# Appendix — Hughes Tool Co. v. Trans World Airlines, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0039%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1973 - **Citation:** 409 U.S. 363 ## Text In THE Supreme Court of the Anited States Ocroser Term, 1972 Nos. 71-827, 71-830 + Hvucues Toot Company and Rarmonp M. Hotimay, Petitioners, = Trans: Wortp Arties, Inc., Respondent. Trans Worip Araines, Inc., Cross-Petitioner, —vV = Nature of Claim and Jurisdiction of Court 65. Plaintiff's claim arises opt of the facts previously alleged in support of the claims hereinbefore stated, and this Court has jurisdiction to grant all relief available under such facts since this Court has jurisdiction, as here- inbefore alleged in Paragraphs 1 and 56, to determine each of the claims hereinbefore stated and arising out of the facts alleged. 3 IL. Description of Parties and Background of Acts Committed 66. The description of the parties involved is as herein- before alleged in Paragraphs 2 through 6 hereof and the background of the acts committed is.as alleged in Para- graphs 29 through 35, and such Paragraphs are hereby realleged. \ \ Acts Com ¢ From |and after ber 31, 1960, the defendants have maliciously and wilfully “i the business of TWA } } | ; | A-30 TWA Complaint by acts alleged in Paragraphs 37 through 48 hereof, which Paragraphs are hereby reallaged. IV. Effects of Acts 68. TWA has been injured as and in the manner herein. before alleged in Paragraph 53, which Paragraph is hereby realleged. 69. TWA has been injured in the amount of appror- mately $10,000,000. Such damages will, as a result of de- fendants’ continuing wrongful acts, be substantially in- creased in the near future. 70. Unless the relief TWA requests is granted, it wil suffer immediate, further and irreparable injury. TWA has no adequate remedy at law. PRAYER Wuenerorg, plaintiff prays that this Court order, adjudge and decree: L « With Respect to the First and Second Claims Stated Hereinbefore, (1) That the defendants and Atlas have violated Se tions 1 and 2 of the Sherman Act, Section 7 of the Clayton Act; and, with respect to the first claim only, Section 3 of the Clayton Act; (2) That the defendants divest’ themselves of all right naa interest in the stock of plaintiff; . Baad , A-31 TWA Complaint (3) That the defendants pay to the plaintiff $105,000,000, three-fold the damages sustained by plaintiff, together with costs and attorneys’ fees; (4) That the defendants, their officers, agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice of this injunction be perpetually enjoined (a) from attempting to exercise control or domination over the activities of TWA, directly or indirectly, (b) from threatening suit against TWA, its management or its directors either because of the failure of any of them to act in any manner sought by the defendants or because of the action of any of them in any manner not sought by the defendants, and (c) from acquiring or holding any interest, beneficial or otherwise, direct or indirect, in the stock of plaintiff; (5) That the defendants, their officers, agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice of this injunction be during the pendency of this suit enjoined (a) from attempting to exercise control or domination over the activities of TWA, directly or indirectly, and (b) from threatening suit against TWA, its management or its directors either because of the failure of any of them to act in any manner sought by the defendants or because of the action of any of them in any manner not sought by the defendants ; and II. With Respect to the Third Claim Stated Hereinbefore, (1) That defendants pay to plaintiff compensatory damages in the amountjof $10,000,000, and such other and farther punitive and exemplary damages as to this Court May seem just and proper; | A-32 TWA Complaint (2) That the defendants, their officers, agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice of this injunction be, at first during the pendency of this suit, and thereafter perpetually, enjoined (a) from attempting to exercise control or domination over the activities of TWA, directly or indirectly, (b) from interfering with any con- tract made and entered by TWA and from threatening suit against TWA, its management or its directors either be- of the failure of any of them to act in any manner sought by the defendants or because of the action of any of them in any manner not sought by the defendants, and (c) from otherwise interfering with, obstructing or harass- ing TWA, directly or indirectly, in any activity done by TWA pursuant to the authority vested in its officers and directors; and TH. That the plaintiff have such other and further relief as to this Court may seem just and proper. Dated: New York, New York, June 30, 1961. Canmy, Gorpon, Remnper & OuL By /s/ Joun T. Cann John T. Cahill, Partner By /s/ Joun F. Sonnetr John F. Sonnett, Partner Attorneys for Plaintiff 80 Pine Street — fo New York 5, New York | | Mie Iti 4 A-33 - Order Referring this Action to Judge Metzner for All Purposes, Dated August 31, 1961_~ [Doc. 42] [caption ] 61 Civ. 2324 The above action is hereby referred to the Honorable Charles M. Metzner, United States District Judge, for all purposes. Dated: August 31, 1961. /s/ Sy tvesrer J . Ryraw Sylvester J. Ryan Chief Judge A-34 Opinion and Order of December 5, 1961 [Doc. 50] [carrion] 61 Civ. 2324 Merzyzp, D.J.: Plaintiff moves pursuant to-Fed. R. Civ. P. 34 for the production and inspection of certain documents. Dispute exists as to the time when the documents shall be produced and as to three categories of requested documents. The first category refers to loans (item I(e)). The second cate- gory refers to balance sheets and profit and loss statements for the years 1939 through 1960 (item V(a)). The third category refers.to federal income tax returns for the years 1939 to date (item V(b)). The order of priority of deposition proceedings has al- ready been set. Consequently, while a motion pursuant to Rule 34 may be made at any time, it does not follow that the order granting such a motion should vary previously [fol. 711] established schedules under Rule 26. Holt v. The James Sheridan, 12 F.R.D. 72 (S.D.N.Y. 1951); Technical Tape Corp. v. Minnesota M. & M. Mfg. Co., 18 F.R.D. 318 (S.D.N.Y. 1955). The documents should be produced prior to the dates scheduled for the taking of the depositions noticed by plaintiff. The complaint states claims of conspiracy in violation of the antitrust statutes. The scope of proof is quite broad in these cases and under the liberal federal rules wide lati- tude is permitted in the deposition-discovery proceedings. Rule 34 must be read in conjunction with Rule 26, which permits testimony which is “reasonably calculated, to lead to the discovery of admissible evidence.” The financial data \ | | sought by 5 come within the “rule o my | Kes A-35 Opinion and Order of December 5, 1961 as applied to the allegations of the complaint. Income tax returns are not protected by privilege. Konczakowski v. Paramount Pictures, Inc., 19 F.R.D. 361 (S.D.N.Y. 1956). Defendant may request relief pursuant to Rule 30(b) gpon the settlement of ‘the order to be entered hereon. Motion granted. Settle order. Dated: New York, N. Y., December 5, 1961. Charles M. Metzner, U.S. D. J. A-36 Pretrial Order, February 7, 1962 | [Doc. 59] [caption ] 61 Crv. 2324 OrpER Pretrial conferences were held in this cause on January 10, 1962 and January 23, 1962, wherein the following proceedings were had. IL. The deposition of the plaintiff by Charles C. Tillinghast, Jr., shall be continued and the depositions of the other witnesses shall be commenced in accordance with the schedule annexed hereto. The Special Master hereinafter appointed may vary this schedule upon application of either party if in his dpinion the circumstances require such variance. IT. _ Upon the consent of counsel for the plaintiff and the defendant Hughes Tool Company, the Court was em- powered to appoint a Special Master. J. Lez Ranxry, Esq, of 36 West 44th Street, New York 36, New York is hereby appointed Special Master to act in connection with the depositions and other discovery proceedings undertaken by any person now a party or any person who may hereinafter become a party, with the following powers: to preside over and supervise the conduct of depositions and in connection therewith to rule on such objections ‘to questions, whether heretofore made or to be made, as have‘not been reserved by stipulation of the parties to the time of trial; to rule A-37 Pretrial Order, February 7, 1962 on objections, whether heretofore made or to be made, with respect to the production of documents; to make any and all other rulings which may be required pursuant to the provisions of Rules 26 to 37, and 45, of the Federal Rules of Civil Procedure and such other rules as may from time to time become applicable. IV. Any action taken or ruling made by said Special Master shall be subject ‘to review by the Honorable Charles M. Metuner, United States District Judge for the Southern District of New York, upon timely application with reason- able notice. V. The Special Master shall be reimbursed for such nses as are reasonably and necessarily incurred by him\and the compensation of the Special Master is to be fixed at $60.00 per hour. Such reimbursement and compensation are to be taxed as costs at the conclusion of this action; provided, however, that until the taxation of costs the compensation of the Special Master is to be paid at monthly intervals, fifty per cent (50%) by plaintiff Trans World Airlines, Inc., and fifty per cent (50%) by defendant Hughes Tool Com- pany, and provided, further, that such payments shall be subject to reallocation among any additional parties who may hereafter be joined and who my participate in the depositions. VI. Defendant Hughes Tool Company shall file its answer to the complaint herein upon the day following the comple- tion, in accordance with the annexed schedule, of the deposi- ‘tion of plaintiff by Charles C. Tillinghast, Jr., Robert W. and E. O. Cocke. A-38: Pretrial Order, February 7, 1962 VIL. The deposition of plaintiff by A. V. Leslie, in view of his present illness, is adjourned without date and shall be re-scheduled by the Special Master upon reasonable notice by the defendant at an appropriate time in light of the health of the witness and at a date not in a conflict with the annexed schedule. VIII. Any request for a change in the date fixed for the pro- duction of writings and other material by the defendant Hughes Tool Company, presently set for March 15, 1962 by order of this Court dated December 18, 1961, shall be made to the Special Master. So Oxperzp. Dated: New York N. Y. February 7, 1962 /s/ CHartes M. Merzner Charles M. Metzner U.8S.D.J. 21, 1962 . 27, 1962 . 27, 1962 . 28, 1962 1, 1962 r. 8, 1962 t. 15, 1962 Pretrial Order, February 7,1962 SCHEDULE OF DEPOSITIONS I. Depositions Noticed by Defendant Hughes Tool Company Deponent Trans World Airlines, Inc. By: Charles C. Tillinghast, Jr. R. W. Rummel E. O. Cocke Charles Thomas Bank of America By: Keith Carver Robert Gordon Bankers Trust Company By: E. F. Ebert Morgan Guaranty Trust Co. of New York By: John Schroeder The Mellon Bank By: Frederick Gwinner Ralph Ehler Ben-Fleming Sessel Robert A. Kerr Irving Trust Company By: Ben-Fleming Sessel Robert A. Kerr Frederic H. Brandi Arthur L. Wadsworth Dillon, Read & Co., Inc. —, By: Frederic H. Brandi Arthur L. Wadsworth James F. Oates, Jr. Grant Keehn Equitable Life Assurance Society of the United States By: . James F. Oates, Jr. Grant Keehn Warner Mendel and Location of Depositions 10 a.m. 80 Pine St. New York, N. Y. 10 a.m. The Irvine Ranch 13042 Myford Rd. Tustin, if. 10 a.m. Clerk’s Office U. S. Court House Los Angeles, Calif. 10 a.m., Room 3113 120 Broadway New York, N. Y. 2 p.m., Room 3113 120 Broadway New York, N. Y. 10 a.m. Clerk’s Office U.S. District Court Pittsburgh, Pa. 10 a.m., Room 3113 120 Broadway New York, N. Y. 10 a.m., Room 3143 120 Broadway New York, N. Y. 10 a.m., Room 3113 120 Broadway New York, N. Y. 10 a.m., Room 311 120 —T New York, ° ¥. Pretrial Order, February 7, 1962 Deponent Harry C. Hagerty Gordon P. Jenkins Metropolitan Life Insurance By: Horry C. Hagerty Gordon P. Jenkins Irving S. Olds Ernest R. Breech Boeing Compan By: William M. Allen J. O. Yeasting Prudential Insurance Company of America By: Monroe Chappelear IL. Depositions Noticed by Plaintiff Trans World Airlines, Inc. Howard R. Hughes Hughes Tool Company By: Raymond Holliday Hughes Tool Company By: M. E. Montrose Hughes’ Tool Company By: C. H. Price Hughes Tool Company By: C. S. Johnson Hughes Tool Company By: H. E. Rogers Hughes Tool Company By: C. Collier 120 Broadway New York, NJ New York, N.} 10 a.m. Clerk’s _ Office New York, N. |] 10 a.m. 10 a.m., 18th 80 Pine Street New York, N. 10 a.m., 18th Fi 80 Pine Stree New York, N. ¥ A4l1 Toolco’s Answer and Counterclaims [Doe. 63] [carrion ] 61 Civ. 2324 + Defendant Hughes Tool Company (hereinafter “Toolco”) for its answer to the complaint and for its counterclaim herein states: Answering the First Claim for Relief 1. Tooleo denies each and every allegation of para- graphs 7, 9, 10, 22, 23, 24, 26, 36, 37, 38 and 44 through 55 inclusive of the complaint. 2.. Tooleo admits the allegations contained in para- graphs 2, 6, 25, 29, 30, 32, 33, 34 and 40 of the complaint. 3. Toolco admits that it is a corporation organized and existing under the laws of the State of Delaware and that it has assets of several hundred million dollars and except asso admitted denies each and every allegation of para- graph 3 of the complaint. 4. Toolco admits that Howard R. Hughes (hereinafter “Hughes”) has been its sole stockholder from a time prior to January, 1939 to the present, that from a time prior to January, 1939 to December, 1960, he was an officer of Tooleo, and except as so admitted denies each and every dlegation of paragraph 4 of the complaint. 5. Tooleo admits that Raymond M. Holliday has been for some years past, and now is, an officer of Toolco, that fince 1959 he has been, and now is, a director of Trans World Airlines, Inc. (hereinafter “TWA”), and except as @admitted denies each and every allegation of paragraph bef.the complaint , A-42 Toolco’s Answer and Counterclaims 6. Tooleo admits that TWA has, since its organization in 1934, operated a domestic air carrier system between certain cities in the United States, that since 1946 TWA has operated an international air transportation system between the United States and certain cities in Europe, ' Africa and Asia, that during the period from 1958 through 1960, TWA purchased and leased jet-powered aircraft for amounts aggregating substantially in excess of $100,000,000, which aircraft were manufactured by manufacturers in various states in the United States, that in 1960 operating revenues of TWA were substantially in excess of $300,000,000 and net income after taxes in excess of $6,000,000, that in 1959, TWA provided the only scheduled air transportation between certain pairs of United States cities, and, except as so admitted, denies that it has knowl- edge or information sufficient to form a belief as to the allegations of paragraph 8 of the complaint. 