JAMES HUNTER, III, Circuit Judge:
This is an appeal by United States Gypsum Company (USG), National Gypsum Company (National), Georgia-Pacific Corporation (G-P), The Celotex Corporation (Celotex), Andrew J. Watt, Colon Brown, and J. P. Nicely, defendants in a complex case under Section 1 of the Sherman Act, 15 U.S.C. § 1.
Gypsum board is produced in standard sizes, of which 4' × 8' × ½" is the most common. It consists of a layer of gypsum rock sandwiched between sheets of heavy paper. Since World War II, it has replaced gypsum plaster as the principal component of interior walls in all types of buildings.
The gypsum board industry is highly concentrated. Between 1960 and 1973, the number of producers varied from nine to fourteen, and the eight major producers accounted for more than ninety-four percent of national sales. The corporate appellants together account for more than seventy-five percent of national sales. There are no significant differences in quality or appearance among the standard types of board produced by the various manufacturers. Demand is determined by activity in the construction industry and is inelastic with respect to price. Because of the homogeneity of the different brands, a buyer's decision to purchase one particular brand is generally based on price. Price discounts and changes in credit terms are the most important form of competition in the industry.
Between 1965 and 1970, the Department of Justice conducted several investigations of possible antitrust violations in the gypsum board industry. In 1971, a grand jury inquiry commenced, and another twenty-eight months of investigation ensued. On December 27, 1973, an indictment was returned in the Western District of Pennsylvania. It named the appellants and nine other defendants
At the outset, we are met with appellants' contention that the due process clause of the fifth amendment requires dismissal of the indictment. They allege that the Government unduly delayed bringing the indictment and that this delay impaired appellants' ability to present a defense. We affirm the district court's refusal to dismiss the indictment.
In United States v. Marion, 404 U.S. 307, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971), the Supreme Court indicated that "the Due Process Clause of the Fifth Amendment would require dismissal of the Indictment if it were shown at trial that the pre-indictment delay in this case caused substantial prejudice to appellee's rights to a fair trial and that the delay was an intentional device to gain tactical advantage over the accused." Id. at 324, 92 S.Ct. at 465. Because no prejudice was shown, however, the Marion Court upheld the indictment. Thus, there was no holding as to the specific requirements of a successful showing of prejudicial delay, and it was unclear whether both prejudice and governmental intent are necessary or whether prejudice alone would suffice. See, e. g., United States v. Barket, 530 F.2d 189, 194-195 & n.9 (8th Cir.), cert. denied, 429 U.S. 917, 97 S.Ct. 308, 50 L.Ed.2d 282 (1976). We need not resolve this question, because we find neither undue delay nor substantial prejudice.
We consider first the alleged undue delay. Appellants' major argument is that the Government deliberately postponed empaneling the grand jury to await the outcome of a civil case, Wall Products Co. v. National Gypsum Co., 326 F.Supp. 295 (N.D.Cal.1971), involving charges of the same conspiracy. After a lengthy evidentiary hearing, however, the court below found that the interval between the initial investigations of the gypsum board industry and the bringing of the indictment was not unreasonable in light of the extraordinary magnitude of the case and the frequent dead ends encountered by the investigators. United States v. United States Gypsum Co., 383 F.Supp. 462, 464-70 (W.D.Pa.1974). As the district court noted, id. at 467, any delay in empaneling the grand jury resulted from the Government's reluctance to frame criminal charges against appellants before learning whether plaintiffs in a civil action could carry their burden of proof. The district court's findings are not clearly erroneous.
USG separately argues that the Government is collaterally estopped to deny intentional delay, relying on United States v. United States Gypsum Co., Civil No. 71-2467 (N.D.Cal., filed Dec. 30, 1971). In that suit against six gypsum companies, the Government sought to recover damages accrued before the start of the normal four-year period, claiming that defendants' fraudulent concealment of their conspiracy had tolled the statute of limitations. The district court granted a motion for partial summary judgment, declaring that the Government did know, or should have known, of the alleged conspiracy prior to January 1, 1968. This finding, insists USG, estops the Government from denying delay in this case.
USG's claim does not satisfy the first requirement. Governmental knowledge sufficient to preclude reliance on the doctrine of fraudulent concealment in a civil case is not identical with the availability of evidence sufficient to support the decision to bring criminal charges against the same defendants. Proof of the existence of the former does not entail proof of the existence of the latter. Therefore, there can be no collateral estoppel.
Having found no undue delay, we note that, in any event, appellants have not met their burden of proving substantial prejudice. In United States v. Dukow, 453 F.2d 1328 (3d Cir.), cert. denied, 406 U.S. 945, 92 S.Ct. 2042, 32 L.Ed.2d 331 (1972), this court, following Marion, refused to order the dismissal of an indictment where no substantial prejudice was shown. Accord, United States v. Benson, 487 F.2d 978, 984-85 (3d Cir. 1973). In Dukow, Judge Adams held the deaths of two potential witnesses not prejudicial, because there had been neither an offer of the testimony they would have given nor any indication that they possessed unique knowledge of the transaction in question. Dukow, supra, 453 F.2d at 1330. Here, as in Dukow, appellants argue that potential witnesses died in the lengthy interval between initial investigation and trial, but there is no showing that the deceased would have proffered testimony not merely cumulative of the evidence already at appellants' disposal.
Of the thirty-six deceased potential witnesses listed, only three received particular attention from appellants. One was Melvin Quayle, who was depicted in other testimony as an emissary of the other alleged conspirators. Quayle's denial before the grand jury of this role was read at trial. Appellants do not suggest that he would have testified any differently had he lived.
