Opposition Brief — United States v. Pevely Dairy Co.

tw ee rT! CTCUC~t j “ice - Supreme Court, g

FILED

Nos. 592, 593, APR 319508

a CHARLES Flu 9

IN THE : ELMORE CRO}

SUPREME COURT OF THE UNITED STATES.

OCTOBER TERM, 1949.

UNITED STATES OF AMERICA,

Petitioner,

Vv.

PEVELY DAIRY COMPANY.

UNITED STATES OF AMERICA,

Petitioner,

Vv.

ST. LOUIS DAIRY COMPANY.

BRIEF

Of Respondent, Pevely Dairy Company, in Oppo-

’ — sition to Issuance of Writ of Certiorari.

F WILLIAM H. ALLEN,

408 Olive Street,

St. Louis 2, Missouri,

J JAMES A. FINCH,

Cape Girardeau, Missouri,

J E. C. HARTMAN,

319 North Fourth Street,

St. Louis 2, Missouri,

Counsel for Respondent,

Pevely Dairy Company.

Sr. Louis Law Printine Co., 415 North Eighth Street. CEntral 4477.

Page

Opinions below ...........eceeeeeesccecceeeecs veer 1

Jurisdiction of this court...............cceeeeeeeees 2

I a os hi whee nso dan ee Cie he esses 2

Summary of the argument..................eeeeees 11

REE oes os wi eel n eh awe aca cbubh cay cece be Seerae 16

I. The evidence relied upon by the Government,

being all circumstantial and all consistent with

innocence, is insufficient to support a conviction

(1) In holding that the evidence was insufficient

to support a conviction, the Court of Ap-

peals stated and applied the settled law as

declared by the Federal Courts with respect

to the scope of review of a jury’s verdict of

guilty in a criminal case.................

(2) Testimony of the Government’s witnesses,

Gee and Wasser, as to meetings between

them prior to October 1, 1941, does not sup-

ee ee reer er

(3) In view of the evidence as a whole and the

stipulated facts, proof of uniform price

changes made effective by respondents on

or near the same day did not constitute

circumstantial evidence such as to support

i GP IIEE b-85 < kn a pene ecen eu welneees«

II. Certiorari does not issue by this Court merely

to review the evidence in a case or the infer-

ences to be drawn therefrom.................

III. The Court of Appeals was not influenced by any

misconceptions of law anent the effect of the

acquittal of the individual defendants or the

GIO 0 TNO bias 5 ki vs da cupinds uxaee

16

16

23

38

ii

IV. The Court of Appeals properly condemned as

prejudicial error the injection into the case of

evidence as to compensation of the Kerckhoff

IO i ne aS WN Whe sce cbioceneee 38

RNR — Sak ics beh ewbWiGak erie eis casa maul 39

Cases Cited.

Blumenthal v. United States (9 Cir.), 158 F. 2d 762,

NE Was Mas ok WA ak AE Oo eTE le Ck bow had KR oo 12,17

Cartello v. United States (8 Cir.), 93 F. 2d 412. .11, 13, 17, 24

Cement Manufacturing Protective Ass’n v. United

States, 268 U. S. 588, 605, 69 L. Ed. 1104, 1111. .14, 33, 37

Donovan v. United States, 3 Cir., 54 F. 2d 193, 195.... 17

Estep v. United States (10 Cir.), 140 F. 2d 40, 45...12,17

General Talking Pictures v. Western Electric Co., 304

img ee pS Se: eee 15, 38

Glasser v. United States, 315 U. S. 60............... 20

Gold v. United States (8 Cir.), 36 F. 2d 16, 32, 33...13, 24

Graceffo v. United States, 3 Cir., 46 F. 2d 852, 853.... 17

Hammond v. United States, 75 U. S. App. D. ©. 397,

es a a Aas 0 eo raw swine kab ase 12, 17,18

Isbell v. United States (8 Cir.), 227 F. 788, 792,

OD ik AAR R Mas ee RKY A RBRWS ds NEER DRO 12, 17, 18, 21

Jacobson v. Hahn (2 Cir.), 88 F. 2d 433...... 13, 24, 25, 27

McGuire v. United States, 171 F. 2d 136, 138........ 22

Neal v. United States (8 Cir.), 102 F. 2d 643, 648...12,17

Nicola v. United States (3 Cir.), 72 F. 2d 780, 786. .12, 17

O’Hara v. Lamb Construction Co. (Mo. App.), 197

ie Oe HE Ss Sw Sas kbdK sd) bse bees ac eaaeuns 15, 39

P. Pastene & Co. v. Irving National Bank, 249 N. Y.

Py IN $b 0k nh oo i nae Pim beeches ewuae 26

Paddock v. United States (9 Cir.), 79 F. 2d 872....12,17

Pennsylvania R. Co. v. Chamberlain, 288 U. S. 333,

340, 341, 77 L. Ed. 819, 822, 823................. 27

iii

Pierce v. United States, 6 Cir., 115 F. 2d 399, 400.... 18

Scott v. United States (10 Cir.), 145 F. 2d 405, 408.12, 17, 21

Southern Power Co. v. North Carolina Public Service

ce ie S © F% F | See 15

Union Electric Light & Power Co. v. Snyder Estate,

MO o's was oh veh vied wk dubnmec cies 15, 39

Union Pacific Coal Co. v. United States (8 Cir.), 173

ee PU GE van ah naw nen ke 40s 0K MA Rb dim ance 12,17

United States v. Gasomiser Corp. (D. C. Del.), 7 Fed-

GUAE TEMS DOUUNNNU THB, fiw oi civ icc cce casas 11, 17, 32

United States v. International Harvester Co., 274 U. S.

oe SB ee ee ee 14

United States v. Johnston, 268 U. S. 220,-227, 69 L.

Se EE wc aneudand ouenscdewens accents va 15

United States v. Laffman (3 Cir.), 152 F. 393, 394...12,17

United States v. Litberg (7 Cir.), 175 F. 2d 20....11, 17, 22

United States v. Manton, 107 F. 2d 834, 839.......... 20

United States v. Reginelli (3 Cir.), 133 F. 2d 595.... 21

United States v. Russo (3 Cir.), 123 F. 2d 420,

1 EE ETE FT Oe OCT TN ALT NT 12, 17, 18

United States v. Silva (2 Cir.), 131 F. 2d 247, 249. ..12,17

United States v. Standard Oil Co. (8 Cir.), 47 F. 2d

PE Eis 6 6a RS as bees eohe deeb caeeh 14, 33, 34

United States v. Sugar Institute (D. C. N. Y.), 15 F.

RN I ict rg ce a ee ad cee ee ah 14

United States v. Tatcher (3 Cir.), 131 F. 2d 1002,

WE Scktarhhrawhsnk en kaudecvec Ageia oe es 12,17

United States v. Valenti (2d Cir.), 134 F. 2d 362...... 20

Wesson v. United States (8 Cir.), 172 F. 2d 931..... 11,17

Wiget v. Becker (8 Cir.), 84 F. 2d 706............ 13, 24

Winn v. Consolidated Coach Corporation (6 Cir.), 65

"FB, 2d 256, certiorari denied 291 U. S. 688, 78 L. Ed.

DOE Shi tbknk Obs sk ova as aan anki ete 13

Yellow Cab Co. v. Rodgers (3 Cir.), 61 F. 2d 729... .13, 24

Yoffe v. United States, 153 F. 2d 570, 572, 573.. .12, 19, 20

Nos. 592, 593,

IN THE

SUPREME COURT OF THE UNITED STATES.

OCTOBER TERM, 1949.

UNITED STATES OF AMERICA,

Petitioner,

ve

PEVELY DAIRY COMPANY.

UNITED STATES OF AMERICA,

Petitioner,

ve

ST. LOUIS DAIRY COMPANY.

BRIEF

Of Respondent, Pevely Dairy Company, in Oppo-

sition to Issuance of Writ of Certiorari.

OPINIONS BELOW.

The opinion of the United States Court of Appeals for

the Highth Circuit in the case entitled Pevely Dairy Com-

pany v. United States, and St. Louis Dairy Company v.

United States, is reported in 178 F. 2d, p. 363. It also ap-

pears on pp. 650 to 662 of the record. The opinion of the

District Court on defendants’ motions to dismiss the in-

dictment is reported in 77 F. Supp. at page 553, and its

opinion on motion of each respondent for judgment of ac-

quittal or a new trial is reported in 79 F. Supp. at page 12.

a, Pan

JURISDICTION OF THIS COURT.

In filing its petition for a writ of certiorari, petitioner

has invoked the jurisdiction of this Court under Title 28,

U. S. Code (New Federal Judicial Code), Section 1254.

This respondent raises no question concerning the same.

STATEMENT OF THE CASE.