7. Tooleo admits that commencing in or about the year 1989 and at various times thereafter it acquired common stock of TWA, that as at December 31, 1960, the amount of stock so-acquired amounted to approximately 78.2% of such common stock, and except as so admitted denies each and every allegation of paragraph 11 of the conrplaint. 8. Tooleo admits that commencing in 1958 jet-powered aircraft became one of-the most important factors in the competitive operations of air carriers, and except as 60 admitted denies each and every allegation of paragraph 12 of the complaint. 9. Tooleo admits that by 1955 aircraft manufacturers (including Boeing Airplane Company (hereinafter “Boe- ing”) and Douglas Aircraft Company, Inc. (hereinafter “Donglas”), had prepared to the general knowledge of the air carrier industry plans and drawings and otherwise A43 Toolco’s Answer and Counterclaims had undertaken preparations for the manufacture of jet- powered aircraft intended for use by air iers, that many air carriers beginning in 1955 devoted tantial efforts to determining what, if any, jet airc should acquire and to obtaining jet aircraft suitable to their needs, that Boeing and Douglas contemplated and did ultimately manufacture jet-powered aircraft for long range and me- dium range flights, and except as so admitted denies each and every allegation of paragraph 16 of the complaint. 10. Toolco admits that General Dynamics Corporation, Convair Division (hereinafter “General Dynamics”), on its own account as one of the four major domestic aircraft manufacturers, commenced a program prior to 1955 for the design, development and manufacture of a jet-powered transport aircraft designated the Model 18, that such pro- gram never proceeded past the preliminary design stage and was terminated in 1955 by General Dynamics, and except as so admitted denies each and every allegation of paragraph 14 of the complaint. ll. Toolco admits that prior to May 1, 1956, it consid- ered the manufacture of a jet-powered aircraft with design and range characteristics suitable for use on both domestic and transatlantic routes, that Tooleo contemplated that if it did manufacture this aircraft it would furnish the same to TWA and other air carriers, that it abandoned conside- ration of manufacture of such an aircraft prior to mid-1956, md except as so admitted denies each and every allegation of paragraph 15 of the complaint. 12. Toolco denies that it has knowledge or information sificient to form a belief as to the truth of the allegations of paragraph 16 of the complaint. %. Toolco admits that in January 1956 Toolco entered intoan agreement with Boeing for the purchase of eight & A444 Toolco’s Answer and Counterclaims Model 707-131 jet-powered aircraft with an option to pur. chase seven additional such aircraft, that in 1956 Tooleo exercised its option to purchase such additional aircraft and also placed an order for eighteen long-range Boeing jet transports, and that in June of 1956 Tooleo committed for the purchase of thirty Convair 880 aircraft from General Dynamics, and except as so admitted denies each and every allegation of paragraph 17 of the complaint. 14. Tooleo admits that purchase orders placed by Toolco with General Dynamics and Boeing gave Toolco the right to assign to TWA the right to acquire the jet-powered aircraft ordered by Toolco, and that Toolco released six of the long-range Boeing jet transports on order in & transac. tion with Boeing and Pan American World Airways, Inc. which was recommended and approved by the management of TWA, and except as so admitted denies each and every allegation of paragraph 18 of the complaint. 15. Toolco admits that during the period 1956 to 196 changes were made in the design and configuration of the Model 880 Convair aircraft ordered by Toolco and except as so admitted denies each and every allegation of pare- graph 19 of the complaint. « 16. Tooleo admits that in the period 1959 and 196 Tooleo leased to TWA certain jet-powered aircraft on 4 day-to-day basis, that such aircraft were the only jet powered aircraft flown on TW ‘A’s scheduled routes during said years, and except as so admitted denies each and every allegation of paragraph 20 of the complaint. 17. Toolco admits that on or about May 17, 1960, North east Airlines, Inc. (hereinafter “Northeast”) submitted to TWA a proposed agreement for the merger of Northeast with and into TWA, that Northeast is a substantial air car A45 Toolco’s Answer and Counterclaims rier operating under certificates of public convenience and necessity and serving the east coast of the United States and Canada, that upon information and belief in 1959 Northeast’s revenue miles totaled 519,000,000 and its total assets exceeded $35,000,000, and except as so admitted denies each and every allegation of paragraph 21 of the complaint. 18. Toolco denies that it has knowledge or information sufficient to form a belief as to the truth of the allegations of paragraph 27 of the complaint. 19. Toolco admits that subsequent to 1955 it discussed with various persons various proposals for the financing of jet-powered aircraft and except as so admitted denies each and every allegation of paragraph 28 of the complaint. 20. Toolco admits that as part of the arrangements with certain banks and insurance companies, Tooleo, TWA and three Voting Trustees (Ernest R. Breech, Irving 8S. Olds and Holliday) executed an agreement dated as of December 15, 1960, which provided that the TWA stock owned and to be owned by Toolco would be placed in a voting trust (here- inafter “the Voting Trust”), and except as so admitted denies each and every allegation of paragraph 31 of the complaint. 2L Toolco denies that it has knowledge or information sufficient to form a belief as to the truth of the allegations of paragraph 35 of the complaint. = 22. Toolco admits that on or about May 31, 1961, it sent a telegram to Boeing that set forth certain positions of Tooleo and except as so admitted denies each and every allegation of paragraph 39 of the complaint. 8. Toolco admits that TWA requested the Securities tad Exchange Commission to accelerate the effective date A46 Toolco’s Answer and Counterclawms of its Registration Statement to May 18, 1961, and that Tooleo opposed such acceleration by reason of certain def. ciencies in said Registration eee adem admitted denies each and every allegation of paragraph 4! of the complaint. 24. Tooleo admits that pursuant to the direction of the Securities and Exchange Commission its counsel set fort in a letter to the Securities and Exchange Commission ani TWA a statement as to the respects in which TWA’s Regis tration Statement might be deficient, that in said letter it was stated to be the position of Toolco that it was compellel to enter into the Voting Trust under conditions whid would warrant a termination of the Voting Trust otherwix than in accordance with the terms of the arrangement under which it was created, that it was further stated n said letter that Toolco had requested its counsel to invest gate the possibility of enjoining the Boeing purchase tram action or of taking action on behalf of TWA against th persons responsible for any commitments incurred or dan ages suffered by TWA in connection with such program, and except as so admitted denies each and every allegation of paragraph 42 of the complaint. « 25. Toolco admits that after TWA’s Registration State ment had been twice amended subsequent to the sending ¢ the aforesaid letter, the Securities and Exchange Commi: sion accelerated the effective date of the Registration State ment as so amended so as to make the Registration State ment effective on May 24, 1961, and except as so admitte denies each and every allegation of paragraph 43 of th complaint. A47 -Tooleo’s Answer and Counterclaims Answering the Second Claim for Relief “26. Toolco denies each and every allegation of para- graphs 56 through 64, inclusive, of the complaint except in so far as such paragraphs reallege prior paragraphs of the complaint. As to such realleged paragraphs Toolco repeats to the same extent as if herein fully set forth each and every denial or admission which it has made with respect to the paragraphs so realleged. Answering the Third Claim for Relief fi. Tooleo denies each and: every allegation of para- graphs 67 through 70, inclusive, of the complaint except in so far as such paragraphs reallege prior paragraphs of the éomplaint. As to such realleged paragraphs Toolco repeats fo the same extent as if herein fully set forth each and every denial or admission which it has made with respect to the paragraphs so realleged. ee 4s 4 Fimst ann Comprere Derense To THE COMPLAINT AND + Each Cram ror Retier ALLEGED THEREIN: 28. The complaint, and each of the claims for relief alleged therein, fail to state a claim upon which relief can be granted. As 4 Szconp anp Comprete Derense To THE COMPLAINT AND ' Face Ciam ror Retier Attecep THerer : 29. The alleged facts set forth in the complaint do not tonstitute violations by Toolco of Section 1 of the Sherman Act (15 U. S. C. §1 (1958)), of Section 2 of the Sherman Act (15 U. S. C. §2 (1958)), of Section 3 of the Clayton Act (15 U. 8. C. §11 (1958)), or Section 7 of the Clayton det (38 Stat. 731, 15 U. S. C. $18 (1946 Ed.)), and since A48 Toolco’s Answer and Counterclaims plaintiff TWA and defendant Tooleo are both Delaware corporations, this Court lacks jurisdiction over the subject matter of the action and over each of the claims for relief alleged in the complaint. As AND For A THIRD AND CoMPLETE AFFIRMATIVE DEFENSE To THE CoMPLAINT AND EacH CLAIM FOR Rewrer ALLEGED THEREIN : 30. Since both Toolco and TWA are Delaware corpors- tions, the jurisdiction of this Court, if any, depends upon the alleged violations of the antitrust laws contained in plaintiff TWA’s complaint. 31. Toolco is a corporation primarily engaged in the manufacture and sale of equipment for the oil well drilling industry. It has at no time manufactured commercial transports and its sole activities with respect to the sale or lease of aircraft to commercial airlines (except for the sale of two DC-6 aircraft originally acquired by Toolco for its own use) have arisen from its efforts to assist TWA in obtaining flight equipment adequate to its needs. Tt has at no time been in the business of selling or leasing any flight equipment to any airline and the only oceasiong on which it has made equipment ordered by it available to any air- line other than TWA have been when certain equipment ordered for the use and benefit of TWA has proved to be in excess of the needs or capabilities of TWA. 32. Toolco first acquired an interest in TWA in 1939 when the airline industry was in its infancy. By the end of 1942 it had acquired approximately 45% of the total outstanding shares of TWA. Thereafter, it acquired addi- tional shares of TWA until it had acquired more than 78% of said shares. , A49 Tooleo’s Answer and Counterclaims 33. The control of TWA by Toolco and the acquisition of more than 78% of the common stock of TWA by Toolco were subject to and approved by orders of the Civil Aero- nautics Board (hereinafter “the Board”) under Section 408 of the Federal Aviation Act of 1958 (49 U.S.C. § 1378) or the identical provisions of Section 408 of the Civil Aeronautics Act of 1938. Section 414 of the Federal Aviation Act of 1958 (49 U. S. C. § 1384) exempts and relieves any person affected by any such order from the operation of the anti- trust laws and of all other restraints or prohibitions made by or imposed under authority of law in so far as may be necessary to enable such person to do anything authorized, approved or required by such order. 34. The initial acquisition of a controlling interest in TWA by Toolco was approved by the Board, under Sec- tion 408 of the Civil Aeronautics Act of 1938, as consistent with the public interest, in an opinion and order dated October 17, 1944. Said order provided that such approval would be effective so long as commercial transactions between TWA and Toolco were limited to those involving complete items of property the price of which did not ex- ceed $200 each, with the further limitation that the total annual expenditures involved in such commercial transac- tions by either party should not exceed $10,000. “95. In 1950 the Board approved under said Section 408 the farther acquisition of control of TWA by Toolco sub- ject to the same conditions contained fn the aforesaid 1944 order. In so doing, the Board approved the exercise by Tooleo of complete control over the business and affairs of TWA, including equipment and financing, and found that the continuing interest of Tooleo in TWA appeared essen- tial to the best interest of the carrier and the public. A-50 Toolco’s Answer and Counterclaims 36. Since the date of the Board’s 1944 order no com- mercial transactions between Tooleo and TWA have taken place except as authorized by said order or except after a modification of said order upon a finding by the Board under said Section 408 that the proposed transaction was consistent with the public interest. 37. Tooleo from the time of its initial acquisition of an interest in TWA has on various occasions assisted TWA in acquiring flight equipment adequate to its needs and in financing such flight equipment. TWA also acquired flight equipment directly from various manufacturers without assistance from Toolco. Orders of the Board specifically approved as not inconsistent with the public interest all transactions between TWA and Toolco with respect to the acquisition or financing of flight equipment. 38. The complaint does not allege any violation of the Federal Aviation Act of 1958 or of the orders of the Board under Section 408 thereof. 39. The only act alleged in the complaint with respect to the period prior to 1961 which was not specifically approved by the Board was a proposal that Northeast be merged with and into TWA. Such a merger,proposal was, however, within the contemplation of the Board in approv- ing control of TWA by Toolco. The merger proposal was, moreover, specifically conditioned upon the approval of the Board under the applicable provisions of the Federal Avia- tion Act of 1958, including Section 408 thereof, and upon approval by a majority of the stockholders of TWA other than Tooleo voting at a meeting called to approve such a merger. 