Appellants also insist that Donald Miller, late merchandising manager of Celotex, "would have made an excellent witness for the defense." They vouchsafe no reason to believe, however, that Miller's testimony would have been significantly more exculpatory than that offered by other witnesses.
Finally, appellants single out a USG memorandum of June 6, 1961, as a document the Government was able to exploit because its author, B. J. Nabors, was dead. Appellants, though, were free to offer alternative explanations of the document's contents. Moreover, Nabors died in 1967, ten months before the date on which USG claims the Government should have known of the conspiracy and sought an indictment. Cases of this magnitude often last so long that documents are introduced when the authors are no longer available to dispel any inculpatory impressions the documents may create. To hold that this handicap, by itself, is a violation of due process would be to erect a practical barrier to suits of this sort.
Appellants argue that under United States v. Barket, supra, the Government bears the burden of proving that none of the unavailable witnesses possessed exculpatory evidence. We find this argument unpersuasive. Barket differs from the case sub judice in several important respects. First, the procedural posture of Barket was the reverse of that here: the district court had granted the motion to dismiss the indictment. Second, the Barket court expressed grave misgivings about the merits of the Government's case. Third, the Eighth Circuit found the Government guilty of culpable negligence in delaying Barket's indictment. Fourth, and most important, the Barket court explicitly found
None of these conditions obtains in the case before us. Because the court below refused to dismiss the indictment, we can order it dismissed only if we hold the district court's findings clearly erroneous. We are unable to take the frankly skeptical view of the Government's case on the merits, adopted by the Barket court. As we have already noted, the Government did not cause any undue delay in this case. Most importantly, we do not find that appellants' ability to defend themselves was impaired. Because the Barket court explicitly reached the opposite conclusion, its statement concerning the burden of proof on the issue of missing witnesses' possession of exculpatory evidence was dictum.
Thorough scrutiny of the voluminous record and careful consideration of the many issues raised on appeal convinces us that reversal is required.
The Government's case on price fixing centered on a practice appellants call "verification." An officer of one gypsum board manufacturer would telephone a competing firm's officer to determine the price at which the competitor was offering gypsum board to a specific customer. The scope, purpose, and duration of this activity are sharply disputed by the parties. The Government contends that the purpose of verification was to enable competitors to stabilize prices and "police" agreed-upon increases, that the calls involved broad discussions of present and future pricing policies, that the appellants verified daily, and that they continued to do so until 1973. Appellants insist that the only purpose of the calls was to ensure compliance with the Robinson-Patman Act (discussed below), that the conversations were limited in scope and number, and that the practice had been discontinued, except for a few isolated, unauthorized calls, before the start of the applicable limitations period, December 27, 1968. There is evidence to support each claim of both sides.
Appellants contend, however, that the court below erred in instructing the jury on the legal status of the practice. Although appellants assert that the evidence demonstrated that the purpose of certification was to comply with the Robinson-Patman Act, the trial court instructed the jury that any purpose was irrelevant so long as the jury
Section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a),
Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 759-60, 65 S.Ct. 971, 977, 89 L.Ed. 1338 (1945). This court declared in Viviano Macaroni Co. v. Federal Trade Commission, 411 F.2d 255, 259-60 (3d Cir. 1969), that the seller cannot meet this burden merely by accepting the purchaser's word with respect to competitor's offers; instead the seller must attempt to corroborate the report, as well as the reliability of the purchaser or other reporter.
Appellants claim that their verification practice was designed to comply with the dictates of Staley and Viviano. They assert that almost all discounting off list prices was not reflected in invoices, rendering that form of corroboration ineffective. In addition, they say, purchasers of the gypsum board were notoriously unreliable and often were discovered to have lied about a competitor's offer in order to "whipsaw" a price cut. There is evidence to support these
The countervailing policies of section 1 of the Sherman Act, however, complicate appellants' exposition of the issue. The Supreme Court has dealt several times with the limits imposed by the Sherman Act on exchanges of information among competitors. In American Column & Lumber Co. v. United States, 257 U.S. 377, 42 S.Ct. 114, 66 L.Ed. 284 (1921), the Court held that section 1 of the Sherman Act condemned the exchange of specific price information with regard to specific customers, where the clear purpose was to stabilize prices. The Court reached the same result in United States v. American Linseed Oil Co., 262 U.S. 371, 43 S.Ct. 607, 67 L.Ed. 1035 (1923). Then in 1925, two cases upheld the exchange of information among competitors. In Maple Flooring Ass'n v. United States, 268 U.S. 563, 45 S.Ct. 578, 69 L.Ed. 1093 (1925), the Sherman Act was held to permit the exchange of average cost data relating only to closed transactions, despite an apparent stabilizing effect on price, where no intent to constrain individual competitive activity was found. And the Court in Cement Manufacturers Protective Ass'n v. United States, 268 U.S. 588, 45 S.Ct. 586, 69 L.Ed. 1104, approved the exchange of specific price information concerning specific customers, despite possible effects on prices, where the purpose of the dissemination scheme was to prevent buyers from defrauding sellers.
The Supreme Court has drawn a narrow line in deciding the data dissemination cases under section 1 of the Sherman Act. The difficulty derives from the fact that in competitive markets, information exchanges promote competition, while in oligopolistic markets, they depress competition. United States v. Container Corp. of America, 393 U.S. 333, 342-43, 89 S.Ct. 510, 21 L.Ed.2d 526 (1969) (Marshall, J., dissenting); P. Areeda, Antitrust Analysis 13-16 (1974). Thus, the Court has attempted to fashion rules that will reach the latter, yet not amount to broad proscriptions embracing the former.
