Opposition Brief — United States v. Pevely Dairy Co.
Supreme Court brief1950
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INDEX.
Opinions below and jurisdiction
Questions presented
Statement
I. Certiorari does not issue to review evidence or
inferences drawn from it
II. There is no conflict with the Supreme Court or
among the Circuits as to the rule applied by the
Court of Appeals below that respondent’s mo-
tions for acquittal should have been sustained
for the reason that there was no substantial evi-
dence, considered in the light most favorable to
the Government, to support the conviction.... 19
1. The Court of Appeals applied the controlling
substantial evidence rule, and did not weigh
the evidence as erroneously claimed by peti-
tioner
2.In determining the sufficiency of the circum-
stantial evidence, upon which the Government
relied exclusively, the Court of Appeals was
entitled to pass upon the reasonableness of
the inferences to be drawn from the circum-
stances proven, and properly held that the
motion of acquittal should have been sus-
tained in the absence of reasonable inferences
supporting the conviction to the exclusion of
the hypothesis of respondent’s innocence.... 20
3. Applying the above rule to the case at bar,
the Appellate Court was justified in holding
that there was no substantial evidence of re-
spondent’s guilt, considering the proven cir-
cumstances in a light most favorable to the
COVOMAO og 6 osc odin idks baka ceaninw enn 26
III. The Appellate Court properly held that the judg-
ment of the District Court should be reversed
because of prejudicial evidence received over
objections of respondent, and the District Court
erred in not striking that evidence from the
WE ig ickaukoea nd ich 0s 0b Obs £6650 0bRs eaee 45
IV. The Appellate Court did not hold, as suggested
by petitioner, that (A) the Statute of Limita-
tions applied to the case at bar, nor that (B)
the jury’s verdicts of conviction were dis-
credited by the verdicts of acquittal.......... 52
CA i. 5 ann 60 ahoe LAS SAAS s CAA HERE AON the anESE 54
Cases Cited.
Abrams v. United States (1919), 250 U. S. 616, 619,
63 L. Ed. 1173, 1176, 40 S. Ct. 17.........ccceeees 9, 18
American Tobacco Co. v. United States (C. C. A. 6,
1944), 147 F. 2d 93, 101, aff. (1946) 328 U. S. 781, 90
L. Ed. 1575, 66 8. Ct. 1126.......... 10, 13, 14, 22, 29, 36
Appalachian Electric Power Co. v. N. L. R. B. (C. C.
A. 4), 1938), 93 F. 2d 985, 989..........cceeeeee 10, 23
Arnall Mills v. Smallwood (C. C. A. 5, 1933), 68 F.
SP eT Eee Ear e eT Tey ee ye ey yy 14, 43
Beck v. United States (C. C. A. 8, 1929), 33 F. 2d 107,
WO ko nce ds yn dews 045 400seGaekeneswesanae 10, 25
Bishop v. United States (C. C. A. 8, 1926), 16 F. 2d
i 5 irre ry rrr ry rrr errr rr. rec 10, 25
Braatelien et al. v. United States (C. C. A. 8, 1945),
147 FV, 94 GBB, GOB... cccccccvcccccscccscccns 15, 50
oo bg '
. ili
Cady v. United States (C. C. A. D. C., 1923), 293 F.
Rs RAs RS ee 10, 26
Cartello v. United States (C. C. A. 8, 1937), 93 F. 2d
OR WU Si a is i a cei ee 14, 42
Cement Mfrs. Protective Ass’n v. United States
(1925), 268 U. S. 588, 69 L. Ed. 1104............. 13, 32
Chieago & N. W. R. Co. v. Ohle (1886), 117 U. S. 123,
129, 29 L. Ed. 837, 839, 6 S. Ct. 632.............. 9, 18 i
Coen v. American Surety Co. of N. Y. (C. C. A. 8,
1941), 120 F. 2d 393, 400, cert. den. 314 U. S. 667,
OR hs. oe: Gy OR By. OE BEB iaidikc iebcieos va cides’ 16, 53
|
'
Commonwealth v. Giles, 1 Gray (Mass.) 466........ 15, 51
Consolidated Edison v. Columbian Enameling &
Stamping Co., 306 U. S. 292, 300, 83 L. Ed. 660, 59
A ME Ecs 0 earn ob Ghd kid wiping ote ae eae 10 |
Cravens v. United States (C. C. A. 8, 1932), 62 F. 2d
BN MO tik Reh Gb aeend Wald as igh Taha 10, 25
Curley v. United States (C. A. D. C., 1947), 160 F. 2d
oe oe UE OS eer are tear 10, 21
Davis v. United States (C. C. A. 6, 1901), 107 F. 753,
Bek bau a etek os hb sane bos Devas keledenee 14, 39
Dickerson v. United States (C. C. A. 8, 1927), 18 F.
PE Cs SE Nene Shh Ada Me Ven y eek heeanecan cee 10, 23
Eastern Coal Corp. v. N. L. R. B. (C. C. A. 4, 1949),
PF OR BU TR i is hs i ee 10, 23
Edwards v. United States (C. C. A. 8, 1925, 7 F. 2d
EBD chinks thcisacttdh, So acter oe 10, 25
Estep v. United States (C. C. A. 10, 1943), 140 F. 24
OA Oe ecb stcurnsdincadd akon kdbase ts tens 10, 23
Ezzard v. United States (C. C. A. 8, 1925), 7 F. 2d 808,
MU isuecuuhentst Oreuthsckiachics ace eee 14, 43
Federal Trade Commission v. The Cement Institute
et al. (1948), 333 U. S. 683, 708, 92 L. Ed. 1010... .13, 32 |
Foran et al. v. Commissioner (C. C. A. 5, 1948), 165 F.
BE Fe eis ncecdibhakds 6 tapes chk inde eee 14, 44
iv
Gargotta v. United States (C. C. A. 8, 1935), 77 F. 2d
OG BN iii Sk se Ccobei views ctcvudwindscoesea 10, 25
General Talking Pictures v. Western Electric Com-
pany (1938), 304 U. S. 175, 82 L. Ed. 1273, 1275. ..9,17
Gold v. United States (C. C. A. 8, 1929), 36 F. 2d
DE BE i bbks do be 54 ct hetildedecwace eds cotenben 10, 25
Graceffo v. United States (C. C. A. 3, 1931), 46 F. 2d
By cab vikientis bsdebe Sovnvs cn ovend dxecatonens 10, 25
Grant et al. v. United States (C. C. A. 3, 1931), 49 F.
OE GRR FR SED: cities tices vdacwoesdienvennsocud 11, 25
Grantello v. United States (C. C. A. 8, 1924), 3 F. 2d
PRES ee) ree Cea ter Renee Se Oe 11, 25
Hammond v. United States (C. A. D. C., 1942), 75
U. S. App. D. C. 395, 127 F. 2d 752, 753.......... 11, 26
Heard v. United States (C. C. A. 8, 1919), 255 F. 829,
re eee Sees ion. cece chen an cdwess sued 14, 43
Howell Turpentine Co. v. Commissioner (C. C. A. 5,
TR ee Ee Wk OD, Ws oc tacveveaccveseseeess 14, 44
Jacobson v. Hahn et al. (C. C. A. 2, 1937), 88 F. 2d
ie ean UC AUNG tana Y wah edeksakvadsoocuewen 15, 43
Karchner v. United States (C. C. A. 7, 1932), 61 F.
ee ae awknkie Sut 11, 26
Kettenbach v. United States (C. C. A. 9, 1913), 202
PE ES Codes daddcuepscs in vadiens wakonns xbee 15, 51
Lancaster v. Collins (1885), 115 U. S. 222, 225, 29 L.
Be rk ty © GR. Ta. wiciyncinnnccccscscicccct 9, 18
Lilienthal’s Tobacco v. United States (1878), 97 U.S.
Be, Se Bs, TR Be, Gas siencicwiccinnicccccscias 14, 40
McClintock v. United States (C. C. A. 10, 1932), 60 F.
TA ESR AAR ARE AP ETT IE a 11, 26
McLaughlin v. United States (C. C. A. 3, 1928), 26 F.
Mortensen v. United States (1944), 322 U. S. 369, 374,
68 IL. Wd. 1381, 1386, 64 G. Ct. 1087... eccece 9,18
Vv
National Labor Relations Board v. Columbian Enamel-
ing & Stamping Co., 306 U. S. 292, 300, 83 L. Ed.
Ce Is a Be wich wanin turd satin prcdinc le 6Caigdlan 23
Nicola v. United States (C. C. A. 3, 1934), 72 F. 2d
I nls hn dk 6d a dining s Rha ee Kilns who cs 11, 25
Nosowitz v. United States (C. C. A. 2, 1922), 282 F.
Pe hs eiibtindwaewh dad San Lawes die baoueie 11, 25
O'Hara v. Lamb Construction Co. (Mo. App., 1917),
ee ae Pe I NS ne cc 6. cheb sea le teenies da 15, 48
Parnell v. United States (C. C. A. 10, 1933 on rehear-
a Oe; OE we Rs ck ci ek. 11, 26
Peightel v. United States (C. C. A. 8, 1931), 49 F. 2d
BE cl diu wid boak Pes dullncdn sedbcdas inns dela 11, 23
Pennsylvania R. R. Co. v. Chamberlain (1933), 288
U. S. 333, 340-1, 77 L. Ed. 819, 823, 53 S. Ct. 391. .15, 44
People v. Altice Case (1922), 222 Mich. 379, 190 N. W.
BT, with ainitis% oh 5-65 bai ue de die ah cise ok oak és 16, 53
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319, 320, cert. den. 331 U. S. 825, 91 L. Ed. 1840, 67
PRO EE kd eke hake doh chle bce ek ee ck a 11, 21
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Fe ee ee re ee Sy Ee 11, 25
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No. 593.
IN THE
SUPREME COURT OF THE UNITED STATES.
OCTOBER TERM, 1949.
UNITED STATES OF AMERICA,
Petitioner,
v.
ST. LOUIS DAIRY COMPANY,
Respondent.
BRIEF
Of Respondent, St. Louis Dairy Company, in Oppo-
sition to Petition for Writ of Certiorari.
OPINIONS BELOW AND JURISDICTION.
The data set out and statements made by petitioner in
its brief, pages 1 and 2 under the above headings, are
correct and concurred in by this respondent.
QUESTIONS PRESENTED.
Actually only two questions are presented by the peti-
tioner.
1, Whether there was substantial evidence to justify the
District Court in overruling respondent’s motions for a
pst Miia:
verdict of acquittal at the close of the Government’s case,
at the close of all the evidence, and for a judgment of
acquittal or, in the alternative, for a new trial, after
verdict and judgment were rendered against respondent.
2. Whether the admission of evidence as to the foreign
control of respondent and as to the compensation of indi-
vidual defendants constituted reversible error.
Question No. 1 rephrases what petitioner has set out
in different and rather inaccurate language as its Ques-
tions 1 and 2. Petitioner’s Question 4 is identical with
Question 2 above. Petitioner’s Question No. 3 is irrelevant
and unnecessary.
STATEMENT.
Petitioner’s description of the proceedings below is cor-
rect. For the purpose of completeness it may be added
that separate motions for judgment of acquittal were filed
by respondent at the close of the Government’s case, at the
close of all the evidence, and, after verdict, for judgment
of acquittal or in the alternative for new trial. They all
were overruled by the District Court (R. 287-293, 571-578,
631-637).
The Government charged a conspiracy among two
dairies und some of their officers to fix retail and whole-
sale milk prices of Grade A regular milk in the St. Louis
area, for the ten-year period prior to the return of the
indictment on February 15, 1948 (R. 4-10, 22-25, 62). The
two dairies (or handlers, as they are sometimes referred
to) are the St. Louis Dairy Company and the Pevely Dairy
Company, the two largest milk distributors in the area.
