisenhart,

verified January 5, 1942, submitted on the pending prior

motion, that they raise issues of fact and give their own

version which is contrary to the matters alleged in the

indictment,

One of the attacks upon the alleged falsity of the com-

plaint is that it appears from the face of the agreements

between the defendants Bausch & Lomb Optical Company

and Carl Zeiss, Jena, Germany that Carl Zeiss, Inc. is not a

party thereto,

As a matter of fact, however, and as a matter of law,

it is respectfully submitted that that fact would not prevent

proof that other parties not named in the contract, were or

became liable thereon even if the cause of action were based

upon the contract, which is not the fact. Plaintiffs’ cause

of action as stated before and alleged in the complaint, is

for fraud practiced on the United States Government, That

could be established from the other allegations of the com-

plaint even without the allegations of the conspiracy. In

other words, plaintiffs’ theory of the case under T, 31

(U.S. C. §$$231-235) was two-fold. The fraud committed

on the government may be by making or causing to be made

of false claim against the government or obiaining the pay-

Opposing Affidavit of Emanuel Thebner.

ment or allowance of any claim, knowing it to be false or

fraudulent. Both these alternatives were set forth in the

complaint.

The principal attack upon the complaint is that Carl

Zeiss, Inc. was not physically a party to the contracts between

Bausch & Lomb Optical Company and Carl Zeiss, Jena,

Germany. The exclusion from the original complaint of

reference to Carl Zeiss, Jena, Germany was because there

was an absolute identity between Carl Zeiss, Inc. and Carl

Zeiss, Jena, Germany, which could be proven by factual

evidence as appears from the indictment aforesaid as a

matter of fact and as a matter of law, it would appear to

have been unnecessary because the charge in the complaint

was that of tort and Carl Zeiss, Inc. as a tort feasor. That

in so doing it was an agent is entirely immaterial, as an

agent is liable for tort as well as the principal.

As to the factual matter, deponent desires to call to the

attention of the Court the following which are not mentioned

in the moving affidavits. Paragraph “7” of the indictment

states:

“Whenever it is hereinafter alleged in this indictment

that the defendant Zeiss did do, or perform any act or

thing, the said allegation shall be deemed to mean that

the said act or thing was done by Zeiss, either in its

own name or, or through the instrumentality and agency

of Nedinsco or Car] Zeiss, Inc.”

Insofar as anything stated in the indictment relates or

tends to charge a violation of the Sherman Anti-Trust Act or

the Wilson Tariff Act by the involvement of interstate or

foreign commerce, it is principally in that connection that

Carl Zeiss, Jena, Germany had a bearing in the indictment.

205

206

207

“-

Opposing Affidavit of Emanuel Thebner.

Insofar as this action is concerned, Carl Zeiss, Inc., which

was and is to all intents and purposes, Carl Zeiss, Jena,

Germany, is the only party that was necessary to plead in

this action as a tort feasor.

In this connection, we call attention to the following state-

ments in the indictment:

208

Par. 4: “For a number of vears, including the three years

next preceding the date of the return of this

indictment, Zeiss has carried on business in the

Borough of Manhattan, City of New York, and

within the Southern District of New York,

through the instrumentality and agency of Carl

Zeiss, Inc., a corporation organized on or about

209 December 11th, 1925, and existing by virtue of

the laws of the State of New York, which is a

wholly owned subsidiary of Zeiss, and is com-

pletely dominated, controlled, and operated by

Zeiss.” (Italics ours.)

Par. 10: * * * * Bausch & Lomb and Zeiss for many years

have manufactured and distributed and now

manufacture and distribute and sell in the aggre-

gate the greater part of all military optical in-

struments manufactured and sold in the world.”

210 The Court will note according to the preamble first above

mentioned this must be construed as well that Carl Zeiss,

Inc. manufactured and distributed.

Par. 11: “Bausch & Lomb manufactures military optical

instruments at its plant in Rochester, New York,

for sale and shipment in interstate commerce

principally to the United States Government

**ee#y

Opposing Affidavit of Emanuel Thebner.

Par. 14: “* * * Bausch & Lomb and Zeiss (meaning as well

Carl Zeiss, Inc., as per preamble) have been en-

gaged in importing military optical instruments 211

into the United States through the Port of New

York in the said Southern District of New York.”

(Matter in parentheses ours. )

In paragraph “17” of the indictment it is alleged that the

agreement of April 28, 1921 was supplemented on June 27,

1925 and again on October 28, 1925 and further states as

follows:

“To modify the provisions of paragraph 2 with respect

to royalty payments and to modify paragraph 3 so as

to specify the circumstances under which Bausch &

Lomb and Zeiss (meaning Carl Zeiss, Inc. as per pre-

amble) could make quotations on military optical in-

struments, the eventual designation of which was the

territory of the other, it being agreed that such a quota-

tion could be made only with the consent of the other

party to the agreement, and that the price quoted should

be agreed upon by Zeiss (meaning Car] Zeiss, Inc. as

per preamble) and Bausch & Lomb. Bausch & Lomb

and Zeiss (meaning Carl Zeiss, Inc. as per preamble)

agreed that if either were requested to make bids by

any government on military optical instruments in-

tended for use in the territory allotted the other, the

requested quotation would contain a mark-up over the

bidders regular price up to 20% of said regular price,

which excess was intended to throw the business to the

party to whom the territory was allotted and, in case

such bid were successful, the excess was to be paid by

the successful bidder to the other contracting party.”

(Matter in parentheses ours. )

212

213

214

215

216

Opposing Affidavit of Emanuel Thebner.

The modifications of the agreement of 1921 are further

set forth in 17-d of the indictment, which paragraph con-

cludes as follows:

“Notwithstanding this change in the form of April 28th,

1921 agreement as supplemented, Bausch & Lomb and

Zeiss intended and continued to carry out the terms of

Paragraph % and 9 of the April 28th, 1921 agreement

as supplemented in 1925.”