In Container, supra—the most recent data dissemination case —the facts were similar to those presented in the case sub judice. Eighteen manufacturers of corrugated containers accounted for 90% of the shipments of such products from the southeastern United States. The industry exhibited excess capacity and a downward trend in prices, yet twenty-one new competitors entered the industry during the period covered by the complaint—a clear indication that prices were above competitive levels. Containers were produced to customer specifications, but were substantially identical regardless of manufacturer. With a few exceptions, no manufacturer could command a higher price than another. From 1955 to 1963, defendants exchanged with varying frequency the prices most recently quoted to specific customers. No Robinson-Patman defense was raised, however.
The Supreme Court, 6-3, found a combination or conspiracy proscribed by the Sherman Act. The freedom to supply information only if each defendant so chose was described merely as the freedom to withdraw from the agreement. From the concentrated nature of the industry, the majority concluded that the information exchanges must have set a floor under prices. The Court distinguished Cement Manufacturers, supra, by pointing out that Container revealed no "controlling circumstance, viz., that cement manufacturers . . . exchanged price information as a means of protecting their legal rights from fraudulent inducements . . . ." Id. at 335, 89 S.Ct. at 511.
Mr. Justice Fortas concurred, declaring that he did not understand the majority to have established a per se ban of such exchanges. Instead, he concluded that the record supported a finding that the data dissemination had in fact affected prices.
Each of the Container opinions found an agreement in the reciprocal dissemination of price information. The discord arose over proof of the agreement's effect. None of the Justices concerned himself with the agreement's purpose. The Court's careful distinction of Cement Manufacturers, however, suggests that proof of an actual purpose is not irrelevant in all cases. Where the information exchange occurs under a "controlling circumstance," such as the purpose of preventing fraud in Cement Manufacturers, the exchange can be upheld under the Sherman Act, despite a proven or presumed effect on price.
The question before us is whether appellants' alleged desire to establish a defense, to price discrimination charges, of compliance with section 2(b) of the Robinson-Patman Act would create a similar "controlling circumstance" that would legitimate an agreement otherwise prohibited by section 1 of the Sherman Act. If it would, then the trial court's instruction was improper in permitting the jury to convict appellants merely by finding an effect on prices, with no consideration of purpose. The Government denies that compliance with section 2(b) amounts to a "controlling circumstance." Container, claims the Government, limited "controlling circumstances" to prevention of fraud.
We do not read that case so narrowly. If the Container Court had sought to restrict the exception to "prevention of fraud," it could have distinguished Cement Manufacturers by noting simply that the Container case did not involve an attempt to thwart fraudulent purchasing practices, as had Cement Manufacturers. Instead, the Court used that much broader term "controlling circumstance," one of which was the desire to prevent fraud present in the latter case. This suggests that there are "controlling circumstances" other than the one delineated in Cement Manufacturers.
Price verification, insist appellants, must be considered a controlling circumstance. They claim that otherwise the very activity dictated by the Robinson-Patman Act could be used as evidence of conspiracy to convict under the Sherman Act. This conflict between the two acts would leave them with
The Government replies that nothing in the Robinson-Patman Act condones discussions about prices among competitors, nor has any court ever required such discussions as a condition of establishing a section 2(b) defense. Section 2(b), says the Government, does not force appellants to verify. The Government poses its alternatives for the appellants: (1) refrain from cutting prices to the single buyer; (2) cut prices as to all buyers. In neither event will the seller break either antitrust law.
Even the Government concedes that this choice is "difficult." We fear that so limiting sellers' alternatives would discourage price competition in industries like gypsum board, where the fact that price cutting occurs off list prices and invoices makes corroboration of reported competitor's offers difficult or impossible. In such industries, the Government's alternatives would eliminate the section 2(b) defense. This, it seems to us, would be more likely to put a floor under prices than to induce wholesale cutting, since a firm in a concentrated industry would be unlikely to reduce prices across the board simply to close a single sale. Report of the Attorney General's National Committee to Study the Antitrust Laws 181 (1955). And it is through isolated price reductions that established price levels are eroded, precipitating widespread price cuts. P. Areeda, supra, at 231. The Government's position, then, could induce greater price rigidity.
Because the Government's resolution of the conflict between the Sherman and Robinson-Patman Acts would require us to read the Sherman Act as discouraging the very price competition it was designed to promote, we reject that resolution. Appellants, however, seek an accommodation of the two acts that would recognize any bona fide attempt to comply with section 2(b) of Robinson-Patman as a "controlling circumstance" for Sherman Act purposes. Anti-competitive dangers exist on this side, too. Such a resolution would countenance a broad range of data dissemination schemes and communications among competitors, which might provide camouflage for illegitimate agreements. With this problem in mind, we turn to the cases that have already addressed this issue.
Except for the court below, each court to consider the issue has agreed with appellants that the attempt to establish a 2(b) defense amounts to a "controlling circumstance" that shields those exchanging information from Sherman Act liability. The first and most apposite case involved a civil action alleging essentially the same conspiracy charged here. In Wall Products Co. v. National Gypsum Co., 326 F.Supp. 295 (N.D.Cal.1971), the court found that manufacturers of gypsum board, because their products were homogeneous, deemed it essential to meet lower offers by competitors. Purchasers aggressively played one manufacturer against another, whipsawing a series of price cuts through the industry by falsely reporting lower offers. When purchasers told sellers' field representatives of competitors' lower offers, the representatives asked for invoices or other written corroboration, but these requests usually proved fruitless. In order to insulate themselves against possible Robinson-Patman liability, specific company officials were given authority to communicate with the competitor in question. This communication took place "[only] after exhausting other means of confirming the truth of such reported deviation." Id. at 309. Specific confirmation was obtained, and no reported offers were met unless verified. The Wall Products court held that this activity amounted to a "controlling circumstance" contemplated by Container. 326 F.Supp. at 312.