40. In December, 1960, as a result of the demands and unlawful activities of certain lending institutions and A-51 Toolco’s Answer and Counterclaims others, Toolco was compelled to place in a voting trust the shares of common stock of TWA which it owned. By reason of such voting trust Toolco no longer controls TWA. All of the activities of Toolco alleged in the complaint with respect to the period subsequent to 1960 were taken on the advice of counsel for Toolco solely for the purpose of protecting Toolco’s interests as beneficiary under said voting trust and as equitable owner of more than 78% of the stock of TWA. 41. By reason of the facts herein alleged, this Court lacks jurisdiction of the subject matter of the complaint and over the subject matter of each alleged claim for relief contained therein. As any For a Fimst Counrerciam Acamst TWA ann Agamsst Apprrionat Derenpants THe Equrrasre Lire Assurance Society or THE Unrrep States, METROPOLITAN Lire Insurance Company, Irvine Trust Company, DILLon, Reap & Co. Inc., Ennest R. Brezon anp Cuartzs C. TrLmeHast, JR. 42. Toolco is a corporation organized and existing under the laws of the State of Delaware with its principal place of business in Houston, Texas. All of its common stock is owned by. Hughes, a leading aviator and aeronautical engineer who for many years has been interested in the development of commercial aviation in the United States. 43. Plaintiff TWA is a corporation organized and exist- ing under the laws of the State of Delaware with its principal executive offices in the City of New York. TWA isand for many years has been the country’s third largest domestic and second largest international air carrier. At al times hereinafter mentioned from 1947 to December, SS, A-52 Toolco’s Answer and Counterclaims 1960, Tooleo owned a majority of TWA’s capital stock and nominated a majority of TW4A’s directors. Since December, 1960 Tooleo has been the equitable owner of in excess of 78% of the capital stock of TWA which stock was placed in a voting trust in December, 1960. 44. Additional defendants The Equitable Life Assurance Society of the United States (hereinafter “Equitable”) and Metropolitan Life Insurance Company (hereinafter “Met. ropolitan”) are corporations organized and existing under the laws of the State of New York with their principal places of business in the City of New York. Metropolitan is the country’s largest insurance company. with admitted assets of’ approximately $17 billion. Equitable is the country’s third largest insurance company with admitted assets of approximately $10 billion. From 1947 to December, 1960 Equitable was the sole holder of TWA’s senior indebt- edness other than bank debt. At all times since December, 1960 Equitable and Metropolitan have been the holders of all such senior indebtedness of TWA. 45. Additional defendant Irving Trust Company (here- inafter “Irving”) is a trust company organized and exist- ing under the banking laws of the State of New York with its principal place of business in the City of New York. Irving is and for many years has been one of TWA’s prin- cipal commercial bankers, has made loans and participated with other lending institutions in making loans to TWA and has undertaken on behalf of TWA to bring together lending institutions for the purpose of participating in loans to TWA. Irving for many years prior to 1961 maintained a similar banking relationship with Toolco. 46. Additional defendant Ernest R. Breech (hereinafter “Breech”) is, upon information and belief, a citizen of the A-53 Toolco’s Answer and Counterclaims State of Michigan. From December, 1960, until his resigna- tion on or about January 26, 1962, he was one of the two voting trustees selected by Equitable and Metropolitan with respect to 5,221,301 shares of TWA’s capital stock owned by Tooleo which were placed in a voting trust in December 1960. Breech is and at all times since April 27, 1961 has been the Chairman of the Board of Directors of TWA. 47. Additional defendant Charles C. Tillinghast, Jr. (hereinafter “Tillinghast”), a citizen of the State of New York, is and at all ‘times hereinafter mentioned since April 17, 1961, has been the president and chief executive officer of TWA. 48, Additional defendant Dillon, Read & Co. Inc. (here- inafter “Dillon Read”), on information and belief, is a cor- poration organized and existing under the laws of the State of New York with its principal place of business in the City of New York. Dillon Read is engaged in the investment banking business and is and since early 1959 has been the principal financial adviser to TWA. 49. This counterclaim is asserted pursuant to Rule 13(a) of the Federal Rules of Civil Procedure and arises out of the subject matter of TWA’s claims herein. 50. In 1960 Equitable and Metropolitan, together with a group of commercial banks headed by Irving, demanded asa condition to their providing any financing to TWA that Toolco place in a lender-controlled voting trust prior to any default all shares of TWA stock which it owned. Such financing was required by TWA in order for it to acquire jet aircraft theretofore ordered by Toolco for the benefit of TWA. In order to insure that such needed jet equipment would be acquired by TWA and for reasons which included the difficulty, if not impossibility, of obtaining such financ- ing elsewhere, Toolco was compelled to yield to such A-54 Toolco’s Answer and Counterclaims demands but only upon the express agreement and under. standing that: ; (a) The Voting Trust would terminate upon the repayment of the obligations in connection with which it was created; and , (b) Tooleo would have the right to terminate the Voting Trust by purchasing all such obligations at the principal amount thereof together with accrued interest and, in addition, by paying to Metropolitan and Equitable a premium to be initially 22% of the principal amount of such obligations acquired by them. 51. Thereafter, in December 1960, pursuant to the aforesaid agreement Tooleo, TWA, Equitable, Metropol- itan, Irving and others entered into a series of transactions for the financing of the acquisition of the jet flight equip- ment ordered by Toolco for the benefit of TWA. In con- nection therewith and the purchasé by Equitable and Metropolitan of $92,800,000 principal amount of TWA’s 614% Equipment Mortgage Sinking Fund Notes due De. cember 31, 1972 (hereinafter the “Series A Sinking Fund Notes”) and the borrowing by TWA of $72,800,000 from banks headed by Irving, which borrowing was evidenced by 6% Equipment Mortgage Serial Notes ‘ue December 31, 1961—December 31, 1964 (hereinafter the “Series A Serial Notes”), Tooleo, TWA, Equitable, Metropolitan, Irving and others entered into a series of transactions and agreements by which the 5,221,301 shares of TW4A’s con- mon stock were placed in the Voting Trust and Metropol- itan and Equitable designated Breech and Irving S. Olds as two of the three voting trustees with respect to said stock. By the terms of said agreements: (a) Metropolitan and Equitable, as the holders of a majority in principal amount of the Series A Sinking Fund Notes and Series A Serial Notes, A-55 Toolco’s Answer and Counterclaims acting through Irving as agent for the lenders, have, and at all times since December, 1960, have had, the absolute right and power to remove the two lender- named voting trustees, or either of them, and to designate and remove from time to time the suc- cessor of either of said voting trustees. (b) The Voting Trust is to continue, as to all shares of TWA beneficially owned by Toolco, for a period of 10 years from its inception, unless sooner terminated in accordance with the terms of said agreements; and Toolco ted, so long as it - ghould be the owner of any vo trust certificates, further to extend the Voting Trust, at the request of Irving as agent, for such additional period not exceeding the maximum period then permitted by the law of Delaware as should be specified in such request. (c) The Voting Trust shall terminate (i) upon consent of Irving as agent acting at the direction of the holders of a majority in amount of the Series A Serial Notes and Series A Sinking Fund Notes, or (ii) upon cancellation and discharge of the Indenture of Mortgage securing said Notes, i.e., upon the pay- ment or prepayment of said Notes, or (iii) upon the exercise by Toolco of an option to purchase, after December 31, 1961, all but not less than all of the Series A Sinking Fund Notes and Series A Serial Notes at a price equal to the principal amount thereof plus accrued interest and, in addition thereto, a pre- mium which is initially 22% of the principal amount of the Series A Sinking Fund Notes, namely, $20,416,000. 52. By reason of the agreements and transactions en- tered into in December, 1960, and the Voting Trust then created, Equitable and Metropolitan, together with other landing institutions including Irving, acquired and now poteess control over the business and affairs of TWA. ss y have the right and power at any time to remove and A-56 Toolco’s Answer and Counterclaims select a successor to either or both of the voting trustees whom they have chosen. The majority voting trustees who are thus subject to their control in turn have the absolute right and power under the by-laws of TWA at any time to reconstitute TWA’s Board of Directors without cause by altering the number of directors, by removing the entire Board of Directors at will, and subject to certain qualifica tions, by removing one or more directors.. The majority voting trustees have used the power so given to them to reconstitute TWA’s Board of Directors and the members of said Board of Directors as presently constituted have been chosen in accordance with the wishes and with the approval of Metropolitan and Equitable. 53. Since the creation of the Voting Trust and the re constitution of TWA’s Board of Directors, TWA, Breech, Tillinghast, Irving, Metropolitan, Equitable and Dillon Read entered upon a course of conduct designed and caleu- lated to prevent Toolco from regaining control of TWA, to perpetuate the Voting Trust and to interfere with the right of Toolco to terminate the Voting Trust in accordance with the rights of Toolco to terminate the Voting Trust in accordance with the terms of the agreements made in . December 1960. Among the actions taken“in furtherance of these objectives were the following: (a) In or about March, 1961, Breech selected Tillinghast to be TWA’s president and chief exect- tive officer. Prior to his selection Tillinghast had had no experience in the airline industry but he had acted as counsel for a corporation of which Breech was the chief executive officer. Upon information and belief, prior to his acceptance of the presidency — of TWA, Tillinghast consulted with Breech and thereafter with representatives of Equitable, Metro- politan and Irving as to steps which could be taken A-57 Toolco’s Answer and Counterclaims to make it impossible for Toolco to terminate the Voting Trust and regain control of TWA in the foreseeable future and Dillon Read participated in conversations and suggestions as to how Tillinghast could be satisfied’ that Tooleco would be unable to terminate the Voting Trust. (b) Thereafter, TWA entered into an employ- ment contract with Tillinghast pursuant to recom- mendations made by Breech. This contract pro- vides that Tillinghast will be employed as TWA’s chief executive officer for a minimum of five years upon terms such that upon his retirement or dis- charge at any time following the termination of the Voting Trust (or upon his retirement at any other time after five years) he shall receive a pension for ten years, said pension being in the amount of $50,000 per year until he reaches age 65 and $30,000 per year thereafter. Tillinghast is now 50. (c) Shortly after Tillinghast’s election as presi- dent, TWA entered into agreements with Boeing for the purchase of additional jet aircraft from Boeing although, upon information and belief, the number of such aircraft which TWA agreed to acquire is in excess of TWA’s needs and financial capabilities. The aggregate cost of such jet aircraft and related equipment is in excess of $187,500,000. In order to finance such purchases, TWA through Dillon Read proposed to enter into agreements with Metropolitan, Equitable and the banking group headed by Irving to supply an additional $147,000,000 of senior debt. Metropolitan, Equitable and Irving agreed to supply such financing only upon terms de- signed and calculated to perpetuate the Voting Trust and to preclude Toolco from regaining control of A-58 Toolco’s Answer and Counterclaims TWA in accordance with the agreements made in December, 1960. (d) In May 1961, Toolco learned of such proposed action between TWA and the lending institutions which control TWA. Toolco notified TWA, the vot ing trustees and the lending institutions of its con- cern at the self-dealing implicit in such negotiations. Tooleo requested that it be informed as to the details of the contemplated finarting of the Boeing pur. chases. TWA refused to furnish such information to it. (e) Thereafter, in August 1961, TWA, upon in- formation and belief, entered into agreements with Metropolitan and Equitable and with Irving and its associated banks, by the terms of which: (i) TWA agreed to sell and Equitable and Metropolitan agreed to purchase, subject to cer- tain conditions, an aggregate of $107,000,000 prin- cipal amount of additional sinking fund notes bear- ing interest at 6% and maturing on December 1, 1977 (hereinafter the “Series B Sinking Fund Notes”) ; (ii) Irving and the banking group which it headed agreed to lend to TWA, subject to certain conditions, an additional $40,000,000 to be evi- denced by additional serial notes bearing interest — at 514% and maturing serially from December 31, — 1963 through December 31, 1966 (hereinafter the Series B Serial Notes) ; (iii) As required by its agreements with Metro- politan, with Equitable and with Irving and its A-59 Toolco’s Answer and Counterclaims associated banks, TWA entered into a supple- mental indenture by the terms of which the holders of a majority in principal amount of the Series B Sinking Fund Notes and Series B Serial Notes, namely, Metropolitan and Equitable, may demand payment from TWA of the principal of all said Notes ($147,000,000) together with accrued inter- est upon the happening of any of the following events, whether or not such events have come about or been effected by operation of law or pur- suant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body : (a) the Voting Trust agreement shall have terminated for any reason whatsoever other than a termination by Irving as agent, prior to the payment in full of all the outstanding Series A Sinking Fund Notes and Series A Serial Notes at the voluntary request of the holders (other than Tooleo or a Toolco affiliate) of a majority in amount of such outstanding Notes; (b) the rights of the holders (other than Toolco or affiliates of Toolco) of a majority of the outstanding Series A Sinking Fund Notes and Series A Serial Notes, acting through Irving as agent, to remove and fill yacancies in the office of the two voting trustees appointed by Irving as agent shall have terminated for any reason whatsoever other than a termination by the vol- untary action*of such holders of a majority of the Series A Sinking Fund Notes and Series A Serial Notes; or A-6 Toolco’s Answer and Counterclaims (c) all the outstanding Series A Sinking Fund Notes and Series A Serial Notes shall be owned by Toolco or by any affiliate of Toolco, or by Tooleo and any affiliate of Toolco. Neither TWA nor any of the lending institutions sought or obtained the consent of Toolco to such agreements. 