These new modification agreements were made on Novem-

ber 26th, 1926 and on December 24th, 1926, respectively,

which period of time is approximately one year after the

incorporation of Carl Zeiss, Inc.

As the Court will undoubtedly read the indictment in

connection with this affidavit, it is not necessary to continue

further quoting therefrom,

A reference to the amended complaint by comparison with

the original, indicates except for a single correction which

was an inadvertent error in stating that the three indi-

vidual defendants who it is conceded were officers and

directors of Bausch & Lomb, Inec., was mistakenly stated

to be also officers and directors of Carl Zeiss, Inc, All of

the other additional allegations are in the nature of evi-

dentiary matters that could have been proven upon the trial

under the original complaint, but out of abundance of

caution and to meet the hypercritical attack of the com-

plaint, it was deemed better to serve an amended complaint.

The basic cause in all respects to wit: the conspiracy and the

fraud and the parties are all the same.

In substance, the amended complaint by addition and

changes were to the following effect :

(1) Wherever Carl Zeiss, Inc. was referred to as having

Opposing Affidavit of Emanuel Thebner.

agreed, we now allege it to be Carl Zeiss, Jena, Germany,

the party mentioned on the face of the agreement.

(2) The showing of the complete control and domina-

tion of Carl Zeiss, Inc. by Carl Zeiss, Jena, Germany.

(3) The allegation that the acts and matters referred to

in the complaint were carried out through the instrumen-

tality and agency of Carl Zeiss, Inc., in substance the

same as in the indictment.

A change was also made instead of whereas it is alleged

in the original complaint that all bids would contain a

mark-up up to 20% over the regular price, it is alleged in the

amended complaint in paragraph “11” that

“A sum of money equal to a percentage of the gross

sales price of each military optical instrument sold by

Bausch & Lomb to the Government of United States,

the said sum of money to be paid irrespective of

whether the fees of military optical equipment so sold

was covered in whole or in part by patents owned by

Zeiss.”

The indictment has a similar allegation (paragraph 17-b).

Mr. Eisenhart in his affidavit of January 5, 1942 at page

8 states that Judge Goddard had asked Mr. Isseks whether

any charge of fraud was involved, Mr. Isseks replied as

follows:

“No, sir, there is no charge of fraud against the defen-

dants in connection with the acts complained of in

the indictment.”

217

218

219

; -

Opposing Affidavit of Emanuel Thebner.

This isolated sentence does not truly represent the position

of the Assistant United States Attorney General.

Mr. Isseks, however, upon further auestion by the Court

as to why he should impose the maximum fine, shows that

he meant by the statement, “that there was no fraud in-

volved.” Mr. Isseks said:

220

“Your Honor | think the acts are sufficiently culpable,

although not involving acts of coercion or threats to

warrant the imposition of the maximum fine. This

continued from 1921 to date, and the penalty imposed,

if the penalty imposed by the maximum fine will be

small compared to what the government would consider

the defendant Bausch & Lomb has derived as benefits,

and of course its officers, and I think that the reason

itself ix sufficient for your Honor in imposing the

maximum fine.”

221

The statement in Mr. Eisenhart's affidavit at page “9”

charging that plaintiffs have seen fit to distort the earlier

charges made by the government counsel and then proceed-

ing to refer to the fact that Carl Zeiss, Inc. was not a party

to the contract and at page “11” stating that Bausch & Lomb

had no dealings with Carl Zeiss, Inc. manifests that de-

fendants were attempting to get what may be said as “snap

judgment” on the technicality that Carl Zeiss, Inc, was not,

on the face of the contract, a party thereto.

Without repeating what has already been said in that

connection, showing that the criticism is not justified, there

is presented questions of fact both as to the liability of

Car! Zeiss, Inc. and as to whether Bausch & Lomb had deal-

ings with Carl Zeiss, Inc. in connection with the matters

alleged in the complaint. The indictment clearly supports

the allegations of the complaint in both these respects.

222

Opposing Affidavit of Emanuel Thebner.

Mr. Eisenhart in his affidavit at page “10” in paragraph

“2”, says:

. 7 223

“Paragraph ‘8’ and ‘9 of the present complaint al-

leged that defendant Bausch & Lomb on or about April

28, 1921 and the defendant Carl Zeiss, Inc. from on or

about December 11, 1925 (together with the individual

defendants alleged to be, but not in fact officers and

directors of Carl Zeiss, Inc.), entered irts conspiracy,

etc.”

The allegation of paragraph “8” of the complaint in that

connection is as follows:

“The defendant Bausch & Lomb Optical Company from 224

on or about April 28, 1921 and the defendant Carl Zeiss,

Inc. from the date of its incorporation, on or about

December 11, 1925 and the individual defendants since

the time they became officers and directors of said

corporation * * *”

In conclusion, plaintiffs respectfully state that their posi-

tion herein taken with regard to the consideration of the

motion for summary judgment at this time is not in order

\o avoid u decision either as to the sufficiency of the original

or ax to the sufficiency of the amended complaint nor as to

the passing upon the motion for summary judgment, but 225

each be taken up in due order according to the course and

practice of this Court,

The foregoing matters in this affidavit were primarily

addressed to the motion made by the defendant Bausch &

Lomb Optical Company and the individual defendants. A

like motion has also been made by the defendant Carl Zeiss,

226

227

228

Opposing Affidavit of Emanuel Thebner.

Inc. To avoid duplication, we respectfully ask that this

affidavit be read in opposition to both of said motions with

the same force and effect as if a separate affidavit was filed

in the Carl Zeiss, Inc.’s motion.

WHEREFORE, deponent respectfully prays as follows:

1. That the motions of all the defendants instituted by

orders to show cause dated January 14th, 1942 be denied in

all respects.