The individual defendants were the president of respond-
ent, Basil M. Lide, and the five Kerckhoff brothers who
were, respectively, president and directors of Pevely Dairy.
inde si
All the defendants were tried together. The jury acquitted
all individual defendants, but found the corporations
guilty. On appeal the convictions were reversed. Peti-
tioner rested its case on circumstantial evidence alone, and
admitted that it had no direct evidence of any express oral
or written conspiratorial agreement by or between any of
the defendants (R. 22 and 71). The Government contended
that ‘‘an oral agreement’’ could be ‘‘implied’’ from cir-
cumstantial evidence consisting primarily of uniform price
changes made effective by both corporate defendants
within short spaces of time of each other, and from certain
conversations between the two sales managers of the cor-
porate defendants, Gee and Wasser, in the period from
August 7, 1939, through August 28, 1941.
Both Gee and Wasser were called as government wit-
nesses and unequivocally denied the existence of any con-
spiratorial agreement (R. 256, 229). They testified posi-
tively concerning the economic necessity for each of the
price changes involved, and their testimony on both points
was fully supported by the testimony of other defendants’
witnesses.
There is no conflict in the evidence relating to the cost
factors involved in the marketing of milk and concerning
the cireumstances—all beyond defendants’ control—which
make the milk a uniform product. The price of raw milk
is determined and fixed pursuant to government orders and
regulations, stemming from the Agricultural Marketing
Agreement Act of 1937 as amended (Act of June 3, 1937,
e. 296, 50 Stat. 249, 7 U. S. C. A. 671, as amended, R. 100).
The defendants had no voice in the determination of those
prices (R. 147). In the ten-year period in question there
were steady and continuous increases in producers’ price
which show a total rise in raw milk cost from January,
1942, to January, 1948, of about 5 cents per quart (R.
135-7). The second largest cost factor to the handlers is
al” ane
labor for processing and distributing the milk. Labor con-
tracts are negotiated with the unions on an industry-wide
basis with a consistent upward trend in the wages which
affect the costs of both dairies identically (R. 330, 457),
The same pattern is disclosed by the other cost factors such
as gasoline used for delivery, coal burned in the plants,
bottles, caps and other commodities required for the
processing and distributing of Grade A milk by the
handlers (R. 386).
The foregoing cost factors applicable to Grade A milk
are regularly analyzed by the sales and accounting man-
agement of the company on the basis of a cost allocation
and accounting system used by respondent for the past
ten years (R. 374), and which follows the system estab-
lished by the International Association of Milk Dealers
(R. 377) and adopted by dairies generally throughout the
country (R. 339). Under this system the allocation of all
costs and expenses is on a functional basis as to each
product sold by respondent. Materials, receiving expenses
and labor processing expenses are allocated directly to the
product to which they relate (R. 363-364). Delivery, selling
and administrative expenses are allocated to each product
on a point system which is based on selling units such as a
quart of milk or a pound of butter, cheese and other similar
products. The point system, upon which are also bottomed
the union labor contracts, is predicated on the principle
that the vost of delivery is alike for every unit (R. 382-383).
These are the cost factors and cost allocation data which
are furnished to the president of St. Louis Dairy when
its sales and accounting management advises him from
time to time in connection with price determinations (R.
235, 304, 384-387). The only person vested with authority
to, and who does as a matter of practice, determine prices
is the president of the company, Mr. Lide (R. 234, 237,
303, 384, 385, 482).
Be
One of the factors which is considered by Lide in ar-
riving at a price determination is the price change which
a competitor may already have announced or decided
upon (R. 305, 392). It is important to find out price
changes adopted or announced by any competitor at the
earliest possible moment. Every employee of respond-
ent is urged to get any available information from other
drivers, stores where price lists may have been left, cus-
tomers in general, of price changes made by a competitor
and to immediately report to the management (R. 238-9,
314). Any price change of Pevely or other local handler
affects the operation of respondent; of Pevely most, be-
cause it is largest, and the most serious competitor. If
the change consists of a reduction, St. Louis Dairy would
lose customers unless it promptly conforms; if it is an in-
crease in price due to some change which has or soon
will increase costs, it must consider moving too, since the
same costs necessarily affect the operation of St. Louis
Dairy in the same manner (R. 305-306, 393).
In order to be able to report to the management more
promptly any price change determined or promulgated
by Pevely, Julian W. Gee, sales manager of respondent,
did on four occasions in the period August, 1939 (R. 248),
to August 28, 1941 (R. 254),* exchange information with
Joseph J. Wasser, Pevely’s sales manager, concerning
price changes, after they had been determined by the com-
pany making the change, but before the effective date of
the change (R. 227, 228, 233-234, 246-250). Both Gee and
Wasser, who testified as government witnesses, denied the
existence of any conspiracy or agreement (R. 256 and
229, respectively). Nevertheless the government relied
* R. 254. On direct examination Gee testified that that conversation
had taken place on September 2, 1941 (R. 284). Inasmuch as September
2 was the effective date of the price change, the reason for the apparent
mistake is obvious. The conversation took place on August 28 and the
price change was effective September 2.
en Se
on inferences contrary to the oral testimony of these wit-
nesses.
After exchanges such as this were found to be a subject
of criticism and thus discontinued,t respondent confined
its sources of information about price changes decided
and determined upon by competitors to that obtainable
by the company’s drivers, through newspaper reporters
and similar media. This is the testimony of the govern-
ment’s witness (R. 238-9).
The evidence further shows that certain uniform price
changes were made by both companies, as set forth in the
indictment and the bill of particulars by the government,
and that those price changes were neither simultaneous
nor were they always initiated by the same company (R.
546-547, 564-565). Economic justification for each of those
changes was testified to by a government witness (R. 249)
and others (R. 308-320). The uniformity of the price
changes was explained by the respondent’s employees and
by independent economists having personal experience in
the St. Louis Milk Market situation: Judson P. Mason, the
Director of Dairy Marketing for the’ Illinois Agricultural
Association, with both government and private experience
in the field, including service with the St. Louis Federal
Milk Marketing Administration (R. 439-440); and Father
Leo ©. Brown, S. J., Professor of Economies at St. Louis
University and a member of the Dairy Council (R. 452-
454). They testified that Grade A Milk is a standard prod-
uct, in that there is very little difference in the milk of
one dairy as to another and that its butter fat, bacterial
content and other requirements are brought into uni-
formity by rigid administration of the St. Louis Milk
+ Peremptory instructions to that effect were given to Gee and Wasser
by officials of their companies (R. 315 and 230-231, respectively) and Gee
‘desired to avoid any appearance of impropriety, following a Grand Jury
investigation (R. 254).
~~
Ordinance. This ordinance, which embodies the sanitary
requirements of the United States Public Health Service
Ordinance (R. 442, 445) remained basicaliy unchanged
during the period invelved here (Ordinance No. 40939 of
December 15, 1936, as amended by Ordinance No. 41242
of February 23, 1938 and by Ordinance No. 41803 of April
4, 1940, R. 28-59). They further testified that in a com-
petitive market the cost factors being identical for the
relatively few sellers, and the supply of milk being short
for all, uniformity of prices and practically simultaneous
price changes are the natural and inevitable result of the
same economic pressures upon all (Mason, R. 446-448;
Brown, R. 457), bringing about almost simultaneous price
announcements (R. 461-462).
All of the evidence, both on the government’s and on
the respondent’s side, shows free and bitter competition
exists between the two respondents, both in the continuous
struggle to expand the milk supply at the expense of the
other company, and in securing the customers of each
other (R. 183, 257, 472, 473). That evidence was supported
and amplified by independent experts who testified that
there is plenty of competition among the dairies in the
St. Louis market (R. 446-7, 455, 462).
During the regime of the O. P. A. both the minimum
price paid to producers and the maximum pricé charged
to customers were dictated by public authority. This
program was supported by a government subsidy to the
producers. At the termination of these conditions the
supported price level was maintained by passing on the
deficiency from the producers to the handlers, who in turn
undertook to retrieve it from consumers (R. 146, 317).
t This evidence is apparently overlooked by petitioner when it states
(Petition, p. 4) that “During the period covered by the indictment the
record reveals no instance of price competition between the two respond-
ents in respect of Grade A milk.”
a
The record shows that after the disestablishment of the
O. P. A.’s milk control (June, 1946), the total price in-
creases made by respondent to its customers until and
including February, 1948, amounted to 54%¢ per quart
on Grade A regular milk, whereas the total increase in
the cost to it of material and labor for that period was 6¢
and a fraction per quart (R. 467-469). The government
introduced no testimony upon this subject and the fact
of this unfavorable price balance is uncontradicted by
any evidence.
—
This is the circumstantial evidence in the case upon
which the jury found defendant Lide ‘‘not guilty’’ and
which fhe appellate court held insufficient as a matter of
law to sustain the conviction of respondent.
— we
SUMMARY OF THE ARGUMENT.
I. Certiorari does not issue to review evidence or infer-
ences drawn from it.
Abrams v. United States (1919), 250 U. S. 616, 619,
63 L. Ed. 1173, 1176, 40 S. Ct. 17;
Chicago & N. W. R. Co. v. Ohle (1886), 117 U. S. 123,
129, 29 L. Ed. 837, 839, 6 S. Ct. 632;
General Talking Pictures v. Western Electric Com--
pany (1938), 304 U. S. 175, 82 L. Ed. 1273, 1275;
Lancaster v. Collins (1885), 115 U. S. 222, 295, 29
L. Ed. 373, 374, 6 S. Ct. 33;
Mortensen v. United States (1944), 322 U. S. 369, 374,
88 L. Ed. 1331, 1335, 64 S. Ct. 1037;
Troxell v. Delaware, Lackawanna & Western R. Co.
(1913), 227 U. S. 434, 442, 57 L. Ed. 586, 590, 33
S. Ct. 274;
United States v. Socony-Vacuum Oil Co. (1940), 310
U. S. 150, 254, 84 L. Ed. 1129, 1184, 60 S. Ct. 869.
II. There is no conflict with the Supreme Court or
among the Circuits as to the rule applied by the Court of
Appeals below that respondent’s motions for acquittal
should have been sustained for the reason that there was
no substantial evidence, considered in the light most
favorable to the Government, to support the conviction.
1. The Court of Appeals applied the controlling sub-
stantial evidence rule, and did not weigh the evidence, as
erroneously claimed by petitioner.
2. In determining the sufficiency of the circumstantial
evidence, upon which the Government relied exclusively,
the Court of Appeals was entitled to pass upon the reason-
ableness of the inferences to be drawn from the circum-
stances proven, and properly held that the motion of
aie
acquittal should have been sustained in the absence of
reasonable inferences supporting the conviction to the
exclusion of the hypothesis of respondent’s innocence.
American Tobacco Co. v. United States (C. C. A. 6,
1944), 147 F. 2d 93, 101, aff. (1946) 328 U. §.
781, 90 L. Ed. 1575, 66 S. Ct. 1126;
Appalachian Electric Power Co. v. N. L. R. B. (C. C.
A. 4, 1938), 93 F. 2d 985, 989;
Beck v. United States (C. C. A. 8, 1929), 33 F. 2d 107,
112;
Bishop v. United States (C. C. A. 8, 1926), 16 F. 2d
410, 416-7;
Cady v. United States (C..C. A. D. C., 1923), 293 F.
829;
Consolidated Edison v. Columbian Enameling &
Stamping Co., 306 U. S. 292, 300, 83 L. Ed. 660,
59 S. Ct. 501;
Cravens v. United States (C. C. A. 8, 1932), 62 F. 2d
261, 274;
Curley v. United States (C. A. D. C., 1947), 160 F. 2d
229, cert. den. 331 U. S. 837;
Dickerson v. United States (C. C. A. 8, 1927), 18 F.
2d 887, 893;
Eastern Coal Corp. v. N. L. BR. B. (C. C. A. 4, 1949),
176 F. 2d 131, 136;
Edwards v. United States (C. C. A. 8, 1925, 7 F. 2d
357, 360;
Estep v. United States (C. C. A. 10, 1943), 140 F.
