Jurisdictional Statement — United States v. American Bldg. Maint. Industries

EE Seal

x

4 INDEX

2 bs Page

Do) 1

h iedidion .-_.......____._3 ewe meme m eee n ne 1

Question presented_._______________ ee 2

Matutes involved........._.__...._....._.__ 2

tat pc Gankacomsmcwnwocececencucneee 3

fe A.The acquiring company and the industry __ 4

© _B. Theacquired companies_________________ 5

=’ -C. Benton’s operations_________...._______ 5

> D. The summary judgment proceedings_____ 7

The questions are substantial._________________. 8

Con desig nin ps Wie ao ook eeecnccneee. + 14

yA ane 15

m Appendix B__._.._.._......._.._._______. 21

NE Rte e fevee iets eal bececwenn 24

CITATIONS

Brown Shoe Co. v. United States, 370 USS.

Ne ek mtn Re enim eden cia ade sat 10, 11

Burke v. Ford, 389 U.S. 320.____..__________ 14

Federal Trade Commission v. Bunte Bros.,

came, oie US. S40. oo 12

Gulf Oil Corp. v. Copp Painting, Inc. No. 73-

1012, certiorari granted, March 25, 1974____ 9

Mandeville Island Farms, Inc. v. American

Crystal Sugar Co., 334 U.S. 219______.____ 9

~ Shreveport Rate Cases, 234 U.S.342_...______ 1]

~ Transamerica Corp. v. Board of Governors, 206

i ik ah anes a dnd wee enanc 10

533-699—74——1 oe

Cases—Continued

United States v. Employing ee Assoc.,

Page

aoa ewe 14

United States y. Penn-Olin Chemical Co., 378

Si, BEG edvnekeccnccmeckoace ae 13

United States v. South-Eastern Underwriters

pS, ke eee eee 9 F

Statutes:

Cellar-Kefauver Amendments of 1950, 64 i

Re SE Ns tie he ccd ae 3, 13 §

Clayton Act, 38 Stat. 730, as amended, 15

US.C. 12 et seq.:

Mee 6 DBE, 12.3. nannkcBaens-: 2,11 |

Section 7, 15 U.S.C. 18.__ 3, 8, 10, 11, 12, 13, 14

Miscellaneous:

H. Rep. No. 627, 63d Cong., 2d Sess-------- ll}

H. Rep. No. 1191, 81st Cong., Ist Sess. _..-. 12 |

Gu the Supreme Court of the United States

OctoBER TERM, 1973

No.

UnitEep STATES OF AMERICA, APPELLANT

an

AMERICAN BUILDING MAINTENANCE INDUSTRIES

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR

THE CENTRAL DISTRICT OF CALIFORNIA

JURISDICTIONAL STATEMENT

OPINION BELOW

The findings and conclusions of the district court

(App. A) are not reported.

JURISDICTION

The judgment of the district court (App. B) was

entered on December 12, 1973. A notice of appeal to

this Court (App. C) was filed on February 7, 1974.

On March 1, 1974, Mr. Justice Douglas extended the

time for docketing an appeal until May 11, 1974. The

jurisdiction of this Court is conferred by Section 2 of

(1)

the Expediting Act (15 U.S.C. 29). United States y.

Falstaff Brewing Corp., 410 U.S, 526.

2

QUESTION PRESENTED

Whether a corporation which performs janitorial

and maintenance services within a single state for

companies which sell products in interstate and for-

eign commerce, which solicits and negotiates such

contracts through interstate communications, and

which purchases substantial quantities of supplies

originating in other states, is ‘‘engaged in commerce”

for purposes of Section 7 of the Clayton Act.

STATUTES INVOLVED

Section 1 of the Clayton Act, 38 Stat. 730, as amended,

15 U.S.C. 12, provides in pertinent part:

“Commerce’’, as used herein, means trade or

commerce among the several States and with

foreign nations, or between the District of Co-

lumbia or any Territory of the United States

and any State, Territory, or foreign nation,

or between any insular possessions or other

places under the jurisdiction of the United

States, or between any such possession or place

and any State or Territory of the United States |

or the District of Columbia or any foreign

nation, or within the District of Columbia or

any Territory or any insular possession or

other place under the jurisdiction of the

United States: Provided, That nothing in this

Act contained shall apply to the Philippine

_ Islands.

3

Section 7 of the Clayton Act, 38 Stat. 731, as

amended, 64 Stat. 1125, 15 U.S.C. 18, provides in

pertinent part:

No corporation engaged in commerce shall ac-

quire, directly or indirectly, the whole or any part

of the stock or other share capitai and no cor-

poration subject to the jurisdiction of the Fed-

eral Trade Commission shall acquire the whole

or any part of the assets of another corporation

engaged also in commerce, where in any line of

commerce in any section of the country, the ef-

fect of such acquisition may he substantially to

lessen competition, or to tend to create a

monopoly.

STATEMENT

The United States instituted this civil antitrust suit

against American Building Maintenance Industries

(*“ABMI”’) on January 8, 1971, contending that

ABMI violated Section 7 of the Clayton Act, 15

U.S.C. 18, by acquiring the stock of J. E. Benton Man-

agement Corp. and by merging Benton Maintenance

Company into American Building Maintenance Com-

pany of California. The complaint alleged that the

merger and acquisition, which was consummated in

1970, may substantially lessen competition in the sale

of janitorial services in Southern California and the

Los Angeles area.’ On December 12, 1973, the district

court granted the defendants’ motion for: summary

judgment, holding that neither of the Kenton com-

* The complaint defines “Southern California” as Santa Bar-

bara, Ventura, Los Angeles, Orange, San Bernardino and River-

side Counties.