The indictment, returned February 25, 1948, charged

that during the immediately preceding period of approxi-

mately ten years the defendants had continuously engaged

in an unlawful conspiracy to fix uniform and non-competi-

tive retail and wholesale prices for fluid milk sold by the

corporate defendants, Pevely Dairy Company and St. Louis

Dairy Company, these respondents, throughout the St.

Louis Area, in restraint of trade and commerce and in vio-

lation of Section 1 of the Sherman Act, Act of July 2, 1890,

ce. 487, as amended, 15 U. S. C. 1 (R. 7). Such was the

charge made, though during the ‘‘O. P. A. Period,’’ that

is, from April 28, 1942, to June 30, 1946, the prices which

the dairies were permitted to charge for fluid milk were

fixed by the Government (R. 149), and at the trial the Gov-

ernment abandoned its claim of price fixing during that

period (R. 580).

By its original bill of particulars the Government con-

ceded that it had no direct evidence of any conspiratorial

agreement among the defendants and stated it would rely

upon evidence from which, it claimed, an agreement could

be implied, consisting in part of concert of action and

course of conduct and in part of meetings and discussions

concerning prices and price changes (R. 22). There was a

supplemental bill of particulars (R. 24) and a second sup-

plemental bill (R. 62). According to the indictment, as

amplified by these bills of particulars, and omitting the

O. P. A. period, the dates on which the alleged uniform

eines

and practically simultaneous price changes charged to have

been made by the corporate defendants covered (1) the

period from April 8, 1938, to September 1, 1942, inclusive,

it being alleged that such price changes were made on or

about April 8, 1938, June 12 and August 7, 1939, and Feb-

ruary 9 and December 1, 1940, and July 1 and September 1,

1941 (R. 62), and (2) the period from July 3, 1946, to Janu-

ary 27, 1948, inclusive, it being alleged that such price

changes were made on or about July 3, July 9, October 4

(R. 22) (not October 14th stated in the indictment, R. 8),

1946, January 20, August 1, September 16, 1947, and Janu-

ary 27, 1948. The prices mentioned in the indictment (R.

8,9) applied only to Grade A regular milk (R. 186), which

did not include homogenized milk (R. 326), and conse-

quently the alleged conspiracy relates alone to Grade A

regular milk to the exclusion of all other dairy products

(R. 326, 602).

The jury returned a verdict of guilty against the cor-

porate defendants, these respondents, and acquitted all

the individual defendants (R. 627, 628). Judgment of con-

viction was accordingly entered against each of the re-

spondents (R. 629-631), each filed a motion for judgment

of acquittal and in the alternative for a new trial (R. 631

634), which were overruled (R. 637), and each duly ap-

pealed to the United States Court of Appeals for the

Eighth Cireuit (R. 1, 2, 3), where, pursuant to the opin-

ion of that court here sought to be reviewed (R. 650, 662),

it was ordered and adjudged that the judgments of the

District Court be reversed and the cause remanded to that

court with directions to grant respondents a new trial (R.

663, 664).

The evidence shows that the fluid milk business in the

St. Louis area is regulated and controlled by two govern-

mental agencies, namely, the Department of Agriculture

(R. 83) and the Health Department of the City of St.

ibetiRai

Louis (R, 82). The Standard Milk Ordinance of the City

of St. Louis embodies the statutory requirements of the

United States Public Health Ordinance (R. 442, 445). The

original ordinance, No. 40,939, approved December 15, 1936

(R. 32-59), remained basically unchanged during the pe-

riods here involved, though amended by Ordinance No.

41,242, approved February 23, 1938 (R. 30-32) and Ordi-

nance No. 41,803, approved April 4, 1940, in particulars

not here of consequence (R. 28-30). It prescribes mini-

mum butter content and maximum bacterial count, and

provides for the inspection of milk when received at the

plant of the handler and for the inspection of the

farm of the producer and the approval of the farm

buildings and equipment on each dairy farm no matter

where located. Under this ordinance fluid milk cannot be

sold in the City of St. Louis unless it has been approved

by the Health Commissioner of the City or unless it has

been imported from some controlled milk shed where sim-

ilar inspection has been made (R. 157, 158). And because

of this ordinance Grade A milk became and is a standard-

ized product; there is no appreciable difference between

the Grade A milk of one dairy and that of another (R.

445). During all the period covered by the indictment

the price to be paid to producers by all handlers for raw

milk was determined pursuant to the Government’s or-

ders and regulations authorized by the Agricultural Mar-

keting Agreement Act of 1937, under which the Secretary

of Agriculture issued Order No. 3 (R. 85-95) as amended

(R. 97-99), which was introduced by the Government as

its Exhibit No. 4 (R. 83), establishing the basic formula

by which the local Federal Milk Market Administrator de-

termines the prices to be paid producers for milk. He

announces monthly the prices to be paid by the handlers

to the producers for Class I milk, including Grade A reg-

ular milk here involved, and Class IT milk, including but-

intl

ter, cream, skimmed milk and other dairy products. The

prices actually paid the producer are ‘‘blended”’ prices

made up of a combination of Class I and Class II prices,

and dependent upon the character of the utilization made

by the handler of such milk (R. 100, 142, 149).

At or about the time of the enactment of the Standard

Milk Ordinance of the City of St. Louis there were approxi-

mately 9900 producers in the St. Louis milk shed, but by

1947 the number of producers had decreased to about 3300

(R. 152). The evidence for the Government showed that

the supply of milk in the St. Louis area constantly be-

came shorter and shorter (R. 235), making it necessary

for the companies to import milk from Chicago, purchased

from other handlers, for which they were required to pay

a premium which increased during the scarce period when

pastures were drying up (R. 141). The Government’s evi-

dence showed that during nearly all the period covered by

the indictment there was an upward trend in the prices

that handlers were required to pay producers; that the

Class I price per quart (that is the average price paid by

the dairies to the producers) increased from .0666 in Janu-

ary, 1942, to .1190 by December, 1947 (R. 134-137); that

the premium required to be paid producers had gone up

constantly for the ten years covered by the indictment (R.

141); and that the price required to be paid for labor is

fixed by union contract and was increased from time to

time (R. 236); and that these were the major cost factors

(R. 236, 260) and were identical for both corporate de-

fendants (R. 260).

In support of the charge in the indictment, as amplified

by the original bill of particulars (R. 22, 23) and the sup-

plemental bill (R. 24, 25), that the Government would rely

in part upon the meetings and discussions between an

employee of St. Louis Dairy Company and an employee of

Pevely Dairy Company, the Government called two wit-

a

~—

nesses, Julian Gee, an employee of St. Louis Dairy Com-

pany, and J. J. Wasser, an employee of Pevely Dairy

Company. They testified to several meetings they had

prior to October 1, 1941. Upon each such occasion one of

these witnesses would have with him a list of increased

prices that his company had decided to put into effect

(R. 228, 231, 249) and would give the other a list of such

prices. Both of these witnesses denied that there was ever

any agreement or understanding between them as to a

price change or a price increase (R. 229, 256). No such

exchange of information was had after October 1, 1941 (R.

230, 254). The Government’s evidence shows that neither

of these witnesses had any authority to make for his com-

pany any agreement fixing prices (R. 229, 230, 231, 234,

252).

Mr. Wasser, as the Government’s witness, testified that

it was the practice of Pevely Dairy Company to have at

each Board Meeting a report from the auditing depart-

ment showing how the company was progressing on the

sale of fluid milk; whether it was profitable or was going

at a loss; and that there was always an economic reason

for every change in price (R. 232). And the testimony of

Mr. Gee, as the Government’s witness, showed that when-

ever an increase was ordered in the price of production,

or labor costs were increased under a new union contract,

there would be a conference with Mr. Lide, president of

St. Louis Dairy Company, Mr. Versen, vice-president, and

Mr. Gee and Mr. Reinhardt, the comptroller, at which time

Mr. Lide would call for the report of the comptroller as to

costs, and the situation would be thoroughly considered

(R. 236); the final decision resting with Mr. Lide (R. 234).

And Mr. Gee said that every price change made by St.

Louis Dairy prior to October 1, 1941, was made as the

result of some drastic change in costs, either of labor or

payments to the producers for milk (R. 249).

ae

ee

As to the price changes made by each of the companies

during the second period mentioned above, that is from

July, 1946, to January, 1948, inclusive, two were made in

July, 1946, one in October, 1946, and the others in January,

August and September, 1947, and January, 1948. That of

January, 1947, which became effective for both companies

on January 20 of that year, was a decrease in price, result-

ing from a decrease in price that the companies were

required to pay producers for raw milk (R. 136, 262, 318).

The other six changes during said period were increases.

The Government’s witness Mr. Gee testified that they were

all justified by increased costs (R. 260). That such price

increases were necessitated by increased costs was shown

in detail by the testimony of Mr. Versen, vice-president of

St. Louis Dairy Company (R. 308, 313, 317-320), and by

defendant Pevely Dairy Company, particularly by its Ex-

hibit I (R. 495), a tabulation or calculation by Mr. Nagel,

Comptroller of the Company, of the increase or decrease

in the operating expense per average quart of fluid milk

sold by Pevely Dairy Company at retail and wholesale,

compared to the selling price per unit quart (R. 496).