2d 40, 45;
Gargotta v. United States (C. C. A. 8, 1935), 77 F. 2d
977, 981;
Gold v. United States (C. C. A. 8, 1929), 36 F. 2d
16, 32;
Graceffo v. United States (C. C. A. 3, 1931), 46 F. 2d
852, 853;
— )
Grant et al. v. United States (C. C. A. 3, 1931), 49 F.
2d 118, 119-120;
Grantello v. United States (C. C. A. 8, 1924), 3 F. 2d
117, 118;
Hammond v. United States (C. A. D. C., 1942), 75
U..S. App. D. C. 395, 127 F. 2d 752, 753;
Karchner v. United States (C. C. A. 7, 1932), 61 F.
2d 623;
McClintock v. United States (C. C. A. 10, 1932), 60 F.
2d 839, 842;
McLaughlin v. United States (C. C. A. 3, 1928), 26 F.
2d 1, 3;
Nicola v. United States (Cc. C. A. 3, 1934), 72 F. 2d
780, 786;
Nosowitz v. United States (C. C. A. 2, 1922), 282 F.
575, 578;
Parnell v. United States (C. C. A. 10, 1933 on rehear-
ing), 64 F. 2d 324, 329;
Peightel v. United States (C. C. A. 8, 1931), 49 F. 2d
235, 240;
Peters v. United States (C. C. A. 8, 1947), 160 F. 2d
319, 320, cert. den. 331 U. S. 825, 91 L. Ed. 1840,
67 S. Ct. 1316;
Read v. United States (C. C. A. 8, 1930), 42 F. 2d 636;
Ridenour v. United States (C. C. A. 3, 1926), 14 F. 2d
888, 892-3;
Romano v. United States (C. C. A. 2, 1925), 9 F. 2d
522, 524;
Roukous v. United States (C. C. A. 1, 1912), 195 F. 353,
361, cert. den. 225 U. S. 710, 56 L. Ed. 1267, 32
S. Ct. 840;
Salinger v. United States (C. C. A. 8, 1927), 23 F.
2d 48, 52;
Schad v. 20th Century-Fox Film Corp. (C. C. A. 3,
1943), 136 F. 2d 991, 996;
waite ED cate
Scott v. United States (C. C. A. 10, 1944), 145 F. 2d
405, 408, cert. den. 323 U. S. 801, 89 L. Ed. 639,
65 S. Ct. 561;
Spalitto v. United States (C. C. A. 8, 1930), 39 F. 2d
782, 784;
Sullivan v. United States (C. C. A. 8, 1922), 283 F.
865, 868;
Tingle v. United States (C. C. A. 8, 1930), 38 F. 2d
573, 575;
Turinetti v. United States (C. C. A. 8, 1924), 2 F.
2d 15, 17;
Union Pacific Coal Company v. United States (C. (.
A. 8, 1909), 173 F. 737, 740;
United States v. Gasomiser Corporation (D. C. Dela,
1947, reh. den. 1948), 7 F. R. D. 712;
United States v. Laffman (C. C. A. 3, 1945), 152 F. 2d
393, 394; ;
United States v. Litberg (C. C. A. 7, 1949), 175 F.
2d 20, 21;
United States v. Valenti (C. C. A. 2, 1943), 134 F.
2d 362;
VanGorder v. United States (C. C. A. 8, 1927), 21 F.
2d 939, 942;
Wesson v. United States (C. C. A. 8, 1949), 172 F. 2d
931, 933;
Wiener v. United States (C. C. A. 3, 1922), 282 F.
799, 801;
Willsman et al. v. United States (C. C. A. 8, 1923), 286
F. 852, 856-7;
Yoffe v. United States (C. C. A. 1, 1946), 153 F. 2d
570;
Yusem v. United States (C. C. A. 3, 1925), 8 F. 2d 6, 8.
3. Applying the above rule to the case at bar, the Appel-
late Court was justified in holding that there was no sub-
stantial evidence of respondent’s guilt, considering the
we 13.
proven circumstances in a light most favorable to the
government.
A. No reasonable inference of respondent’s guilt to the
exclusion of its innocence could be drawn from the uni-
formity of the retail and wholesale prices charged by the
two dairies for Grade A milk and from the proximity in
time of their prices changes, since the unrefuted positive
evidence showed that those changes were dictated exclu-
sively by impelling economic reasons, flowing from the
undisputed facts that the cost factors for producing
Grade A milk are substantially identical for both dairies,
that Grade A milk is a standardized product sold in a tight
market, and that those prices were decided upon by re-
spondent in the exercise of its independent business judg-
ment.
a. Each one of the price changes made by respondent,
and in issue here, was dictated exclusively by impelling
economic reasons, and was decided upon by respondent in
the exercise of its independent business judgment. This is
the undisputed fact of all the direct evidence.
American Tobacco Company v. United States (1946),
328 U. S. 781, 1. c. 804, 90 L. Ed. 1575, 1. ¢. 1591,
66 S. Ct. 1126.
b. Grade A milk being a standardized product sold in a
tight market, and its cost items being substantially iden-
tical for both respondents, uniformity in prices and price
changes is bound to result from those identical economic
forces.
Cement Mfrs. Protective Ass’n v. United States (1925),
268 U.S. 588, 69 L. Ed. 1104;
Federal Trade Commission v. The Cement Institute
et al. (1948), 333 U. S. 683, 708, 92 L. Ed. 1010;
United States v. International Harvester Co. (1927),
274 U. S. 693, 708-9, 71 L. Ed. 1302;
a on
United States v. Standard Oil Company of New Jersey
(D. C. E. D. Mo., 1931), 47 F. 2d 288, 316-317;
United States v. Sugar Institute (D. C. N. Y., 1934),
15 F. S. 817, 887.
ce. The price changes in question were not simultaneous,
nor were the price changes initiated always by the same
respondent.
American Tobacco Company v. United States (1946),
328 U. S. 781, 1. ¢. 804, 90 L. Ed. 1575, 1. ¢. 1591,
66 S. Ct. 1126;
Davis v. United States (C. C. A. 6, 1901), 107 F. 753,
755;
Lilienthal’s Tobacco v. United States (1878), 97 U.S.
237, 266, 24 L. Ed. 901, 905;
United States v. Standard Oil Company of New Jersey
(D. C. E. D. Mo., 1931), 47 F. 2d 288, 1. ¢. 316.
B. No reasonable inference of respondent’s guilt to the
exclusion of its innocence could be drawn from the remote
conversations between Gee and Wasser, who appeared as
government witnesses, and who by direct, unimpeached,
uncontradicted and reasonable testimony denied any con-
spiracy.
Arnall Mills v. Smallwood (C. C. A. 5, 1933), 68 F.
2d 57, 59;
Cartello v. United States (C. C. A. 8, 1937), 93 F. 2d
412, 415;
Ezzard v. United States (C. C. A. 8, 1925), 7 F. 2d 808,
811;
Foran et al. v. Commissioner (C. C. A. 5, 1948), 165 F.
2d 705, 707;
Heard v. United States (C. C. A. 8, 1919), 255 F. 829,
832;
Howell Turpentine Co. v. Commissioner (C. C. A. 5,
1947), 162 F. 2d 319, 325;
an
Jacobson v. Hahn et al. (C. C. A. 2, 1937), 88 F. 2d
433;
Pennsylvania R. R. Co. v. Chamberlain (1933), 288
U. S. 333, 340-1, 77 L. Ed. 819, 823, 53 S. Ct. 391;
Tatt v. Commissioner (C. C. A. 5, 1948), 166 F’. 2d 697,
699;
Texas Co. v. Hood et al. (C. C. A. 5, 1947), 161 F. 2d
618, 620, cert. den. 332 U. S. 829, 92 L. Ed. 403,
68 S. Ct. 206;
Winn v. Consolidated Coach Corp. (C. C. A. 6, 1933),
65 F. 2d 256, 257;
Yellow Cab Oo. of Philadelphia v. Rodgers (C. C. A. 3,
1932), 61 F. 2d 729;
Young v. United States (C. C. A. 5, 1938), 97 F. 2d
200, 202, reh. den. 97 F. 2d 1023.
III. The Appellate Court properly held that the judg-
ment of the District Court should be reversed because of
prejudicial evidence received over objections of respond-
ent, and the District Court erred in not striking from the
record the evidence objected to by respondent.
Braatelien et al. v. United States (C. C. A. 8, 1945),
147 F. 2d 888, 892;
Commonwealth v. Giles, 1 Gray (Mass.) 466;
Kettenbach v. United States (C. C. A. 9, 1913), 202
F. 377, 383;
O’Hara v. Lamb Construction Co. (Mo. App., 1917),
197 S. W. 163, 165;
Union Electric Light & Power Co. v. Snyder Estate
Co. et al. (C. C. A. 8, 1933), 65 F. 2d 297, 302-303;
United States v. Adams Express Co. (D. C. Iowa,
1902), 119 F. 240, 242;
United States v. Gouled (D. C. N. Y. 1918), 253 F. 239;
United States v. Pierce (D. C. N. Y. 1917), 245 F. 888,
890;
United States v. Socony-Vacuum Oil Co. (1940), 310
U. S. 150, 239-243.
rece SPL TC
were | ee
IV. The Appellate Court did not hold, as suggested by
petitioner, that (A) the statute of limitations applied to
the case at bar, nor that (B) the jury’s verdicts of convic-
tion were discredited by the verdicts of acquittal.
Coen v. American Surety Co. of N. Y. (C. C. A. 8,
1941), 120 F. 2d 393, 400, cert. den. 314 U. S. 667,
86 L. Ed. 534, 62 S. Ct. 128;
People v. Altice Case (1922), 222 Mich. 379, 190 N. W.
289;
Watson v. St. Louis, I. M. & 8. R. R. Co. (C. C. Ark.
1909), 169 F. 942, 945, aff. 223 U. S. 745, 56 L. Ed.
639, 32 S. Ct. 533.
Certiorari Does Not Issue to Review Evidence or Infer-
ences Drawn From It.
As it appears from the Petition, and is more fully dis-
cussed hereinafter, the Government is seeking review of
the decision below merely to have this Court pass on the
sufficiency of the evidence and on the reasonableness of
the inferences drawn from it. This Court has repeatedly
stated that certiorari is not granted ordinarily for such
purposes. Thus, in General Talking Pictures v. Western
Electric Company (1938), 304 U. S. 175, 82 L. Ed. 1273,
1275, this Court said:
“Granting of the writ would not be warranted
merely to review the evidence or inferences drawn
from it. Southern Power Co. v. North Carolina Pub.
Serv. Co., 263 U. S. 508, 68 L. Ed. 413, 44 S. Ct. 164;
United States v. Johnston, 268 U. S. 220, 227, 69
L. Ed. 925, 926, 45 S. Ct. 496.”
In an apparent attempt to keep outside the scope of
those holdings, petitioner claims that the Appellate Court
“has invaded the province of the jury” (Petition, p. 16).
The charge is unwarranted as a reading of the opinion
and the following discussion show. Moreover, it is sig-
nificant that petitioner has not found a single case in
which this Court has granted certiorari in a criminal case
which may be considered a precedent in point here (Peti-
tion, p. 16). The Appellate Court did examine the record,
not for the purpose of weighing the evidence, but for the
purpose of determining whether there was substantial evi-
<< son
dence to support the verdict. That this is the proper rule
is established by ample authority in the decisions of this
Court:
Mortensen v. United States (1944), 322 U. S. 369, 374,
88 L. Ed. 1331, 1335, 64 S. Ct. 1037;
Abrams v. United States (1919), 250 U. S. 616, 619,
63 L. Ed. 1173, 1176, 40 S. Ct. 17;
Troxell v. Delaware, Lackawanna & Western R. Co.