4

panies was “engaged in commerce” within the mean-

ing of Section 7 of the Clayton Act at the time of the

merger and acquisition.

A. THE ACQUIRING COMPANY AND THE INDUSTRY

American Building Maintenance Company of Cali-

fornia is a wholly owned subsidiary of ABMI. The

complaint alleged that ABMI is the largest seller of

janitorial services in Southern California and one of

the largest sellers of such services in the country. It

has 56 janitorial service branches serving 500 com- ©

munities in the United States and Canada. The com- |

plaint alleged that ABMI had national revenues of —

about $52.4 million and Southern California revenues

of about $10.9 million frém janitorial services in 1969.

ABMI’s Southern California sales represented about

10 percent of the total janitorial service sales in that

area.

The service industries are the fastest growing seg-

ment of the American economy. More than half of f

the nation’s work force is employed in those industries

and soon more than half of this country’s Gross Na-

tional Product will be generated in the service sector.

The supplying of janitorial services by independent *

contractors is one of the fastest growing service busi-

_ nesses. Receipts for such services increased by 324

percent from 1958 to 1967. In 1972, national receipts

for commercial, institutional and industrial cleaning

services were more than $1 billion (Aff. of Philip

Neff).

There is a nationwide trend toward concentration

in the janitorial service industry. The four largest

5

firms have made at least 170 acquisitions of janitorial

service and related businesses since 1961. ABMI made

54 of those acquisitions. ABMI’s acquisitions included

five janitorial service companies in the Los Angeles

area in addition to the Benton companies (Aff. of

John D. Gaffey).

ABMTI has publicly acknowledged that it intends to

accelerate this acquisition program. In a December

1971 speech to institutional investors, ABMI’s presi-

dent stated: “We have been buying four-six companies

a year. I would say in the future it would be fair to

| | estimate that we will buy between six and eight com-

4 panies a year” (Aff. of John D. Gaffey).

B. THE ACQUIRED COMPANIES

Jess E. Benton, Jr. owned all of the stock of J. FE.

Benton Management Corp. and 85 percent of the stock

of Benton Maintenance Company at the time of the

merger and acquisition (Aff. of Jess E. Benton, Jr.).

Both companies sold janitorial services; Benton Man-

agement also provided building management services

and engaged in the real estate business. All of the

facilities served by these companies were located in

Southern California, The complaint alleged that the

Benton Companies (‘‘Benton”) was the fourth larg-

est seller of janitorial services in Southern California,

with 1969 sales of about $7.2 million. This represented

about 7 percent of the total sales in that area.

C. BENTON’S OPERATIONS

Benton’s customers included TRW, Inc., Jet Pro-

pulsion Laboratory, Rockwell International, General

t

6

Telephone Co. of California, Pacific Telephone and

Telegraph Co., Mobil Oil Corp., Union, Oil Co.,

Texaco, Inc., Carnation Co., Teledyne, Inc. and Tish-

man Realty & Construction Co. Benton maintained

and cleaned offices, manufacturing areas, and labora-

tories for its aerospace customers, offices and rooms

housing telephone switching equipment for its tele-

phone company clients, corporate headquarters build-

ings for Union Oil, Carnation and Teledyne, and re-

gional headquarters buildings for Mobil and Texaco.’

Benton also performed all the janitorial services for

the owner and tenants at Tishman Plaza, a large of-

fice complex in the Los Angeles area se of Alan ©

D. Levy).

In some cases Benton’s activities were cilities to

cleaning services, in other cases it assumed responsi-

bility for maintaining heating, air conditioning, elec-

trical and plumbing services, and paid utility bills for

Texaco (Aff. of Edward H. Patotzka).

Although all of Benton’s maintenance contracts

were performed in California, some of the contracts

were negotiated with out-of-state owners. The Tish-

man Plaza contract was executed by Tishman execu-

tives based in New York (Aff. of Alan D. Levy), and

the New York Life Insurance contract was the prod-

uct of interstate negotiations. Those two contracts

? Affidavits of Charles V. Engle (TRW);, Raymond Her-

nardez (Jet Propulsion Laboratory); Charles. W. Moxley and

John Blain (Rockwell); Donald E. Del Dosso (General Tele-

phone); George G. Guest (Pacific Telephone); John Stover

(Mobil); L. B. Higbee (Union Oil); Edward H. Patotzka

(Texaco) ; Maynard Heider (Carnation); and Edmund Sako-

wicz (Teledyne). $

7

made a significant contribution to Benton’s tota) rev-

énue.’ Benton also used interstate communications to

solicit other contracts (Aff. of John D: Gaffey).

Benton. purchased substantial quantities of jani-

torial supplies and other goods manufactured outside

of California. In 1969 Benton purchased more than

$120,000 in janitorial supplies which were manufac-

tured outside California* and paid about $36,000 in

lease fees attributable to, vehicles and a computer

which ‘were manufactured in other states (Aff. of

John D. Gaffey).’:

D. THE SUMMARY JUDGMENT PROCEEDINGS

ABMI filed a motion for summary judgment to-

gether with proposed findings of fact and conclusions

of law, After réceiving memoranda, affidavits and

counter-affidavits from both parties and hearing oral

argument, the district judge signed the findings and

conelusions which ABMI had submitted.