From the item of administrative expense per unit quart

appearing in that exhibit, all compensation of every char-

acter received by the Kerckhoff brothers from the corpo-

ration was eliminated (R. 499).

Mr. Nagel’s testimony shows that many years prior to

the ten-year period here involved he inaugurated for

Pevely Dairy Company a cost accounting system that has

ever since been employed, by the use of which the com-

pany’s books show each month the cost of each unit item

sold during that month, including raw material, plant

expense, labor, delivery costs, overhead and all other cost

factors, and the unit selling price, and that consequently

the Company’s books showed the total cost of a quart of

Grade A milk delivered, at either wholesale or retail, and

ee

ota MB is

the cost of all fluid milk, delivered in any sized container,

and the resulting profit or loss during any period (R. 486,

489). Mr. Nagel testified that such method of allocating

cost is the method established by the International Asso-

ciation of Milk Dealers set forth in a manual published in

1923 (R. 487). He had for years been a member of the

Accounting Advisory Committee supplied by the industry

to said association. By his testimony and said Exhibit I

(R. 495) it was shown that the net increase in Pevely

Dairy Company’s cost of purchasing, processing and deliy-

ering an average quart of fluid milk from June, 1946, to

January, 1948, was 6.61 cents—after eliminating all com-

pensation paid to the five Kerckhoff brothers; and that the

net increase in the selling price per unit quart during the

same period was 6.5 cents (R. 495, 496, 499). Mr. Nagel’s

further testimony was that there was less profit on Grade

A regular milk than on average fluid milk (R. 494), and

that he believed that considering fluid milk as a whole

presented a truer picture because it included the sale of

milk carrying a higher profit (R. 494).

The cost records of Pevely Dairy Company were ex-

amined by Mr. Webber, a certified public accountant em-

ployed by Ernst & Ernst, a nationally known firm of

certified public accountants. He said that the general

accounting and cost records of Pevely Dairy Company

constituted the most complete accounting system he had

ever found in any organization (R. 504). From the cost

records Mr. Webber made certain tabulations, marked

Pevely Dairy Company’s Exhibits J, K, L and M (R. 505,

513, 521, 525), introduced in evidence (R. 565), and con-

cerning which Mr. Weber testified. Exhibit K (R. 513)

shows the quart equivalents (that is, in quarts or other

sized containers) sold by Pevely Dairy Company in all

fluid milk operations for each month of the period of nine-

teen months ending January 31, 1948, showing the net

| :

sales, cost of the product and various forms of other

expense involved. The last column of that exhibit shows

that for said period of nineteen months the company sold

79,086,783 quart equivalents of fluid milk, and that the

profit, before provision for Federal and State income

taxes (R. 519), amounted to .00401.

— | on

Judson P. Mason, Director of Dairy Marketing for the

Illinois Agricultural Association and formerly statistician

for the Federal Market Administrator in St. Louis, testi-

fied that Grade A milk is generally considered a standard

product in a market where there is in effect the United

States Public Health Ordinance (R. 445); that under con-

ditions prevailing in the dairy business in the City of St.

Louis, where there is a large number of customers and a

small number of handlers, where the cost of raw material

is identical to all handlers, the cost of labor practically

identical for all handlers, and other costs run very similar,

such factors tend to stabilize price levels (R. 446).

And Father Leo Brown, Professor of Economics at St.

Louis University, testified that where as in the Grade A

milk market in St. Louis there is a highly standardized

product, the product of one dealer being the same as that

of another, the economic fortunes of all the sellers are

interdependent, and the economic fortunes of the two

larger sellers are notably interdependent; that one large

seller cannot long sell at a price higher than a price at

which his competitors sell; that if he were to do that he

would lose his customers and cause considerable customer

dissatisfaction among those who remained (R. 455); that a

highly standardized product is governed largely by price,

and customers would follow the lower price (R. 456); that

in such a market as he described he would expect prac-

tical uniformity of price without exception and practically

simultaneous change in prices (R. 457).

Concerning the seven price changes during the second

period mentioned above, that is, from July, 1946, to Jan-

uary, 1948, inclusive, the Government introduced United

States Exhibits 11 to 25, inclusive (R. 184, 185, 186), which

appear in the record on pages 187 to 220, inclusive. Each

such exhibit is a price announcement by one of the corpo-

rate defendants of changes in its retail and wholesale

prices, not only of Grade A milk but of many other dairy

products, during said period. As shown above, all of said

seven changes were increases except that which became

effective on January 20, 1947. A stipulation was read in

evidence showing when copy for each such price announce-

ment made by St. Louis Dairy Company was received from

it by its printer and the date on which each such price

change was to become effective, and showing when copy

for each such price announcement made by Pevely Dairy

Company was received from it by its printer, when the

printed announcements were delivered by the printer to

Pevely Dairy Company, and the date on which each such

price change was to become effective. The stipulation

w'il be further noticed in the argument to follow.

And the Government’s evidence shows that when the

company initiating a price change issued its price an-

nouncements and the same were being delivered to its

customers, the other company very quickly learned thereof,

usually through such price announcements falling into the

hands of its drivers or other employees (R. 238).

—l]1—

SUMMARY OF THE ARGUMENT.

L

The Court of Appeals was quite right in holding that the

evidence adduced was legally insufficient to sustain a con-

viction of respondents on the charge that they had en-

gaged in a conspiracy to fix uniform and non-competitive

prices of Grade A fluid milk sold and distributed by them

throughout the St. Louis area. The Government concededly

had no direct evidence of the conspiratorial agreement

charged (R. 22). Its case rests entirely upon circum-

stantial evidence. Such circumstantial evidence, however,

was wholly insufficient to support a conviction, for the

following reasons:

(1)

While a jury is entitled to draw all reasonable infer-

ences from the circumstances in proof, an appellate court

is authorized to determine, and charged with the respon-

sibility of determining, the reasonableness of such infer-

ences. To sustain a conviction where the evidence relied

upon is purely circumstantial, the evidence must not only

be consistent with the guilt of the accused but must be

such as to preclude every reasonable hypothesis of the

defendant’s innocence. Where all the evidence relied upon

to support a conviction is as consistent with innocence as

with guilt it is the duty of an appellate court to reverse

a conviction.

United States v. Litberg (7 Cir.), 175 F. 2d 20;

Wesson v. United States (8 Cir.), 172 F. 2d 931;

United States v. Gasomiser Corp. (D. C. Del.), 7 Fed-

eral Rules Decisions 712;

Cartello v. United States (8 Cir.), 93 F. 2d 412;

a ae

Isbell v. United States (8 Cir.), 227 F. 788, 792, 793;

Union Pacific Coal Co. v. United States (8 Cir.), 173

F. 737, 740;

Neal v. United States (8 Cir.), 102 F. 2d 643, 648;

Yoffe v. United States (1 Cir.), 153 F. 2d 570;

United States v. Silva (2 Cir.), 131 F. 2d 247, 249;

United States v. Laffman (3 Cir.), 152 F. 393, 394;

United States v. Tatcher (3 Cir.), 131 F. 2d 1002,

1003;

United States v. Russo (3 Cir.), 123 F. 2d 420, 423;

Nicola v. United States (3 Cir.), 72 F. 2d 780, 786;

Paddock v. United States (9 Cir.), 79 F. 2d 872;

Blumenthal v. United States (9 Cir.), 158 F. 2d 762,

763;

Scott v. United States (10 Cir.), 145 F. 2d 405, 408;

Estep v. United States (10 Cir.), 140 F. 2d 40, 45;

Hammond v. United States, 75 U. S. App. D. C. 397,

127 F. 2d 752.

(a)

The well-settled rule that where all the evidence relied

upon to support a conviction is as consistent with innocence

as with guilt it is the duty of the appellate court to reverse

a judgment of conviction if not inconsistent with the gen-

eral principle invoked by petitioner that the verdict of a

jury in a criminal case will be sustained if there is sub-

stantial evidence to support it.

Yoffe v. United States, 153 F. 2d 570, 572, 573.

(2)

The testimony of the Government’s chief witnesses,

Wasser (R. 227-233) and Gee (R. 233-240, 246-264), as to

meetings between them on certain occasions prior to

October 1, 1941, constitutes no proof of a conspiratorial

agreement between these two corporate appellants to fix

-— 13.—

the price of fluid milk for the reason that, not only had

neither of them any authority to make any agreement as

to prices, but both of them positively denied that there

was ever any sort of agreement or understanding between

them with respect to fixing prices. Being the Govern-

ment’s own witnesses, and having positively denied that

they participated in any sort of a conspiratorial agreement,

no inference of the making of a conspiratorial agreement

by or through them could be drawn from their testimony.