(1913), 227 U. S. 434, 442, 57 L. Ed. 586, 590, 33
S. Ct. 274;
Lancaster v. Collins (1885), 115 U. S. 222, 225, 929
L. Ed. 373, 374, 6 S. Ct. 33;
Chicago & N. W. R. Co. v. Ohle (1886), 117 U. S. 123,
129, 29 L. Ed. 837, 839, 6 S. Ct. 632.
This rule has been applied to a conviction for violation
of the Sherman Act in United States v. Socony-Vacuum
Oil Co. (1940), 310 U. S. 150, 254, 84 L. Ed. 1129, 1184,
60 S. Ct. 869, where this Court said:
“A question of law is thus raised, which entails an
examination of the record, not for the purpose of
weighing the evidence but only to ascertain whether
there was some competent and substantial evidence
before the jury fairly tending to sustain the verdict.”
—
I.
There Is no Conflict With the Supreme Court or Among
the Circuits as to the Rule Applied by the Court of
Appeals Below That Respondent’s Motions for Ac-
quittal Should Have Been Sustained for the Reason
That There Was no Substantial Evidence, Considered
in the Light Most Favorable to the Government, to
Support the Conviction.
1. The Court of Appeals applied the controlling sub-
stantial evidence rule, and did not weigh the evidence as
erroneously claimed by petitioner.
The crux of the petition and the main ground relied
upon for the issuance of certiorari are predicated on the
assertion that the Appellate Court committed a ‘‘basic
error of law in reweighing for itself the evidence favorable
to the respondents against that which supported their con-
viction’’ (Petition, p. 16; see also pages 7, 12, 13 and 15).
The government’s contention is founded on an erroneous
premise, for the reason that the Court of Appeals did not
weigh the evidence. It merely applied the substantial evi-
dence rule. A reading of the opinion below makes this
crystal clear:
«“* * * the question on review is * * * whether
the verdict of guilty as against the corporations is
sustained by substantial evidence * * *’’ (R. 661,
178 F. 2d Adv. Op. 363, 370).
This is the well settled rule of appellate review in a
criminal ease, and is no different from the substantial evi-
dence rule which is admitted by petitioner (Petition,
p. 12).
Applying this rule, the Court concluded:
‘¢We are of the view that the proven circumstances,
considered in the light most favorable to the govern-
—_ |p
ment, are not inconsistent with the innocence of ap-
pellants, and hence, their motions for acquittal should
have been sustained’’ (R. 661, 178 F. 2d, 1. ¢. 371).
As the following discussion will show, this is the in-
escapable result of the application of the rule to the evi-
dence in this case, and there is no true issue as to con-
trolling law.
2. In determining the sufficiency of the circumstantia]
evidence, upon which the government relied exclusively,
the Court of Appeals was entitled to pass upon the rea.
sonableness of the inferences to be drawn from the circum.
stances proven, and properly held that the motion of ac.
quittal should have been sustained in the absence of rea.
sonable inferences supporting the conviction to the exclu-
sion of the hypothesis of respondent’s innocence.
Petitioner asserts that the reviewing court committed
error in ‘‘substituting its judgment for that of the jury
in deciding what inferences should be drawn from the
evidence and what evidence should be believed’’ [Peti-
tion, p. 7 (2) and passim]. This assertion is stoutly de-
nied. The Appellate Court did not substitute its judgment
for that of the jury, but merely exercised its traditional
and time-honored function of determining whether the in-
ference drawn by the trier of the facts is a reasonable one,
viewing the evidence in the light most favorable to the
government. Nor is there any conflict among the circuits
on the point, as shown by the decisions discussed herein-
after.
Petitioner further contends that the Court below ‘‘as-
serted the dubious principle that circumstantial evidence
must not only be consistent with defendant’s guilt but
must be inconsistent with their innocence if it is to justify
a verdict of guilty’’ (Petition, p. 15, note 10; our em-
phasis).
laa
This somewhat hesitant challenge against a well estab-
lished principle of criminal procedure is purportedly sur
ported by the government by reference to the cases of
Curley v. United States (C. A. D. C., 1947), 160 F. 2d 229;
United States v. Valenti (C. C. A. 2, 1943), 134 F. 2d 362,
and Yoffe v. United States (C. C. A. 1, 1946) 153 F. 2d 570.
But all three of these cases involved evidentiary situa-
tions entirely different from that at bar. Secondly, not
one of those decisions actually sustains the government’s
contention. In the Curley case, the Court did not rule out
the function of the reviewing court to pass on the reason-
ableness of the inferences:*
‘‘The jury may not be permitted to conjecture
merely, or to conclude upon pure speculation or from
passion, prejudice or sympathy. The critical point
in this boundary is the existence or non-existence of
a reasonable doubt as to guilt. If the evidence is such
that reasonable jurymen must necessarily have such
a doubt, the judge must require acquittal, because no
other result is permissible within the fixed bounds of
jury consideration. But if a reasonable mind might
fairly have a reasonable doubt or might fairly not
have one, the case is for the jury, and the decision is
for the jurors to make’’ (160 F. 2d, 1. ¢. 232). (Our
emphasis. )
In the Valenti case, the Court reviewed the evidence
and concluded that the inferences drawn by the jury were
both ‘‘logical and natural’’ (134 F. 2d, 1. ¢. 364) and that
‘“‘the bases for inference seem to us quite substantial’’
(134 F. 2d, 1. ¢. 365). After having stated the passage re-
* It is significant that in Peters v. United States (1947), 160 F. (2d)
819, 320, cert. den. (1947) 331 U. S. 825, 91 L. Ed. 1840, 67 S. Ct. 1316,
the Court of Appeals for the Eighth Circuit referred to the Curley case
as supporting the propositions that “Circumstantial evidence is sufficient
to sustain a verdict when the facts and circumstances are such as legliti-
mately tend to sustain an inference of their existence.” (Our emphasis.)
SOARES ATR LITE
lied upon by petitioner here (Petition, p. 15, note 10) the
Court added:
‘We have applied these principles repeatedly in
allowing the jury to draw rational inferences from
facts in evidence’’ (134 F. 2d, 1. c. 364). (Emphasis
added. )
Thus, the Court did pass on whether there was a ‘‘sub-
stantial’’ basis for the inferences drawn by the jury and
on whether those inferences were ‘‘logical’’, ‘‘natural’’ or
‘*rational’’—which is the rule of reasonableness applied
by the appellate court in the case at bar.
It is even more obvious that the Yoffe case offers no sup-
port to the government’s contention.
These decisions are not in conflict with the traditional
rule of the scope of appellate review, which involves pass-
ing on the reasonableness of the inferences to be drawn
from circumstantial evidence. American Tobacco Co. v.
United States (C. C. A. 6, 1944), 147 F. 2d 93, 101, aff.
(1946) 328 U. S. 781, 90 L. Ed. 1575, 66 S. Ct. 1126.
Thus, in United States v. Litberg (1949), 175 F. 2d 20, 21,
the Court of Appeals for the Seventh Circuit reversed a
conviction on the ground of insufficient evidence, stating
the rule: *
“On the one hand, we must keep in mind the oft re-
peated rule that the weight and credibility to be at-
tached te 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, a court of review is
charged with the responsibility of determining the rea-
sonableness of such inferences. In other words an
-— 93 ...
inference may not properly be relied upon in support
of an essential allegation if an opposite inference may
be drawn with equal consistency from the circum-
stances in proof.” (Our emphasis.)
Similarly, the Third Circuit reversed a conviction in
United States v. Laffman (1945), 152 F. 2d 393, 394, re-
iterating the rule that:
“In order to justify a conviction of crime on cir-
cumstantial evidence it is necessary that the directly
proven circumstances be such as to exclude every rea-
sonable hypothesis but that of guilt.’ United States
v. Russo, 3 Cir., 1941, 123 F. 2d 420, 423. Accord:
United States v. Tatcher, 3 Cir., 1942, 131 F. 2d
1002.”+
To the same effect, Turinetti v. United States (C. C. A. 8,
1924), 2 F. 2d 15, 17, where, reversing a conviction, the
Court said:
“Whenever a circumstance, relied on as evidence of
criminal guilt, is susceptible of two inferences, one of
which is in favor of innocence, such circumstance is
robbed of all probative value, even though from the
other inference, guilt may be fairly deducible.”*
See, in accord, the Tenth Circuit in Estep v. United
States (1943), 140 F. 2d 40, 45, and in Scott v. United
States (1944), 145 F. 2d 405, 408, cert. den. 323 U. S. 801,
89 L. Ed. 639, 65 S. Ct. 561. The analogous rule was
asserted by the Fourth Circuit in c:vil cases.°*
+ See also, in a civil suit, Schad v. 20th Century-Fox Film Corp. (1943),
136 F. 2d 991, 996.
* The same rule was asserted by that Court in Peightel v. United
States (1931), 49 F. 2d 235, 240; Tingle v. United States (1930), 38 F.
24 573, 575, and in Dickerson v. United States (1927), 18 F. 2d 887, 893.
** Appalachian Electric Power Co. v. N. L. R. B. (1938), 93 F. 2d 986,
989, cited with approval by this Court in National Labor Relations Board
v. Columbian Enameling & Stamping Co., 306 U. S. 292, 300, 88 L. Ed.
660, 59 S. Ct. 501, and Eastern Coal Corp. v. N. L. R. B. (1949), 176 F.
2d 131, 136.
— =
The same principle is aptly expressed in a well con-
sidered opinion of the Court in United States v. Gasomiser
Corporation (D. C. Dela. 1947, reh. den. 1948), 7 F. R. D.
712. Rejecting the identical contention which is urged
here by the government, the Court said:
“* * *, it should first be stated that in applying
the ‘circumstantial evidence rule’ the court accepts all
of the government’s evidence as true and looks at it in
the light most favorable to the government. But the
court does not draw all possible inferences in favor of
the government; it rather draws all inferences reason.
ably deducible from the evidence taken in the light
most favorable to the government. See Yoffe y.
United States, 1 Cir., 1946, 153 F. 2d 570, 573.
“Tt should be made clear, however, that while all
the government’s evidence is accepted as true, the
court may very well look to the defense evidence
for the purpose of ascertaining a reasonable hypothesis
other than guilt” (7 F. R. D., 1. ¢. 720, 721).
As stated long ago by the Eighth Circuit in Union Pa-
cific Coal Company v. United States (1909), 173 F. 737, 740:
“There was a legal presumption that each of the
defendants was innocent until he was proved to be
guilty beyond a reasonable doubt. The burden was
upon the government to make this proof, and evi-
dence of facts that are as consistent with innocence
as with guilt is insufficient to sustain a conviction.
* * * and where all the substantial evidence is as
consistent with innocence as with guilt, it is the duty
of the appellate court to reverse a judgment of convic-
tion. Vernon v. United States, 146 Fed. 121, 123, 124,
76 C. C. A. 547, 549, 550; United States v. Richards
(D. C.), 149 Fed. 443, 454; Hayes v. United States
(C. Cc. A.), 169 Fed. 101, 103; United States v. Hart
_
(D. C.), 78 Fed. 868, 873, affirmed in Hart v. United
States, 84 Fed. 799, 28 C. C. A. 612; United States v.
M’Kenzie (D. C.), 35 Fed. 826, 827, 828; United States
v. Martin, 26 Fed. Cas. 1183, 1184 (No. 15,731); People
v. Ward, 105 Cal. 335, 341, 38 Pac. 945; People v.
Murray, 41 Cal. 66, 67; State v. Hunter, 50 Kan. 302,
32 Pac. 37; Bradshaw v. State, 17 Neb. 147, 22 N. W.
361, 366.”
The Eighth Circuit does not stand alone, but follows
the overwhelming weight of the authorities:
First Circuit: Roukous v. United States (1912), 195 F.
353, 361, cert. den. 225 U. S. 710, 56 L. Ed. 1267, 32 S. Ct.
840.
Second Circuit: Nosowitz v. United States (1922), 282
F. 575, 578; Romano v. United States (1925), 9 F. 2d 522,
524.