The court found that the Benton companies con-

ducted their businesses entirely within California, °

that Benton did not advertise nationally, The court

* The details of these transactions are contained in ,exhibits

covered by the district court’s protective order of June 2, 1971.

*The district court findings focused only on Benton's direct

interstate purchases which were admittedly small. The court found

direct purchases aggregating approximately $140 and interstate

telephone calls of $19.78 (Finding 7, App. A, pp. 16-17; Finding

15, App. A, p. 18). The findings do not reflect Benton's purchases

of out-of-state products from local citi ton as noted in

the text, were substantial.

* Benton also expended about $80,000 of funds advanced by

clients for gas, water, electricity and elevator parts which

originated outside of California (Affidavits of John D. Gaffey,

James J. Breen).

533-699—74——2

/ /

SSS

| 8

also found that Benton’s purchases: of produc

“which were shipped to it from outside California

and its expenditures for interstate telephane cal

were de minimus. (App. A, pp. 17, 18) The court co

cluded that each Benton company “was not a corpor'

tion engaged in commerce” and that “[t]here is no juri

diction of the Federal Court in this action under Sectic

7 of the Clayton Act (15 U.S.C. § 18)” (App. A, p. 20

THE QUESTION 18 SUBSTANTIAL

This appeal presents a substantial question invol

ing the reach of Section 7 of the Clayton Act. Thi

' section prohibits anticompetitive acquisitions of co’

porations - “engaged in commerce.” The questic

is whether Section 7 applies to acquisitions <

firms which, although conducting primarily a loc

business, nevertheless ‘serve customers who- then

selves ‘are engaged | fn interstate commerce, an

which, - in providing such services, make substanti:

purchases of goods shipped. in interstate commerce

The district court’s narrow interpretation of the reac

of Section 7 is inconsistent with the basie congre:

sional purpose reflected in that’ section of arrestin

in their incipiency anticompetitive trends towa1

concentration, and would seriously weaken the effe

tiveness of that section in accomplishing that purpos

, Court has already recognized the importan:

of the issue. One of the questions which it agreed 1

review when it granted the petition for certiorari i

i

lucts

nia”

volv-

That

cor-

stion

s of

local

hem-

and

ntial

erce.

pach

sting

ward

Lffec-

9

Gulf’ Oil Corp. v: Copp Painting, ‘Ine: No. 73-1012

(granted March 25, 1974], involves the’ applicability

of Section 7 to the acquisition of a company which

produces and sells intrastate asphalt that is used ‘on

interstate highways.’’ The present case involves a

similar question concerning the reach of Section 7.

We believe that it would be appropriate for the Court

to consider the two cases together, which would enable

it to examine the reach of the statute in related but

different factual settings.

1. This Court has recognized that in enacting the

Sherman Act, Congress ‘‘wanted to go to the utmost

extent of its Constitutional power in restraining trust

and monopoly agreements * * *.” United States v.

South-Eastern Underwriters Assoc., 322 U.S. 533,

508. Accordingly, the Sherman Act has been applied

to all activities which substantially affect interstate

commerce. See, ¢.g., Mandeville Island Farms, Inc. v.

American Crystal Sugar Co., 334 U.S. 219. We sub-

*The question states in relevant part:

With respect to a commodity which is not only made

and sold in one state alone but is only salable and usable

in that state, does the fact that it is used in an instru-

mentality of commerce such as a highway supply the

necessary.requirements, by itself and as a matter of law.

* * * * k

(c) Of Section 7 of the Clayton Act that the acquisi-

tion by a “corporation engaged in commerce” be of a corpo-

ration “engaged also in commerce”, and that “the effect * * *

may be substantially to lessen competition or tend to create

a monoply,” where the acquired corporation sold nothing

in commerce and the product it made did not enter com-

merce ?

10 Mii

mit that Section 7 of the Clayton, Act, which, was de-

signed to provide ‘authority; for arresting: mergers at

a time when the trend toa lessening. of competition

in a line of commerce was still in its incipieney” (Brown

Shoe Co. v. United States, 379 U.S, 294, 317), was in-

tended to have a similar reach,..

-.The Court of Appeals for, the ‘Third Circuit pee

recognized that when Congress originally enacted See-

. tion 7 ,0f the Clayton Act in 1914, it intended that

provision to have just as broad a reach as the Sher-

man Act. In T'ransamerica Corp. v. Board of Governors,

206 F. 2d 163, 166, the court said:

We find nothing in the legislative history, how-

ever, to indicate that Congress did not intend

by Section 7 to exercise its power under the

commerce clause of the Constitution to the full-

est extent. The avowed purpose of the Clayton

Act was to: supplement the Sherman Act, 15

U.S.C.A. §81-7, 15 note, by arresting in their

incipiency those acts and practices which might

ripen into a violation of the latter act. Since

the general language of the Sherman Act was

designed hy Congress ‘‘to go to the utmost ex-

tent of its Constitutional power in restraining

trust and monopoly agreements’’ the supple-

mentary general language of the..Clayton Act

was undoubtedly intended to have the same all

inclusive scope. .