The three other cases that involved this issue shared similar facts. In each, a major oil company conferred with its competitors during a gasoline price war, in order to verify its competitors' prices before granting temporary allowances to its own local retailer. Although it is not made clear in
In Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir.), cert. denied, 408 U.S. 928, 92 S.Ct. 2494, 33 L.Ed.2d 341 (1972), the competitors exchanged price information that was also publicly available through trade journals and financial dailies. Id. at 181. The court cited Wall Products, however, for the broad proposition that price information exchanges for the purpose of establishing a Robinson-Patman defense amount to a "controlling circumstance." Id. at 182.
The third gasoline war case was Gray v. Shell Oil Co., 469 F.2d 742, 746-47 (9th Cir. 1972), cert. denied, 412 U.S. 943, 93 S.Ct. 2773, 37 L.Ed.2d 403 (1973). There the court held that the jury had to decide whether the purpose of Shell's communications with its competitors was to comply with the Robinson-Patman Act. Because the jury had found that purpose, the court upheld a verdict of no liability, citing Belliston, supra.
First, it should be noted that the three gasoline war cases significantly expanded the Wall Products holding. None contained any suggestion that alternative means of corroboration, such as invoices or public trade papers, were unavailable, as they had been in Wall Products. Indeed, the Belliston court expressly found that they were available. None indicated that the gasoline retailers had achieved the same reputation for mendacity that the Wall Products court ascribed to wallboard buyers. The gasoline war cases, then, suggest that the category of price exchanges that qualify as "controlling circumstances" is quite broad. So free a license to exchange price information might undermine the Container holding.
Second, these cases diluted the pro-competitive strength of the Sherman Act in order to preserve the force of Robinson-Patman's requirement of solid corroboration. Yet Automatic Canteen Co. v. Federal Trade Commission, 346 U.S. 61, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953), suggests that when policies of the Sherman and Robinson-Patman Acts conflict, it is the Robinson-Patman Act that should give way. In Automatic Canteen, a buyer was charged with violating section 2(f)
We are therefore reluctant to embrace the accommodation fashioned by the gasoline war cases, which seems to eviscerate the Sherman Act for the benefit of Robinson-Patman. The best way to resolve the dilemma framed by appellants in this case, in the light of Automatic Canteen, would be to ease their burden under Robinson-Patman, instead of facilitating evasions of the Sherman Act's procompetitive strictures as did the gasoline war cases. If Robinson-Patman is interpreted to permit a seller lacking other corroboration to cut his price without taking the ultimate corroborative step of verifying the purchaser's report with his competitor, then the Sherman Act
In Kroger Co. v. Federal Trade Commission, 438 F.2d 1372 (6th Cir.) cert. denied, 404 U.S. 871, 92 S.Ct. 59, 30 L.Ed.2d 115 (1971), the Sixth Circuit affirmed an FTC finding that Kroger had induced a discrimination in price, in violation of section 2(f) of the Robinson-Patman Act. In soliciting bids for sale of private label milk to its chain of grocery stores, Kroger falsely told Beatrice Foods that it had received a bid twenty percent off list price from another dairy. The FTC found that Beatrice attempted to corroborate Kroger's report, but did not contact its competitor directly. Beatrice Foods Co., 76 F.T.C. 719, 809-11 (1969). Relying on Kroger's false report, Beatrice cut its price to Kroger. Both Beatrice and Kroger were charged with violating the Robinson-Patman Act. The FTC, however, held that Beatrice had established the "good faith meeting competition" defense under section 2(b). Despite this finding that the price was not illegal as to the seller, Kroger was held to have induced a discriminatory price. The FTC declared that Beatrice could not be held liable for the discriminatory effect of the price, because it had no reason to disbelieve Kroger. The Sixth Circuit affirmed the ruling that Kroger could nevertheless be held to have known that the price it induced was in fact discriminatory. Kroger, supra, 438 F.2d at 1376-77.
The Kroger case, when combined with the Wall Products decision and our Viviano holding, offers a solution to the quandary in which appellants claim to find themselves. Kroger indicates that sellers can establish a section 2(b) defense without taking the ultimate corroborative step of communicating directly with their competitors. It accomplishes this by holding the purchaser to a high standard of good faith bargaining under section 2(f). Thus, as long as the seller has taken all other reasonable steps in an attempt to corroborate his purchaser's report of lower offers, he need not fear Robinson-Patman liability, provided that—as in Kroger—he has no independent reason to doubt the purchaser's reliability.
Viviano, though, requires the seller to investigate that reliability. Vivano, supra, 411 F.2d at 259. This holding protects the integrity of the section 2(b) defense. If the seller could discriminate in price when he had good reason to believe that the buyer—even a buyer held to a high standard by Kroger —was lying about a competitor's supposedly lower offer, then the "good faith" requirement of section 2(b) would be rendered nugatory. Therefore, if previous experience or the investigation required by Viviano reveals that the purchaser cannot be trusted, as was the case in Wall Products, supra, 326 F.Supp. at 309, then, and only then, the seller may communicate with his competitor to test the buyer's veracity. The presence of this doubt as to the purchaser's truthfulness, combined with the seller's inability to corroborate the buyer's reports independently, creates the "controlling circumstance" that exempts price information exchanges from the Sherman Act ban, under Container. This is a narrow "controlling circumstance," not the broad one of the gasoline war cases.