Third Circuit: McLaughlin v. United States (1928), 26
F. 2d 1, 3; Nicola v. United States (1934), 72 F. 2d 780,
786; Wiener v. United States (1922), 282 F. 799, 801;
Yusem v. United States (1925), 8 F. 2d 6, 8; Ridenour v.
United States (1926), 14 F. 2d 888, 892-3; Grant et al. v.
United States (1931), 49 F. 2d 118, 119-120; Graceffo v.
United States (1931), 46 F. 2d 852, 853.
t This fundamental rule, which is expressly recognized in the Yoffe
case (153 F. 2d, 1. c. 572-3), relied upon by petitioner here (Petition, p.
15, note 10), has been reasserted in an impressive series of consistent
decisions of the Eighth Circuit:
Sullivan v. United States (1922), 283 F. 865, 868;
Willsman et al. v. United States (1923), 286 F. 852, 856-7;
Grantello v. United States (1924), 3 F. 2d 117, 118;
Edwards v. United States (1925), 7 F. 2d 357, 360;
Bishop v. United States (1926), 16 F. 2d 410, 416-7;
Van Gorder v. United States (1927), 21 F. 2d 939, 942;
Salinger v. United States (1927), 23 F. 2d 48, 52;
Beck v. United States (1929), 33 F. 2d°107, 112;
Gold v. United States (1929), 36 F. 2d 16, 32;
Spalitto v. United States (1930), 39 F. 2d 782, 784;
Read v. United States (1930), 42 F. 2d 636;
Cravens v. United States (1932), 62 F. 2d 261, 274;
Gargotta v. United States (1935), 77 F. 2d 977, 981;
Wesson v. United States (1949), 172 F. 2d 931, 933.
—
Seventh Circuit: Karchmer v. United States (1932), 61
F. 2d 623.
Tenth Circuit: Parnell v. United States (1933 on re-
hearing), 64 F. 2d 324, 329; McClintock v. United States
(1932), 60 F. 2d 839, 842.
Court of Appeals, District of Columbia: Hammond v.
United States (1942), 75 U. S. App. D. C. 395, 127 F. 2d
752, 753; Cady v. United States (1923), 293 F. 829.
This is the general rule stated in 16 C. J. 763:
‘In order to sustain a conviction on circumstantial
evidence, all the circumstances proved must be con-
sistent with each other, consistent with the hypothesis
that accused is guilty, and at the same time incon-
sistent with the hypothesis that he is innocent, and
with every other rational hypothesis except that of
guilt.’’
These authorities clearly support the rule of law adopted
by the Appellate Court below. Let us now review briefly
the evidence to which the rule was applied.
3. Applying the above rule to the case at bar, the Ap.
pellate Court was justified in holding that there was no
substantial evidence of respondent’s guilt, considering
the proven circumstances in a light most favorable to the
government.
The case was presented by the government on circum-
stantial evidence, the government admitting that it ‘‘has
no evidence of an express written or oral agreement among
the defendants’’ (R. 22 and 71).
The circumstantial evidence consisted of the uniformity
of the retail and wholesale prices charged by the corpo-
rate defendants for Grade A regular fluid milk sold by
them in the St. Louis area, and of the proximity in time
am 27 —
of the price changes listed in the Indictment, Bill of Par-
ticulars and Supplements. In addition, the government
showed certain conversations between two employees of
the respondents concerning price announcements, in the
period August, 1939—August 28, 1941 (not later), (R. 248-
250). No other evidence was introduced by the govern-
ment and its case is therefore entirely based on the infer-
ences drawn from those facts.
A. No reasonable inference of respondent’s guilt to the
exclusion of its innocence could be drawn from the uni-
formity of the retail and wholesale prices charged by the
two dairies for Grade A milk and from the proximity in
time of their price changes, since the unrefuted positive
evidence showed that those changes were dictated exclu-
sively by impelling economic reasons, flowing from the
undisputed facts that the cost factors for producing Grade
A milk are substantially identical for both dairies, that
Grade A milk is a standardized product sold in a tight
market, and that those prices were decided upon by re-
spondent in the exercise of its independent business judg-
ment.
a. Each one of the price changes made by respondent,
and in issue here was dictated exclusively by impelling
economic reasons, and was decided upon by respondent in
the exercise of its independent business judgment. This
is the undisputed fact of all the direct evidence.
The undisputed testimony in the record shows that the
matter of price changes was most thoroughly analyzed
by the management of respondent, consisting of the Pres-
ident, Lide, the Vice-President, Versen, the Comptroller,
Reinhart, and the Sales Manager, Gee, at regular meetings
at which the economic factors bearing on costs were seru-
tinized and discussed (R. 235, 304, 377-378, 390-391). It
was only after a complete evaluation of the above eco-
a oo
nomic conditions and factors that price changes were ar-
rived at by the President of the company, Lide, who alone
had authority to make price decisions (R. 70, 80, 234, 237,
303, 384-5, 482). This was done on the basis of all avail-
able information, and of the cost accounting and alloca-
tion system followed by respondent for some ten years
before the return of the indictment here (R. 374) and con-
forming to the system established by the International As-
sociation of Milk Dealers (R. 377, 339).
As the Appellate Court properly remarked:
‘‘All this evidence is undisputed and the integrity
of the cost accounting and allocation system used by
appellants and the correctness of the conclusion
reached is not challenged by any direct evidence”’
(R. 656, 178 F. 2d, 1. e. 367-8).
Following that system, the Comptroller collected for the
trial the data pertinent to the cost allocations on Grade
A milk (R. 394-395). These data were checked by a staff
of independent and nationally known auditors which had
audited the company’s books since 1940 (R. 336, 367, 339),
and are incorporated in a detailed cost analysis introduced
in evidence as St. Louis Dairy’s Exhibit C (R. 347-360).
Summarizing the data broken down in said Exhibit (,
Comptroller Reinhart prepared and testified from Exhibit
G (R. 466) to the effect that, after the last maximum prices
for consumers fixed by the government under O. P. A.
(June, 1946), the total price increases made by St. Louis
Dairy until and including February 5, 1948 amounted to
54 cents a quart (R. 467-468), whereas the total increase
of respondent’s costs for labor and materials during that
period was 6 cents and a fraction (R. 469).
That evidence and testimony is undisputed in this case,
thus fully justifying the conclusion of the Appellate
Court:
— 29 —.
‘‘It appears without dispute that the increases in
the price of milk charged by the appellants was
somewhat less than the increase in the cost of pur-
chasing and processing the product’’ (R. 656, 178 F.
2d, 1. ¢. 367).
This fact alone would seem sufficient to dispel any in-
ference of conspiratorial agreement among defendants to
fix prices. This is particularly true in view of the addi-
tional charge in the Indictment that the conspiracy had
the intended effect of ‘‘increasing * * * prices to con-
sumers and other purchasers of fluid milk sold by the cor-
porate defendants’’ (Indictment, paragraph 14, R. 9; our
emphasis).
This is not a proper situation for certiorari. The case
turned on its own peculiar facts. A detail explanation was
furnished by the defendants’ witnesses as to every single
one of the price changes included in the government’s
charges (R. 249, 308-320). The oral testimony was sup-
ported by ample documentation and was not claimed by
anyone to be unreasonable or beyond the normal course
of business in any respect. There was no countervailing
evidence received or offered, either in rebuttal or by means
of cross-examination.
Thus, unlike the American Tobacco and other anti-trust
cases in which convictions were sustained on appeal,* in
the case at bar there was economic justification for each
one of the price changes made by respondent, and that evi-
dence is undisputed. Therefore, the Appellate Court prop-
erly concluded that:
‘*. . . each increase which is specifically charged
either in the indictment or in the bill of particulars
is rationally explained and accounted for and shown
* American Tobacco Co. v. United States (1946), 328 U. S. 781, 1. c. 801,
90 L, Ed. 1575, 1. c. 1591, 66 S. Ct. 1126.
— poo
to have resulted from economic conditions which in-
creased the cost of processing and distributing, and, as
before suggested, this evidence is wholly without con-
tradiction’’ (R. 657, 178 F. 2d, 1. ¢. 368).
b. Grade A milk being a standardized product sold in
a tight market, and its cost items being substantially
identical for both respondents, uniformity in prices and
price changes is bound to result from those identical eco.
nomic forces.
The undisputed evidence in the case bears out fully the
above proposition. The shortage of milk in the St. Louis
area was established by Government witnesses (R. 148,
157, 177, 235), and was confirmed by independent wit-
nesses (R. 442, 459). It is undisputed in the record, as is
the fact that the product is fully and completely standard-
ized by virtue of the St. Louis Milk Ordinance. This fact
was established by testimony of experts* and no rebuttal
evidence was furnished by the Government. Consequently
the Appellate Court was entitled to conclude that
‘‘The milk as handled by appellants was a standard-
ized product’’ (R. 657, 178 F. 2d, 1. ¢. 368).
The evidence showing basic identity of the cost factors
was reviewed in the Statement, supra. Here again, taking
the record as a whole, there is not a scintilla of evidence
in it to disprove the basic equality of the cost factors for
respondent and its competitor Pevely. Nor in the very
nature of these operations could there be.
* Judson P. Mason testified as follows:
“There is a very little difference in the milk of one dairy as to
another, standard products as to butter fat tests, bacterial contents
and other uniform requirements.
Q. Other factors that are brought into uniformity through the
Health Department in the working out of its ordinance? A. That's
right” (R. 445).
Likewise Father Leo C. Brown stated:
“e * * speaking of the Grade A milk market * * * we have
here a highly standardized product, the product of one dealer being
the same as the product of another dealer” (R. 455).
7 = —~_< &
=~ §]
The conclusion is inescapable: the cost factors being
the same, how could the price be different for the same
standardized product in a highly competitive market,
where the supply is inadequate? There is undisputed tes-
timony that the market is highly competitive (R. 446-447,
472, 322), and both economists who testified in the trial
agreed that in such a market as the one involved here, with
few sellers, a standardized product, and identical cost
factors,
“I would expect practically uniformity of price, with
slight exceptions, and practically simultaneous change
in price’ (Father Brown: R. 457);
“* * * if somebody breaks under that [same] pres-
sure by raising prices, you will find normally that
other handlers will come up and meet it in a tight
market’? (Mason: R. 446).
The testimony of these independent experts and econo-
mists is fully supported by the standard and most authori-
tative treatises on the subject, some of which are sum-
marized in the opinion of the Appellate Court (R. 657-8;
178 F. 2d, 1. ¢. 368-9).
The Government’s theory that uniformity in prices and
identical pattern in price changes is tantamount to an
agreement to fix prices and that similar action is identical
to concert of action seems to accept the spurious doctrine
of ‘‘conscious parallelism.’’ This doctrine by identifying
uniformity of prices with an agreement to fix prices results
in denying to business men the right to take into account
in their price policies the prices of their competitors and
to anticipate, and react to, expected price changes by
others. That doctrine denies one of the elements of free
enterprise in a self-styled attempt to protect it. To carry
it to its logical conclusion, the doctrine results in forcing
artificial price dissimilarity, in order that business men
ome 32 ——
may escape the danger of anti-trust prosecutions. If that
doctrine were accepted by the courts it would then be-
come a matter of judicial determination which seller was
thereafter to sell at the lower price and which at the
higher price—which buyer would have the privilege of
buying at less cost and which at the higher. As the above
quoted economists state from their scholarly analyses of
price trends in free markets, prices ordinarily level off
and, after the changes due to cost adjustments, show a
pattern of uniformity for the same standardized product in
the same tight market where a few sellers sell to a large
mass of informed buyers. As the decision below points
out, ‘‘These economic principles must of necessity be
recognized by the courts’’ (R. 658; 178 F. 2d, 1. ¢. 369).
Thus, in Cement Mfrs. Protective Ass’n v. U. 8. (1925),
268 U. S. 588, 69 L. Ed. 1104, this Court reversed the
judgment of the District Court granting a perpetual in-
junction for violation of the Sherman Act. In rendering
the opinion Justice Stone* stated, inter alia:
‘6* * * 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 price,
and uniformity has resulted not from maintaining the
price at fixed levels, but from the prompt meeting of
the changes in price by competing sellers.