Cartello v. United States (8 Cir.), 93 F. 2d 412;

Jacobson v. Hahn (2 Cir.), 88 F. 2d 433;

Wiget v. Becker (8 Cir.), 84 F. 2d 706;

Gold v. United States (8 Cir.), 36 F. 2d 16, 32, 33;

Yellow Cab Co. v. Rodgers (3 Cir.), 61 F. 2d 729.

(a)

The Court of Appeals was quite right in holding that

inferences which are contrary to established facts may not

be drawn from mere conjecture and an unwillingness to

believe the unimpeached and uncontradicted testimony of

witnesses (R. 659, 660); which statement was made in

refutation of the contention that despite the undisputed

testimony of the Government’s own witnesses, Gee and

Wasser, that they participated in no conspiratorial agree-

ment, it could be inferred that they did that very thing.

Such an inference would manifestly have nothing upon

which to rest but mere conjecture, surmise and specula-

tion, obviously insufficient to support a conviction.

Jacobson v. Hahn (2 Cir.), 88 F. 2d 433;

Cartello v. United States (8 Cir.), 93 F. 2d 412;

Winn v. Consolidated Coach Corporation (6 Cir.), 65

F. 2d 256, certiorari denied 291 U. S. 688, 78 L.

Ed. 1059.

ee

—

(3)

Whereas, as here, the Government must rely alone on

circumstantial evidence to sustain the charge of a con-

spiratorial price fixing agreement, and the circumstantial

evidence consists merely of proof of uniform price changes

effective on or near the same day, in the sale of a stand-

ardized product in a highly competitive market, coupled

with proof of uniformity of major cost factors, uniform

cost increases, plus undisputed proof that every increase

in price shown resulted from economic necessity and that

the financial ruin of respondents would have resulted if

such price increases had not been made, and that such

uniformity in price resulted not from any agreement or

attempt to maintain prices at fixed levels but from the

prompt meeting by one of these companies of changes in

prices by its major competitor, no case is made for the

reason that the circumstances so shown are entirely con-

sistent throughout with the defendants’ innocence. The

holding of the Court of Appeals to this effect is fully

sustained by the authorities.

Cement Manufacturing Protective Ass’n v. United

States, 268 U. S. 588, 605, 69 L. Ed. 1104, 1111;

United States v. Standard Oil Co. (8 Cir.), 47 F. 2d

288, 316, 317;

United States v. International Harvester Co., 274

U. S. 693, 708, 709, 71 L. Ed. 1302;

United States v. Sugar Institute (D. C. N. Y.), 15 F.

Supp. 817, 887.

(a)

Under such circumstances uniformity of basic price in

any given area is to be expected under a regime of free

competition.

United States v. Sugar Institute (D. C. N. Y.), 15 F.

Supp. 817, 887.

a

a

II.

It is the rule of decision of this Court that a writ of

certiorari will not issue merely to review the evidence in

a case or the inferences to be drawn therefrom.

General Talking Pictures v. Western Electric Co., 304

U. 8S. 175, 82 L. Ed. 1273, 1275;

Southern Power Co. v. North Carolina Public Service

Co., 263 U. S. 508, 68 L. Ed. 413;

United States v. Johnston, 268 U. S. 220, 227, 69 L.

Ed. 925, 926.

III.

The charge in petitioner’s petition (pp. 16 to 18) that

the Court of Appeals was influenced by ‘‘misconceptions

of law’’ (1) as to the effect of the acquittal of the in-

dividual defendants and (2) as to the effect of the statute

of limitations, is totally lacking in substance.

IV.

The Court of Appeals properly condemned as preju-

dicial error the injection into the case below of the evi-

dence as to the compensation of the Kerckhoff defendants.

Union Electric Light & Power Co. v. Snyder Estate,

65 F. 2d 297, 303;

O’Hara v. Lamb Construction Co. (Mo. App.), 197

S. W. 163, 165.

The evidence relied upon by the Government, being all

circumstantial and all consistent with innocence, is insuffi-

cient to support a conviction.

(1)

In holding that the circumstantial evidence adduced was

insufficient to support a conviction, the Court of Appeals

correctly stated and applied the settled law as declared by

the Federal Courts with respect to the scope of review of

a jury’s verdict of guilty in a criminal case.

Logically, we think, the first thing to be considered is

the broad charge made in petitioner’s petition for the writ

(p. 12) that ‘‘the decision below is in conflict both with the

decisions of this Court and those of almost every other

circuit with respect to the scope of review of a jury’s

verdict of guilty in a criminal case.’’ This assertion we

stoutly deny.

This attack upon the opinion of the Court of Appeals is

based upon the proposition put forth by petitioner in its

petition (p. 12) that ‘‘the verdict of a jury in a criminal

case must be sustained if there is substantial evidence,

taking the view most favorable to the Government, to sup-

port it.”’ That is nothing more than the statemen: of a

broad general principle which the Court of Appeals in no

way violated. In a case of this character, resting solely

upon circumstantial evidence, what will constitute sub-

stantial evidence sufficient to sustain a conviction requires

the consideration and application of the ‘‘circumstantial

evidence rule’’ that has long been recognized and enforced

=~ 17 —

in the Federal courts and in many other courts as well.

This rule is that, where the evidence relied upon is purely

circumstantial, to sustain a conviction it is necessary that

the circumstances shown in evidence be such as to exclude

every reasonable hypothesis but that of guilt. It follows

that where, as here, all the evidence relied upon to support

a conviction is circumstantial in its nature and all thereof

is entirely consistent with the innocence of the accused, it

is insufficient to support a conviction. Among the many

Federal cases so holding are the following: United States

v. Litberg, 7 Cir., 175 F. 2d 20; Wesson v. United States,

8 Cir., 172 F. 2d 931; Cartello v. United States, 8 Cir., 93

F. 2d 412; Isbell v. United States, 8 Cir., 227 F. 788, 792,

793; Union Pacific Coal Co. v. United States, 8 Cir., 173 F.

737, 740; Neal v. United States, 8 Cir., 102 F. 2d 643, 648;

United States v. Laffman, 3 Cir., 152 F. 393, 394; United

States v. Tatcher, 3 Cir., 131 F. 2d 1002, 1003; United

States v. Russo, 3 Cir., 123 F. 2d 420, 423; United States

v. Silva, 2 Cir., 131 F. 2d 247, 249; Nicola v. United States,

3 Cir., 72 F. 2d 780, 786; Donovan v. United States, 3 Cir.,

54 F. 2d 193, 195; Graceffo v. United States, 3 Cir., 46 F.

2d 852, 853; Paddock v. United States, 9 Cir., 79 F. 2d 872;

Blumenthal v. United States, 9 Cir., 158 F. 2d 762, 763;

Scott v. United States, 10 Cir., 145 F. 2d 405, 408; Estep

v. United States, 10 Cir., 140 F. 2d 40, 45; Leslie v. United

States, 43 F. 2d 288, 289, 290; Hammond v. United States,

75 U. S. App. D. C. 397, 127 F. 2d 752; United States v.

Gasomiser Corp. (D. C. Del.), 7 F. R. D. 712.

In the first case cited above, United States v. Litberg,

7 Cir., 175 F. 2d 20, the Court of Appeals for the Seventh

Circuit, in an excellent opinion by Judge Major, concurred

in by Judge Minton (now Mr. Justice Minton of this

Court) and Judge Duffy, aptly stated the principles to be

observed by an appellate court in determining whether

circumstantial evidence is sufficient to support a judgment

of conviction as follows:

oar

‘*On the one hand we must keep in mind the oft-

repeated rule that the weight and credibility to be

attached to testimony of the witnesses is a matter for

the trier of the facts and that we are required to take

that view of the evidence most favorable to the Gov-

ernment. On the other hand, while the trier of the

facts is entitled to draw all reasonable inferences

from the circumstances in proof, the court of review

is charged with responsibility of determining the rea-

sonableness of such inferences. In other words, an

inference may not properly be relied upon in support

of an essential allegation if a just inference may be

drawn with equal consistency from the circumstances

in proof. In United States v. Tatcher, 3 Cir., 131 F,

2d 1002, 1003, the court reversing a.conviction based

on inferences stated: ‘To justify conviction of crime

where the evidence relied upon is circumstantial in

nature, the evidence must be such as to exclude every

reasonable hypothesis but that of guilt. United States

v. Russo, 3 Cir., 1941, 123 F. 2d 420. As we have seen

the evidence relied upon to sustain the defendant’s

conviction is as consistent with his innocence as with

his guilt.’’’ (Citing United States v. Russo, 3 Cir.

123 F. 2d 420, 423; Isbell v. United States, 8 Cir., 227

F. 788, 792; Pierce v. United States, 6 Cir., 115 F. 2d

399, 400; and Hammond v. United States, 75 U. 8.

App. D. C. 395, 127 F. 2d 752, 753.)

=~ 18.