2. That the motions of all the defendants made by order

to show cause dated January 6, 1942 and by notice of mo-

tion dated January 6, 1942, be denied in all respects.

3. That the stay contained in the order to show cause

dated January 14, 1942 be vacated in all respects.

4. That the amended complaint be declared to have been

properly and timely served and is a valid and subsisting

pleading on the part of the plaintiffs herein.

5. In the event that the Court should not see fit to deny

the motion for alternative relief under the orders to show

cause of January 14, 1942 which was originally made by

the defendants under the order to show cause dated Jan-

uary 6th, 1942 and on notice of motion dated January 6,

1942, that the hearing be deferred for a reasonable time

so that the plaintiffs would have an opportunity to prepare

their opposition to said motion.

(Sworn to by Emanuel Thebner, January 15th, 1942.)

Opposing Affidavit of Murray Brensilber.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

229

[SAME TITLE]

STATE OF NEW YorK,

COUNTY OF NEW YorRK, 83. :

MURRAY BRENSILBER, being duly sworn, deposes and says

I am one of the plaintiffs in this action.

That I have read the annexed affidavit of Emanuel Theb- 230

ner and that the same is true in all respects. That I re

iterate the statements therein made as if herein repeated

verbatim.

(Sworn to by Murray Brensilber, January 15th, 1942.)

231

232

233

234

Amended Complaint.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

»™

[nance TITS)

Plaintiffs complaining of the defendants, for their amend-

ed complaint, respectfully allege as follows:

First: That the plaintiffs are and at all times herein

mentioned were, and each of them is a citizen of the United

States of America and of the State of New York, and each

of them is a resident of the State of New York.

Second: The plaintiffs bring this action in behalf of

the United States of America and in their own behalf by vir-

tue of and pursuant to United States Revised Statutes

Sections 3490-3494 (31 U.S. C. 231-235). The matter in con-

troversy exceeds, exclusive of interest and costs, the sum

of $3000.00.

Third: Upon information and belief that the defendant,

Bausch & Lomb Optical Company, hereinafter called Bausch

& Lomb is a corporation organized and existing under the

Laws of the State of New York and has maintained and

now maintains an office and place of business in the Borough

of Manhattan, City of New York within this Southern Dis-

trict of New York, and has transacted business and now

transacts business within said District.

Fourth: Upon information and belief, Carl Zeiss, Inc.

is a corporation organized and existing under the Laws of

the State of New York and has maintained and now main-

a .

Amended Complaint.

tains its principal place of business and office in the Borough

of Manhattan, City of New York within this Southern

District of New York, and has transacted business and now

transacts business within said District. °

Fifth: Upon information and belief, Carl Zeiss (herein-

after called Zeiss), is a corporation or association existing

under and by virtue of the Laws of Germany, and has its

principal place of business in Jena, Germany, and for many

years has been engaged in the business of manufacturing

military optical instruments at its plant in Jena, Germany,

and distributing and selling those instruments in Germany

and in other countries in the world.

Sixth: Upon information and belief, the defendant Carl 236

Zeiss, Inc. is a wholly owned subsidiary of Car] Zeiss, Jena,

Germany, and is dominated. controlled and operated by the

said Car] Zeiss, Jena, Germany.

Seventh: Upon information and belief, Carl Zeiss, Jena,

Germany, has carried on business in the Borough of Man-

hattan, City of New York, and within the Southern District

of New York through the instrumentality and agency of

Carl Zeiss, Inc., a New York corporation.

Eighth: Upon information and belief, M. H. Eisenhart,

Carl L. Bausch and Theodore B. Drescher, are and each of 237

them is and was during the greater part of the times

herein mentioned, associated with Bausch & Lomb, and has

held and at the present time hold the position of an officer

or director of said corporation and were and are actively

engaged in the management, direction and control of the

affairs amd policies of said corporation.

2 _

Amended Complaint.

Ninth: Upon information and belief that the said Bausch

& Lomb and Car! Zeiss, Jena, Germany, are and were at the

times herein mentioned engaged in the business of Manu-

facturing and selling various instruments, among others,

periscopes, range finders, altimeters, bore-sights, bomb-

sights, torpedo directors, sights for guns and other scientific

optical instruments (except binoculars) used to direct and

control the firing of modern instruments of warfare, herein-

after referred to as “military optical instruments”.

238

Tenth: Upon information and belief the United States

Government purchased such military optical instruments

for use on battleships, cruisers and submarines, and for use

239 with aircraft and artillery.

Eleventh: Upon information and belief the defendant,

Bausch & Lomb and Car! Zeiss, Jena, Germany, from on or

about April 28, 1921, and the defendant, Carl Zeiss, Inc.,

from the date of its incorporation, on or about December

11, 1925, and the individual defendants since the time they

became officers or directors of said Bausch & Lomb, to-

gether with other persons to the plaintiffs unknown, have

been continuously engaged during and throughout the peri-

ods of time aforesaid, and up to and on about March 29,

1940, in an unlawful combination and conspiracy to sup-

press and limit competition between themselves by agreeing

(a) to divide the world market for military optical instru-

ments into certain geographical areas, the exclusive terri-

tory of Bausch & Lomb to be the United States of America,

and the exclusive territory of Zeiss to be the rest of the

world; (b) not to sell directly or indirectly such instru-

ments for use in the area or territory allotted to the other

without the prior consent of the other; (c) in the case of

240

= ;

Amended Complaint.

sales made by consent for use in the territory of the other,

to fix, maintain, and control arbitrary, artificial and un-

reasonable prices and terms of sale of such military optical 241

instruments; and that in consideration of the obligations

assumed by Zeiss, as aforesaid, Bausch & Lomb agreed,

among other things, to pay to Zeiss for a period of twenty-

five (25) years from May 1, 1921, a sum of money equal

to a percentage of the gross sales price of each military

optical instrument sold by Bausch & Lomb to the Govern-

ment of the United States, the said sum of money to be

paid irrespective of whether the piece of military optical

equipment so sold was covered in whole or in part by patents

owned by Zeiss.