‘It is urged by defendants that such uniformity
of prices as existed in the trade was due to competi-
tion. They offered much evidence tending to show
* The recent Supreme Court decision in Federal Trade Commission v.
The Cement Institute et al. (1948), 383 U. S. 683, 92 L. Ed. 1010, in no
way can be said to have detracted from the authoritative value of the
“Old Cement case,” which is there expressly and repeatedly distinguished:
“The court’s holding in the Old Cement Case would not have been
inconsistent with a judgment sustaining the Commission’s order here,
even had the two cases been before this Court the same day” (I. c.
p. 708). pet
— bh OD
— wn
complete independence of judgment and of action
of defendants by large expenditures in competitive
sales efforts and by variations in the volume of their
production and shipment, earnings and profits. A
great volume of testimony was also given by dis-
tinguished economists in support of the thesis that, in
the case of a standardized product sold wholesale to
fully informed professional buyers, as were the deal-
ers in cement, uniformity of price will inevitably
result from active, free, and unrestrained competition,
and the Government, in its brief, concedes that ‘un-
doubtedly the price of cement would approach uni-
formity in a norma! market in the absence of all
combinations between the manufacturers’’’ (268 U.
S., 1. ec. 605-6, 69 L. Ed., 1. ec. 1111-1112). (Our empha-
sis.) t
In U. 8. v. Sugar Institute (D. C. N. Y., 1934), 15 F. S.
817, 887, which was a suit in equity under the Sherman
Act, the Court reviewed the alleged agreement on basic
prices and the general effect of the Institute on price
levels, and stated:
‘*The evidence shows that defendants’ product is in
all respects a standardized product; uniformity of
basic price in any given area is therefore to be ex-
pected under a regime of free competition. Cement
Mfrs. Protective Ass’n v. U. S., 268 U. S. 588, 605, 606,
45 S. Ct. 586, 69 L. Ed. 1104 (1925).’’
+ Note also the following language:
“We realize also that uniformity of price may be the result of
agreement or understanding, and that an artificial price level, not
related to the supply and demand of a given commodity, may be evi-
dence from which such agreement or understanding, or some con-
certed action of sellers operating to restrain commerce, may be in-
ferred” (268 U. S., 1. c. 606, 69 L. Ed., 1. c. 1112). (Our emphasis.)
The above passage is highly significant. Before uniformity of prices may
become evidence of a conspiracy, those prices must be shown to be
“artificial” and “not related to the supply and demand of a given com-
modity.” The whole evidence in this case is unequivocally to the con-
trary.
pit on
The principle thus announced by the District Court was
in no wise modified by this Court when it reviewed that
decision. 297 U. 8. 553, 600, 80 L. Ed. 859, 877, 56 S. Ct.
629.
In United States v. International Harvester Co. (1927),
274 U. S. 693, 71 L. Ed. 1302, it was contended that the
defendant was violating the Sherman Act in that, inter
alia, it dominated the interstate trade in harvesting
machinery by the compulsory regulation of prices. Re-
jecting this contention, this Court said, 1. c. pp. 708-9:
‘The most that can be said as to this is that many
of its competitors have been accustomed, independ-
ently and as a matter of business expediency, to
follow approximately the prices at which it has sold
its harvesting machines; but one of its competitors
has habitually sold its machines at somewhat higher
prices. * * * And the fact that competitors may see
proper, in the exercise of their own judgment, to
follow the prices of another manufacturer, does not
establish any suppression of competition or show any
sinister domination.”’
In United States v. Standard Oil Company of New Jer-
sey (D. C., E. D. Mo., 1931), 47 F. 2d 288, the Court, ina
decision of three circuit judges, made clear that no re-
straint on competition is to be inferred from uniformity of
prices arising out of price leadership. Thus the Court said,
1. ce. 316-317: .
‘e+ & *
if the major companies follow the Socony
prices in this area, they do so because they do not
wish to engage in a price-cutting war which might
entail losses to all concerned (including Socony)
without any compensating benefits. Such a view has
no sinister aspect, but is merely a matter of business
judgment and prudence illustrated in every com-
munity in the country by retail competitors in all lines
a
[citing authorities]. Grocers, butchers, and all other
lines in the same markets, generally sell the same
things at the same prices, for the sound reasons that
they wish to get all they can, that they cannot get
more than the price at which the bulk of what is sold
in their respective markets is selling, and that they
do not think it wise to cut prices.’’
In the case at bar the evidence reviewed above and these
authorities fully support the conclusion of the Appellate
Court that:
‘‘We are clear that mere uniformity of prices in
the sale of a standardized commodity such as milk is
not of itself evidence of a violation of the Sherman
Anti-Trust Act’’ (R. 659; 178 F. 2d, 1. ¢. 369).
ce. The price changes in question were not simultaneous,
nor were the price changes initiated always by the same
respondent.
The dates at which the price changes of the dairies be-
came effective and the dates on which each respondent
ordered from its printer the new price announcement are
stipulated in the record (R. 546-547, 564-565), and, for the
convenience of the Court, are summarized in the following
tabulation:
St. Louls Dairy Company Pevely Dairy Cowunpany
Date Price Change Date Price Change
List Received Date Price Change List Received Date Price Change
by Printer Effective by Printer Effective
1/ 3/46, 4:30 P.M. T/ 4/46 7/ 2/46 7/ 3/46
1/ 8/46, 6:30 P.M. 7/ 9/46 7/ 9/46 7/10/46
0/ 4/46, 11:00 A. M. 10/ 5/46 10/ 3/46 10/ 4/46
1/17/47, 8:30 A.M. 1/20/47 1/20/47 1/20/47
(copy delivered
Pevely same day)
1/30/47, 5:00 A.M. 8/ 1/47 7/25/47 8/ 1/47
(copy delivered
Pevely July 29)
9/11/47, 4:00 P.M. 9/16/47 9/15/47, 9:15 A.M. 9/16/47
1/26/48, 9:00 A.M. 1/28/48 1/23/48 1/27/48
(delivered same day)
aw $6 on
The dates appearing in bold type in the foregoing tab-
ulation indicate which company initiated the price change,
and they clearly dispel not only the charge that the price
changes were simultaneous, as the government claimed,
but also any suggestion that the same respondent was
taking leadership in the price pattern, as occurred, for
instance in the American Tobacco case.* It will be borne
in mind that there were a varying number of other com-
peting handlers in the area, averaging about thirty in nor-
mal times (R. 137, 445), and that these figures of the two
largest ones are selected out of the field because these two
alone were indicted and charged.**
The above facts and dates having been stipulated by all
parties, the position of respondents in this case is stronger
than the position of defendants in United States v. Stand-
ard Oil Company of New Jersey, supra, |. c. p. 316, where
the Court referred to the fact that the prices of the major
oil companies were changed at close to the same time, and
stated:
‘‘The reasons for such uniformity as exists are not
far to seek * * *. While there is sharp conflict in
the evidence as to which company first makes changes
in prices, it is evident that Socony could do so, and, if
that change were a reduction, its competitors, gen-
erally speaking, would be compelled to follow that
lead. ‘But even if it be taken that others, in this area,
‘follow’ (in the above sense) the Socony prices, that is
not governing, because there is no element of compul-
sion or attempt at compulsion present, although it is,
as contended, proof of its business power in this area.”
* American Tobacco Co. v. United States, supra, |. c. 804.
** Thus, there is no basis whatever in the record for the statement of
petitioner (Petition, p. 10) and of the trial court that “Of all the dairies
in St. Louis only the two defendants could fathom with such minute
exactitude as to date and amount when and in what amount the two
defendants would make a price change” (79 F. S. 12, 18). Since only
two dairies were indicted and the evidence was circumscribed to them
alone, the assertion of the trial court and of petitioner belongs to the
realm of speculations and assumptions and is wholly unwarranted by the
evidence.
=
Let us analyze a few of the price changes tabulated
above. The first one was ordered by Pevely on July 2,
1946, effective on the 3rd. What is the undisputed testi-
mony as to St. Louis Dairy? That testimony is that St.
Louis Dairy did not order a price change notice to its
printer until July 3rd, at 4:30 P. M., effective the follow-
ing day. On July 8, 1946, St. Louis Dairy ordered a new
price announcement to its printer, effective on the follow-
ing day. Obviously, Pevely knew nothing about it at that
moment, as it is only on the 9th that it ordered to its
printer a price change notice effective not on the same, but
on the following day.
On July 25, 1947, Pevely ordered its price change sched-
ule, which was delivered to it on July 29th. It was only on
the 30th that St. Louis gave the order to the printer, that
is, five days after Pevely’s order. The September price
change shows that four days elapsed between the price
change orders of the two dairies and three days are in-
volved in the January, 1948, change. Had there been a
conspiracy to fix prices, as charged, why this time lag?
There is one common feature to all three instances, namely,
that the dairy which followed the leadership of the other
was able to give its price list to the printer only 24 hours
before the other’s prices became effective—a fact which is
clearly explained considering the availability of that infor-
mation through wholesale stores (which receive the list
prior to its effective date), newspaper publicity through
news items of announced price changes, or other media of
discovery. There is reason for the dairy’s policy of secrecy
as to proposed price changes so far as its customers are
concerned, since customers’ buying and ordering practices
might be altered by advance notice of future prices.
The Petitioner argues that the alternating of the two
appellants in initiating the price changes is further evi-
dence of the prearranged scheme and of the conspiracy
(Petition, p. 4, footnote 3). In this argument Petitioner
~
is illogical. It would be more reasonable to suppose that
if there were a conspiracy and an effective scheme were
devised to create favorable appearances, a less obvious
synchronization would have been resorted to. The tabula-
tion of the printers’ orders shows unmistakably the lack
of any preconcerted plan of action. It is proof of the fact
that the dairy following the leadership of its competitor
without advance knowledge of the price changes either
at the time they were decided upon or even at the time
the new price list was transmitted to the printer.
The tabulation conclusively shows that in no instance
were lists of price changes ordered by respondents from
their printers on the same day. The gap between the dates
on which the price lists were ordered is most revealing,
After the printer delivered the list to its dairy, there was
opportunity for the alert agents and employees of the
other respondent to pick up the list or the information
contained in it from many possible sources as they were
urged to do (R. 238-9, 314). In one instance, as many as
five days elapsed before the other dairy ordered its price
changes. Would this be the practice of two participants
in an agreement to fix prices—an agreement which nee-
essarily requires the meeting of the minds on those price
changes?
No detail oral testimony supplementing these docv-
ments with the outside concurrent memory of witnesses
appears in the record, to be sure. In the rush and hurry
of the day to day conduct of the dairy business it would
not be expected that such evidence would be available
for remote periods. But the records of the printer hap-
pily were intact, and they enable the Court to perceive
how it was done.
This evidence is properly summarized by the Appellate
Court in the following sentences:
—
‘*It is to be observed too that the price changes in
question were not simultaneous. Neither were the
changes uniformly initiated by the same appellant’’
(R. 659; 178 F. 2d, 1. ¢. 369).
No inference of agreement arises from these facts, On
the contrary the conclusion is inescapable that the timing
in the price changes as to the period in which the perti-
nent records were available fully disproves any suggestion
or inference of conspiratorial agreement or concerted
action by respondents, both of which were subject to the
same economic pressures operating in the same tight St.
Louis milk market whereby prices of their standardized
product are irresistibly driven to uniformity.
It is significant that petitioner has not cited any case
even remotely involving a comparable situation, in which
a conviction for violation of the Sherman Act was sus-
tained on evidence of price uniformity and of close time
proximity in price changes. As for Davis v. United States
(C. C. A. 6, 1901), 107 F. 753, 755, quoted by the District
Court below in the passage reproduced at p. 10 of the
Petition, the evidence there is so far removed from that
of the case at bar that any comment to distinguish it
would be supererogation on our part.