The presumption with which an accused is clothed when

standing before the bar of justice is not overcome by

evidence, alone, that offers a reasonable hypothesis other

than guilt—that is entirely consistent with innocence. That

ancient presumption is fundamental in our jurisprudence.

And because of that presumption, in every criminal pros-

ecution by the Government not only is the jury required to

find from the evidence that the defendant is guilty beyond

a

— oe

a reasonable doubt, if the case is sent to the jury, but

in order to get the case to the jury the burden is upon the

Government to adduce evidence from which reasonable

minds may fairly conclude guilt beyond a reasonable doubt;

and proof merely of circumstances that are consistent

throughout with the innocence of the defendant does not

satisfy that burden and does not warrant the submission

of the case. Such evidence does not constitute substantial

evidence such as to warrant a conviction.

The general principle invoked by petitioner in this con-

nection, namely, that the verdict of a jury will be sus-

tained if there is ‘‘substantial evidence’’ to support it, is

in no wise in conflict with what we have said above. In

Yoffe v. United States, 1 Cir., 153 F. 2d 570, cited by peti-

tioner, the court (1. ¢. 572, 573) said:

‘*Appellants claimed that the evidence before the

trial court was insufficient to warrant submission of

any of the issues to the jury. They refer to the state-

ment which has often been quoted with approval in

Federal decisions: ‘Unless there is substantial evidence

of facts which exclude every other hypothesis but

that of guilt, it is the duty of the trial court to in-

struct the jury to return a verdict for the accused;

and where all the substantial evidence is as consistent

with innocence as with guilt, it is the duty of the

appellate court to reverse the judgment of conviction.’

(Citing authorities.)

‘‘The statement does not conflict with the general

principle that in criminal cases the trial court may

not properly direct a verdict if there is any substantial

competent evidence before it to support a conviction

(citing authorities), and that on a motion for a

directed verdict that view of the evidence most favor-

able to the government and the inferences reasonably

deducible therefrom must be accepted.’’

EEE ——————————

niin

It follows that petitioner’s criticism of the opinion of

the Court of Appeals with respect to the scope of review of

a jury’s verdict of guilty in a criminal case is wholly un-

warranted. The authorities cited by petitioner do not sus-

tain its position in this regard.

In Glasser v. United States, 315 U. S. 60, upon which

petitioner relies, nothing may be found with which the

opinion of the Court of Appeals in this case is in conflict.

In the Glasser case this Court (315 U. S. 80, 86 L. Ed., 1. «.

704), said that ‘‘the verdict of a jury must be sustained

if there is substantial evidence, taking the view most fav-

orable to the Government, to support it’’ (citing United

States v. Manton, 107 F. 2d 834, 839, also here relied upon

by petitioner). For the reasons stated above, the opinion

of the Court of Appeals in the instant case is in no wise

in conflict with the ruling in the Glasser case or that in

the Manton case. And as to the application of the circum-

stantial evidence rule, it should be noted that in the Glas-

ser case this Court, upon affirming the conviction of the

other defendants, reversed the judgment below as to Glas-

ser because of error committed at the trial, and expressly

refrained from expressing an opinion as to whether the

circumstances in evidence warranted a submission of the

case to the jury as against Glasser.

Further authorities cited by petitioner in this connec-

tion in the footnote, p. 12, of its petition, do not, upon

analysis, serve to cast any doubt upon the soundness of

the law as here declared and applied by the Court of Ap-

peals. The Hardeman Case (C. A. D. C.), 163 F. 2d 21, is

here inconsequential; and Yoffe v. United States (3 Cir.),

153 F. 2d 570 (cited also on p. 17 of the petition) from

which we have quoted above, is directly contrary to peti-

tioner’s contention. In United States v. Valenti (2d Cir.),

134 F. 2d 362 (also cited on p. 15 of the petition) the Court

eal

cal

properly ruled that the facts and circumstances there in

evidence—wholly unlike those here present—‘ ‘logically

lead to the inference of guilt.’’ In United States v. Regi-

nelli (3 Cir.), 133 F. 2d 595, where the charge was the vio-

lation of the Mann Act (18 U.S. C. A., secs. 398, 399) there

was abundant evidence consistent with guilt and inconsis-

tent with innocence. And the Court (133 F. 2d, 1. «. 599),

said: ‘‘In the circumstances thus shown, the trial court

would not have been warranted in declaring, as a matter

of law, that a lawful purpose on the part of the defendant

for the transportation was as inferable from the evidence

in the case as an immoral purpose.’’ This is in plain rec-

ognition of the rule applied by the Court of Appeals in the

instant case.

In Scott v. United States, 3 Cir., 145 F. 2d 405, cited

twice by petitioner in its petition (pp. 12, 14), the Court

definitely recognized the rule applied by the Court of Ap-

peals in the instant case. The court held that circum-

stantial evidence may fully suffice to warrant a conviction,

“provided the circumstances relied upon are wholly con-

sistent with guilt and inconsistent with any other reason-

able hypothesis’’ (citing authorities) the Court adding:

“In arriving at its conclusions the jury may not

speculate upon the guilt of the defendant, or choose

between equally permissible inference of guilt or in-

nocence’’ (citing authoritivs).

In Curley v. United States, cited in the footnote on p.

15 of the petition, the Court of Appeals for the District

of Columbia, in an opinion by Judge Prettyman, to which

there was a vigorous dissent, found fault with the earlier

opinion of that court in Hammond v. United States, supra,

127 F. 2d 752, 753, because therein the court, quoting from

Isbell v. United States, 8 Cir., 227 F. 788, 792, recognized

the circumstantial evidence rule as stated and applied in

SS

a ee

United States v. Litberg, supra, 7 Cir., 175 F. 2d 20, and

in a long line of other Federal Cases. However, the au-

ther of the majority opinion in the Curley Case (160 F.

2d, 1. c. 232) said:

‘*The true rule, therefore, is that a trial judge, in

passing upon a motion for a directed verdict of ac-

quittal (motion for judgment of acquittal under the

new Federal Rules), must determine whether upon the

evidence, giving full play to the right of the jury to

determine credibility, weigh the evidence, and draw

justifiable inferences of fact, a reasonable mind might

fairly conclude guilt beyond a reasonable doubt.”’

(Emphasis ours.) :

Thus the court restated an old rule not inconsistent with,

but necessarily embracing within its concept the true cir-

cumstantial evidence rule as stated and applied in the

Litberg Case, the Isbell Case and all the other cases herein

relied upon by this respondent, for, if the evidence is

wholly circumstantial, and the circumstances shown are

just as consistent with innocence as with guilt, how may

a reasonable mind fairly conclude guilt beyond a reason-

able doubt?

And we note that in the later case of McGuire v. United

States, 171 F’. 2d 136, 138, the same court stated and ap-

plied the rule quoted above from the Curley Case.

Nor is there any warrant for the statement in petition-

er’s petition for the writ (pp. 12, 13, 15, 16), that in the

instant case the Court of Appeals, in setting aside the

verdicts below, rejected the jury’s theory of the case and

accepted another theory on the ground that it seemed

more credible, weighed the evidence, and by such means

invaded the province of the jury. Nowhere in the opinion

of the Court of Appeals may any justification be found for

— 23 —

this attack upon the opinion. On the contrary, the Court

of Appeals properly applied the well established rule that

had theretofore been reiterated and applied by the same

court and by other Federal courts in a long line of cases,

some of which are cited above, namely, that where circum-

stantial evidence alone is relied upon to support a convic-

tion, such evidence, in order to constitute substantial evi-

dence warranting a conviction, must not only be consistent

with the defendant’s guilt but inconsistent with his inno-

cence; must be such as to exclude every reasonable hypoth-

esis but that of guilt (R. 660, 661).

(2)

The testimony of the Government’s witnesses, Wasser

and Gee, as to meetings between them prior to October 1,

1941, does not support a conviction.

In petitioner’s petition (pp. 9, 10, 14, 15) reference is

made to the testimony of the Government’s witness

Wasser, sales manager for Pevely Dairy Company (R.

227-233), and its witness Gee, salesmanager for St. L nis

Dairy Company (R. 233-240, 246-264), as to meetings be-

tween them on certain occasions prior to October 1, 1941.

Such testimony, we submit, not only constitutes no evi-

dence of a conspiratorial agreement between the corporate

defendants, these respondents, but on the contrary nega-

tives the existence of such an agreement. Their testimony

showed that they met on several occasions during the

period from August 7, 1939, to August 28, 1941, and upon

such occasions one would furnish the other with a list of

prices showing price changes that the former’s company

had already determined upon, and the future date upon

which the new prices were to become effective (R. 227-234,

248-250). Mr. Wasser testified that during the period

mentioned he had upon certain occasions informed Mr.