54. The employment contract between Tillinghast and TWA in go far as it requires TWA to pay to Tillinghast an annuity upon the termination of the Voting Trust whether or not in accordance with its terms is without consideration and represents a waste of the corporate assets of TWA. 55. The supplemental indenture into which TWA en- tered in August 1961, in so far as it permits the accelers tions of the maturity of the Series B Sinking Fund Notes and the Series B Serial Notes constituted and constitutes unjustified self-dealing between TWA and those now in con- trol of TWA, was and is contrary to and in violation of the agreements or obligations of TWA, Metropolitan, Equi- table and Irving made or incurred at and prior to the time the Voting Trust was created and constituted and consti- tutes an unjustifiable interference with the xights of Toolco to effect the termination of the Voting Trust in accordance with said agreements. In connection with TWA’s 1961 financing Dillon Read, upon information and belief, received substantial payments, the exact amount of which is pres enty unknown to Tooleo. 56. Upon information and belief, TWA, Breech, Tilling- hast, Metropolitan, Equitable and Dillon Read will, unless enjoined by this Court, continue to engage in a course of conduct designed and calculated to perpetuate the Voting Trust, to prevent its termination in accordance with its A-61 Toolco’s Answer and Counterclaims terms and to perpetuate the control of Metropolitan and Equitable and of Breech and Tillinghast over the business and affairs of TWA. 57. Additional defendants Breech, Tillinghast, Metro- politan, Equitable, Irving and Dillon Read are necessary parties in order that complete relief may be granted to Tooleo. 58. By reason of the foregoing Toolco has suffered sub- stantial damages and is threatened with irreparable injury. 59. Toolco has no adequate remedy at law. As anv For a Seconp Countercitamm Acarmst TWA anp Acarsst AppiTionaL Derenpants Merroporrran, Eavt- TABLE AND IRVING 6. Tooleo repeats and realleges each and every allega- tion of paragraphs 42 through 48, inclusive, and 50 through 56, inclusive, hereof. 61. Jurisdiction of this Court arises from the violations of Section 408 of the Federal Aviation Act of 1958 (49 U. 8. C. § 1378) herein alleged. Said Section 408 makes it mlawful for any person engaged ‘in any phase of aeronau- ties to acquire control of any air carrier in any manner whatsoever unless such acquisition of control is approved by the Board and further makes it unlawful for any such person to continue to maintain control of any air carrier which has been acquired in violation of said Section 408. 62. At all time since 1955 Metropolitan and Equitable have been and are now persons engaged in a phase of aero- mantis within the meaning of said Section 408 by reason ities which include the following: A-62 Toolco’s Answer and Counterclaims (a) Upon information and belief, at all times since 1955 the major airlines of the United States have been and are now dependent upon Equitable, Metropolitan and Prudential Life Insurance Com- pany of America (hereinafter “Prudential”), the country’s second largest insurance company, for long-term senior financing and said insurance com- panies have dominated, and now dominate, the sup- plying of such financing to the major air carriers of the United States. This dominance has arisen in part from the historic interest of said insurance com- panies in airline financing, in part from the recogni- tion and enforcement of the traditional lender con- cept and in part from the vast amounts of financing required by the major airlines, particularly in con- nection with the acquisition of jet flight equipment Upon information and belief, since 1955 none of the country’s five largest air carriers have arranged any senior financing other than bank financing without the participation therein of one or more of said three insurance companies. (b) Metropolitan is, and, upon information and | belief, for many years has been, the country’s largest supplier of financing to air carriers. As at December 31, 1960 it held obligations of said carriers in a prin- cipal amount in excess of $288 milliop. Included in such obligations were those of four of the country’s five largest air carriers, including TWA. (c) Equitable is, and, upon information and be- lief, for many years has been, the country’s third — largest supplier of financing to air carriers. As at December 31, 1960 it held obligations of said carriers in a principal amount in excess of $188 million, in- cluding obligations of TWA. (a) As at December 31, 1960, Metropolitan held senior obligations of air carriers other than TWA in a principal amount in excess of $250 million and A-63 Toolco’s Answer and Counterclaims =~ Equitable held such obligations in a principal amount in excess of $144 million. (e) As at December 31, 1960, Metropolitan held in excess of 46% and Equitable in excess of 28% of the senior long-term debt of the country’s five largest air carriers. 63. In December 1960 by the creation of the Voting Trust and the agreements made in connection therewith, Metropolitan and Equitable acquired control of TWA within the meaning: of Section 408 of the Federal Aviation Act of 1958. Neither Equitable nor Metropolitan sought or obtained the approval of the Board pursuant to said Sec- tion 408 to such acquisition of control of an air carrier and Metropolitan and Equitable have continued to maintain and perpetuate their control of TWA without Board approval. 64 As more fully alleged in paragraph 53 hereof, in Angust 1961 Metropolitan and Equitable, together with Irving and its associated banks, agreed with TWA to supply t TWA an additional $147 million of senior financing upon terms and conditions calculated to perpetuate the Voting Trast and the control of Equitable and Metropolitan over the business and affairs of TWA. No approval of the Board vas sought or obtained to this further consolidation of con- trol by Metropolitan and Equitable. . By reason of the facts herein alleged, the acquisition and maintenance of control of TWA by Metropolitan and Equitable through the Voting Trust and-the consolidation of that control by giving to Metropolitan and Equitable the power to accelerate indebtedness of TWA upon termi- ution of the Voting Trust was and is unlawful under Sec- tin 408 of the Federal Aviation Act of 1958 and the crea- ig and continued existence of the Voting Trust was and is 000 to the public policy of the United States. A-64 Toolco’s Answer and Counterclaims 66. TWA, Equitable, Metropolitan and Irving are nee. essary parties to this second counterclaim in order that Tooleo may be afforded full and proper relief hereunder. 67. ‘Tooleo has no adequate remedy at law. As anp ror a Tamp Counterciuam Aaarmst TWA am Aaaryst Att ApprrionaL DEFENDANTS 68. Tooleo repeats and realleges each and every. alle gation of paragraphs 42 through 48, inclusive, 50 through 55, inclusive, and 62 hereof. 69. Upon information and belief, additional defend- ants James F. Oates, Jr. (hereinafter “Oates”) and Harry C. Hagerty (hereinafter “Hagerty”) are citizens of the State of New York; Oates is, and at all times hereinafter mentioned since 1955 has been, the president of Equitable and is and has been since said date in a position to deter- mine or influence its lending policies; Hagerty at all times hereinafter mentioned since 1955 until December 31, 1961 was the Vice Chairman of the Board of Directors of Metr- politan and was during such period in a position to deter- mine or influence its lending policies. : 70. Additional defendant Ben-Fleming Sessel (herein- after “Sessel”) is a citizen of the State of Connecticut. He is, and at all times hereinafter mentioned since 1955, has been the Senior Vice President of Irving and a director of TWA. He was originally nominated as a director of TWA by Tooleo. 71. Tooleo asserts this counterclaim derivatively in the right of TWA and its stockholders. It has made no demand upon the directors or the stockholders of TWA to bring this claim for the reasons that the directors are under the domi- nation and control of the additional defendants, that more A-65 Toolco’s Answer and Counterclaims than 78.27% of the stock of TWA is held in the Voting Trust, that a majority of the voting trustees of such stock are sub- ject to the control of the additional defendants and that demand would be futile. - 72. Jurisdiction of this Court over this counterclaim arises from the violations by the additional defendants of Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2) and of Section 7 of the Clayton Act (15 U.S.C. § 18) herein- after alleged. = 73. The trade or commerce among the several States which is the subject matter of this counterclaim includes: (a) The furnishing in interstate commerce by lend- ing institutions of senior financing to the major air- lines of the United States; and (b) The furnishing in interstate commerce by lend- | ing institutions of senior long-term financing to the major airlines of the United States. 74. The requirements of the major airlines: for senior fnancing constitute and have constituted a separate and distinct market for lending institutions for reasons which include the following: (a) The large amounts of moneys required; (b) The large amounts of moneys required at a | particular time; and (c) The nature of the security for such financings, namely, jet and other aircraft which have a limited useful life and which may become obsolete in a rela- tively few years. 7%. The requirements of the major airlines for long- term senior financing constitute and have constituted a separate and distinct market from the total requirements of A-66 Toolco’s Answer and Counterclaims the major airlines for senior financing for the reason that banking institutions which have furnished a substantial por. tion of the senior short-term financing do not act as sup- pliers of long-term financing. As used herein, the term “long-term financing” means debt financing maturing more than five years from its creation and the term “short-term financing” means debt financing maturing within five years of its creation. 76. TWA constitutes and has constituted a substantial proportion of the market for the supplying of long-term and short-term financing to the major airlines of the United States. For example, in 1960 Equitable and Metropolitan supplied to TWA $92.8 million in long-term financing and Irving and a banking group which it headed supplied $722 million in short-term financing and in 1961 TWA agreed to sell to Metropolitan and Equitable, and Metropolitan and Equitable agreed to purchase, an additional $107 million of long-term debt securities and Irving and, with one excep tion, the same banking group agreed to lend on a short-term basis an additional $40 million. 77. The violations of the antitrust laws hereinafter more fully alleged include the following: (a) A combination and conspiracy to restrain interstate commerce by preventing TWA from ac- quiring (i) senior long-term financing from others than Equitable and Metropolitan except with the con- sent and acquiescence of Equitable and Metropolitan and (ii) senior short-term financing from others than Irving and such banking institutions as it permitted to participate in such financing, all in violation of Section 1 of the Sherman Act. , (b) A combination and conspiracy to attempt to monopolize and to monopolize a substantial segment _ Oe A-67 Toolco’s Answer and Counterclaims of the interstate trade and commerce of the United States by attempting to monopolize and monopolizing the supplying of senior long-term financing to the major airlines of the United States, all in violation of Section 2 of the Sherman Act. (c) An agreement in restraint of interstate trade and commerce of the United States, to refuse to sup- ply financing to TWA or Toolco so long as TWA was, is or shall be controlled by Toolco, all in violation of Section 1 of the Sherman Act. (d) A combination and conspiracy to restrain in- terstate commerce by preventing TWA from obtain- ing long-term or short-term senior financing except at interest rates fixed in advance by agreement among lending institutions, all in violation of Section 1 of the Sherman Act. (e) An agreement in restraint of interstate trade and commerce of the United States between and among lending institutions, including Equitable and Metropolitan and others, to the effect that (i) none of such lenders would supply financing to any major airline without the consent of the itional senior lender to that airline, and (ii) in the event that the traditional senior lender to an airline refused to sup- ply financing except upon particular terms, none of the other of such lenders would supply financing to that airline upon any terms, all in violation of Sec- tion 1 of the Sherman Act. (f) The acquisition by Equitable, Metropolitan and other lending institutions, through voting trus- tees, of legal title to more than 78.2% of the capital stock of TWA, in violation of Section 7 of the Clay- ton Act. (g) The refusal of Irving and the refusal of other lending institutions, whether acting alone or in con- cert, to extend credit to Tooleo or Hughes except _ upon condition that Hughes as sole stockholder of Tooleo, and Tooleo as controlling stockholder of TWA, agree to grant to such lending institutions an exclusive market for senior financing through the placing of Tooleo’s TWA stock in a lender-controlled voting trust, all in violation of Section 1 of the Sher. man Act. A-68 Toolco’s Answer and Counterclaims 78. During the period from 1939 through 1955, Tooleo through the use of its credit and resources, from time to time assisted TWA in the acquisition of piston-engined air- craft which TWA did not have the financial resources to acquire but which were necessary to enable TWA to main- tain its competitive position on its authorized routes and to expand its operations pursuant to new authorizations of additional routes. In 1955 TWA and Toolco recognized that in order for TWA to maintain its competitive position it would require a fleet of jet-powered aircraft substantially as soon as its principal competitors and that orders for such equipment should not be delayed. TWA did not and would not have the financial resources or credit to order any jet aircraft prior to the end of 1958 at the earliest. Tooleo, therefore, in 1956, in accordance with practices previously followed when the acquisition of needed aircraft was beyond TWA’s then capabilities, used its own credit and resources to place orders for the acquisition of a fleet of jet aircraft from Boeing and General Dynamics for use by TWA. Prior to the execution of these contracts the type of equipment, the form of the contracts and the specifications of the air- craft were approved in detail by the operating and engi- neering personnel of TWA; and thereafter TWA’s repre sentatives supervised their —eo testing and delivery. 