While the legislative history of the original Section

7 does not contain an extended discussion of the ‘‘com-

meree’’ requirement, it does indicate that Congress

intended fully to exercise its commerce power. The

“engaged in commerce”? language of Section 7 and

a

t

11

the definition of commerce in Section 1 of the Clayton

Act, 15 U.S.C. 12, were part of the original bill re-

ported by the House of Representatives Judiciary

Committee. The House Report stated that the ‘‘defini-

tion of commerce * * * is broadened so as to include

trade and commerce between any insular possessions

or other places under the jurisdiction of the United

States, which at present do not come within the scope

of the Sherman antitrust law or other laws relating

to trusts.” H. Rep. No. 627, 63rd Cong., 2d Sess.,

p. 7. The Report also said that Section 8, which be-

came Section 7, ‘‘* * * is intended to eliminate this

evil [the aggregation of economic power through stock

acquisition] so far as it is possible to do so * * *.” Id.

at 17.’ :

In 1950 Congress amended Section 7 to extend it to

acquisitions of assets. Although the legislative history

of the 1950 amendments did not deal directly with the

“commerce” requirement, that history reflects a con-

tinuing Congressional intent to fully exercise its regu-

latory powers.

In Brown Shoe Co. v. United States, 370 U.S. 294,

315-323, this Court reviewed the 1950 legislative his-

tory and found that “[t]he dominant theme pervading

* At the time of the passage of the Clayton Act in 1914 the

distinction between activities “in commerce” and activities

“affecting commerce” had not been fully developed. The Shréve-

port Rate Cases, 234 U.S. 342, decided in 1914, has recognized.

Congress’ power to regulate activities substantially affecting

interstate commerce. The principles of the Shreveport Rate

Cases were subsequently applied to the Sherman Act, passed in

1890. See Mandeville Island Farms, supra. Those principles are

equally applicable to Section 7 of the Clayton Act.

12

congressional consideration * * * was a fear of what

was considered to be a rising tide of economic concen-

tration in the American economy.” Id. at 315. In addi-

tion, the legislative: history reflected Congressional

concern: over the “desirability of retaining ‘local con-

trol’: over: industry and the protection of small busi-

nesses.” Jd. at 315-316. Motivated by its concerns over

increasing -concentration, Congress sought to give

“#*"*:* eourts' the power to brake this force at its

outset and. before. it gathered momentum.” "Id. at 317-

318.

--Under the district setsie' s restrictive interpretion of

Section 7, a firm such as ABMI could obtain a virtual

monopoly of a service industry, which is inherently

local, by acquiring one local firm after another. Such

a result’ would be contrary to the aim of Section 7,

which was intended to block all acquisitions likely to

contribute to increasing levels of concentration. As the

House Report tothe 1950 amendment stated:

Acquisitions * * * have a cumulative effect,

and control of the market * * * may _ be

achieved not in a single acquisition but as the

result of a series of acquisitions. The bill is

intended to permit intervention in such a cumu-

lative process when the effect of an acquisition

may be a significant reduction in the vigor of

competition * * * [H. Rep. No. 1191, 81st adie,

Ist Sess. 8.]

This Court has observed that the commerce require-

ment in every statute ‘‘presents a unique problem in

which words derive vitality from the.aim and nature

of the specific legislation.” Federal Trade Commis-

sion V. Bunte Bros., Inc., 312 U.S. 349, 351.

13

In Section 7% as it stood after the Celler-Kefauver

Amendments of 1950, 64 Stat. 1125, 1126, The com-

merce requirement was not stated separately. Instead,

in a single comprehensive sentence the amended

statute bars corporations “engaged in commerce’”’

from aequiring the stock or assets “of another cor-

poration engaged also in commerce’’, ‘‘where in any

line of commerce in any section of the country, the

effect of such acquisition may be substantially to

lessen competition, or to tend to create a monopoly.” 15

U.S.C. 18. The commerce requirement, therefore, was

defined by the entire sentence. It should have been read

by the district court in its total context rather than in

isolation. See United States vy. Penn-Olin Chemical Co.,

378 U.S. 158, 168. o Xe

It would indeed have been anomalous for Congress,

which in 1950 strengthened Section 7 to prohibit in

their incipiency anticompetitive practices before they

developed into full-blown violations of the Sherman

Act, not to have intended to exercise the same full

reach of its commerce power that it had long since

utilized in the Sherman Act itself. Otherwise, the con-

gressional attempt to deal with these practices before

they reached the stage of Sherman Act violations

would have been seriously weakened.

2. This merger and acquisition had a substantial ef-

fect upon interstate commerce. Benton derived 80

percent to 90 percent of its revenues from customers

who were engaged in selling goods in interstate and

foreign commerce or in providing interstate communi-

14

cations facilities (Aff. of John D. Gaffey). Benton’s

Services were an essential and important part of the

interstate and international operations of those

clients.°

Benton also purchased or leased substantial quan-

tities of janitorial supplies and other goods which

originated outside of California. Purchases of sup-

plies originating in other states have frequently been

recognized in Sherman Act cases as sufficient to estab-

lish the requisite effect upon interstate commerce. See,

e.g., Burke v. Ford, 389 U.S. 320; United States v. Em-

ploying Plasterers Assoc., 347 U.S. 186.

CONCLUSION

* Probable jurisdiction should be noted.

Respectfully submitted.

Rosert H. Bork,

Solicitor General.

THomas E. Kauper,

Assistant Attorney General.

Wiuuiam L. Patron,

Assistant to the Solicitor General.

Car. D. Lawson,

LEE I. WEINTRAUB,

Attorneys.

May- 1974.

* Affidavits cited in n. 2, supra. Even if Section 7 were

deemed to require activities in the “flow of commerce”, Ben-

ton’s intimate involvement in the operations of its clients which

were unquestionably engaged in interstate commerce satisfies

such a restrictive test.. Moreover, Benton engaged in a form of

‘interstate sales activity by negotiating contracts with persons in

other states and by soliciting contracts through the use of in-

terstate facilities.