242

Twelfth: Upon information and belief, that at all times

subsequent to on or about December 11, 1925, and to and

including on or about March 29, 1940, Carl Zeiss Inc. has re-

fused to sell military optical instruments for use in the

United States and thereby aided and abetted the further-

ance of the combination and conspiracy herein alleged.

Thirteenth: Upon information and belief, between April

28, 1921 and March 29, 1940, the combination and conspiracy

hereinbefore alleged has been operated and carried out in

part within the Southern District of New York and said

defendant, Bausch & Lomb and Carl Zeiss, Jena, Germany,

have, by their concerted action aforesaid, sold, shipped and

delivered military optical instruments to the Government

of the United States at arbitrary, artificial and wireasonable

and non-competitive prices agreed upon by the defendant,

Bausch & Lomb with Carl Zeiss, Jena, Germany, and said

defendant, Bausch & Lomb has received payments from

the United States Government for the sale and delivery of

243

244

245

246

Amended Complaint.

such military optical instruments which they divided be-

tween them in accordance with their said agreements,

Fourteenth: Upon information and belief that in pursu-

ance of said conspiracy, combination and agreements by

Bausch & Lomb and its co-conspirators, Bausch & Lomb

severally at various times between May 1921 and March

1940, did submit to the Government of the United States

bids for contracts for the manufacture and sale of military

optical instruments and other articles and materials to

be used by the United States Government in the War, Navy

and other departments and bureaus of the Government.

Such bids were at prices that pretended to be and were

represented to be, and which the Government of the United

States and its authorized representatives believed to be, the

normal, prevailing and competitive prices of such military

optical instruments. Such bids, were, in fact, not the nor-

mal, prevailing and competitive prices therefor, but were in

excess of the normal, prevailing and competitive prices

for such military optical instruments. The officers author-

ized to accept such bids and enter into such contracts of

sale and make such purchases on behalf of the Government

of the United States, the Treasury, War and Navy De-

partments respectively, were without knowledge of the con-

spiracy, combination and agreements aforesaid, entered

into by the defendants, and accepted various bids submit-

ted by the defendant Bausch & Lomb at various times,

the exact dates of which are presently unknown to the

plaintiffs, for manufacture and sale and the sale of mili-

tary optical instruments to the Government of the United

States. The said officers on behalf of the Government of

the United States, its Treasury, War and Navy Depart-

ments, did make various purchases from time to time, the

exact dates of which are unknown to the plaintiffs, of such

tT ;

Amended Complaint.

instruments, articles and materials to be supplied to the

War and Navy Departments in large quantities and

amounts, the exact prices, amounts and particulars of which

are presently unknown to the plaintiff. _—

Fifteenth: Upon information and belief that at various

times between May 1921 and March 1940, the defendants,

by carrying out the combination and conspiracy hereinbe-

fore described, have exacted arbitrary, artificial, unreason-

able and non-competitive prices from the Government of

the United States, in connection with the sale to it of mili-

tary optical instruments. The defendants, other than Carl

Zeiss Inc., severally and from time to time, the exact dates

being at present unknown to the plaintiffs, have presented

for payment and approval to various officers of the Civil

Military and Naval service of the United States, bids,

claims, invoices, bills, vouchers and statements and ac-

counts against the United States for purchase of military

optical instruments, upon the aforesaid bids, contracts and

sales in large sums of money, the exact amount of which is

at present unknown to the plaintiffs. The defendants, knew

that such bids, claims, invoices, bills, vouchers, statements

and accounts were excessive, false, fictitious and fraudu-

lent by reasons aforesaid, in that said defendants added to

the normal, prevailing and competitive prices, an arbi-

trary amount pursuant to the conspiracy, combination and

agreements between the defendants aforesaid, and said

claims, bills, statements and accounts were respectively

paid and satisfied.

248

249

Sixteenth: Upon information and belief the individual

defendants and each of them, and Carl Zeiss Inc. partici-

pated in and aided and abetted in the matters and things

herein alleged.

Se tee ee

250

251

252

Amended Complaint.

Seventeenth: Upon information and belief, such bids,

claims, invoices, bills, statements and accounts which con-

tained the arbitrary amounts added to the regular prices

that were presented by the defendants, other than Carl

Zeiss Inc. and which they caused to be presented for pay-

ment and approval, and obtained payment thereof from

the Government of the United States, the Treasury, Navy

and War Departments, respectively for the period from

November 1937 to December 1938, amounted in the ag-

gregate, and was equal to about the sum of $8,000,000. in

which said sums the defendants are indebted to the United

States Government, and various other sums of money in

other years, the exact amount of which is at present un-

known to the plaintiffs, for which said sums the defendants

are indebted to the United States Government.

Eighteenth: Upon information and belief, the aforesaid

agreements, acts and conduct of the defendants constituted

a fraud upon the United States of America and were and

are against the Public Policy, and were a violation of the

Revised Statutes of the United States, §§3490-3494 (U.S. C.

231-235).

Nineteenth: Upon information and belief the aforesaid

agreements by and between the defendant, Bausch & Lomb,

and Carl Zeiss, Jena, Germany, and the acts and conduct

of Carl Zeiss, Inc. and the individual defendants, also con-

stituted an unlawful combination and conspiracy in viola-

tion of the Statutes of the United States, and more par-

ticularly the Act of Congress of July 2, 1890 entitled “An

Act to Protect Trade and Commerce Against Unlawful

Restraints and Monopolies” (U. 8S. C. Title 15, §1) and the

amendments thereof.

=~ _ _ —<—

Amended Complaint.