79. Toolco’s total commitments in connection with TWA’s jet equipment program exceeded $300 million. A-69 Toolco’s Answer and Counterclaims Tooleo and TWA recognized that even if Toolco had desired to do so, it could not supply permanent financing for such a fleet. By reason of the vast amount of financing re- quired, such permanent financing could be accomplished only with the participation of one or more principal sup- pliers of long-term financing to the major airlines, namely Equitable, Metropolitan and Prudential. 80. By 1956 Equitable had established itself as TWA’s traditional senior lender, holding $40 million in principal amount of TWA’s 334% Equipment Mortgage Sinking Fund Bonds (hereinafter “the Sinking Fund Bonds”) due December 1, 1969. Upon information and belief, prior to 1956, lending institutions, including Metropolitan, Equitable and Prudential, entered into an understanding and agreement that (i) none of such lending institutions would supply financing to an airline except with the consent of the traditional senior lender to that airline and (ii) if the traditional senior lender to an airline refused to supply such financing except upon particular terms none of such lending institutions would supply fmancing on any terms. By reason of such agreement and anderstanding, Equitable’s position as traditional senior lender to TWA made Equitable’s support a necessity if the permanent financing of TWA’s jet equipment program were to be accomplished. 81. Tooleco discussed with Equitable in 1958 Equitable’s requirements as to the permanent financing of TWA’s jet equipment program. In such discussions Equitable indi- cated that: (a) Since in Equitable’s view, TWA’s financial condition had not improved sufficiently so that TWA could independently finance the required jet fleet, A-70 Toolco’s Answer and Counterclaims Toolco ‘would either have to supply a substantial portion of such financing itself or be responsible for the obligations incurred by TWA; (b) Equitable would require that as a condition to its participation in any TWA financing Tooleo agree that Toolco’s stock interest in TWA would be placed in a lender-controlled voting trust but only in the event of a default by TWA; and (c) As a part of any financing TW4A’s Sinking Fund Bonds which Equitable held would have to be refunded. 82. The discussions with Equitable during 1958 were unsatisfactory to Toolco, primarily because Equitable did not appear prepared to participate in financing TWA’s jet program unless Toolco assumed substantial permanent obligations. early 1959 Dillon Read was retained to prepare plans for the permanent financing of TWA’s jet equipment program. Dillon Read advised Toolco and TWA that since Equitable was TWA’s traditional senior lender, Equitable’s support and participation was essential to the development of any permanent financing. Dillon Read further advised Tooleo and TWA that under pre vailing conditions an offering of equity securities by TWA would be inadvisable. 83. In view of the apparent difficulties to independent financing by TWA, Toolco, in cooperation with TWA, developed a plan for permanent financing through a leasing arrangement. Dillon Read undertook to and did develop & proposal for such an arrangement on terms which they presented as advantageous to TWA. TWA did not accept this proposcal since Equitable would not support such a leasing plan. EE IIE A-71 Toolco’s Answer and Counterclaims 84, Toolco had reason to believe that the public accept- ance of jet aircraft and the consequent improvement in the earnings of TWA would place TWA in a position inde- pendently to finance its jet equipment program. Early in 1959 Boeing commenced the delivery of jet aircraft ordered by Tooleo. As such aircraft were received, they were placed in service by TWA under temporary leases pending permanent financing by TWA. TWA was thus enabled to place jet aircraft in transcontinental service substantially at the same time as one of its principal domestic competi- tors and considerably in advance of its other principal domestic competitor. After this early introduction of jet equipment TWA realized earnings before taxes in excess of $17.4 million in 1959 and in excess of $15.2 million in 1960. 85. Toolco financed the acquisition of jet aircraft leased. to TWA out of its own cash resources until they were all but exhausted. Thereafter, such jet aircraft were financed largely through loans from Irving, TWA’s and Toolco’s lead bank, and other banks. Such loans were made avail- able to Toolco until early in 1960. Although Irving in- formed Toolco in 1959 that it had exhausted its legal loan limit, its consents to subsequent loans continued to be required by reason of the terms of its existing loans. In 1959 Tooleo advised Irving that such interim credit should not be terminated without giving Toolco adequate lead time either to arrange other interim credit or to consummate a plan for the permanent financing of TWA. 86. Upon information and belief, at some time in or shout March 1960, the exact time being unknown to Toolco, Equitable, Irving and other lending institutions, Dillon Read and Oates, Sessel and others entered into an under- A-72 Toolco’s Answer and Counterclaims standing and conspiracy (the persons who either at its in- ception or from time to time thereafter joined such con. spiracy being hereinafter called “the conspirators”) to the following effect: (a) Equitable and Irving would use their respec. tive positions as traditional senior lender and lead bank to TWA and the conspirators would use all economic and other power at their disposal to obtain and maintain control of TWA for their mutual ad- vantage, including the use of TWA as a market for the supplying of senior financing upon terms advan- tageous to the lenders. (b) The conspirators would permit to participate in supplying senior financing to TWA only those whom they selected and would use their concerted efforts to prevent other lending institutions from participating in any TWA senior financing except with the consent of Equitable as to long-term senior fmancing and of Irving as to short-term senior financing and then only on terms satisfactory to Equitable and Irving. (c) The conspirators would agree among them- selves as to the interest rate to be paid by TWA for senior short-term and long-term indebtedness and would refuse to advance any financing to TWA ex- cept after its acceptance of such predetermined inter- est rates. In furtherance of said conspiracy and pursuant to said understanding the conspirators took the actions herein- after set forth. 87. Following the refusal of Equitable to support a leas- ing plan, Tooleo with the knowledge and assistance of. Tw A entered into negotiations with aircraft manufacturers for assistance in the financing of not only TWA’s the A-73 Toolco’s Answer and Counterclaims planned jet fleet but also of additions thereto. Irving learned of such negotiations early in 1960. Thereafter, Irving and other banks which had advanced money to ° Tooleo, without prior notice to Toolco, advised Toolco on March 5, 1960 that they would no longer supply any short- term credit for the purpose of paying for further deliveries of jet equipment for TWA. The payment of rentals due from TWA to Toolco under the leases of jet aircraft by Tooleo to TWA would have provided at least a partial alternative source of moneys to Toolco to be used in mak- ing payments for jets thereafter to be delivered. Equitable refused to permit TWA to make any such payments. 88. In March 1960, TWA and Tool6o agreed to support a plan, later known as the “Dillon Read Plan”, which con- templated that Equitable and one or more other insurance companies would supply permanent senior long-term fnancing, Irving and associated banks would supply short- term and interim senior financing to TWA and Tooleo would accept $100 million of subordinated debt of TWA in pay- ment, pro tanto, of TWA’s obligations to Toolco and also establish a revolving credit in favor of TWA in the amount of $50 million. Equitable agreed to participate in such fnancing but only on condition that Tooleo and TWA agree : (a) To the acceleration of the maturity of $31,000,000 principal amount of TWA’s Sinking Fund Bonds due in 1969 held by Equitable so that such bonds would mature at the same time as the interim bank debt and to an increase in the interest rate on the Sinking Fund Bonds to that on the in- terim bank debt; -__ (b) To @ guarantee by Toolco of the payment of 2” said Bonds;. A-74 Toolco’s Answer and Counterclaims (c) To the interest rate for the permanent finance. ing supplied by the insurance companies being one half of 1% greater than for the bank financing; and (d) To the execution of an agreement which would provide that in the event of certain defaults, including a default as a result of a change of man- agement, the TWA stock owned by Toolco would be placed in a voting trust controlled by the lenders. Dillon Read advised Toolco that no alternative to the acceptance of the Dillon Read Plan and the requirements of Equitable appeared feasible. Relying upon this advice Toolco on or about March 28, 1960, agreed to accept said Plan and requirements. 89. Thereupon Irving on behalf of TWA undertook to form a banking group for the purpose of providing interim and short-term financing to TWA. Prior to Toolco’s accept ance of the Dillon Read Plan, Dillon Read had advised Toolco and TWA that the interest rate on the permanent bank financing would be in the neighborhood of five or five and one-half per cent. Sessel, on behalf of Irving, advised TWA and Toolco that negotiations as to interest rate would have to await the formation by it of a banking group and represented to Toolco and to TWA that when a banking group was formed, Toolco and TWA would have a full opportunity to negotiate the interest rate. Thereafter, Metropolitan, after consultation with Equitable and with Equitable’s approval, agreed to supply the portion of the long-term financing not being supplied by Equitable, and Metropolitan and Equitable agreed among themselves that the interest rate on such financing would be 644%. Upon information and belief, this interest rate was in excess of that on any other financing theretofore or thereafter sup- plied by Equitable to any other corporation in 1961. When A-75 Toolco’s Answer and Counterclaims Irving formed its banking group, the members thereof, spon information and belief, after consultation with Equi- tshle and Metropolitan, agreed among themselves and with Metropolitan and Equitable that the interest rate on the short-term financing would be 6%. Thereafter, Irving re- tnsed to negotiate or to permit Tooleo or TWA to negotiate the rate of interest with the banking group which it had formed. Upon information and belief, Irving and Dillon Read in violation of their respective fiduciary obligations to TWA eachioncealed from TWA and Tooleo that other commercial banks were interested in participating in such bank financing upon other and more favorable terms to TWA. By reason of such concealment and since no accept- able alternative to the Dillon Read Plan appeared feasible, TWA was compelled to accept the 6% interest rate on the bank financing and the 614% rate on the insurance company fmancing. 90. In May 1961, Equitable and Metropolitan and Irving and its associated banks committed themselves to the Dillon Read Plan but under conditions which permitted them to withdraw their commitment in the event of a change in TWA’s management. Prior to the making of this commitment Charles S. Thomas (hereinafter “Thomas”), TW.A’s then president, upon information and belief, had advised Dillon Read and other of the conspira- tors that he would remain as president of TWA only if he were given a substantial increase in salary and a lifetime retirement annuity. Although the conspirators, prior to committing themselves to the Dillon Read Plan, thus knew of Thomas’s plans and the resulting uncertainty as to his tenure, neither Dillon Read nor any of the conspirators informed Toolco or TWA thereof until after Toolco without Amowledge of Thomas's planned demands (i) had committed A-76 Toolco’s Answer and Counterclaims itself to the Dillon Read Plan; (ii) had guaranteed interim loans to be made to TWA up to $40 million pursuant to an agreement between TWA and Irving and its associated banks, said loans to be used by TWA for the jet equipment program and to repay existing bank loans; and (iii) had guaranteed the Sinking Fund Bonds of TWA held by Equitable, the maturity of which was accelerated to the same date as that of the interim bank financing. The ma. turity of such interim debt was fixed as the initial closing date under the Dillon Read Plan. The closing was origi- nally scheduled for May 31, 1960 but was postponed to June 23, 1960 and thereafter, at the request of Equitable, to July 23, 1960. 91. On information and belief, prior to J uly 23, 1960, the precise date being unknown to Toolco, Metropolitan and Hagerty joined the conspiracy hereinabove alleged and, to insure the success thereof, the conspirators entered into a further agreement and understanding to the follow. ing effect: (a) The conspirators, and each of them, would refuse to lend moneys to TWA or Toolco so long as Toolco controlled TWA; (b) The conspirators, and each of them, would refuse to finance or otherwise deal with TWA or Tooleo or Hughes except upon condition that Toole place its stock in TWA in a lender-controlled voting trust; (c) The conspirators would use their concerted efforts to obtain and maintain control of TWA and to foreclose all other lenders from the opportunity of supplying financing to TWA except with their consent. 