There was some evidence of this narrow "controlling circumstance" in this case. Several witnesses testified that the purpose of the "verification" calls was to establish a Robinson-Patman defense and that their scope was confined by that purpose. There was also testimony concerning the unreliability of purchasers in the gypsum board market. Therefore, appellants were entitled to an instruction that their verification practice would not violate the Sherman Act if the jury found: (1) the appellants engaged in the practice solely to comply with the strictures of Robinson-Patman; (2) they had first resorted to all other reasonable means of corroboration, without success; (3) they had good, independent reason to doubt the buyers' truthfulness; and (4) their communication with competitors was strictly limited to the one price and one buyer at issue. Trial court charged instead that if the jury found that verification had
Appellants also contend that, on the state of the evidence, they were entitled to a more precise charge on the purpose and scope of the conspiracy any particular defendant was alleged to have joined. The Government insists that the trial court's charge on this point was sufficient and that appellants waived their objections in any event. I agree with appellants that the court's charge was deficient. Finding no waiver, I would order reversal on this point.
Over a period of five months, the Government introduced masses of evidence concerning a multitude of seemingly unrelated events and attempted to link them together to show a single, overall conspiracy to stabilize the prices and marketing conditions of gypsum wallboard. Most of this evidence dealt with actions prior to the start of the applicable limitations period. In these circumstances, it was necessary specifically to inform the jury that any particular defendant could be found guilty of conspiracy only if he understood that he had joined the single, overall agreement charged in the indictment; participation in any of the subsidiary events was not enough. United States v. Peoni, 100 F.2d 401, 403 (2d Cir. 1938); accord, United States v. Purin, 486 F.2d 1363, 1369 (2d Cir. 1973), cert. denied sub nom. Da Silva v. United States, 416 U.S. 987, 94 S.Ct. 2392, 40 L.Ed.2d 764 (separate appeal), cert. denied sub nom. Purin v. United States, 417 U.S. 930, 94 S.Ct. 2640, 41 L.Ed.2d 233 (1974) (separate appeal). The great number of activities in evidence and the huge cast of characters involved made it essential to impress upon the jury that each defendant could be found guilty of the conspiracy charged only if that overall design was within his reasonable contemplation when he engaged in any of the isolated activities. Specifically, the jury should have been asked to decide whether a given defendant, by engaging in one or more of the apparently isolated events, was associating himself with the overall agreement charged in the indictment. United States v. Borelli, 336 F.2d 376, 385 (2d Cir. 1964), citing Peoni, supra, 100 F.2d at 403. This the trial court did not do.
Trial court did—as did the trial court in Borelli, supra—repeatedly instruct the jury that each defendant could be found guilty only if he knowingly joined the conspiracy charged and that guilt was to be determined on an individual basis.
The Borelli court described the problem:
Borelli, supra, 336 F.2d at 384. Appellants here raise a similar concern. For example, it does not follow that appellant Brown's participation in the allegedly conspiratorial 1965 industry-wide price increase and 1966 change in credit terms—the only actions with which any evidence connected him—means that he associated himself with an overall conspiracy to stabilize prices beginning before 1960 and lasting until 1973. Each of the other appellants was likewise connected by the evidence only to a few of the dozens of allegedly conspiratorial episodes that the Government sought to weave into one overriding agreement. Yet the jury was never told that participation in one episode, without more, was insufficient to prove association in the latter enterprise.
In view of the ambiguity surrounding the scope of any agreement joined by each of the defendants, the trial court should have given the charge they requested on this point.
The Government's assertion that appellants waived any objection to the trial court's charge on this point is without merit. Defense counsel three times expressed their willingness to make a record by "particularizing" objections to each charge the trial court denied. On each occasion, the court observed that particular objections would consume too much time and that one blanket objection sufficed to make a record for all. Where the trial judge declares that he does not require further elucidation of the requests he has refused, there can be no waiver. See Green v. Reading Co., 183 F.2d 716, 719 (3d Cir. 1950); 3 C. Wright, Federal Practice and Procedure § 842 (1969). Hence, the lack of a specific objection to the refusal to give this specific charge does not bar appellants from raising it as error on appeal.
Contrary to the Government's claim, appellants submitted their requested charge in a timely manner. After telling counsel on June 27, 1975, what the substance of his charge would be, the trial judge invited written objections by July 2. On June 30, the court advanced that deadline one day, so that he could rule on the objections before closing arguments began. On July 1, appellants filed numerous objections and supplemental requests designed to meet the court's previous comments. Among them was the charge at issue here. Because of time constraints, the trial court did not then rule on the lengthy submissions. He indicated, however, that he would refer to them in formulating his charge.
Appellants also question the sufficiency of the trial court's charge with respect to withdrawal from the alleged conspiracy. Where a continuing conspiracy is proven, each defendant who by affirmative action has completely disassociated himself from the agreement before the start of the limitations period is entitled to acquittal. Hyde v. United States, 225 U.S. 347, 369, 32 S.Ct. 793, 56 L.Ed. 1114 (1911). This abandonment may be effected by communicating it "in a manner reasonably calculated to reach co-conspirators." Borelli, supra, 336 F.2d at 388. Proof of such communication need not involve evidence that the defendant directly informed each co-conspirator of his intent to withdraw.
Buhler v. United States, 33 F.2d 382, 384 (9th Cir. 1929); accord, Marino v. United States, 91 F.2d 691, 698 (9th Cir. 1937), cert.
Appellants introduced evidence of the resurgence of price competition, and other forms of competition, which could have convinced the jury that one or more of the defendants had abandoned any conspiracy to stabilize prices and other conditions before the start of the limitations period. They also requested a charge to the effect that active competition on price might amount to the "affirmative action" necessary to accomplish a withdrawal.
As the court explained the meaning of "withdraw," it comprised only affirmative notification—which connotes direct announcement—and disclosure to law enforcement authorities. Either might constitute withdrawal, but the court, by limiting withdrawal to these two, improperly excluded other possibilities, such as conduct inconsistent with the theory of continued adherence.