Twentieth: Upon information and belief the defendants

are not and were not at the times herein mentioned, nor any

of them, in the military or naval service of the United States

or in the Militia called into or actually employed in the

service of the United States.

Twenty-one: By reason of the premises, and the acts and

conduct of the defendants and the Statutes of the United

States in such case made and provided, the defendants are

indebted to the Government of the United States in the sum

of about $20,000,000. in which amount the Government of

the United States sustained damages, and the defendants

shall forfeit and pay to the United States the sum of $2,000.

for each of said transactions and in addition, double the

amount of damages sustained by the Government of the

United States, and of which amount of damages and for-

feitures the plaintiffs herein are entitled to receive one-half

of such forfeitures and amount of damages which they shall

recover and collect, and all costs the Court may award

against the said defendants.

WHEREFORE, plaintiffs demand judgment against the de-

fendants for the sum of double the amount of said damages

aforesaid, to wit, $40,000,000., and in addition thereto the

amount of forfeitures and penalties as ascertained and de-

termined by this Court, which shall be at least in the sum

of $2,000. together with the interest on said sums and the

costs of this action.

EMANUEL THEBNER,

Attorney for Plaintiffs,

Office & P. O. Address,

111 John Street,

Borough of Manhattan,

City of New York.

253

254

255

Indictment.

i IN THD

DISTRICT COURT OF THE UNITED STATES

}

256 For tHe SouTHERN District or New York

| C 107-169

UNITED STATES OF AMERICA,

SOUTHERN District or New York, ss. :

INDICTMENT

The Grand Jurors of the United States of America being

duly impanelled, sworn and charged in the District Court

of the United States for the Southern District of New York,

at the March Term of the said Court in the year 1940, and

inquiring for the said District, upon their oaths, find and

present as follows, to wit:

257

COUNT ONE

DEFINITIONS

1. The term “military optical instruments” as used in

this indictment shall be deemed to include such instruments

as periscopes, range finders, altimeters, boresights, bomb

sights, torpedo directors, sights for guns and other scientific

optical instruments (except binoculars) used to direct and

258 control the firing of modern instruments and warfare. These

instruments are an essential and integral part of what is

commonly called the “fire control mechanism” of battle-

ships, cruisers and submarines. They are likewise essential

to the rapid and accurate firing of modern instruments and

warfare.

Indictment.

PeRIOD OF TIME COVERED BY THE INDICTMENT

2. The conspiracy and combination hereinafter alleged

was entered into on or about April 28th, 1921, and con-

tinued thereafter up to and including the date of the presen-

tation of this indictment. Each allegation hereinafter made

in this indictment that an act has been done by any of the

defendants herein, or any other person, shall be deemed to

be an allegation that such act was performed within the

three years next preceding the date of the presentation of

this ind'ctment, unless otherwise stated.

THE DEFENDANTS

3. The Bausch & Lomb Optical Company is hereby in-

dicted and made a defendant herein. The said defendant,

Bausch & Lomb Optical Company (hereinafter referred to as

Bausch & Lomb) is a corporation organized under and

existing by virtue of the laws of the State of New York,

and has its principal place of business in Rochester, New

York. For many years, the exact number to your Grand

Jurors unknown, Bausch & Lomb has maintained and now

maintains an office in the Borough of Manhattan, City of

New York within this Southern District of New York, and

has transacted business and now transacts business within

the said district. Bausch & Lomb has been for many years,

and is now, engaged in the business of manufacturing,

among other things, military optical instruments at its

plant in Rochester, New York, and distributing and selling

the said military optical instruments in interstate and

foreign commerce.

4. Carl Zeiss is hereby indicted and made a defendant

herein. The said defendant, Carl Zeiss (hereinafter re-

259

260

261

263

264

Indictment.

ferred to as Zeiss) is a corporation or association existing

under and by virtue of the laws of Germany, and has its

principal place of business in Jena, Germany. For many

years, the exact number to your Grand Jurors unknown,

Zeiss has been and is now engaged in the business of

manufacturing, among other things, military optical instru-

ments at its plant in Jena, Germany, and distributing and

selling those instruments in Germany and in other countries

in the world. For a number of years, including the three

years next preceding the date of the return of this indict-

ment, Zeiss has carried on business in the Borough of Man-

hattan, City of New York, and within the Southern District

of New York, through the instrumentality and agency of

Carl Zeiss, Inc., a corporatior. organized on or about Decem-

ber 11th, 1925, and existing by virtue of the laws of the

State of New York, which is a wholly owned subsidiary of

Zeiss, and is completely dominated, controlled, and operated

by Zeiss. Since 1921, Zeiss has carried on business in

Holland and in other countries through the instrumentality

and agency of N. V. Nederlandsche Instrumenten Compagnie

(hereinafter referred to as Nedinsco), a corporation organ-

ized under and existing by virtue of the laws of Holland,

which has its principal office at The Hague, Holland, and

which is a wholly owned subsidiary of Zeiss, and is com-

pletely dominated and controlled by Zeiss. Through the

instrumentality and agency of Nedinsco, Zeiss has carried

on the business of manufacturing military optical instru-

ments at a plant in Holland, and distributing and selling

the said instruments in various countries in the world.

5. Carl Zeiss, Inc., is hereby indicted and made a defen-

dant herein. The said defendant, Carl Zeiss, Inc., as hereto-

fore alleged, is a corporation organized and existing by

virtue of the laws of the State of New York, and has main-

Indictment.

tained and now maintains its principal office in the Borough

of Manhattan, City of New York, within this Southern Dis-

trict of New York, and has transacted business and now

transacts business within the said district. “ee

6. The following individuals are hereby indicted and made

defendants herein, each being associated with Bausch &

Lomb, and each having the official title or position therewith

shown below. Said individual defendants, during a part of

the period of time covered by this indictment, and during all

of the three years next preceding the date of the return of

the indictment, have held, and at the present time hold the

official title or positions indicated below, and have been

actively engaged in the management, direction, and control

of the affairs and policies of Bausch & Lomb in and in con-

nection with the interstate and foreign trade and commerce

described in this indictment.