Under the authority of the decisicns reviewed above,
it is clear that the evidence in this case fully justified the
conclusion of the Appellate Court that no reasonable in-
ference of respondent’s guilt, to the exclusion of its inno-
cence, could be drawn from the proven circumstances. If
two inconsistent inferences might be logically possible,
the evidence was insufficient to sustain the conviction, and
to overcome the presumption of innocence which is the
guiding star of our criminal law system. As this Court
ee TPR ON TOT ty TH
Sporggere amr
teil ie
said in Lilienthal’s Tobacco v. United States (1878), 97
U. S. 237, 266, 24 L. Ed. 901, 905:
««* * * in criminal trials the party accused is en-
titled to the legal presumption in favor of innocence,
which, in doubtful cases, is always sufficient to turn
the scale in his favor.’’
B. No reasonable inference of respondent’s guilt to the
exclusion of its innocence could be drawn from the remote
conversations between Gee and Wasser who appeared as
government witnesses, and who by direct, unimpeached,
uncontradicted and reasonable testimony denied any con.
spiracy.
Petitioner (Petition, pp. 5, 9 and 11) and the District
Court below (79 F. S., 1. c. 17-18) laid great emphasis upon
the conversations between Gee and Wasser in the remote
period of August, 1939, until August 28, 1941. These con-
versations involve four instances (R. 246-250, 262) out of
the seven price changes complained of by the government
in that period and of the fourteen charged for the whole
ten years. To prove those conversations Gee and Was-
ser were called as government witnesses. Gee and Was-
ser were examined by government’s counsel from the
transcript of their testimony before the Grand Jury in
1942, which was fully used to refresh Gee’s recollection
(R. 263-4). They both admitted having given to each
other information concerning price changes decided upon
by the respective companies before the date the change
went into effect, but in no instance was any information
concerning any contemplated price changes given by either
respondent before the price change had been decided upon
(R. 227, 228, 233-4, 246-250). This was the natural posi-
tion, since neither of them had any authority to fix prices,
or announce a price change until after its determination
by the responsible heads of their companies.
7 "& & ®@
a em
Petitioner (Petition, p. 11) questions the reason for the
exchange of information between Gee and Wasser. But
it takes no economist to know that every competitor is
interested in the price policy of the others, and when no
harm results from the mutual disclosure of that informa-
tion, why should the direct exchange be avoided? In their
normal and natural perspective those conversations do not
have any of the sinister connotations that the government
is trying to insinuate. When that source of information
was eliminated in August, 1941, because its propriety was
being questioned (R. 230, 254), other media were resorted
to, and notice of price changes, in advance of their effec-
tive dates was obtained through newspapers, price lists
left at stores, etc. (R. 238-239, 247). Petitioner’s pur-
ported analogy (Petition, p. 11) of a meeting at which A
says, ‘‘I am going to raise my price 10 cents next week”’
and B says, ‘‘I will, too”’—which the government claims
to be another form of conspiratorial price fixing—is simply
inapplicable to the present situation. There is no evidence
of either one of the sales managers saying, ‘‘I will, too’’.
It is undisputed that neither Gee nor Wasser had au-
thority to fix prices for their respective companies (as to
Wasser: R. 229, 230, 231; as to Gee: R. 234, 235, 237, 303,
384-5, 482).
Moreover, in the course of their testimony, the existence
of any conspiratorial agreement was positively and em-
phatically denied:
“Now, Mr. Gee, in connection with any of these
price changes, as Sales Manager for the St. Louis
Dairy Company, did you ever agree with Mr. Wasser
or anybody, any competitor, to a price change or
price increase? A. TI most certainly did not.
“Q. Ever in your life? A. Never” (R. 256; see also
R. 229).
— on
This testimony, which is fully supported by the other
employees and officers of respondent (R. 393-4, 479-81, 322),
is binding on the government, which chose to call Gee
and Wasser as witnesses. In the teeth of these positive
denials of agreement, the petitioner asserts that a cop-
spiratorial agreement may be inferred from their testj-
mony (Petition, pp. 8-11, 15).
Rejecting this contention, the Appellate Court pointed
out: :
“The evidence is undisputed that they did not make
any agreement with reference to the fixing of prices
and it is equally undisputed that they did not com.
municate the knowledge of the changes determined
upon by reason of any agreement between the dairy
companies. This testimony, we think, forms no basis
for a legitimate inference of the making of or partici-
pation in any sort of a conspiracy for the fixing of
prices” (R. 659; 178 F. 2d, 1. ce. 369-370).
The Appellate Court refers to its previous decision in
Cartello v. United States (1937), 93 F. 2d 412, 415, wherein
the Court stated inter alia:
“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 wit-
nesses, with personal knowledge, not been placed upon
the witness stand by the government, there might be
some room for suspicion or surmise that this had been
done, but the government has itself proven that al-
though the ballots were altered, they were not altered
by either of the defendants at this polling place. Ordi-
narily, a litigant is bound by the testimony of his
own witnesses, especially if that testimony is uncon-
tradicted and there is no claim.of mistake. Wiget v.
— \
Becker (C. C. A. 8), 84 F. 2d 706; Gold v. United
States (C. C. A. 8), 36 F. 2d 16; Yellow Cab Co. v.
Rodgers (C. C. A. 3), 61 F. 2d 729; Jacobson v. Hahn
(C. C. A. 2), 88 F. 2d 433, 435.”
The rule that the litigant is bound by the testimony of
his own witnesses, especially if their testimony is uncon-
tradicted and there is no claim of mistake, is not challenged
anywhere by petitioner. As the citations of authorities in
the Cartello case indicate, this rule has been consistently
followed in the 8th Circuit. See also Heard v. United
States (1919), 255 F. 829, 832. It is not only the rule of
the 8th Circuit but it is also recognized by the 2nd Circuit,
Jacobson v. Hahn et al. (1937), 88 F. 2d 433, by the 3rd
Circuit, Yellow Cab Co. of Philadelphia v. Rodgers (1932),
61 F. 2d 729, and, seemingly, by the 5th Circuit in Young v.
United States (1938), 97 F. 2d 200, 202, reh. den. 97 F. 2d
1023.
Furthermore, as the Appellate Court pointed out, “Infer-
ences which are contrary to established facts may not be
drawn from mere conjecture and an unwillingness to be-
lieve the unimpeached and uncontradicted testimony of
witnesses” (R. 659-660; 178 F. 2d, 1. e. 370).
This rule has been followed by the 8th Circuit for a long
time. See, e. g., Ezzard v. United States (1925), 7 F. 2d
808, 811. In agreement is the 5th Circuit. Thus, in Texas
Co. v. Hood et al. (C. C. A. 5, 1947), 161 F. 2d 618, 620,
cert. den. 332 U. S. 829, 92 L. Ed. 403, 68 S. Ct. 206, the
Court quotes with approval its prior decision in Arnall
Mills v. Smallwood (1933), 68 F. 2d 57, 59, as follows:
“Although the cireumstances may support the in-
ference of a fact, if it is shown by direct unimpeached,
uncontradicted, and reasonable testimony which is con-
sistent with the circumstances that the fact does not
exist, no lawful finding can be made of its existence.”
‘aint iu
The rule has been applied also by this Court. In Penn.
sylvania R. R. Co. v. Chamberlain (1933), 288 U. S. 353,
340-1, 77 L. Ed. 819, 823, 53 S. Ct. 391, it is stated:
“And the desired inference is precluded for the
further 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 of unimpeached witnesses
consistent with the facts actually proved, from which
testimony it affirmatively appears that the fact sought
to be inferred did not exist.”
This conclusion is supported by a long list of precedents
which are recited in the opinion. It was followed by an
impressive series of decisions.* The fact that these are
civil cases does not detract in any way from their author-
ity as precedents in a criminal case. Rather a fortiori,
the rule should apply to a criminal proceeding where the
rules of evidence are more strictly applied against the
prosecution, recognizing the presumption of innocence in
favor of the defendant.
These authorities fully warrant the conclusion of the
Appellate Court that the testimony of Gee and Wasser,
“forms no basis for a legitimate inference of the mak-
ing of or participation in any sort of a conspiracy for
the fixing of prices” (R. 659, 178 F. 2d, 1. ¢. 370).
* See, e. g., Foran et al. v. Commissioner (C. C. A. 5, 1948), 165 F. 2d
705, 707; Tatt v. Commissioner (C. C. A. 5, 1948), 166 F. 2d 697, 699;
Howell Turpentine Co. v. Commissioner (C. C. A. 5, 1947), 162 F. 2d 319,
325, hy Winn v. Consolidated Coach Corp. (C. C. A. 6, 1933), 65 F. 2d
256, 257.
The Appellate Court Properly Held That the Judgment
of the District Court Should Be Reversed Because of
Prejudicial Evidence Received Over Objections of
Respondent, and the District Court Erred in Not
Striking That Evidence From the Record.
Petitioner assigns as error the holding of the Appellate
Court that a new trial was required by the admission in
evidence of certain prejudicial evidence showing (A) for-
eign control of respondent, and (B) the compensation
paid to certain individual defendants (Petition, p. 8, num-
ber 6, and pp. 19-21).
A. The District Court admitted, over the objection of
respondent (R. 79-80) the portion of government’s Ex-
hibit 3, which shows that all of the stock of respondent is
owned by the National Dairy Products Corporation of
New York (R. 80-1). Petitioner argues (Petition, p. 19)
that the admission of that evidence was not prejudicial
for the reason that ‘‘The trial court was careful to in-
struct the jury to disregard extraneous matters in reach-
ing its verdict with respect to the corporate defendants
(R. 607, 614).’’ The generic instructions given by the trial
court at the cited pages of the record are in no way suf-
ficient to erase from the record the evidence objected to
by this respondent. Since the Court is the judge of the ma-
teriality and relevancy of the evidence, the jury may well
take the instructions to disregard ‘‘extraneous matters’’
as meaning evidence which had not been admitted a‘ the
trial.
Petitioner apparently admits that the evidence it suc-
ceeded in introducing over respondent’s objections was
immaterial. That much being conceded, it is also clear
that the evidence was prejudicial in that it pointed out
a ee
to the jury that respondent was a wholly owned subsidiary
of a foreign corporation. The appellate court well knew,
and was entitled to take judicial notice of, the fact that
the case at bar had been tried extensively in the news.
papers in advance of the trial below, and sensationally
during the proceedings in court. Charges, countercharges,
investigations by private and public groups and agencies
had aroused public opinion, and the emphasis on the for-
eign character of the corporation which is in complete
financial control of respondent was bound to and beyond
a shadow of doubt did prejudice the jury. On the strength
of the ruling of the trial court, the government’s attorney
in his closing argument was able to direct the jury’s mind
and emotions to that fact:
«* * * there is no evidence, but I presume they
[sic] were dividends paid to the National Dairy Cor.
poration’’ (R. 581). (Our emphasis.)
Under similar circumstances the admission of such evi-
dence was held prejudicial error. Thus, in Union Electric
Light & Power Co, v. Snyder Estate Co. et al. (C. C. A.8
1933), 65 F. 2d 297, the defendant’s counsel propounded
questions relative to the ownership of the stock of plain-
tiff. The Court held that the admission of that evidence
was prejudicial error, saying, |. c. pp. 302-303:
‘‘This cross-examination impressed upon the jury the
size and extent of the holdings of plaintiff, the foreign
character of the controlling factors of plaintiff, and
that the ownership of substantially all the stock of
plaintiff was in the North American Edison Con-
* . *
pany.
‘‘These extraneous facts, if they are facts, served
only to arouse the prejudice of the jury. * * *
‘‘This evidence not only took the jury far from the
simple issue to be tried, but it distracted their at-
tention from that issue, and brought before them the
indices
size and wealth of plaintiff and its affiliates, and the
above-quoted argument of defendant’s counsel was
calculated to keep fresh in the minds of the jury the
size and wealth and foreign character of the plain-
tiff.’’