The court did permit appellants to argue their theory of withdrawal to the jury. That opportunity did not salvage appellants' rights, however, because the court in its subsequent charge told the jury that they could not consider appellants' theory. Reversal is, in my opinion, required on this point.
The judgments of conviction will be reversed and the case remanded to the court below.
ADAMS, Circuit Judge, concurring.
While I concur in the reversal of the defendants' convictions, I am impelled to discuss one issue that Judge Hunter has not
After a nineteen week trial, the jury began its deliberations in the afternoon of Tuesday, July 8, 1975. On each of the next two days (Wednesday and Thursday), the jury deliberated from 9:00 a. m. until 10:00 p. m.
On Friday, July 11, the fourth day of sequestered deliberations, the trial court advised counsel that "[s]ome of the jurors aren't feeling well" and that "[s]ome are tired."
On Saturday, July 12, the judge, in open court, ordered the jurors to continue their deliberations. He did so, using a supplemental instruction previously approved by this Court in United States v. Fioravanti.
Late on Sunday, the sixth day of deliberations, the jury notified the court that it could not reach a verdict. A note addressed to the judge declared: "We cannot reach a unanimous verdict. If any juror changes his mind now, he would only change due to compassion for his fellow jurors."
On Monday, July 14, the seventh day of deliberations, the court received another note from the jury. This message stated that the foreman wished to "discuss the condition of the jury" and to "seek further guidance" from the judge.
During the meeting between the judge and the foreman, the foreman initially reported on the health of the jury. He represented that the jurors were "distraught" and "sick," with "at least eight of the jurors . . . taking some kind of pill."
At the end of the conference, the following critical exchange occurred:
The trial judge then instructed the foreman to "tell [the jury] to keep deliberating and see if they can come to a verdict."
Upon returning to the courtroom, the judge purported to summarize for counsel what had transpired during the conference. The judge first stated that "because of what [the foreman] calls personality differences between some members of the jury . . . he does not feel that they are ever going to be able to get over this." Thereafter, the court advised counsel that some of the jurors were "not feeling well," but that the foreman really did not "know if they are sick or aren't sick." The judge then announced that he had relayed a message to the jurors "to continue their deliberations."
Significantly, the judge did not tell counsel about the foreman's opinion that the jury was hopelessly deadlocked; did not indicate that the foreman was under the impression that the court wanted a definitive verdict either for the prosecution or the defendants; and did not mention the directive to the jury that it should "see if [it] can come to a verdict." Thus, it does not appear that the report on the substance of the discussions between the court and the foreman was accurate or even substantially accurate.
In any event, on the following morning, the eighth day of deliberations, the jury returned guilty verdicts against each of the defendants.
Defendants contend that the trial court "coerced" a deadlocked jury into reaching its verdict. They maintain that the judge caused the jurors to deliberate at excessive lengths and despite illness and exhaustion. The defendants also argue that the repetition of even an approved supplemental charge inherently compelled a verdict. Finally, they assert that the district court
The factual linchpin of the defendants' contention that the court, in effect, "coerced" a verdict from the jury is the private conference between the foreman and the trial judge. There, as noted above, the foreman declared that he knew the court wanted a verdict "one way or the other." At that point, I believe, the trial judge possessed the affirmative obligation to make it clear to the foreman that the jury had the option of reaching no verdict, should juror unanimity prove impossible. Instead, by stating merely "which way it goes doesn't make any difference to me," there was effectively conveyed to the jury, through the medium of the foreman, the directive that only a verdict for the prosecution or a verdict for the defendants would be acceptable to the court. Such an admonition provides justification, in my view, for overturning the defendants' convictions.
Reversal on this ground would appear to be required by prior teachings of the Supreme Court as well as this Court. In a per curiam opinion in Jenkins v. United States,
This Court previously has provided a cogent delineation of the relevant principles governing judge-jury relations during the deliberative period. In Fioravanti,
Speaking for a unanimous panel, Judge Aldisert posited:
In our system of criminal justice, then, a jury need not, and may not, render a verdict if it is unable to attain agreement. To permit a trial judge to undermine a jury's prerogative of not returning a verdict would abrogate the protection that the right to a jury accords criminal defendants. Moreover, if jurors are encouraged to subscribe to verdicts to which they are not committed, merely to reach some definitive result upon judicial insistence, then the universal perception of jury verdicts as manifestations of reasoned agreement would have to be examined anew. Such reevaluation is unnecessary so long as we thwart efforts to preclude one bona fide outcome of jury deliberations—no verdict.
None of this is to suggest that jurors should not be encouraged to reach a verdict if unanimity is at all possible, or that the discretion of trial judges over declarations of mistrial should be restricted. Yet where a trial judge, in effect, eliminates the possibility
In the present case, it is evident that the jury had the mistaken impression, for whatever reason, that it must reach a verdict of guilty or not guilty. Yet, that impression was in no way dissipated by the trial court in its conference with the foreman, or at any time thereafter.
In my judgment, the jury issue present here warrants reversal, and such a conclusion buttresses the result reached by Judge Hunter.
Having decided that the defendants' convictions must be reversed because of the jury question, I will comment but briefly on the matters considered by Judge Hunter.
I concur in Parts I, II and IIIA of Judge Hunter's opinion. As to Part IIIA, I do so, recognizing that the exception to Sherman Act liability that the § 2(b) proviso of the Robinson-Patman Act creates is a very narrow one. Sellers in prosecutions for verification activities face the difficult task of convincing the jury or the court, as the case may be, that such activities do not constitute price-fixing but reflect a "controlling circumstance" beyond their power (e. g., the "lying buyer").
With respect to the "conspiracy" and "withdrawal" issues,
WEIS, Circuit Judge, dissenting.