92. Prior to July 23, 1960, but after Toolco was firmly committed to the Dillon Read Plan, after it had guaran- ) ie A-77 Toolco’s Answer and Counterclaims teed $54,500,000 principal amount of TWA’s indebtedness and after loan agreements had been executed permitting the lenders to withdraw from their commitments in the event of a change in management deemed by them to be adverse, Thomas, upon information and belief, after con- siltation with the knowledge and approval of the con- spirators, for the first time demanded, on threat of resignation, a substantial increase in salary and lifetime wtirement annuity of $50,000 per year. Toolco refused to rmeommend to TWA the acceptance of such demands under pressure of the financing but itself offered Thomas equiva- leit benefits. Thomas insisted that his demands should be met by TWA and upon information and belief, was sup- ported i in said demands by the conspirators. 98. Thereafter, on July 21, 1960, Tooleo advised repre- sentatives of the lending institutions that Thomas, having finished the two years of service to which he was committed, intended to resign. Toolco proposed to the lenders that the fiancing proceed as planned upon the understanding that ifa president of TWA acceptable to the lenders had not been found within 90 days Toolco would place its TWA stock in a lender-controlled voting trust. Representatives of Metropolitan and Equitable tentatively accepted this proposal but it was thereafter rejected by the conspirators. Upon information and belief, the decision to reject the proposal’ was made jointly by Oates and Hagerty. The conspirators thereafter refused to acquiesce in any plan which would permit Toolco to name the president of TWA. When a compromise between Thomas and Toolco appeared probable, Thomas consulted Oates and Hagerty. Upon information and belief, they advised Thomas not to accept compromise but to resign. Thomas did so. Immedi- upon his resignation the conspirators claimed that Mere had been an adverse change in TWA’s management BO A-78 Toolco’s Answer and Counterclaims and, exercising the out which they had insisted be included in the loan agreements, cancelled the lenders’ commitments to TWA under said agreements. 94. Thereupon the conspirators entered upon a course of conduct designed and calculated to compel Tooleo to place its TWA stock in a lender-controlled voting trust and to give to the conspirators control of TWA: _ (a) The conspirators agreed to proceed with the Dillon Read Plan if, but only if, by September 1, 1960, Tooleo placed its TWA stock in a voting trust prior to any financing. The maturity of the TWA debt which Toolco had guaranteed was extended to September 1. _ (b) Irving insisted as a condition to its consent to the extension of the maturity of the interim bank debt that TWA accept no further deliveries of jet aircraft. (c) Although Toolco repeatedly offered to rec ommend a president for TWA acceptable to the lenders and although Toolco proposed for their con- sideration several qualified executives and offered to consider any alternative suggestions the lenders might make, the conspirators refused to consider any of Toolco’s proposals or make any alternative suggestions. (d) Irving was requested by Toolco to formulate and implement a new financing plan which would not require Toolco to place its TWA stock in a lender- controlled voting a7 z4 i port of Prudential, its traditional senior lender, in A-79 Toolce’s Answer and Counterclaims represented to Toolco that such participation would be inadvisable and did not permit Toolco to partici- pate therein. By such representations, Irving led and induced Toolco to refrain from making any efforts to sectre financing for TWA elsewhere or to obtain for itself financing required to repay its obli- gations to Irving and others incurred for the benefit of TWA. (e) Upon information and belief, Irving refused to permit several large banks which were not a part of the Irving banking group as previously formed to participate in formulating and implementing a financing program although Irving knew that such banks were prepared to participate therein. Irving concealed from TWA and Toolco the willingness of such banks to participate in a banking group without a voting trust. (f) The conspirators realized that any extended delay in the arrangement of permanent financing would cause a substatnial delay in the delivery of Convair aircraft to TWA and that the damage which would result from such a delay created pressure upon Toolco and TWA to yield to their demands. (g) Irving finally presented to Toolco a plan on September 26, 1960 (hereinafter “the Bankers’ Plan”). Irving knew or should have known that the Bankers’ Plan as submitted could not be effectu- ated. The Bankers’ Plan contemplated that General would participate in the financing to the extent of $40 million but as Irving knew or should have known General Dynamics did not have the available resources to extend a $40 million credit. Toolco accepted the Bankers’ Plan in order to avoid the damage to TWA which would result from a delay in arranging financing for the Convair aircraft. (h) General Dynamics sought to obtain the sup- A-80 Toolco’s Answer and Counterclaims order to supply the $40 million credit which the Bankers’ Plan contemplated. Upon information and belief, Prudential consulted one or more of the conspirators and thereupon refused to give the re. quired support. Toolco thereupon made arrange ments to relieve General Dynamics of a substantial part of General Dynamics’ commitment under the Bankers’ Plan by itself supplying an additional $30 million to be realized through the liquidation of assets unrelated to TWA. It negotiated, prepared, executed and delivered to Irving a plan which was substantially identical to the Bankers’ Plan except for this change. (i) On October 6, 1960 Irving and its associated banks met, avowedly to consider Toolco’s proposal. A representative of Equitable attended this meeting. Upon information and belief, prior to the presents- tion of Tooleo’s plan, Sessel advised the banks that Hughes had stated that a voting trust would be preferable to receivership and thereupon the banks agreed that they would not consider Toolco’s pro- posal and that in order to pressure Toolco and Hughes into a voting trust they would inform Toolco’s representatives that (i) no more loans would be made to TWA without an immediate voting trust agreement, (ii) the banks would proceed with the Dillon Read Plan if the insurance companies would also do so, (iii) should Toolco and Hughes not ac- cept the Dillon Read Plan with a lender-controlled voting trust, Irving and the other banks would set off at the opening of business on October 7 deposit balances against outstanding loans to TWA and Tooleo and (iv) the banks’ decision was final, no more plans would be considered and Toolco and Hughes would have until 5:00 P. M. Eastern Day- light Saving Time to accept the banks’ demands. (j) In midafternoon Toolco’s representatives were called into the meeting. Pursuant to the agree A-81 Toolco’s Answer and Counterclaims ment theretofore made, Sessel, as spokesman, stated to Tooleo that its proposal was totally unacceptable and refused to permit any discussion thereof. He further stated that the banking group would not require Toolco t6 place its TWA stock in a lender- controlled voting trust. He demanded that before 5:00 P.M. EDT Toolco agree by written document executed by its then president, Hughes, to accept the Dillon Read Plan with such a voting trust. He stated that if the demands of the banks were not met he would place Toolco in receivership. He further threatened that unless Tooleo agreed to a lender- controlled voting trust he would collect summarily the substantial indebtedness owed to Irving by Hughes personally which had no relationship to TWA or Toolco, which debt was not yet due but the maturity of which could be accelerated, and proceed immediately with a private foreclosure of Hughes’ stock in Toolco which had been pledged as security for Hughes’ debt to Irving. (k) Prior to 5:00 P.M. Tooleo acceded to the de- _mands of Irving provided that TWA be given the -— right to refund without premium or penalty the senior indebtedness to be provided to TWA and that Toolco be entitled to purchase all such indebtedness at 100% of the principal amount plus accrued inter- est. Irving and the other banks agreed to such a provision and a representative of Equitable who was present at the meeting accepted it in principle. (1) Thereupon Metropolitan after consultation with other of the conspirators demanded for the first time that Toolco’s right to acquire the bank and insurance company debt and thus terminate the Vot- ing Trust be subject to the payment of a penalty to be initially 22% of the principal amount of the insur- ance company debt, plus accrued interest, ie., $20,416,000. This punitive and unprecedented de- *' mand was designed solely for the purpose of pre- serving the lender-controlled voting trust. A-82 Toolco’s Answer and Counteyclaims (m) Tooleo promptly submitted to Equitable an alternative proposal which contemplated a voting trust but reserved to Toolco a right to purchase the senior notes for 100% of their principal amount plus accrued interest. In order to replace the participa. tion of Metropolitan and to reduce Equitable’s par. ticipation to an amoutn not greater than its existing loan to TWA, Toolco, in this proposal, committed to take $67.3 million of the sinking fund notes, Although this proposal afforded the lending banks an improved security position, Irving peremptorily refused to consider the plan on the ground that it and its associated banks did not want to do business with Hughes. (n) Thereafter, on October 19, 1960, Equitable and Metropolitan, with full knowledge of the pres sure upon Toolco and TWA to accept any demands in order that Convair aircraft might be delivered to TWA as soon as possible, stated in identical terms to Tooleo and TWA their willingness to reinstate the Dillon Read Plan, provided that (i) Tooleo agree to place its TWA stock in a lender-controlled voting trust; (ii) Tooleo consent to a penalty in the initial amount of 22% on $92,800,000 as a condition to termi- nation of the Voting Trust by the refinancing of the loans to TWA; (iii) the by-laws of TWA (providing for reconstitution of the TWA Board of Directors by & majority of the stockholders at any time without cause) remain unchanged; and (iv) no employment contract be made with an executive officer of TWA providing for tenure of office beyond the date of the next annual election of officers. The additional de- mands thus made were designed and calculated to give to the conspirators the power to determine the management of TWA, including its chief executive officer, to reconstitute the Board of Directors of TWA at will, and to manage and control the business and affairs of TWA in such manner as they should determine. . A-83 Toolco’s Answer and Counterclaims (o) Also on October 19, 1960, Irving made a simi- lar proposal to TWA and Tooleo. Irving stated (i) that acceptance of Metropolitan’s and Equitable’s proposals was a prerequisite to any commitment by it and its participating banks, and (ii) that in the event it, as agent for the other lending banks, did not have Toolco’s unconditional agreement in writing to its proposal by October 21, 1960, Irving and the other lending banks would enforce their rights of collection of TWA’s debts by all available remedies, including the right of set-off. (p) Tooleo received the October 19 letters on Friday, October 21. Toolco endeavored to negotiate a reduction of the 22% premium but the conspirators remained adamant. Thereupon, Toolco entered into an oral understanding with Irving that on Monday, October 24, a full quorum of TWA’s Board of Direc- tors would be asked to pass upon the financing after the Tooleo nominee directors had been notified that they could no longer assume that they were being indemnified by Toolco. On the basis of this under- standing with Irving, Tooleo accepted the October 19 demands of the lending institutions. (q) Irving refused to honor its agreement to per- mit TWA’s full Board of Directors to consider the October 19 proposals. Toolco, therefore, on October 22, 1960, notified the lenders that it no longer consid- ered itself bound by its conditional acceptance thereof. Toolco also notified Irving that it would seek to find other sources of “financing to replace Irving and its banking group. Thereupon Irving and certain members of said banking group commenced offsetting TWA and Toolco balances against TWA’s debt to such banks. At the same time, widespread publicity was given in the press and otherwise to -accounts of Toolco’s withdrawal of its conditional * acceptance of the October 19 proposals. Said ac- . counts were false and misleading and calculated to A-84 Toolco’s Answer and Counterclaims injure the reputation of Tooleo. Upon information and belief, such false and misleading publicity ema. nated from Irving and Sessel, was known to them to be false and misleading and was designed by them to preclude TWA or Toolco from finding any source of financing for TWA’s jet equipment program other than Irving and its associated banks and Metropoli- tan and Equitable and then only upon terms which included a lender-controlled voting trust. (r) Thereafter, Tooleo endeavored to develop an alternative plan for financing TWA’s requirements. Tooleo’s efforts to develop such a plan were unsue- cessful for reasons which included (i) the unwilling. ness of other lending institutions to finance TWA without the approval and support of Equitable, TWA’s traditional senior lender, (ii) the control and domination by Metropolitan, Equitable and Prn- dential of the market for major airline financing, and (iii) the attitude of the financial community which was based on erroneous assumptions of fact arising from the false and misleading statements of Irving and Sessel. Faced with no alternative by reason of the unlawful conduct of the conspirators, Tooleo on November 30, 1960, committed itself to accept the lender-controlled voting trust, the ~additional de- mands of the conspirators and the Dillon Read Plan. 95. Thereafter, in December, 1960, the necessary trans- actions and agreements to effectuate the Dillon Read Plan, ‘to place the common stock of TWA owned by Tooleo in a lender-controlled voting trust, and to comply with the additional demands of the conspirators were effected. By the terms of such agreements, the conspirators acquired and now possess the power to control the business and affairs of TWA. In furtherance of the conspiracy herein- A-85 Toolco’s Answer and Counterclaims above alleged the conspirators since December, 1960 have used the power so acquired: (a) To install a management of TWA which is responsive to them rather than to the owners of TWA; (b) To prolong and perpetuate their control of TWA by (i) prolonging and perpetuating the Voting Trust and (ii) frustrating the option which they gave to Tooleo in December, 1960 to regain control of TWA by acquiring, upon the payment of applicable penalties, all the Series A Sinking Fund Notes and Series A Serial Notes; ” (c) To impose upon TWA commitments which extend beyond the term of the Voting Trust and which are not related to the repayment of the loans in connection with which the Voting Trust was created ; (d) To gain for themselves financial advantage at the expense of TWA through making additional loans to TWA under conditions which are not com- petitive; and (e) To maintain TWA as a captive market for additional senior financing. Breech, notwithstanding the fiduciary duty which he owed @Tooleo as the equitable owner of the 78.2% of TWA’s dock which he held in trust, while serving as voting trustee aid as Chairman of the Board of Directors of TWA has participated in the acts and course of conduct by which seh objectives have been attained; Tillinghast who was ted president of TWA in the manner hereinabove al- e has furthered the efforts of the lending institutions }maintain control of TWA through the voting trustees; @ Breech and Tillinghast joined the conspiracy herein- move alleged. A-86 Toolco’s Answer and Counterclaims 96. Since December 1960, the conspirators have done or caused to be done the following in furtherance of said conspiracy : (a) On February 28, 1961, TWA’s Board of Directors was reconstituted so that a majority of said Board consisted of persons of the conspira- tors’ choosing. Thereafter, on April 27, 1961, the TWA Board of Directors was further reconstituted by removing therefrom all directors who répresented the interests of Toolco, with the single exception of Holliday, the voting trustee named by Toolco. Breech caused himself to be elected chairman of TWA’s Board of Directors as so reconstituted. (b) The conspirators selected Tillinghast to be TWA’s president and chief executive officer and, upon information and belief, at or about the time of his selection explained to him the nature of the con- spiracy and the contemplated course of conduct which would prevent Tooleco from regaining control of TWA. The conspirators thereafter caused TWA to enter into a contract by which upon Tillinghast’s re- tirement at any time following the termination of the Voting Trust and whether or not he has rendered any services to TWA (or upon his retirement at any other time after five years) he shall receive a pension for ten years, said pension being in the amount of $50,000 per year until he reaches age 65 and $30,000 per year thereafter, all as more fully alleged in para- graph 53 hereof. (c) The conspirators have failed for reasons un- related to any proper corporate or business purpose of TWA, to take advantage of opportunities to strengthen TWA’s business. One of such opportuni- ties which they have failed to pursue is that of a merger of Northeast into TWA’ Because of TWA’s route structure the traffic on its routes for many years has decreased sharply in the winter months. To A-87 Toolco’s Answer and Counterclaims temedy this seasonal imbalance Toolco in 1960 entered into negotiations with Atlas Corporation, the controlling stockholder of Northeast, looking toward a merger of Northeast with and into TWA. North- east by reason of its’ east coast route to Florida has a sharp seasonal imbalance which is the reverse of that of TWA. Such negotiations, which were carried on with the knowledge of TWA, culminated in May, 1960 in an agreement of merger which Atlas Corporation and Tooleo agreed to recommend to the Board of Directors of: Northeast and TWA, respectively. Under the merger agreement, the merger was subject to Board approval and to approval by a majority of the shareholders of TWA other than Tooleo. Breech and ‘Olds, with full knowledge of the agreement thus made by Toolco with Atlas Corporation, failed to recommend the merger to the TWA Board of Direc- tors and the conspirators failed to take action to con- summate a merger with Northeast either on the terms negotiated by Toolco or on other appropriate terms, notwithstanding the suggestion made by Toolco in May, 1961 that it was willing to discuss with TWA the possibility of Toolco’s assuming any financial risk that such a merger might otherwise impose upon TWA and notwithstanding the recommendations of TW4A’s operating personnel that such a merger was in the best interests of TWA. (d) For reasons unrelated to any interest of TWA, the conspirators refused to grant Toolco’s ’ request for a one week’s postponement in an offering by TWA of $111,235,900 principal amount of sub- ordinated debentures with warrants attached. This offering was being made to TWA’s stockholders pur- suant to agreements made in December, 1960 at the time of the creation of the Voting Trust. The pur- pose of the offering was to refund an interim note of $100 million which was accepted by Toolco in pay- * ment of obligations of TWA to it. By the terms of - said agreements the entire proceeds of the offering A-88 Toolco’s Answer and Counterclaims would be paid to Toolco, which had agreed to pur. chase all unsubscribed debentures up to a principal amount of $100 million, unless Toolco exercised an option to subscribe to all the debentures to which others did not subscribe. Toolco desired a post. ponement of the offering in order that it might make a simultaneous secondary offering of both the deben- tures which it was obligated to purchase and those which it had the option to purchase. Such a second- ary’ offering would have permitted TWA -to obtain an additional $11,235,900 in junior capital and Tooleo to obtain $100 million in cash. Upon information and belief, the conspirators refused Toolco’s request for a week’s delay in order to prevent Toolco from obtaining cash resources which might be used to pur- chase the Series A Sinking Fund Notes and Series A Serial Notes and thus to terminate the Voting Trust. (e) The conspirators entered into agreements with Boeing for the purchase of additional jet air- craft from Boeing, even though, upon information and belief, the number of aircraft which TWA agreed to acquire was in excess of TWA’s needs and finan- cial capabilities. The total cost of such additional jet equipment is in excess of $187,500,000 and a pri- mary purpose of the conspirators in entering into this program was, upon information and belief, to create a need for additional financing for TWA upon terms which would perpetuate their control of TWA. (f) Tooleo made various proposals to TWA which would have provided additional capital to TWA. One of such proposals would have guaranteed to TWA an additional $100 million of equity capital and was conditioned solely upon the termination of the Voting Trust. The conspirators refused to enter- tain any of such proposals upon their merits and rejected or allowed such proposals to expire without any negotiations with reepect thereto. A-89 Toolco’s Answer and Counterclaims (g) On June 30, 1961, the conspirators caused TWA to file its complaint in the instant action in which TWA seeks, among other relief, to divest Toolco of its interest in TWA. (h) Thereafter, without the approval by or con- sultation with Toolco or approval by the other stock- ‘holders of TWA, the conspirators caused TWA to enter into agreements with Metropolitan, with Equit- able and with Irving and its associated banks for the supplying of $147 million of additional financing to TWA. As more fully alleged in paragraph 53 hereof, the conspirators in connection with said additional financing caused to be executed a Supplemental In- denture giving to Metropolitan and Equitable the right to accelerate the maturity of said $147 million of indebtedness in the event the Voting Trust were to terminate whether in accordance with its terms or otherwise or in the event Tooleo were to exercise the option given to it in December, 1960, to acquire the Series A Sinking Fund Notes and Series A Serial Notes upon the payment of the applicable penalty. 97. During the years in which Toolco nominated a majority of the directors of TWA, namely from 1947 through 1960, the business of TWA grew steadily. From 1947 through 1960 TW.A’s operating revenues grew more than four times. In 1960 TWA had earnings before taxes im excess of $15,000,000. During the years from 1947 through 1960 TWA realized earnings before taxes of $95,600,000. -* 98. By reason of the unlawful conspiracy and acts here- insbove alleged: *... (a) TWA’s jet equipment program was disrupted * and the delivery of jet aircraft which had been or- A-90 Toolco’s Answer and Counterclaims dered by Tooleo from General Dynamics for the bene- fit of TWA was delayed; (b) TWA has been compelled to obtain financing upon unfavorable terms and at higher interest rates than it would have otherwise had to pay; (c) TWA’s assets have been wasted; (d) TWA has lost valuable opportunities ; (e) The business and affairs of TWA have stead- ily deteriorated. Upon information and belief, TWA in 1961 lost in excess of $30 million without regard to accelerated depreciation on piston aircraft and before applicable tax credits, or an adverse change from 1960 in excess of $45 million. TWA’s present management estimated in September, 1961 that by March, 1962 TWA, which started 1961 with a favorable cash balance of more than $40,600,000, would have a cash deficit of $2,500,000. 99. By reason of the foregoing, TWA has suffered and is continuing to suffer substantial damages in its business and property, the exact amount of which is presently ur- known to Tooleo but which is, upon information and belief, estimated to be in excess of $45 million, which amount may become substantially greater as a result of the conspirators’ continuing unlawful activities. 100. TWA is threatened with irreparable injury. - 101. All additional defendants are necessary parties to this counterclaim in order that complete relief may be granted. A-91 Toolco’s Answer and Counterclaims As awp FoR A Fourra CouNTERCLAIM Aaarmst TWA anv ’ _Agarest Ati ApprrionaL DEFENDANTS 102. Toolco repeats and realleges each and every allega- tion of paragraphs 42 through 48, inclusive, 62, 69, 70 and 73 through 97, inclusive, hereof. 108. Jurisdiction of this Court over this counterclaim arises from the violations of the antitrust laws herein alleged. 104. Since the creation of the Voting Trust, TWA, uder and by reason of the control of the conspirators over its business and affairs, has participated in the acts and warse of conduct by which the conspiracy has been fur- thered, as hereinabove more fully alleged. 105. By reason of the facts herein alleged, Toolco has sffered and is continuing to suffer substantial damages in its business and property, the amount of which is presently estimated to be in excess of $77 million, which mount may become substantially greater as a result of ‘the conspirators’ continuing unlawful activities. * 106. Toolco is threatened with irreparable injury. 107. TWA and the additional defendants are necessary ities to this counterclaim in order that complete relief may be granted. 108. Toolco has no adequate remedy at law. Ms.amp vor a Furr Couwrsnctam Acawst TWA axp 4s Acamst Att ApprrionaL DgFENDANTS 108. Toolco repeats and realleges each and every alle- ion of paragraphs 42 through 48, inclusive, 62, 69, 70 #98 through 97, inclusive, hereof. A-92 Toolco’s Answer and Counterclaims 110. Jurisdiction of this Court is ancillary to its juris diction over the third and fourth counterclaims heretofore alleged in that this Court has jurisdiction to grant all avail. able relief upon the facts therein alleged. 111. During 1960 Equitable, Metropolitan, Irving, Hagerty, Oates and Sessel, together with others, entered into a conspiracy to deprive Toolco of its voting rights with respect to TWA stock owned by it and thus to deprive Toolco of control of TWA. They made their demands for a lender-controlled voting trust not for the purpose of pro- tecting any legitimate interest which they might have as lending institutions but rather for the purpose of injuring, maliciously and wilfully, Tooleo and Hughes. In order to coerce and compel Toolco to place its TWA stock in such a lender-controlled voting trust, they, acting in concert, took or caused to be taken the actions alleged in paragraphs 90 through 94 hereof. 112. After Tooleo, by reason of the wrongful activities — of the conspirators, had been coerced and compelled to place its 78.2% stock interest in TWA in the Voting ‘Trust, Breech and Tillinghast joined in the conspiracy herein- above alleged and since January 1961, the conspirators, acting in concert and in-furtherance of the objects of the conspiracy, have engaged in a course of conduct designed and calculated to interfere with Toolco’s rights as the equi- table owner of over 78% of the stock of TWA, to maintain and perpetuate the Voting Trust and the control over TWA which the conspirators unlawfully acquired, and to manage the business and affairs. of TWA in the interests of the conspirators and not in the interests of the owners of TWA. TWA, under the control of the conspirators, has partici- pated in said course of conduct and the acts in furtherance of the conspiracy more fully alleged in paragraph 96 hereof. A-93 Toolco’s Answer and Counterclaims 113. Among the objectives of the conspiracy has been the ereation and perpetuation of a voting trust for a period beyond that permitted by applicable law. Under Section 18 of the Delaware Corporation Law the maximum term for which a voting trust of a Delaware corporation may be ereated is ten years and a voting trust may be extended for sn additional term of ten years only in the last year of said voting trust and then only in the manner provided in said Section 218. The conspirators required that Toolco agree in December, 1960 to extend the Voting Trust at the request of Irving as agent for the holders of TWA’s Series A Sink- ing Fund Notes and Series A Serial Notes for an additional term not to exceed the maximum permitted by Delaware law and since the creation of the Voting Trust have sought to perpetuate the Voting Trust as hereinabove alleged with- out the consent or acquiescence of Toolco. 114. As a result of the acts of the conspirators herein- shove alleged, Toolco has suffered damages in an amount presently estimated to be in excess of $77 million. 115. The continuation of the conspiracy herein alleged will result in irreparable injury to Toolco. 416. Toolco has no adequate remedy at law. 117. TWA and all additional defendants are necessary yarties to this counterclaim in order that complete relief As AND For A Sixrn CounTerciam AGAINST TWA | “18. Tooleo repeats and realleges each and every alle- ation of paragraphs 42, 43 and 50 hereof. "HS. As a part of the transactions in December 1960 by @ek TWA’s jet equipment program was financed, Toolco ipted TWA’s interim subordinated note in the amount A-94 Toolco’s Answer and Counterclaims of $100 million and TWA agreed to refund said note from an offering of subordinated income debentures and to pay interest on said note at the rate of 642% per annum to the date of refunding. 