266

Name of Individual Address Official Title or

Defendants Position

M. H. Eisenhart Rochester, New York President

Carl L. Bausch Rochester, New York Vice-President in

charge ot Re-

search and En-

gineering

Theodore B. Drescher Rochester, New York Vice-President in 267

charge of Opera-

tions

7. Whenever it is hereinafter alleged in this indictment

that the defendant Bausch & Lomb did do or perform any

act or thing, the said allegation shall be deemed to mean that

Indictment.

each of the said individuals named herein as defendants and

described as officers, agents or employees of Bausch & Lomb

did authorize, order, direct and do such act or thing. When-

ever it is hereinafter alleged in this indictment that the de-

fendant Zeiss did do, or perform any act or thing, the said

allegation shall be deemed to mean that the said act or

thing was done by Zeiss, either in its own name, or through

the instrumentality and agency of Nedinsco or Carl Zeiss,

Inc.

268

NATURE OF THE INTERSTATE AND FOREIGN COMMERCE INVOLVED

8. Since 1921, Bausch & Lomb has manufactured, dis-

tributed and sold a substantial part of all optical instru-

269° = ments manufactured and distributed in the United States.

In the five years next preceding the date of the return of

this indictment, Bausch & Lomb has manufactured, distribut-

ed and sold approximately 50¢¢ of all military optical in-

struments manufactured, distributed and sold within the

United States.

9. For many years, including the three years next pre-

ceding the date of the return of this indictment, Zeiss and

its subsidiary Nedinsco have been among the largest manu-

facturers and sellers of various types of optical instruments,

including military optical instruments, in the world. For

270 many years, including the three years next preceding the

date of the return of this indictment, Zeiss and Nedinsco

have manufactured and sold the greater part of all military

optical instruments manufactured and sold in Europe.

10. For many years prior to 1921, Bausch & Lomb and

Zeiss competed with each other in countries other than the

United States in the sale of all types of optical instruments,

PONE TP UES so Cs ANG ON, ay OF ib Pint me!

Indictment.

including military optical instruments. Since 1921, Bausch

& Lomb and Zeiss have not competed either in the United

States or any other countries in the world in the sale and

distribution of military optical instruments, although they

have continued to compete in the sale and distribution of

certain other types of optical instruments. Bausch & Lomb

and Zeiss for many years have manufactured and distributed

and now inanufacture and distribute and sell in the aggre-

gate the greater part of all military optical instruments

manufactured and sold in the world.

11. Bausch & Lomb manufactures military optical in-

struments at its plant in Rochester, New York, for sale and

shipment in interstate commerce principally to the United

States Government and has, upon occasion, as hereinafter

alleged, also sold military optical instruments to foreign

governments, and to firms, shipyards and individuals lo-

cated in the states of the United States other than the State

of New York. The United States Government purchases

such instruments for use on battleships, cruisers and sub-

marines and for use with aircraft and artillery. Upon the

receipt of an order from the United States Government, the

said instruments are manufactured in Rochester, New York,

and are shipped and transported in interstate commerce to

the United States shipyards, forts and various military and

naval units located in San Francisco, California; Boston,

Massachusetts; Brooklyn, New York; Philadelphia, Penn-

svylvania; Washington, District of Columbia, and to various

other states of the United States of America.

12. On a number of occasions between 1921 and the date

of the return of this indictment, military optical instru-

ments have been sold by Bausch & Lomb directly to Govern-

271

272

TN ASAE etree FST RR Ray!

SEER RIO in i ee ree

ee Bs

ERS es

PaaS Fim a IN

‘ ss

274

Indictment.

ments other than that of the United States of America.

Bausch & Lomb manufactured the said instruments in

Rochester, New York, and shipped such instruments to the

foreign country through the Port of New York, and such

shipments constituted shipments in interstate and foreign

commerce.

13. On a number of occasions between 1921 and the date

of the return of this indictment, military optical instru-

ments have been purchased from Bausch & Lomb by various

firms, shipyards and individuals located in the United

States of America. The instruments were used in the con-

struction of battleships, cruisers*and submarines intended

for delivery to a foreign country. Bausch & Lomb manu-

factured the said instruments in Rochester, New York, and

shipped such instruments to the various firms, shipyards,

and individuals located in the United States of America, and

such shipments constituted shipments in interstate com-

merce. Such instruments were intended for ultimate use

in foreign commerce and were transported in foreign com-

merce.

14. At all times since 1921, including the three years next

preceding the date of the return of this indictment, Bausch

& Lomb and Zeiss have been engaged in importing military

optical instruments into the United States through the Port

of New York in the said Southern District of New York.

Zeiss has shipped the said military optical instruments

from points in Europe to Bausch & Lomb through the Port

of New York in the said Southern District of New York.

Except for the said military optical instruments so shipped,

neither Bausch & Lomb nor Zeiss has shipped to or im-

ported into the United States any military optical instru-

PROC E LOEN

Amended Complaint.

ments which have been manufactured outside the United

States.