The majority opinion discusses the conflict between the Sherman and Robinson-Patman Acts and the resulting dilemma that a business concern may face in steering between this Scylla and Charybdis of commerce. However, the course charted by the majority to avoid these two hazards, while carefully considered, does not clear the shoals of United States v. Container Corporation of America, 393 U.S. 333, 89 S.Ct. 510, 21 L.Ed.2d 526 (1969).
The trial judge charged the jurors that, standing alone, verification to comply with Robinson-Patman did not violate the Sherman
This combination of factors is characterized as a "controlling circumstance." In the interest of brevity, it may be termed the "lying buyer" defense.
There are serious difficulties with this interpretation when the facts of the Container case are examined. The pertinent details in the case are not elaborated in the Supreme Court's opinion but must be gleaned from the extensive findings and opinion of the district court.
The district court concluded that the defendant's conduct was designed to "prevent the perpetration of fraud upon them," and thus was insulated by Cement Manufacturers Protective Association v. United States, 268 U.S. 588, 45 S.Ct. 586, 69 L.Ed. 1104 (1925). Although the district court did not discuss the Robinson-Patman issue, it was briefed by the parties on appeal to the Supreme Court.
The factual background of Container is strikingly similar to that of the case sub judice, except that these defendants do not deny the existence of an agreement to verify and the jury verdict establishes the fact of effect upon prices. These factors weigh the scales even more heavily on the side of the government. The buyers' behavior in the gypsum industry cannot be classified as a "controlling circumstance" exempting the agreement from the proscription of Container if in that case the Court condemned that very circumstance.
The defendants here have been found guilty of price fixing, and it is now well settled that such conduct is illegal even if the motives which inspire it are beneficent or altruistic, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940). In essence, the defendants contend that if price stabilization did occur as a result of their efforts to prepare a Robinson-Patman defense, then such an effect is only incidental and not prohibited. But Robinson-Patman does not mandate price verification with competitors in oligopolistic markets. Our opinion in Viviano Macaroni Co., v. FTC, 411 F.2d 255 (3d Cir. 1969), does not go so far but requires only a reasonable inquiry into a buyer's veracity. That case does not compel an investigation which itself is illegal either because it results in price fixing or violates other provisions of law.
If the Robinson-Patman Act requires verification, even that which tends to stabilize prices, it is difficult to understand why the defendants' "purpose" to comply would be significant. Observance of a statutory requirement is legal whether or not the actor has knowledge of it. Thus, it may be seen that the defendants' use of "purpose" is to make it interchangeable with "motive." As Socony-Vacuum, supra, makes clear, that
I do not understand Container to expand the holding of Cement Manufacturers, but rather to confine it. The Supreme Court did not attempt to distinguish Cement in detail but there is a difference between that fact situation where a seller was bound by an existing contract to furnish material and that which obtains here where he is free to enter into a transaction or not as he chooses. Container was based on the premise that information exchanges in a restrictive market have the actual or theoretical effect of stabilizing prices and generally should not be tolerated, 393 U.S. at 337, 89 S.Ct. 510. In the oligopolistic setting, the control of price information by the seller reinforces his economic power in a manner inconsistent with the play of free market forces. This theory led the Supreme Court to reject the proposition that an exception should be made when the exchange of price information in a response to the "lying buyer," though obviously the opinion did not condone the purchaser's tactics.
I agree with the majority that Belliston v. Texaco, Inc., 455 F.2d 175 (10th Cir.), cert. denied, 408 U.S. 928, 92 S.Ct. 2494, 33 L.Ed.2d 341 (1972), and Gray v. Shell Oil Co., 469 F.2d 742 (9th Cir. 1972), cert. denied, 412 U.S. 943, 93 S.Ct. 2773, 37 L.Ed.2d 403 (1973), do not fit within Container. Moreover, in my view Wall Products Co. v. National Gypsum Co., 326 F.Supp. 295 (N.D.Cal.1971), does not follow the Supreme Court's opinion.
The trial judge in the case sub judice obviously grasped the significance of Container when he charged:
I believe that in the circumstances of this case, the instruction was correct, properly presented the issue to the jury,
The testimony in this case took more than four months and generated a transcript of many thousand pages. After all the evidence had been received, the trial judge's task was to instruct the jury on complex issues of law in the antitrust, conspiracy and general criminal fields. Such a charge must be phrased in language intelligible to a lay audience and, while conveying the substance of the law, must be sufficiently succinct that the jury is not overwhelmed. Too often we on the appellate courts scrutinize jury instructions for adherence to the esoteric standards expected of a law review article. We tend to forget that the charge should be as simple as possible and contain
Judge Hunter's opinion faults the trial judge for failing to give the instruction requested by the defendants which is set out in full at footnote 12. In essence, this point for charge required the jury to determine what kind of agreement or understanding existed as to each defendant. It went on to say that no defendant was to be held responsible for what another conspirator might have done beyond the common agreement or understanding. I assume that the refusal of the trial judge to charge in the precise verbiage requested is not at issue, see James v. Continental Insurance Co., 424 F.2d 1064 (3d Cir. 1970). Rather, the error claimed is the omission of an instruction to the effect that a particular defendant could be found guilty of conspiracy only if he understood that he had joined the single overall agreement charged in the indictment. As I read it, the charge adequately set forth the spirit of the instruction that Judge Hunter desires. The portions of the charge quoted in footnote 11 of his opinion demonstrate that the jury was told each defendant's membership in the conspiracy was to be evaluated on an individual basis.