., APPENDIX: A

Unirep States Districr Court, CENTRAL District oF

California :

CIVIL ACTION NO. 71-55

Unitep States oF AMERICA,, PLAINTIFF

oo

AMERICAN BurmpDInG MAINTENANCE INDUSTRIES,

DEFENDANT

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The above entitled action came on regularly for

hearing on September 4, 1973, before the Court, the

Honorable Jesse W. Curtis, United States District

Judge presiding, on the motion of defendant Ameri-

ean Building Maintenance Industries for a summary

judgment of dismissal for lack of federal jurisdic-

tion against plaintiff United States of America, and

said plaintiff and said defendant being represented by

their respective counsel, and the Court having con-

sidered the pleadings and said motion and the papers

filed in support thereof and other papers on file

herein and the arguments of counsel, and being fully

advised in the premises, and it appearing that there

is no genuine issue as to the facts hereinafter set

forth, the Court now makes its Findings of Fact and

Conclusions of Law as follows:

FINDINGS OF FACT

1. Defendant American Building Maintenance In-

dustries is, and at all times relevant to this action was,

(15)

- 16

a corporation organized under the laws of the State of

California, having its principal office in San Francisco,

California.

2. J. E. Benton Management Corporation, formerly

named Pacific Realty Securities Company, was at all

times rélevant to’ this’ action a corporation organized }

under the laws of the State of California having its |

only office in Los Angeles, California,

3. On June 30, 1970 all of the stock of J. E. Benton

Management Corporation was acquired by defendant.

4. Prior to June 30,1970 and at all times relevant

to this action, J. E. Benton Management Corpora-

tion engaged in the real estate business and _ the

business of providing building management, janitorial

and related services. These were the only businesses |

engaged in by J. E. Benton Management Corporation |;

and they were conducted entirely within Los Angeles, |

Orange and Ventura Counties in California.

5. J. E. Benton Management Corporation had no

manufacturing plant, no sales or distribution outléts, |

no product which was sold or shipped, no patents or

scientific know-how, and no location or business situs

advantage,

6. Between March 1, 1970 and June 30, 1970 J. E.

Benton Management Corporation made no purchases

of products which were shipped to it from outside

California.

7. Between March 1, 1969 wad Febuary 28, 1970 }

J. E. Benton Mariagement Corporation made no pur- [

chases of any product or services of any kind or char-

acter which were shipped to it from outside California

except the following:

(a) Real estate publications costing $13.39

from Matthew Bender PaRORY, Albany, New

York;

SS

17

(b) Reel rack costing $25.01 from Monarch

Metal Products, New Windsor, New York; ~

(c) Income tax publication costing $79.98 from

Prentice Hall, Ine., Englewood Cliffs, New Jer-

sey; and .

(d) Sign purchase costing $11.97 from Ready

‘Made Sign Company, Long Island, New York.

These purchases do not represent a substantial or

appreciable amount of interstate commerce by any

standard and are de mutimus.

8. J. E. Benton Management Corporation did not

advertise nationally. It purchased advertising in the

yellow pages of local telephone directories and dis-

tributed brochures describing its business to prospec-

tive customers.

9. Benton Maintenance Company, formerly named

S. W. Straus & Co. and Affiliated Maintenance Com-

pany, was at all times relevant to this action a cor-

poration organized under the laws of the State of

California, having its only office in Los Angeles,

California.

10. On June 30, 1970 Benton Maintenance Com-

pany was merged into American Building Mainte-

nance Company of California, a subsidiary corpora-

tion of defendant.

11. At all times relevant to this action Benton

' Maintenance Company was engaged in the business

_ of providing janitorial and related services. This was

_ the only business engaged in by Benton Maintenance

» Company and it was conducted entirely within Los

. Angeles, Orange and Ventura Counties in California.

12. Benton Maintenance Company had no manufac-

turing plant, no sales or distribution outlets, no prod-

_ uet which was sold or shipped, no patents or scien-

_ tifie know-how and no location or business situs

advantage.

tee PA ee er —

18

13. Between January 1, 1969 and June 30, 1970

Benton Maintenance Company made no purchases of

products which were shipped to it from outside

California.

14. Benton Maintenance Company did not adver-

tise nationally. It purchased advertising in the yellow

pages of local telephone directories and distributed

brochures describing its business to prospective

customers.

15. J. E. Benton Management Cicsassilin and

Benton Maintenance Company received telephone

services from The Pacific Telephone and Telegraph

Company (‘Pacific’) over telephone number 737-

3220 through a single switchboard at their offices

located at 3727 West Olympic Boulevard, Los An-

geles, California. From January 1969 through June

1970 Pacific billed J. E. Benton Management Cor-

poration $18,310.70 for these services. Pacifie was

paid $18,260.45 on these bills of which $19.78 repre-

sented payment of charges for ten out-of-state calls

apparently related to the business activities of the

Benton corporations. These ten calls do not represent

a substantial or appreciable amount of interstate

commerce by any standard and are de minimus.

16. The business of the Benton corporations in pro-

viding janitorial services, and the janitorial: service

business generally is an intensely local activity. No

commodity is sold. The only sale made (if it be a sale)

is the sale of unskilled labor of janitors necessary to

clean buildings. There is no tangible property in-

volved in the business except insignificant, incidental

facilities.