Gee of what Pevely Dairy Company’s ‘‘prices were to be

i

wn

after the company had decided to raise the price’’ (R. 227,

228). He definitely denied, however, that he was ever

assured that St. Louis Dairy Company would put such

price changes into effect (R. 228, 229). And Mr. Gee

testified:

**Q. Now, Mr. Gee, in connection with any of these

price changes, as salesmanager for the St. Louis

Dairy Company, did you ever agree with Mr. Wasser

or any competitor to have a price change or price

increase? A. I most certainly did not.

Q. Never in your life? A. Never’’ (R. 256).

Now the Government’s theory, upon which it has pro-

ceeded throughout this case, namely, that despite the posi-

tive testimony of these witnesses that they did not make

or take part in any sort of conspiratorial agreement, con-

stituting the only evidence as to what occurred between

them, a jury may lawfully find, upon mere conjecture,

speculation and surmise, that they were not telling the

truth, but did in fact enter into agreements to fix the price

of Grade A fluid milk, is, we submit, utterly fallacious.

Such theory is contrary to both reason and authority.

Cartello v. United States, 8 Cir., 93 F. 2d 412; Jacobson v.

Hahn, 2 Cir., 88 F. 2d 433; Wiget v. Becker, 8 Cir., 84 F.

2d 706; Gold v. United States, 8 Cir., 36 F. 2d 16, 32, 33;

Yellow Cab Co. v. Rodgers, 3 Cir., 61 F. 2d 729.

In Cartello v. United States, supra (93 F. 2d 412), the

defendants, election officials, were charged with having

conspired to injure citizens in the free exercise or enjoy-

ment of the rights and privileges secured to them by the

Constitution and laws of the United States, through the

alteration of ballots at a general election. The evidence

adduced by the Government, consisting of the testimony

of two witnesses, went to show that the defendants were

not guilty of the offense charged. In holding that the

— |

— 95 —.

evidence was insufficient to support a conviction, the Court

said:

“It is argued that these ballots could have been

erased in the very presence of the government wit-

nesses, Lemon and Lynch, without their knowledge,

but the evidence is to the contrary and convictions

cannot be sustained on mere possibilities. Had these

witnesses, with personal knowledge, not been placed

upon the witness stand by the government, there

might have been some room for suspicion or surmise

that this had been done, but the government has itself

proven that although the ballots were altered, they

were not altered by either of the defendants at this

polling place. Ordinarily, a litigant is bound by the

testimony of his own witnesses, especially if that tes-

timony is uncontradicted and there is no claim of

mistake.’’ (Emphasis ours.)

In Jacobson v. Hahn, 88 F. 2d 433, the Court of Appeals

for the Second Circuit applied the same rule in a civil case.

That was a suit in equity by Jacobson against Hahn as

Clerk of the District Court for the Northern District of

New York and others, one defendant being the Collector

of Internal Revenue, to recover certain bonds that had

been deposited by plaintiff with the clerk as bail for one

Flegenheimer who had been charged with a criminal of- |

fense but had been acquitted and to declare invalid a lien i

that the collector had filed for taxes. The testimony of

a

the witnesses called by defendants, as well as that of plain-

tiff’s witnesses, established that the bonds were not the

property of Flegenheimer; that the money that went to

purchase them belonged entirely to others and was not

loaned to Flegenheimer. The Court (88 F. 2d, 1. ¢. 435)

said: t

‘‘Having called these witnesses to whose testimony

we have referred, the defendants may not now suc-

ke ba

cessfully question their statements and ask us to

reject them as untruthful or unworthy of belief upon

mere suspicion that the money was loaned to Flegen-

heimer. Carlyle v. Norris, 215 N. Y. 400, 109 N. E.

564, Ann. Cas. 1917A, 429; Pollock v. Pollock, 71 N. Y.

137. The testimony is not inherently improbable nor

is it contradicted by evidence, and the collector hav-

ing presented it is bound by it. Postene & Co. v. Irv-

ing Nat’] Bank, 249 N. Y. 272, 164 N. E. 499; Arnall

Mills v. Smallwood, 65 F. 2d 57 (C. C. A. 5).

‘*We are therefore obliged to hold the finding be-

low that part of the money was Flegenheimer’s is

without evidence to support it. Since the fact is suf-

ficiently established that Flegenheimer obtained the

$75,000.00 used to purchase the bonds for bail pur-

poses only the Court below was not at liberty to draw

contrary inferences and place total ownership in Fleg-

enheimer upon mere conjecture or unwillingness to

believe the witnesses called by the defendants. Winn

v. Consolidated Coach Corp. (C. C. A.), 65 F. 2d 256,

certiorari denied 291 U. S. 668, 54 S. Ct. 543, 78 L.

Ed. 1059. Mere suspicion, conjecture or surmise is in-

sufficient. See Pennsylvania R. Co. v. Chamberlain,

288 U. S. 333, 344, 53 S. Ct. 391, 395, 77 L. Ed. 819.”

In P. Pastene & Co. v. Irving National Bank, 249 N. Y.

272, 164 N. E. 49, cited in Jacobson v. Hahn from which

we have just quoted, wherein the opinion was written by

Judge O’Brien and concurred in by Judge Cordozo, later

Mr. Justice Cordozo of this Court, and Judges Pound,

Crane, Andrews and Kellogg, the Court held that where

evidence produced by the plaintiff tending to show that

he had no right of recovery, which was not ‘inherently

improbable or materially contradicted by other evidence”

was binding upon the plaintiff, citing Carlyle v. Norris

(cited in Jacobson v. Hahn, supra), 215 N. Y. 400, 109

N. E. 564, Ann. Cas. 1917A, 429.

ja ile.

The Court of Appeals, indeed, was quite right when it

said in its opinion: ‘‘Inferences which are contrary to

established facts may not be drawn from mere conjecture

and an unwillingness to believe the unimpeached and un-

contradicted testimony of witnesses.’? This is obviously

sound law. Certainly, facts may be taken as ‘‘established’’

when shown by unimpeached and uncontradicted testimony

from the lips of the Government’s own witnesses, constitut-

ing the only testimony on the subject. It here serves no

useful purpose for petitioner to discourse upon the right

of a jury to believe or disbelieve witnesses. If other testi-

mony had been adduced contrary to that of Wasser and

Gee, quite another situation would have been presented.

But since their testimony was the only testimony on the

subject, and stood wholly uncontradicted and unimpeached,

neither the court nor the jury could utterly disregard that

testimony and find upon mere surmise, conjecture or sus-

picion that these witnesses did something they said they

did not do. This rule has been applied both where the un-

impeached and uncontradicted testimony in question was

that adduced by the Government (Cartello v. United

States, supra, 8 Cir., 93 F. 2d 412) and where the unim-

peached and uncontradicted testimony was that adduced

by defendants (Jacobson v. Hahn, supra, 2 Cir., 88 F. 2d

433; Pennsylvania R. Co. v. Chamberlain, 288 U. S. 333,

340, 341, 77 L. Ed. 819, 822, 823).

In the Chamberlain case just cited this Court said:

‘*And the desired inference is precluded for the fur-

ther reason that respondent’s right of recovery de-

pends upon the existence of a particular fact which

must be inferred from proven facts, and this is not

permissible in the face of the positive and otherwise

uncontradicted testimony from unimpeached witnesses

consistent with the facts actually proved, from which

testimony it affirmatively appears that the facts sought

to be inferred did not exist.’’

paar

— oe

A long line of decisions, Federal and State, are cited in

support thereof.

In this connection petitioner in its petition (pp. 9, 10)

quotes that portion of the District Court’s opinion on mo-

tions for judgment of acquittal in this case (79 F. Supp.

12, 17, 18), wherein the court said that one would be naive

to conclude that at one of these conferences the agent

initiating the conference did so solely to tell his competi-

tor’s agent, ‘‘We are going to raise our prices on Grade A

milk one and one-half cents commencing thirty-six hours

hence. Goodbye.’’ In this the District Judge plainly erred.

Such remark constituted a holding to the effect that the

jury could find, upon mere conjecture, surmise or suspicion,

that these witnesses had discussions as to prices which

they said they did not have, and which is utterly and

wholly unsupported by any other evidence of any character

in the record. And not only this, but the District Judge’s

further statement to the effect that a message such as he

mentioned could have been transmitted by telephone, shows

that the learned Judge failed to hold in mind the evidence

regarding that matter. The record shows the prices in

question did not relate to that of Grade A regular milk

alone, but to retail and wholesale prices of quite a long

list of other products, such as are shown by the price

announcements introduced as Defendants’ Exhibits (re-

lating to a later period) appearing on pages 187 to 220,

inclusive, of the record. The communication in question

merely consisted of the giving by one of these witnesses to

another a list of prices that the former’s company had

already determined to put into effect and was taking steps

to put into effect (R. 231, 249).

Nor is this all. The testimony of both of these Govern-

ment witnesses not only shows that the price changes that

came about during this period were not made by virtue

of any sort of an agreement between the corporate defend-

oma

— .

ants, but shows that they came about because of economic

necessity (R. 232, 235, 236, 249), and were not put into

effect by either corporate defendant until those authori-

tatively in charge of its affairs had thoroughly canvassed

the situation and found that such increased prices were a

necessity (R. 232, 235, 236).