THE COMBINATION AND CONSPIRACY

15. Beginning on or about April 28, 1921, defendants

Bausch & Lomb and Zeiss, and since the date they became

officers or directors of defendant Bausch & Lomb, defen-

dants Eisenhart, Bausch and Drescher, and since on or about

December 11th, 1925, the date of its incorporation, defen-

dants Zeiss Inc., and continuing at all times thereafter up

to and including the date of the presentation of this in-

dictment, such defendants and other persons to your Grand

Jurors unknown, well knowing all of the foregoing facts,

have been engaged in a wrongful and unlawful combination

and conspiracy, carried on in part within the Southern Dis-

trict of New York, in restraint of the aforesaid interstate

and foreign commerce in military optical instruments in

violation of Section 1 of the Act of Congress of July 2, 1890,

entitled “An Act to protect trade and commerce against

unlawful restraints and monopolies”, that is to say:

16. The defendants, Bausch & Lomb and Zeiss, from on

or about April 28th, 1921, to the date of the presentation

of this indictment, and the defendants, Eisenhart, Bausch

and Drescher, since the time they became officers or direc-

tors of the defendant, Bausch & Lomb, to the date of the

presentation of this indictment, and the defendant, Carl

Zeiss Inc., from the date of its incorporation on or about

December 11th, 1925 to the date of the presentation of this

indictment, and other persons to the Grand Jurors unknown,

have been continuously engaged during and throughout the

periods of time aforesaid in an unlawful combination and

278

(

280

281

282

Amended Complaint.

conspiracy to suppress and limit competition between them-

selves by agreeing (a) to divide the world market for mili-

tary optical instruments into certain geographical areas,

the exclusive territory of Bausch & Lomb to be the United

States of America, and the exclusive territory of Zeiss to be

the rest of the world; (b) not to sell directly or indirectly

such instruments for use in the area or territory allotted to

the other without the prior consent of the other; (c) in the

case of sales made by consent for use in the territory of the

other, to fix, maintain, and control arbitrary, artificial, and

unreasonable prices and terms of sale of such military optical

instruments; (d) that Zeiss would not permit any person,

firm or corporation which was engaged, or which wished to

engage in the United States in the business of manufacturing

and distributing military optical instruments in competition

with Bausch & Lomb, to use any of the devices, information,

instruments, machinery, or equipment of Zeiss on any terms

in connection with such manutacture and distribution even

though such persons, firms, or corporations were ready,

willing, and able to compensate Zeiss for the use of such

knowledge, information, devices, instruments, machinery,

and equipment, and (e) that Bausch & Lomb would not

permit any person, firm or corporation which was engaged

or which wished to engage outside the United States in the

business of manufacturing and distributing military optical

instruments, to use any of the devices, information, instru-

ments, machinery, or equipment of Bausch & Lomb on any

terms in connection with such manufacture and distribution

even though such persons, firms, or corporations were ready,

willing, and able to compensate Bausch & Lomb for the use

of such knowledge, information, devices, instruments, ma-

chinery, and equipment.

Indictment.

17. Said unlawful combination and conspiracy has been

effectuated by divers means and methods, including among

others, the following: 283

(a) On or about April 28th, 1921, the corporate defen-

dants entered into a written agreement in German for a

period of twenty-one years, from May Ist, 1921, to April

30th, 1941. Paragraph 3 of such agreement as translated by

defendant Bausch & Lomb, provides as follows:

“B. & L. [Bausch & Lomb] obligate themselves not to

sell, directly or indirectly, military instruments to

countries outside of the United States of America, and

vice versa Carl Zeiss obligate themselves not to sell

such instruments, directly or indirectly to the United 284

States unless the parties have come to an agreement

regarding the conditions of sale and the respective

territories of distribution.”

In Paragraph 9 of the said contract, Bausch & Lomb and

Zeiss agreed to conceal the existence of the contract from

third persons, and (so far as practicable) not to disclose

the contract even to their own employees.

(b) In consideration of the obligations assumed by Zeiss

in Paragraph 3 of the said agreement of April 28th, 1921,

and certain other obligations assumed by Zeiss in the said 285

agreement, Bausch & Lomb agreed in Paragraph 2 of the

said agreement of April 28th, 1921, to pay to Zeiss for a

period of twenty-five years from May Ist, 1921, a royalty

equal to a percentage of the gross sales price of each mili-

tary optical instrument sold by Bausch & Lomb, including

each piece of such equipment sold by Bausch & Lomb to

the Government of the United States, the said royalty to be

Indictment.

paid irrespective of whether the piece of military optical

equipment so sold was covered in whole or in part by

patents owned by Zeiss.

17(a) of this indictment, was supplemented on June 27th,

1925, and again on October 2sth, 1925, to modify the pro-

visions of Paragraph 2 with respect to royalty payments

and to modify Paragraph 3 so as to specify the circum-

stances under which Bausch & Lomb and Zeiss could make

quotations on military optical instruments, the eventual

destination of which was the territory of the other, it being

agreed that such a quotation could be made only with the

consent of the other party to the agreement, and that the

price quoted should be agreed upon by Zeiss and Bausch

‘& Lomb. Bausch & Lomb and Zeiss agreed that if either were

requested to make bids by any government on military

optical instruments intended for use in the territory allotted

the other, the requested quotation would contain a mark-up

over the bidders regular price up to 20% of said regular

price, which excess was intended to throw the business to

the party to whom the territory was allotted and, in case

such bid were successful, the excess was to be paid by the

successful bidder to the other contracting party.

(d) A new agreement, signed by Bausch & Lomb at

Rochester, New York, on November 26, 1926, and by Zeiss

at Jena, Germany, on December 24th, 1926, was entered

into by Bausch & Lomb and Zeiss. The said new agreement

was identical with the agreement of April 28th, 1921 as

supplemented, except that Paragraph 9 calling for secrecy

was omitted from the new written agreement, Paragraph 2

was modified as to the royalty payments, and Paragraph 3

OR AOD AMT Lee TRE AE, FOAL LL NE ALLE IAAL OMEN WE

Indictment.

was changed so as not to indicate on its face that the parties

to the contract had divided the world market between them-

selves and that each had agreed not to compete in the terri-

tory allotted to the other. Before the making of the said

new agreement, Bausch & Lomb knew that Paragraph 3 of

the contract of April 28th, 1921 as supplemented, violated

the Anti Trust laws of the United States, and the said new

agreement was made to conceal the existence of the agree-

ment to divide the world market and not to compete in

interstate and foreign commerce. Notwithstanding this

change in the form of the April 28th, 1921 agreement as

supplemented, Bausch & Lomb and Zeiss intended and con-

tinued to carry out the terms of Paragraphs 3 and 9 of

the April 28th, 1921 agreement as supplemented in 1925.