-17. The Benton corporations purchased supplies as

needed. They did not enter into any requirements or

continuing supply contracts with its suppliers. There

are no significant economies to be realized through

C0

Pe ae AAE te nome ey

19

bulk or quantity purchases of supplies necessary to

the provision of janitorial services, Supplies represent

a minor part of the total costs of providing janitorial

service, The basic service provided was the labor nec-

essary to perform the cleaning work. Costs of supplies

represent approximately three percent of total

amounts paid by customers for janitorial services.

18. The major suppliers of the Benton corporations

were:

(a) Ball Industries, El] Segundo, California,

which delivered itidustrial and janitorial equip-

ment and supplies from its warehouse to the Ben-

ton corporations’ warehouse at 3727 West Olym-

pic Boulevard or to customer locations specified

by the Benton corporations ;

(b) National Sanitary Supply Co., Los An-

geles, California, which delivered paper goods and

other janitorial supplies from its warehouse to the

Benton corporations’ warehouse or to customer

locations specified by the Benton corporations ;

(c) U.S. Guards, Monterey Park, California,

which provided the Benton corporations with

building guard services on a subcontract basis;

and

(d) Courtesy Chevrolet Leasing, Los Angeles,

California, which leased vehicles to the Benton

corporations.

19. Plaintiff United States of America does not al-

lege in its complaint herein that the Benton corpora-

tions, or either of them, are engaged in commerce, nor

does plaintiff allege that the effect of the acquisi-

tion and merger may be to substantially lessen ecompe-

tition or tend to create a monopoly in the sale of jani-

torial services in areas other than areas wholly within

California.

20. The following Conclusions of Law, insofar as

20

they may be considered Findings of Fact, are so found

to be true in all respects and are to that extent adopted

by the Court as Findings of Fact.

Based upon the foregoing Findings of Fact, the

Court concludes as follows:

CONCLUSIONS OF LAW

21. There is no genuine issue as to any of the fore-

going facts which are determinative of the cause.

22. J. E. Benton Management Corporation was not a

corporation engaged in commerce at the time of the

acquisition of its stock by defendant.

23. Benton Maintenance Company was not a cor-

poration engaged in commerce at the time of its

merger into American Building Maintenance Company

of California, a subsidiary corporation of defendant.

24. There is no jurisdiction of the Federal Court

in this action under Section 7 of the Cayen Act. (15

U.S.C. § 18.)

25. Plaintiff United States of América is not en-

titled to a judgment or a final decree or damages

against defendant.

26. Defendant is entitled to a summary judgment |

in its favor dismissing this action and judgment of

dismissal should be entered accordingly.

27. The foregoing Findings of Fact, insofar as they

or any of them may be considered Conclusions of Law,

are to that extent hereby adopted by the Court as Con-

clusions of Law.

Dated at Los Angeles, California, this 12th day of

December, 1973.

JESSE W. CurrTIs,

United States District Judge.

ah

APPENDIX B

United States District Court, Central District of

‘California

CIVIL ACTION NO. 71-55 !

UNITED STATES OF AMERICA, PLAINTIFF

ve 7

AMERICAN BumpInc’ MAINTENANCE INDUSTRIES,

DEFENDANT

SUMMARY JUDGMENT OF DISMISSAL IN FAVOR OF DE-

U

FENDANT AMERICAN BUILDING MAINTENANCE INDUS-

TRIES AGAINST PLAINTIFF UNITED STATES OF AMERICA

The above entitled action came on regularly for

hearing on September 4, 1973, before the Court, the

| Honorable Jesse W. Curtis, United States District

Judge presiding, on the motion’ of defendant Ameri-

can Building Maintenance Industries for a summary

judgment of dismissal for lack of federal jurisdic-

tion against plaintiff United States of America, and

said plaintiff and said defendant being represented by

their respective counsel, and the Court having con-

| sidered the pleadings and said motion and the’ papers

_ filed in support thereof and other papers on file herein

_ and the arguments of counsel, and being fully advised

in the premises, the Court made its Findings of Fact

and Conclusions of Law, and it appearing that there

is no genuine issue as to any material fact and that

said defendant is entitled to a judgment of dismissal

as a matter of law.

IT IS HEREBY ORDERED, ADJUDGED AND:

DECREED that summary judgment of dismissal be

/

(21),

f

22

entered in favor or defendant American Building

Maintenance Company against plaintiff United States

of America dismissing the above entitled action, and

that said plaintiff take nothing on his complaint from

defendant, and that said defendant have and recover

its costs from said plaintiff in the sum of $

Dated at Los Angeles, California this 12th day of

December, 1973.

JeEssE W. CvurRTIs,

United States District Judge.

United States District ‘Court, Central District of

California

CASE NO. 71-55

UnttTep States OF AMERICA, PLAINTIFF

Vv.

AMERICAN BumLpInG MAINTENANCE INDUSTRIES,

DEFENDANT

NOTICE OF ENTRY

To the above named parties and to their attorneys

' of record:

You are hereby notified that Summary judgment of

dismissal in favor of defendant American Building

Maintenance Industries against plaintiff United States

of America in the above entitled case was entered in

the docket on December 12, 1973.

You are al.o notified that if this case was tried and

you introduced exhibits into evidence, they must be

claimed at this office after the expiration of thirty

days from the receipt of this notice. (After sixty days

im cases in which the United States, its officers or

23

agencies were parties) Unless they are claimed within

thirty days after the expiration of the above period,

they will be destroyed pursuant to Local Rule 20(a).

If an appeal is taken they will, of course, be held

until the Appellate Court finally determines the mat-

ter. Exhibits which are attached to a pleading will not

be destroyed but will remain as a permanent record

in the case file.