120. TWA refunded said interim note on June 13, 1961 but failed and refused to pay interest to the date of such refunding on the entire principal amount of said note. 121. The amount of such interest which TW failed and refused to pay is $72,089.55 and such amount remains due payable to Tooleo by TWA. Prayer for Relief Wuenerore, Toolco prays judgment dismissing the com- plaint herein and further prays that this Court order, adjudge and decree: With Respect to the First Counterclaim 1. That Equitable, Metropolitan and Irving be perpett- ally enjoined from accelerating the maturity of any indebt- edness of TWA by reason of the termination of the Voting Trust. 2. That the employment contract between Tillinghast and TWA in so far as it relates to the payment of any pe- sion or annuity be declared void and of no effect and that TWA be perpetually enjoined from paying any annuity or pension to Tillinghast thereunder. 3. That TWA, Breech, Tillinghast, Metropolitan, Equi- table, Dillon Reed and Irving be perpetually enjoined from taking any action which is designed or would have the effet A-95 Toolco’s Answer and Counterclaims of preventing the termination of the Voting Trust in accord- ance with its terms. 4, That TWA, Breech, Tillinghast, Metropolitan, Equi- table, Dillon Read and Irving account to Toolco for all damages suffered by Toolco by reason of the acts alleged in the First Counterclaim. With Respect to the Second Counterclaim 1. That Equitable and Metropolitan have acquired con- trol of TWA in violation of Section 408 of the Federal Aviation Act of 1958. 2. That Equitable, Metropolitan and Irving take all requisite action to terminate the Voting Trust. 3. That TWA recognize Tooleo as the owner for all purposes of the shares of TWA’s stock deposited in the Voting Trust and that Toolco is entitled to exercise all the rights of a stockholder of TWA with respect thereto. 4. That Equitable, Metropolitan and Irving, and each of them, be perpetually enjoined from accelerating the maturity of any indebtedness of TWA by reason of the termination of the Voting Trust. With Respect to the Third Counterclaim 1. That the additional defendants have violated Sections land 2 of the Sherman Act. 2 That Metropolitan and Equitable have violated Sec- tion 7 of the Clayton Act. & That the Voting Trust is invalid and void. 4 That TWA recognize Toolco as the owner for all pur- _ Roses of the shares of TWA’s stock deposited in the Voting A-96 Toolco’s Answer and Counterclaims Trust and that Tooleo is entitled to exercise all the rights of a stockholder of TWA with respect thereto. 5. That Equitable, Metropolitan and Irving take all requisite action to terminate the Voting Trust. 6. That Equitable, Metropolitan and Irving, and each of them, be perpetually enjoined from accelerating the maturity of any indebtedness of TWA by reason of the termination of the Voting Trust. 7. That Equitable, Metropolitan and Irving, and each of them, be perpetually enjoined from refusing to deal with TWA while it is controlled by Toolco. 8. That the additional defendants be perpetually enjoined from interfering in any way with the exercise by Tooleo of its rights as a stockholder of TWA. 9. That the additional defendants pay to TWA $135 million, three-fold the damages sustained by TWA, and pay to Toolco its costs, attorneys’ fees and expenses. With Respect to the Fourth Counterclaim 1. That TWA recognize Toolco as the owner for all purposes of the shares of TWA’s stock deposited in the Voting Trust and that Toolco is entitled to exercise all the rights of a stockholder of TWA with respect thereto. 2. That Equitable, Metropolitan and Irving take all requisite action to terminate the Voting Trust. 3. That Tooleo may at any time acquire the Series A Sinking Fund Notes and Series A Serial Notes at the principal amount thereof plus accrued interest and without the payment of any premium or penalty. ‘4. That Equitable, Metropolitan and Irving, and each of them, be perpetually enjoined from accelerating the A-97 Toolco’s Answer and Counterclaims maturity of any indebtedness of TWA by reason of the termination of the Voting Trust. 5. That the additional defendants Equitable, Metro- politan and Irving, and’each of them, be perpetually en- joined from refusing to deal with Toolco and with TWA while it is controlled by Toolco. 6. That the additional defendants pay to Toolco the sum of $231 million, three-fold the damages sustained by Tooleo, together with costs and attorneys’ fees. With Respect to the Fifth Counterclaim 1. That TWA recognize Tooleo as the owner for all purposes of the shares of TW4A’s stock deposited in the Voting Trust and that Toolco is entitled to exercise all the rights of a stockholder of TWA with respect thereto. 2. That Equitable, Metropolitan and Irving take all requisite action to terminate the Voting Trust. 3. That Tooleo may at any time acquire the Series A Sinking Fund Notes and Series A Serial Notes without the payment of any premium or penalty. 4. That Equitable, Metropolitan and Irving, and each of them, be perpetually enjoined from accelerating the ma- turity of any indebtedness of TWA by reason of the ter- mination of the Voting Trust. 5. That the additional defendants pay to Tooleo dam- ages in the amount of $77 million. With Respect to the Sixth Counterclaim ; 1, That Tooleo recover damages in the amount of 089.55 together with interest from and including June A-98 Toolco’s Answer and Counterclaims TogzTHER wiTH Toolco’s costs and disbursements and such other, further and different relief as to the Court shall seem just and proper. Dated: New York, N. Y. February 12, 1962. /s/ Cuester C. Davis CK@8ter C. Davis Attorney for Defendant Hughes Tool Company 120 Broadway New York 5, N. Y. Strate or CatirorNia t ss. County or Los ANGELEs , Raymonp M. Hotimay, being duly sworn, deposes and says that he resides at Houston, Texas; that is Executive Vice President of Hughes Tool Company, a corporation, defendant herein; and that he has read the foregoing an- swer and counterclaims and knows the contents thereof and that the same are true of his own knowledge except as to the matters therein stated to be alleged on informa- tion and belief, and as to such matters believes them to be true. /8/ Raymowrp M. Hotzmay Subscribed and sworn to before me this 12th day of February, 1962. /3/ Datias Kerrier Notary Public in and for Los Angeles County, California My commission expires July 23, 1963 A-99 Holliday’s Answer [Doe. 83] ——$_— [CAPTION ] 61 Civ. 2324 —— Defendant Raymond M. Holliday (hereinafter “Holli- lay”) by his attorney, Chester C. Davis, for his answer to he complaint herein states: ANSWERING THE F'mst Ciam ror REier 1. Denies each and every allegation of paragraphs 7, 9, (0, 22, 23, 24, 26, 36, 37, 38 and 44 through 55 inclusive of he complaint. 2. Admits the allegations contained in paragraphs 2, 6, 5, 29, 30, 32, 33, 34 and 40 of the complaint. 3. Admits that Hughes Tool Company (hereinafter ‘Tooleo”) is a corporation organized and existing under he laws of the State of Delaware and that it has assets f several hundred million dollars, and except as so admit- ed denies each and every allegation of paragraph 3 of the omplaint. 4, Admits that Howard R. Hughes (hereinafter Hughes”) has been the sole stockholder of Tooleo from a ime prior to January, 1939 to the present, that from a time rior to January, 1939 to December, 1960, he was an officer f Toolco, and except as so admitted denfies each and every llegation of paragraph 4 of the complaint. 5. Admits that he has been for some years past, and now g, an officer of Toolco, that since 1959 he has been, and al is, a director of Trans World Airlines, Inc. (herein- “TWA”), and except as so admitted denies each and allegation of paragraph 5 of the complaint. A-100 Holliiday’s Answer 6. Admits that TWA has, since its organization in 1934, operated a domestic air carrier system between certain cities in the United States, that since 1946 TWA has oper- ated an international air transportation system between the United States and certain cities in Europe, Africa and Asia, that during the period from 1958 through 1960, TWA pur- chased and leased jet-powered aircraft for amounts aggre- gating substantially in excess of $100 million, which air- craft were manufactured by manufacturers in various states in the United States, that in 1960 operating revenues of TWA were substantially in excess of $300 million and net income after taxes in excess of $6 million, that in 1959, TWA provided the only scheduled air transportation be- tween certain pairs of United States cities, and, except as so admitted, denies that it has knowledge or information sufficient to form a belief as to the allegations of paragraph 8 of the complaint. 7. Admits that commencing in or about the year 1939 and at various times thereafter Tooleo acquired common stock of TWA, that as at December 31, 1960, the amount of stock so acquired amounted to approximately 78.2% of such common stock, and except as so admitted denies each and every allegation of paragraph 11 of the complaint. 8 Admits that commencing in 1958 jet-powered air- craft became one of the most important factors in the competitive operations of air carriers, and except as 80 admitted denies each and every allegation of paragraph 12 of the complaint. 9, Admits that by 1955 aircraft manufacturers (includ- ing Boeing Airplane Company (hereinafter “Boeing”) and Douglas Aircraft Company, Inc (hereinafter “Doug- las”)) had prepared to the general knowledge of the air A-101 Holliday’s Answer carrier industry plans and drawings and otherwise had undertaken preparations for the manufacture of jet-powered aircraft intended for use by air carriers, that many air carriers beginning in 1955 devoted substantial efforts to determining what, if any, jet aircraft they should acquire and to obtaining jet aircraft suitable to their needs, that Boeing and Douglas contemplated and did ultimately manu- facture jet-powered aircraft for long range and medium range flights, and except as so admitted denies each and every allegation of paragraph 13 of the complaint. 10. Admits that General Dynamics Corporation, Con- vair Division (hereinafter “General Dynamics”), on its own account as one of the four major domestic aircraft manufacturers, commenced a program prior to 1955 for the design, development and manufacture of a jet-powered transport aircraft designated the Model 18, that such pro- gram never proceeded past the preliminary design state and was terminated in 1955 by General Dynamics, and except as so admitted denies each and every allegation of paragraph 14 of the complaint. “lL. Admits that prior to May 1, 1956, Tooleo considered the manufacture of a jet-powered aircraft with design and range characteristics suitable for use on both domestic and transatlantic routes, that Toolco contemplated that if it did manufacture this aircraft it would furnish the same to TWA and other air carriers, that it abandoned considera- tion of manufacture of such an aircraft prior to mid-1956, and except as so admitted denies each and every allegation of paragraph 15 of the complaint. 42. Denies that he has knowledge or information suffi- (mt to form a belief as to the truth of the allegations of 16 of the complaint. A-102 Holliday’s Answer 13. Admits that in January 1956 Toolco entered into an agreement with Boeing for the purchase of eight Model 707-131 jet-powered aircraft with an option to purchase seven additional such aircraft, that in 1956 Toolco exercised its option to purchase such additional aircraft and also placed an order for eighteen long-range Boeing jet trans- ports, and that in June of 1956 Toolco committed for the purchase of thirty Convair 880 aircraft from General Dynamics, and except as so admitted denies each and every allegation of paragraph 17 of the complaint. 14. Admits that purchase orders placed by Toolco with General Dynamics and Boeing gave Toolco the right to assign to TWA the right to acquire the jet-powered aircraft ordered by Toolco, and that Toolco released six of the long-range Boeing jet transports on order in a transaction with Boeing and Pan American World Airways, Inc. which was recommended and approved by the management of TWA, and except as so admitted denies each and every allegation of paragraph 18 of the complaint. 15. Admits that during the period 1956 to 1960 changes were made in the design and configuration of the Model 880 Convair aircraft ordered by Toolco and ®xcept as 80 admitted denies each and every allegation of paragraph 19 of the complaint. 16. Admits that in the period 1959 and 1960 Toolco leased to TWA certain jet-powered aircraft on a day-to-day basis, that such aircraft were the only jet-powered air- craft flown on TWA’s scheduled routes during said years, and except as so admitted denies each and every allegation of paragraph 20 of the complaint. 17. Admits that on or about May 17, 1960, Northeast Airlines, Inc. (hereinafter “Northeast”) submitted to TWA A-103 Holiday’s Answer a proposed agreement for the merger of Northeast with and into TWA, that Northeast is a substantial air carrier operating under certificates of public convenience and neces- sity and serving the east coast of the United States and Canada, that upon information and belief in 1959 North- east’s revenue miles totaled 519,000,000 and its total assets exceeded $35 million, and except as so admitted denies each and every allegation of paragraph 21 of the complaint. 18. Denies that-he has knowledge or information suffi- cient to form a belief as to the truth of the allegations of paragraph 27 of the complaint. 19. Admits that subsequent to 1955 Toolco discussed with various persons various proposals for the financing of jet-powered aircraft and except as so admitted denies each and every allegation of paragraph 28 of the complaint. 20. Admits that as part of the arrangements with cer- tam banks and insurance companies, Tooleo, TWA and three Voting Trustees (Ernest R. Breech, Irving S. Olds and Holliday) executed an agreement dated as of December 15, 1960, which provided that the TWA stock owned and to be owned by Toolco would be placed in a voting trust (here- inafter “the Voting Trust”), and except as so admitted denies each and every allegation of paragraph 31 of the complaint. 21. Admits that in March 1961, after consideration of TWA’s requirements for additional jet-powered aircraft, some officers of TWA recommended to the Board [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0039%3A01. Public record. Not legal advice.