And in addition to all this is the further fact that this

record shows without contradiction or dispute that neither

of these men had any authority whatsoever to fix prices or

make any sort of an agreement with anyone for the fixing

of prices for or on behalf of the corporate defendant he

represented (R. 229, 230, 231). Just how the corporate

defendants could be held criminally liable because of the

acts of agents having no authority to make for them any

sort of a conspiratorial agreement, the Government has

never, throughout this entire case, undertaken to show.

In its petition (p. 11) petitioner says:

‘‘A meeting at which A says, ‘I am going to raise

my price 10 cents next week,’ and B says, ‘I will, too,’

has the same consequence—economical and legal—as

one in which A and B expressly agree on a price to be

charged.”’

The record affords no justification for such argument.

According to the undisputed testimony of these Govern-

ment witnesses, when one would give the other a price

announcement or list of prices it would be with a statement

that his company had ordered that the increased prices be

put into effect; and on no occasion did the other party to

the conference ever say that his company would do like-

wise. There was never any “I will too” (R. 229, 256). Nor,

according to the testimony of these two witnesses, did

they upon any such occasions “discuss price changes to be

made” as stated by petitioner in its petition (p. 9). The

fact that Mr. Wasser, in informing Mr. Gee of an increase

—,

in price determined upon by Pevely Dairy Company, hoped

that Mr. Gee’s company would increase its price, too (R.

229), certainly has no tendency to show any conspiratorial

agreement. On the contrary, the very fact that Mr. Wasser

could only hope that the competitor would increase its

price negatives the making of any conspiratorial agree-

ment. Hope, which springs eternal in the human breast,

has not as yet come under the ban of the Sherman Anti-

Trust Act.

(3)

In view of the evidence as a whole and the stipulated

facts, proof of uniform price changes made effective by

respondents on or near the same date did not constitute

circumstantial evidence such as to support a conviction.

Since the Government relied alone upon circumstantial

evidence to sustain the charge made against the corporate

defendants, these respondents, of a conspiratorial agree-

ment fixing the sale price of Grade A regular milk, and

such circumstantial evidence consisted merely of proof of

uniform price changes which became effective on or near

the same day, and testimony of the Government’s wit-

nesses, the stipulated facts, as well as undisputed evidence

adduced by the defendants, showed that the product was

a standardized product vended in a highly competitive

market, with proof of uniformity of major cost factors,

uniform increases from time to time in such cost factors,

that every increase in price resulted from economic neces-

sity, and that such uniformity in price resulted not from

any agreement or attempt to maintain prices at fixed levels

but from the prompt meeting by one of these companies

of changes in price theretofore put into effect by its major

competitor, no case was made for the jury for the reason

that the circumstances so relied upon by the Government

were entirely consistent throughout with the defendants’

innocence.

a

1 As appears from our statement, supra, the record shows

that because of the Standard Milk Ordinance Grade A

l milk is a thoroughly standardized product. There is no

7 appreciable difference between the Grade A milk of one

3 dairy and that of another (R. 445). It appeared in the

2 Government’s case that during all the period covered by

the indictment prices to be paid from time to time to pro-

: ducers by all handlers in the St. Louis area for raw milk

were the same, the price being regulated by Order No. 3

of the Secretary of Agriculture (R. 84, 85-95, 97-99). It

further appeared that the principal labor costs for both

1 respondents were the same, being fixed by contracts be-

tween the handlers and the union (R. 236), which were

identical for all handlers and thus, in effect, industry-wide

contracts (R. 330, 457). And it appeared in the Govern-

ment’s case that the cost of the raw product and the labor

l costs were the two major cost items for both companies

) (R. 236). Naturally the cost of equipment, gasoline, bot-

tles and materials generally were bound to be substantially

the same for both companies per quart of Grade A milk.

And the Government’s witness, Mr. Gee, said that the cost

price for both companies on the major portion of costs

would be the same; that there isn’t much margin for a

difference between them (R. 260).

i,

~~ a oa .=—=CO

It appears beyond dispute that these respondents, the

two large dairies in the City of St. Louis, were selling a

standarized product in a highly competitive market with

uniform basic costs. The testimony of Judson P. Mason,

Director of Dairy Marketing with the Illinois Agricultural

Association and formerly statistician for the Federal

Market Administrator in St. Louis, is shown in our state-

ment, supra, and was referred to by the Court of Appeals

in its opinion (R. 657). He testified not only that Grade

A milk is a highly standardized product, but where, as

here, the cost factors are basically identical for all han-

dlers and other costs very similar, such factors tend to

oP ae. Fe ee ee Oe TS oS aS. ee eC

-_-—

~

on itiin

stabilize price levels (R. 446). And Dr. Leo Brown, Pro-

fessor of Economics at St. Louis University, whose testi-

mony is shown in our statement, supra, and referred to in

the opinion of the Court of Appeals (R. 657, 178 F. 2d,

1. c. 368), testified that under conditions such as are pres-

ent in the milk industry in St. Louis, the product of one

dealer being the same of another, the economic fortunes

of all the sellers are interdependent, and the economic

fortunes of the two large sellers are notably interde.

pendent; that one cannot long sell at a price higher than

that of his competitors (R. 445); that in such a market he

would expect practical uniformity of price with slight ex.

ceptions and practically simultaneous change in price (R.

457).

The testimony of these expert witnesses serves to shed

much light upon the conditions prevailing on the Grade A

milk market in the City of St. Louis during the period

here involved. It is true that this testimony came from

the lips of defense witnesses. However, not only does it

stand wholly unrefuted and undisputed, but it merely

shows in greater detail the fundamental features of the

case as shown by the Government’s own evidence. Indeed,

we submit, the Government’s own evidence and the stipu-

lated facts to which we shall presently refer, conclusively

show that every fact and circumstance in this case from

which the Government has sought to have an inference of

guilt drawn is thoroughly consistent with the innocence

of these respondents; though we think it cannot be doubted

that where, as here, the evidence relied upon for a convic-

tion is purely circumstantial, the court, in ruling a mo-

tion for a judgment of acquittal at the close of all the evi-

dence, is authorized to look if need be to the defense evi-

dence in determining whether the inferences to be drawn

from the facts and circumstances shown in proof by the

Government offer a reasonable hypothesis other than guilt.

United States v. Gasomiser Corporation (D. C. Del.), 7

mal og

F. R. D. 712, 720, 721, 722. And it may be here noted that

the testimony of these experts accords exactly with the

brief statement of Mr. Wasser on the stand as the Govern-

ment’s witness that it was impossible for Pevely Dairy

Company to get a higher price than its competitor (R.

229). Indeed, the evidence both for the Government and

the defense irrefutably shows that, in view of the circum-

stances and conditions under which these two dairies are

forced to operate, uniformity of price will naturally and in-

evitably come about despite the fact, as shown by the Gov-

ernment’s own evidence, that there is between these two

companies very keen competition and rivalry in the matter

of obtaining and retaining wholesale and retail customers

(R. 257), as well as in the matter of obtaining a supply of

raw milk from producers (R. 180), of which there has been

a shortage in this area for many years (R. 143).

The Court of Appeals was quite right in holding in its

opinion:

‘‘The milk as handled by appellants was a standard-

ized product. Its cost items being substantially iden-

tical for both appellants, uniformity in price would

result from economic forces (R. 657, 178 F. 2d, 1. e.

368).

‘‘We are clear that mere uniformity of price in the

sale of a standardized commodity such as milk is not

in itself evidence of the violation of the Sherman Anti-

Trust Act’? (R. 659, 178 F. 2d, 1. ¢. 369).

In this connection the court not only referred to the tes-

timony of the expert witnesses mentioned above but quoted

from a recent treatise by Edward H. Chamberlain, Pro-

fessor of Economics at Harvard University, and from the

decision of this Court in Cement Manufacturers Protective

Ass’n v. United States, 268 U. S. 588, and the decision of

the Court of Appeals for the Eighth Circuit in United

a

States v. Standard Oil Company, 47 F. 2d 288, both of

which decisions are here squarely in point (RB. 658, 659,

178 F. 2d, 1. c. 368, 369).

The Government has laid great stress upon the uniform-

ity of price changes during the period of nineteen months

from July, 1946, to January, 1948, as shown by the price

announcements of these respondents (United States Ex-

hibits 11 to 25, inclusive, R. 187-220, introduced in evidence

by the Government, R. 184-186). There were seven of

these price changes during that period, all of which ex-

cept that of January 20, 1947, being price increases. As

shown in our statement, the Government’s witness, Mr.