Ss —_— oo &S VS

CERTIFICATE OF MAILING

I, Edward M. Kritzman, Clerk, United States Dis-

trict Court, Central District of California, and not a

party to the within action, hereby certify that on

December 12, 1973, I served a true copy of this notice

of entry on the parties in the within action by deposit-

ing true copies thereof, enclosed in sealed envelopes,

in the United States Mail in the United States Post

Office inail box at Los Angeles, California, addressed

as follows:

Lawler, Felin & Hall,

605 W. Olympic Blvd.,

Los Angeles, Calif.

Michael J. Dennis, Esq.,

Department of Justice.

Antitrust Div.

Los Angeles, Calif.

Epwarp M. KritzMan,

Clerk.

By Joe R. Fores,

Deputy Clerk.

APPENDIX C

United States District Court, Central

District of California

CIVIL NO. 71-55

UNITED STATES OF AMERICA, PLAINTIFF

Vv.

AMERICAN BUILDING MAINTENANCE INDUSTRIES,

. DEFENDANT

NOTICE OF APPEAL OF SUMMARY JUDGMENT OF DISMISSAL

To: Defendant American Building Maintenance In-

dustries and to its attorneys of record:

PLEASE TAKE NOTICE that the plaintiff

United States of America appeals to the United States

Supreme Court under the provisions of 15 U.S.C. § 29

the Summary Judgment of Dismissal in Favor of

Defendant American Building Mainteniance Indus-

tries Against Plaintiff United. States of America

entered herein on December 12, 1973.

Datep Fesruary 6, 1974. :

MicHakL J. DENNIS,

Attorney, Department of Justice.

(24)

U.S. GOVERNMENT PRINTING OFFICE: 1974

ll a —

ical eo airicaetaieetel

am |

TOPICAL INDEX

Page

Be | Pema ie neways Meme MCS 1

I NN oi 1

MN car casoisnkeseciscvensstle since td cies bls Sosaaselaseasouasainas 2

The Question Presented Is Not Substantial ............ 5

A. In‘Section 7 of the Clayton Act Congress

Used Only a Limited Part of Its Constitu-

tional Power to Regulate Commerce ............ 6

B. The Purchase of Supplies Originating in

Other States Is Insufficient to Establish J uris-

GUNG 5c ee be

C. The Acquired Benton ist Sea Were

Not Engaged in Commerce Merely Because

of the Commerce Carried on by Their Cus-

COE sacs icrsditnecosiganuleactesaniiiiseniubuinseiones 17

D. The Acquired Benton Colsdbanions Were

Not Engaged in Commerce by Reason of

Their Use of Interstate Communications ...... 18

E. The Question Presented in This Case Is Not

: the Same as the Question Presented in Gulf

. Oil Corp. v. Copp Paving, Ine. .................... 19

CN ee ae “i ee

ii.

TABLE OF AUTHORITIES CITED

Cases Page

Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir.

1972), cert. den. 408 U.S. 928 (1972) ...2000....... 10

Brown Shoe Co. v. United States, 370 U.S. 294

Bie IRENA EO SA ci ect es sana aaa aeeR 7

Burke v. Ford, 389 U.S. 320 (1967) | 15

Page

Ekco Prods. Co., CCH Trade Reg. Rep. 916,879

at 21,901 (FTC 1964), aff'd 347 F.2d 745 (7th

Cir. 1965) . 9

Federal Trade Colidiiadion v. uate ahi, in a

312 U.S. 349 (1941) 11, 12

Golden Grain Macaroni Company v. F.T.C., 472

fe AE 2a |: ain eee Oe 9

Gulf Oil Corp. v. Copp Paving, Inc., No. 73-1012

now pending before this Court ........ 19

John Kalin Funeral Home, Inc. v. Fultz, 313 F.

Supp. 435 (W.D. Wash. 1970), aff'd 442 F.2d

1342 (9th Cir. 1971), cert. den. 404 U.S. 881

(1971) ie

Kirschbaum v. Walling, 316 WIS. 517 (1942) _... 14

Klor’s Inc. v. Broadway-Hale Stores, 255 F.2d 214

(9th Cir. 1958), rev’d on other grounds, 359

U.S.. 207 (1959) ..... 8

Las Vegas Merchant Plumbers Ass’n v. United

States, 210 F.2d 732 (9th Cir. 1954), cert. den.

286. U3, Siz (19ee) 8

Littlejohn v. Shell Oil Company, 483 F.2d 1140

(Sth Cir. en banc 1973), cert. den. 414 U.S.

RI RIED. Snhnecesquinsc ancien Madanetettag iets cs 10

McNutt v. General Motors, 298 U.S. 178 (1936) .. 20

Page

Mitchell v. Lublin, McGaughy & Assoc., 358 U.S.

oi MNT A Nap shhiiisivnponkssansiecili vcbingthanstailidiene mop 11

| Myers v. Shell Oil Company, 96 F.Supp. 670

SRG Se” TEES |S @ ae AA ap caster Me can OO MOP LAE 9

Rasmussen v. American Dairy Association, 472 F.

en ee PI, DOTE gcc i 7

Rosemound Sand and Gravel Co. v. Lambert Sand

and Gravel Co., 469 F.2d 416 (5th Cir. 1972) .. 10

j Transamerica Corp. v. Board of Governors, 206

am ee ee RD 14

United States v. Employing Plasterers Ass’n, 347

Sy ae Ss, Cs RISERS cele 15

United States v. Frankfort Distilleries, 324 U.S.