In the Union Electric case, the Court pointed out ‘‘the
evidence was not overlooked in the counsel’s argument to
the jury’’ (1. ¢., p. 303). The same situation is present
here, and it is earnestly submitted that the ruling of this
Court in that case is controlling in the case at bar.
The case of United States v. Socony-Vacuum Oil Co.
(1940), 310 U. S. 150, 239-243, relied upon by Petitioner
(Petition, p. 20), is not in point here, for the reason that,
as it appears from the opinion, the assignment of errors
in that case was concerned with the argument to the jury
by government counsel (310 U. S., 1. ¢. 237), rather than
with the ruling of the trial court in admitting the evi-
dence. Moreover, in that case this Court emphasized the
length of the trial, and specifically admonished: ‘‘But each
ease necessarily turns on its own facts’’ (1. c. 240).
B. In the course of the trial, counsel for the government
laid great emphasis on the salaries paid to the Kerckhoff
brothers, a highly prejudicial matter, which was bound to
arouse the jury. The first attempt by counsel for the
government was overruled by the District Court, but the
message had already been conveyed to the jury in the
question propounded by the government’s attorney:
‘*Q. For instance, are you familiar with the salaries
that are paid to each of these five Kerckhoffs? * * *
You know they are paid, outside of bonuses—each is
paid $3,000 a month, don’t you?’”’ (R. 233.)
At the second attempt by counsel for the government,
the District Court overruled the objection of respondent’s
winittiien
counsel based on the grounds of prejudice and allowed eyi-
dence of the compensation paid to the Kerckhoffs (R,
539-541). At the close of all the evidence, respondent
moved the Court to strike out, and instruct the jury to
disregard, that evidence, but the District Court overruled
the motion (R. 569).
True enough, the trial court instructed the jury not to
be influenced by the salaries paid to certain officers of the
dairies (R. 622-3), but since the Court had refused to
order that evidence stricken and had overruled respond-
ent’s motion to that effect (R. 569) it is clear that a prej-
udicial error was committed. The inconsistent attitude
of the District Court cannot be deemed to have been ig-
nored by the jury. The present situation is therefore
quite a little stronger than that in O’Hara v. Lamb Con.
struction Co. (Mo. App., 1917), 197 S. W. 163, 165, where
the Court said:
‘‘The red hot iron of prejudice has been thrust into
the case; merely withdrawing it still leaves a fester-
ing wound.’’
The point was promptly capitalized and fully exploited
by the government’s attorney, who in his closing argument
called the jury’s attention to those salaries and bonuses:
‘«These salaries of officers * * *”’ (R. 581).
Obviously what salaries Pevely Dairy pays or did pay its
officers is a matter confined to its own business and man-
agement policy, but the ‘‘red hot iron of prejudicc’’ was
injected in the case to the irreparable detriment of this
respondent.
Petitioner argues that ‘‘the only possible prejudice
would have been to the individuals whose salaries were
shown, all of whom were acquitted’’ (Petition, p. 21).
Yet Petitioner pointed out also that ‘‘Some of the reasons
which may lead a jury to refuse to convict individuals are
obvious. In the present case * * * there was a strong
plea to the jury by counsel’’ (Petition, p. 17, note 12). The
theory of the government is apparently that the jury’s
verdicts—so obviously inconsistent in acquitting the in-
dividuals who fixed the prices for which the corporations
were convicted—constituted a compromise. That theory
is quite tenable, but it clearly points out the danger and
prejudice resulting to all defendants from the admissions
of immaterial prejudicial evidence. The mental and emo-
tional processes of the jury are beyond the realm of inves-
tigation and judicial review, but, unless we are to ignore
all realistic considerations, the conclusion is inescapable
that the testimony of the Kerckhoffs’ salaries and bonuses
was highly prejudicial and ought to have been stricken
from the record. The ruling of the District Court was
error and the Appellate Court was fully warranted in so
holding.
C. The District Court erred in admitting evidence cover-
ing the profits of the entire Milk Division of respondent,
which includes products not involved in the case, and in
overruling respondent’s motion to strike that evidence
from the record.
The trial court, over objections of respondent, admitted
evidence of the profits of the whole Milk Division of the
company (R. 324-329, 398-400). This division includes more
than a dozen different products (R. 326-327, 379-380),
whereas this case is confined to only one of those many
kinds of milk products, namely, Grade A regular. At the
close of the defendants’ evidence counsel for the govern-
ment offered Exhibits 43 and 44, containing the operating
profit and loss statements for the whole Milk Division of
St. Louis Dairy Company for the years 1946 and 1947 (R.
566). On objection by respondent the District Court ruled
that those exhibits were inadmissible, remarking that the
— 7
government had failed in its purported purpose of using
those exhibits on cross-examination of respondent’s offi-
cers to impeach the accounting and cost allocation system
used by the dairy (R. 567). Nevertheless the Court refused
to instruct the jury to disregard the testimony previously
read from those same exhibits, stating:
‘‘The Court will leave the record as it is’’ (R. 567),
Fortified by that ruling, counsel for the government
closed his argument to the jury with an emphatic refer-
ence to the $317,383.76 profit shown by respondent Pevely
Dairy Company on fluid milk during the period July, 1946,
to January, 1948 (R. 583). That evidence was prejudicial
and the ruling of the trial court refusing to strike that
evidence from the record is a reversible error.
The government limited its charges to Grade A regular
milk alone* and should be confined in its proof to the
allegations of the indictment and bill of particulars to-
gether with its two supplements.
In a recent textbook by Housel and Walker ‘‘ Defending
and Prosecuting Federal Criminal Cases’’ (2nd Ed., 1947),
p. 450, it is said:
‘¢Byvidence offered by the government at the trial
is limited by and must not conflict with the bili of
particulars; if it does, on objection duly and season-
ably made, its admission will be refused.”
Thus, in Braatelien et al. v. United States (C. C. A. 8,
1945), 147 F. 2d 888, 892, the Court stated:
‘¢When the facts are detailed in a bill of particn-
lars, he who furnishes it will be confined by the court
* Prices and dates set forth in paragraph 13 of the Indictment, R. $9;
Bill of Particulars, paragraph IV, R. 22; Second Supplemental Bill of Par-
ticulars, paragraph I, R. 62; Government’s Exhibit 29, R. 241; and closing
argument of government’s counsel, R, 602.
Ba ies
ie — a the facts so specified (citing authori-
Spree we not only was the government limited
by F no of vt des Grade A regular milk alone, but the
—_ ice concerning the aggregate profits
made by responden
the other products ‘ on many other kinds of milk and on
‘udicial. It or gold by its Milk Division was obviously
preyu i ometed an extraneous and psychological
issue, highly vera to the rights of respondent.
Profits made by | a
f the many produgsPondent, e. 8+, On orange Juice (one
vertainly have no bis 80/4 by its Milk Division, R. 380),
» aged aring on the issue of whether or not
respondent conspire :
milk. Evidence of p to fix prices of Grade A regular
p ; ie ‘ofits unrelated to the product in issue
is as inadmissible a:
any other evidence of the wealth of
attendant. The x e was stated on many occasions, that
ees aan “idence of the wealth of a party liti-
alia Pe a judicial error.” Union Electric Light
' “Snyder Estate Co., supra, 1. c. p. 303.
va)
you hang - ced by the government counsel as
qualifying this line... ° .
f inquiry was that he was entitled to
test the accuracy of , ‘
havi licited the the cost accounting allocations. But
‘Aga Pesce information on this promise he left
— and nev again reverted to it (R. 324, 325,
¢ In accord: Commonw
v. United States (C. C. .alth v. Giles, 1 Gray (Mass.) 466; Kettenbach
Adams Express Co. (D. C. 9, 19138), 202 F. 377, 383; United States v.
Gouled (D. C. N. Y., 191Mowa, 1902), 119 F. 240, 242; United States v.
N. ¥., 1917), 245 F. 888, 8!, 253 F. 239; United States v. Plerce (D. C.
).
seRERnEEETTememenes
a
IV.
The Appellate Court Did Not Hold, as Suggested by Peti.
tioner, That (A) the Statute of Limitations Applied
to the Case at Bar, Nor That (B) the Jury’s Verdicts
of Conviction Were Discredited by the Verdicts of
Acquittal.
A. Petitioner asserts that the Appellate Court was
laboring under a misconception of law concerning the ap.
plicability of the statute of limitation to the case at bar
(Petition, p. 18). A reading of the opinion shows the
error of the government. The Court below did neither
hold nor suggest that the three-year statute of limitation
applies here. The Court remarked that the O. P. A. con-
trols from 1943 to 1946 did break the continuity of the
conspiracy which is pleaded in the indictment as covering
a ten-year period. The Court went on to suggest that any-
thing which transpired during the first period, “if charged
as separate offense,” would ordinarily be barred by the
three-year statute of limitations (R. 660-1, 178 F. 2d, 1. «
370). This argumentative remark of the Court is clearly
in the nature of an obiter and could be carved out of the
opinion without in any way detracting from its logic,
coherence or integrity. Petitioner does violence to the
unequivocal language of the opinion in stating that the
Appellate Court “assumed that the usual three-year stat-
ute of limitation would bar conviction of charges based
upon the evidence of the price conferences (all of which
occurred during or before 1941)” (Petition, p. 18).
Moreover, the whole paragraph of the Court’s opinion
discussing the two separate periods of the conspiracy was
in the nature of dictum as was irrefutably indicated by
its beginning with the words “in passing”. That expres
sion clearly indicates that the Court was going by, beyond
ame §3
or departing* from the major issue before it, namely,
whether there was any substantial evidence to support re-
spondent’s conviction. “In passing” introduces paren-
thetic or incidental considerations which by no stretch of
the imagination can be considered essential to the rationale
of the decision.
The rule is well established that general expressions in
an opinion which are not essential to dispose of the case
are merely dicta: Watson v. St. Louis, I. M. & 8S. R. RB. Co.
(C. C. Ark., 1909), 169 F. 942, 945, aff. 223 U. S. 745, 56
L. Ed. 639, 32 S. Ct. 533; Coen v. American Surety Co. of
N. Y. (C. C. A. 8, 1941), 120 F. 2d 393, 400, cert. den. 314
U. 8. 667, 86 L. Ed. 534, 62 S. Ct. 128; People v. Altice Case
(1922), 222 Mich. 379, 190 N. W. 289.
B. Analogous considerations apply to the other conten-
tion of Petitioner that the Appellate Court erred in treat-
ing ‘‘the jury’s verdicts of conviction as discredited by
the verdicts of acquittal of other defendants’’ (Petition
p. 16; also 2-3 and 17). In the first place, the passage of
the opinion in question here was prefaced by the paren-
thetical limitation ‘‘In passing’’ as to which the foregoing
principle applies. Secondly, the Appellate Court recog-
nized the controlling rule that
‘“‘It 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 corporations is sustained by substantial evidence,
and mere inconsistency in verdicts is not fatal’’ (R.
661, 178 F. 2d, 1. ec. 370-1).
This is as clear a phrasing of the rule announced by this
Court and apparently contended for by Petitioner (Peti-
tion, p. 17) as possible. The Appellate Court merely noted
* Webster’s New International Dictionary, p. 1577: Passing, going by,
beyond, through or away; departing.
1a RENEE NET te
ee
that the inconsistency of the verdicts runs against
‘‘logic or reason.’’ Not even Petitioner could take i .
with such a self-evident truth. The Court’s remark ag
related comments, while illuminating, were obviously
necessary to the holding, and therefore unimportant hey
In conclusion, it is respectfully urged that the petitigg
for writ of certiorari to the court below be denied. E
JACOB M. LASHLY,
ARTHUR V. LASHLY,
PAUL B. RAVA, |
LASHLY, LASHLY & MILLER, ©
705 Olive Street,
St. Louis 1, Missouri, .
Attorneys for Respondent,
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.