Gee, testified that all such increases were justified by in-

creased costs (R. 26). And this was further shown by the

testimony of Mr. Versen (R. 308-313, 317-320), and shown

in detail by this respondent, Pevely Dairy Company, par-

ticularly by its Exhibit I (R. 495), which had been pre-

pared by its controller, Mr. Nagel, and by its Exhibit K

(R. 513), prepared by Mr. Weber from Mr. Nagel’s cost

records. Exhibit I showed that during said period of nine-

teen months from June, 1946, to January, 1948, in which

there had been six increases and one decrease in the selling

price of fluid milk, a total increase of .065, the total net

increase in cost per unit quart was .066 (R. 495, 500);

while the last column of Exhibit K shows that for said

nineteen months period the profit, before provision for

Federal and State income taxes, amounted to .00401 per

unit quart (R. 513). In other words, there was approxi-

mately a profit of four mills per unit quart during that

period, while the net increase to the company of pur-

chasing, processing and delivering a unit quart of milk

had increased more than six and one-half cents. It is

easy to see that without such increases the company

could not have continued to operate.

The stipulation mentioned above shows certain conceded

and highly significant facts in connection with the making

niin

of the change which occurred in the price of Grade A milk

during said period of nineteen months. That stipulation

appears on pages 546 and 547 of the record. As to each

such price change the stipulation shows which company

initiated the change, when its copy was received by its

printer for printing price announcements of such change

for delivery to its customers, and when its price change

was to become effective, and shows, too, when the other

company sent its printer copy for printing its price an-

nouncements regarding the same price change and when

jt made its price change effective; and shows also when

Pevely Dairy Company’s printed announcements for each

such price change were returned to it by its printer. The

stipulation shows that Pevely Dairy Company’s printer

returned to it the printed announcements: on the same

day the printer received the copy thereof in every instance

except for the price change which became effective Au-

gust 1, 1947. Upon that occasion the copy was delivered

by the company to the printer on July 25, 1947, and the

printed announceients were returned to the company on

July 29, 1947; the other facts shown by the stipulation

are summarized in the following tabulation:

St. Louis Dairy Company Pevely Dairy Company

Copy Received Date Price Change Date Copy Received Date Price Change

by Printer Effective by Printer Effective

/ 3/46, 4:30 P.M. 7/ 4/46 7/ 2/46 7/ 3/46

/ 8/46, 6:30 P.M. 7/ 9/46 7/ 9/46 7/10/46

/ 4/46, 11:00 A. M. 10/ 5/46 10/ 3/46 10/ 4/46

/17/47, 8:30 A.M. 1/20/47 1/20/47 1/20/47

/30/47, 5:00 A.M 8/ 1/47 7/25/47 8/ 1/47

/11/47, 4:00 P.M. 9/16/47 9/15/47, 9:15 A.M. 9/16/47

/%/48, 9:00 A.M. 1/28/48 1/23/48 1/27/48

The dates appearing in bold-face type in this tabulation

serve to indicate the company which initiated the par-

ticular price change.

It thus appears that in only three instances out of the

seven (the changes effective on January 20th, August Ist

and October 16th, 1947) did the price changes of the two

itis

companies go into effect on the same day; and not in a

single instance was there simultaneous action to bring

about the price change. In each instance the company not

initiating the price change had ample opportunity to learn

of its competitor’s action and to thereafter take steps to

notify its own customers in time to put into effect its own

price on the date it is shown to have become effective. In

one instance, that is, when Pevely Dairy Company initiated

the price change on July 25, 1947, St. Louis Dairy Com-

pany did not send its copy for its price announcements

until five days later. In the case of the change in Septem-

ber, 1947, four days elapsed after the St. Louis Dairy Com-

pany initiated the price change and sent its copy to the

printer before Pevely Dairy Company sent its copy to its

printer. And three days were involved in the change made

in January, 1948.

And the Government’s own evidence conclusively shows

that when the company initiating a price change issued

its price announcements and they were being delivered to

its customers, copies thereof very quickly fell into the

hands of the drivers or other employees of its competitor

showing what had occurred. The Government’s witness

Mr. Gee testified that a competitor would know of a price

change ‘‘no more than it was on the street’’ (R. 238).

And the undisputed evidence makes it clear that those

operating a dairy under conditions such as are shown to

have been here present must ever be alert to discover any

price change by a competitor so as to be able to take

prompt action as to its own price situation. A decrease in

price by one company must be promptly met by the other

or the latter will suffer a great decrease in the volume of

its business. Customers knowing that the milk of the two

dairies must necessarily be of the same high quality to be

approved as Grade A milk, will not pay even a small

premium for the milk of a particular dairy (R. 229, 455).

ome 37. aes

And, as shown above, the increases mentioned were in-

variably brought about by increased cost factors common

to both companies (R. 232, 249, 260). Naturally neither

company cared to be the first to initiate a price increase.

As to this, the expert witness Mason said:

“In all our experience, lots of times we know that

our costs are mounting. We know we would like to

raise prices, and sometimes, we are glad if somebody

else does it first, and we follow suit, we know that we

are on pretty safe ground because we don’t have to

worry about somebody taking our business. In other

words, everybody is subject to the same pressure, and

if somebody breaks under that pressure by raising

prices, you will find normally that other handlers will

come up and meet it in a tight market’’ (R. 444).

Obviously, when one company took the initiative and

announced a price increase in order to prevent suffering

more loss, its competitor would be under the same neces-

sity for a price increase, and the latter’s action in promptly

adopting the new price certainly can afford no substantial

evidence of a conspiratorial agreement to fix prices.

The language of this Court in its opinion in Cement

Manufacturer’s Protective Association v. United States,

268 U. S. 588, 69 L. Ed. 1104, quoted by the Court of Ap-

peals in its opinion in the instant case (R. 658, 178 F. 2d,

le. 369), is here directly applicable, namely:

“* * * The fact is that any change in quotations

of price to dealers promptly becomes well known in

the trade through reports of salesmen, agents, and

dealers of various manufacturers. It appears to be

undisputed that there were frequent changes in prices

and uniformity has resulted not from maintaining the

prices at fixed levels but from the prompt meeting of

changes in prices by competing sellers,’’

i Si

It follows that the conviction of these respondents does

not rest upon evidence but purely upon suspicion, specu. .

lation, conjecture and surmise.

Il.

And since the decision of the Court of Appeals is in no

way in conflict with the decisions of this Court or of other

Courts of Appeal, but states and applies the settled law

as declared by this Court and the Courts of Appeal, a writ

of certiorari should not issue herein. It is the settled rule

of decision of this Court that the writ will not issue merely

to review the evidence in a case or the inferences to be

drawn therefrom. General Talking Pictures v. Western

Electric Company, 304 U. S. 175, 82 L. Ed. 1273, 1275.

Il.

The charge in petitioner’s petition (pp. 16-18) that the

Court of Appeals was influenced by misconceptions of law,

(1) as to the acquittal of the individual defendants, and

(2) as to the effect of the statute of limitations, calls for

scant notice, if any. As to the former, the Court said:

‘Tt is true the question on review is not whether

the verdict of acquittal of the individual defendants

was warranted, but whether the verdict of guilty

against the corporation is sustained by substantial

evidence, and mere inconsistency in verdicts is not

fatal’? (R. 661, 178 F. 2d, 1. ¢. 370, 371).

And the opinion upon its face plainly shows that the

Court’s decision did not rest in any degree upon the

theory that anything that occurred prior to the O. P. A.

period would be barred by limitations (R. 660, 661, 178

F. 2d 370).

IV.

It cannot be doubted that the Court of Appeals properly

condemned as prejudicial error the injection into this case

— 39 —

below of evidence as to the compensation of the Kerckhoff

defendants (R. 539, 540). Union Electric Light & Power

Co. v. Snyder Estate, 65 F. 2d 297, 303; O’Hara v. Lamb

Construction Co. (Mo. App.), 197 S. W. 163, 165. Peti-

tioner says that this evidence was introduced merely to

rebut defendants’ contention that their prices were deter-

mined by economic necessity and not by concert of action

and the evidence they adduced in support of such conten-

tion. But the record refutes this. Government counsel

got the matter before the jury at an early stage of the

trial in the redirect examination of the witness Wasser

(R. 233), long before the defendants introduced any evi-

dence, obviously for the sole purpose of injecting prejudice

into the case. There never was any attempt by the Gov-

ernment to allocate administrative expense to the cost of

Grade A milk or fluid milk as a whole. And, as shown

above, in this respondent’s evidence as to cost increases

all compensation received by the Kerckhoff brothers from

the corporation had been eliminated (R. 496, 499). And it

is altogether plain that under the circumstances the injec-

tion of this matter into the case was prejudicial to the

corporation as well as to the individual defendants, the

owners thereof.

CONCLUSION.

For the reasons hereinabove stated, we submit that

petitioner’s petition for the writ should be denied, and

pray that this be done.

Respectfully submitted,

WILLIAM H. ALLEN,

JAMES A. FINCH,

E. C. HARTMAN,

Attorneys for Respondent,

Pevely Dairy Company.