He Bs 2k BIDEN Sitcnon ie dt de 5c al nop 16

United States v. Philadelphia National Bank, 374

FRE 3 kp es ble bed aA. IS eet OD 14

United States v. South-Eastern Underwriters Ass’n,

ee See Doe Cee 7

United States v. Yellow Cab Co., 332 U.S. 218

a) peddle ieaicictacecrabictathdsad ibindascic asco 17

Western Laundry and Linen Rental Co. v. United

States, 424 F.2d 441 (1970), cert. den. 400

TD aig i eect ccs

Urban Business Profile, Building Service Contract-

ing, United States Department of Commerce,

SN I

oe

Statutes Page

Clayton Act, Sec. 1 .............. b dsdhschintaddd Sfsanadlveshiboil 2

Clayton Act, Sec. 2, as amended by the Robinson-

Patman Act (Act of June 19} 1936, c. 592, 49

Stat. 1526, 15 U.S.C. §13(a)) oo.) cece eeeeceeeeeoes 9, 10

Clayiter. Act; Sec: 2(a) ccdoccccicccied sc 9

Clayton Act, Sec 7 ooocc.n..ccccccccoseoccece i, 2, 3, 6,7; 8, 9

BPR ES METIS ELE OR a BR 12, 13, 14, 15, 17; 18, 20

Clayton Act (Act of October 15, 1914, c. 323,

38 Stat. 730, as amended) ............................. 2

Fair Labor Standards Act, Sec. 6 .0...2....c-ccccccceo-0---- 11

Federal Trade Commission Act, Sec. UP occccsiconce 11

Rn tN 6

‘ IN THE

Supreme Court of the United States

October Term, 1973

No, 73-1689

UNITED STATES OF AMERICA,

i Appellant,

: vs. ;

AMERICAN BUILDING MAINTENANCE INDUSTRIES,

_ Appellee.

Appeal From the United States District Court for the ,

: _ Central District of California.

_ MOTION TO AFFIRM.

Appellee moves the Court to affirm the judgment

sought to be reviewed on this appeal on the ground

that it is manifest that there are no material disputed

questions of fact and the questions of law as to which

review is sought are, on their face, without substantial -

merit. PX

The Question Restated. et :

May a corporation engaged in rendering janitorial

services solely within a single state, using for that pur-

pose labor obtained in that state and supplies purchased

in that state, be deemed “engaged also in’ commerce”

within that clause of Section 7 of the Clayton Act?

Statutes Involved.

Involved here is the phrase “engaged also in com-

merce” as it appears and is defined in the following

/

/

po So

sections of the Clayton Act (Act of October 15, 1914,

- ¢€. 323, 38 Stat. 730, as amended):

Section 7 (15 U.S.C. §18):

“No corporation engaged in commerce shall

acquire, directly or indirectly, the whole or any

, part of the stock or other share Capital * * *

of another corporation engaged also in commerce,

where in any line of commerce in any section of

the country, the effect of such acquisition may

be substantially to lessen competition, or to tend

to create a monopoly. * * *”!

Section 1 (15 U.S.C. §12):

““*Commerce’, as used herein, means trade or

commerce among the several States and with for-

eign nations * * *”

Statement.

On January 8, 1971 this action was filed to assert

the illegality of the June 30, 1970 acquisition by Ameri-

can Building Maintenance Industries (“ABMI”) of J. |

E. Benton Management Corporation and Benton Mainte-

nance Company (“Benton ~ corporations”). The sole

contention was that the acquisition violated Section 7 of

the Clayton Act. Notwithstanding the explicit limita-

tion: in Section 7 that the acquired corporation must

be “engaged also in commerce” before Section 7 can

apply, the complaint failed to allege that the acquired

corporations. were so engaged. It is conceded that the

acquired corporations operated only within the State

of California. ,

_ Since the acquiring corporation (appellee ABMI)

operates’ in a humber of states, it is not controverted

*Emphasis added herein unless otherwise noted.

sine

that ABMI is “engaged in commerce.” There is ac-

cordingly no issue relative to ABMI’s activity, and the

comments on that activity in the Jurisdictional State-

ment are plainly irrelevant.”

The court below on motion for summary judgment

found that the acquired corporations were not “engaged

also in commerce” and that accordingly the District

Court lacked jurisdiction under Section 7 of the Clay-

ton Act.’ The Governnient makes no contention that

there was any procedural impropriety in the presenta-

tion or the consideration of the motion for summary

judgment or that the findings of fact are in any way

erroneous. The Government disputes only the conclu-

sions of law drawn from the findings of fact.

The findings of fact show:

1. Both Benton corporations (the acquired corpora-

tions) were engaged in the business of providing jani-

torial and related services. One ‘of them, J. E. Benton

Management Corporation (“Benton Management” ),

also engaged in the real estate and building manage-

ment businesses. The Benton corporations conducted

their businesses entirely within Los Angeles, Orange

and Ventura Counties in California.‘

2. The Benton corporations had no manufacturing

plants, no sales or distribution outlets, no products

*Appeliee disputes the accuracy and completeness of the Gov-

ernment’s characterization of the acquiring company in the Juris-

dictional Statement. That characterization constitutes a thinly

disguised effort to argue matters noi properly germane.

*Findings 22 through 24 of the District Court’s Findings of

Fact and Conclusions of Law attached as Appendix A to the

Jurisdictional Statement, hereinafter “Findings”.

‘Findings, 4 and 11.