(e) At all times after May 1st, 1921, to and including

the three years next preceding the date of the return of this

indictment, Bausch & Lomb has refused to sell or to quote

prices on military optical instruments for use outside of

the United States, until Zeiss has consented to such a sale.

On a number of occasions since June 27th, 1925 Bausch &

Lomb has sold military optical instruments for use outside

of the United States only after first obtaining the consent

of Zeiss as to the sale and the price and in the case of each

such sale the sale was made at an arbitrary, artificial,

unreasonable and non-competitive price agreed upon by Zeiss

and Bausch & Lomb. On other occasions subsequent to May,

1921, Bausch & Lomb has offered to sell military optical

instruments for use outside of the United States, with the

consent of Zeiss, at arbitrary, artificial, unreasonable and

non-competitive prices agreed upon by Zeiss and Bausch

& Lomb. At all times subsequent to May, 1921, to and in-

cluding the three years next preceding the date of the return

289

290

291

ce ILE i IRENE IR SRR

292

293

294

Indictment.

of this indictment, Bausch & Lomb has refused to permit

persons, firms and corporations who were engaged or who

wished to engage in the production and distribution of mili-

tary optical equipment outside of the United States, to use

any of the devices, information, machinery, or equipment of

Bausch & Lomb for such production and distribution, even

though such persons, firms or corporations were ready, will-

ing and able to compensate Bausch & Lomb for such use.

(f) At all times subsequent to May Ist, 1921, to and in-

cluding the three years next preceding the date of the return

of this indictment, Zeiss has refused to sell military optical

instruments for use within the United States unless the

sales were consented to by Bausch & Lomb. On various

occasions, subsequent to June 27th, 1925, Zeiss has offered

to sell military optical instruments for use in the United

States with the consent of Bausch & Lomb at arbitrary,

artificial, unreasonable and non-competitive prices agreed

upon by Bausch & Lomb and Zeiss. At all times subsequent

to May Ist, 1921, to and including the three years next pre-

ceding the date of the return of this indictment, Zeiss has

refused to permit any person, firm or corporation engaged in,

or who wished to engage in the manufacture and distribution

of military optical instruments in the United States in

competition with Bausch & Lomb, to use any of the devices,

knowledge, instruments and equipment of Zeiss for the pro-

duction of military optical instruments even though such

persons, firms and corporations were ready, willing and able

to compensate Zeiss for such use.

(gz) Since May Ist, 1921, to and including the three vears

next preceding the date of the return of this indictment,

Bausch & Lomb, pursuant to and in execution of the combina-

tion and conspiracy described in this indictment, has paid to

aa, A A AO =

Indictment.

Zeiss (pursuant to the provisions of Paragraph 2 of the

said agreement of April 28th, 1921, as supplemented and

modified, as described in Paragraph 17(c) and (d) of this 295

indictment), as a royalty, a percentage on the gross sales

price of each piece of military optical equipment sold by

Bausch & Lomb, including each piece of such equipment sold

by Bausch & Lomb to the Government of the United States,

and each such payment has been made irrespective of whether

the piece of miliary optical equipment with respect to which

the payment was made, has been covered in whole or in part

by patents owned by Zeiss.

(h) At all times subsequent to on or about December 11th,

1925, to and including the three years next preceding the

date of the return of this indictment, Carl Zeiss, Inc. has 296

refused to sell military optical instruments for use in the

United States.

EFFECTS OF THE COMBINATION AND CONSPIRACY

18. By carrying out the combination and conspiracy here-

inbefore described, the defendants have directly, substan-

tially and unreasonably restrained interstate and foreign

commerce in military optical instruments; have exacted

arbitrary, artificial, unreasonable and non-competitive prices

from purchasers of military optical instruments including

the Government of the United States, and have prevented

and restrained free and vigorous competition in the produc- 297

tion and distribution of military optical instruments in the

United States and in the interstate and foreign commerce.

JURISDICTION AND VENUE

19. The combination and conspiracy hereinbefore alleged,

has operated and has been carried out, in part, within the

Pie SPO AEA re

100

Indictment.

Southern District of New York. The defendants, within

three years preceding the date of the return of this indict-

99g ment, in effectuating and carrying on said combination

and conspiracy, have, within said district, performed, among

others, the following acts:

(a) Bausch & Lomb refused in said district to sell military

optical instruments to prospective purchasers if such in-

struments were eventually to go outside of the United States

of America.

(b) Bausch & Lomb refused in the said district to enter

into arrangements whereby the information, knowledge,

equipment and machinery of Bausch & Lomb would be sold

or employed in the production of military optical instru-

ments intended for use outside the United States.

299

military optical instruments, through the Port of New York,

in the Southern District of New York, which instruments

were thereafter sold by Bausch & Lomb to the Government

of the United States at arbitrary, artificial, unreasonable

and non-competitive prices agreed upon by the defendants.

(d) Zeiss has collected and received from Bausch & Lomb

in the said Southern District of New York, the said royalty

300 payments paid by Bausch & Lomb to Zeiss pursuant to the

said contract of April 28th, 1921 as supplemented and

modified by the agreements referred to in Paragraph 17(c)

and (d) in this indictment.

(e) Carl Zeiss, Inc. has refused in the said Southern

District of New York to sel] military optical instruments to

prospective purchasers for use within the United States.

101

Indictment.

And so the Grand Jurors aforesaid, upon their oaths

aforesaid, do find and present that the defendants, including

the corporate defendants, throughout the period aforesaid,

including the t

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