Early in the charge, the trial judge reviewed the indictment which listed allegations of some thirteen manners and means used to implement the price-fixing conspiracy. He later said:
The jury was not left in doubt that it was to analyze the evidence of each defendant's participation and return a guilty verdict only if convinced of his participation in the price-fixing scheme charged in the indictment. Moreover, just as a challenged sentence or paragraph should be viewed in the context of the complete charge, so should the instructions be considered in the perspective of the trial as a whole. Cupp v. Naughten, 414 U.S. 141, 94 S.Ct. 396, 38 L.Ed.2d 368 (1973). After able and vigorous defense counsel had spent many hours arguing their respective clients' innocence and emphasizing the evidentiary matters favorable to them, it is unrealistic to believe that the lack of semantical refinement in a lengthy and otherwise adequate charge had any effect whatsoever on the verdict. In my view, the charge as given was not erroneous but, even assuming it were deficient to some extent, reversal would not be warranted.
Similarly, I do not agree that the charge on withdrawal from the conspiracy constitutes grounds for reversal. Judge Hunter's view is that the instructions improperly excluded the possibility of proving withdrawal by evidence of conduct inconsistent with adherence. Moreover, Judge Hunter asserts that the trial judge told the jurors they could not consider the defendants' theory to that effect. But the charge clearly and accurately stated that withdrawal could be found from evidence showing a defendant "took some affirmative action to disavow or defeat the purpose of the conspiracy." The court also stated that a defendant must have notified other members of the conspiracy or made disclosure to law enforcement officials. The trial judge concluded this phase of the charge by saying:
The phrase "some definite, decisive step" was taken from our opinion in United States v. Chester, 407 F.2d 53, 55 (3rd Cir.), cert. denied, 394 U.S. 1020, 89 S.Ct. 1642, 23 L.Ed.2d 45 (1969), and is a correct statement of the law.
If the defendants understood the charge as limiting the evidence of withdrawal to notification, it was counsel's duty to request a correction. After the charge, defense counsel stated to the court:
This colloquy must be understood in light of the discussion which occurred before the charge. Defendants had submitted a request for charge that "resumption of competitive behavior, such as intensified price cutting or price wars, could constitute such
Thus, defense counsel were advised in advance that the court would make only a general statement of the law and would not adopt their application of the facts, although counsel would be free to argue their factual proposition to the jury. The defense did not object to the charge because it limited evidence of withdrawal to affirmative notification, but rather because the judge refused to weave in the defense interpretation of the evidence. However, the jurors were free to consider that the alleged competitive activity was a definite, decisive step indicating a complete disassociation from the unlawful enterprise. The verdict indicates they rejected that theory. I cannot justify a new trial on the basis of this asserted deficiency in the charge.
The concurring opinion finds reversible error in the trial judge's comments to the jury foreman and in the failure to declare a mistrial because the jury was deadlocked. I am unable to agree.
In fairness to the trial judge, it must be emphasized that he spoke to the foreman only after receiving the unequivocal assent of the individual defendants and counsel, and indeed at the latter's urging. Defense counsel voiced some misgivings when the judge advised that he would impound the transcript "for review by some other court if that should ever become necessary," but the judge then stated that he would convey to counsel the import of his conversation with the foreman insofar as it did not reflect the thinking of the jurors. Moreover, the judge was explicit in stating that the transcript would not be available to counsel except on appeal, and he would not meet with the foreman if that provision was unacceptable. This condition precedent could not have been misunderstood by counsel.
After the conference with the foreman ended, the judge met with the lawyers and relayed the substance of the jurors' comments.
The trial judge did not deny the motion, but deferred ruling, saying: "I am not going to discharge the jury yet . . . . I would like a view as to how much longer I should let them deliberate before I . . declare a mistrial . . . ." One defense lawyer suggested that the appropriate point would be the following morning but another disagreed, stating that the deliberations had gone far enough. The judge responded that he would allow the jury to continue until Friday, and at that time would rule on the motion. Since the verdicts were returned on Tuesday, the following morning, the motion became moot.
On the preceding Friday, July 11, the fourth day of deliberation, the judge advised counsel that some jurors were not feeling well and others were tired. He listed a number of alternatives which might alleviate the jurors' discomfort, including the option of sending them home for the weekend. When the defense objected, the judge acquiesced, although he recalled that this court had approved the practice of allowing jurors in a criminal case to return to their homes during deliberations. See United States v. Piancone, 506 F.2d 748 (3d Cir. 1974). In an effort to ease the jurors' task, the hours of deliberation were shortened but the sequestration continued.
The concurring opinion contends the jury had the mistaken impression that it was required to reach a verdict of guilty or not guilty. But at no time did the trial judge so charge or otherwise suggest this to the jury. Indeed, he was well aware that such an instruction would be error. After the Fioravanti charge was given on Sunday, the sixth day of deliberation, the judge and counsel had the following conversation:
In concluding his remarks to the jury foreman on Monday, the judge said:
I do not read this as a direction to reach a verdict, but rather that the jury should attempt to reach a verdict. This was a perfectly proper admonition. Plainly the judge did not rule out the possibility that the jury could not come to a verdict since the language of his remark was conditional.
In my view it would not have been proper for the judge to have told the foreman at the private conference that the jury had the option of reaching no verdict. The judge had assured counsel in advance that he would give no instruction on the law during the conference and, indeed, the defense
The reasoning of Jenkins v. United States, 380 U.S. 445, 85 S.Ct. 1059, 13 L.Ed.2d 957 (1965), is not pertinent here. In that case, after only two hours of deliberation, the trial judge stated to the jury in part, "You have got to reach a decision in this case." Id. at 446, 85 S.Ct. at 1060. The Solicitor General's brief referred to the principle that jurors may not be coerced into surrendering views conscientiously held. Fioravanti also refers to that principle, and the trial judge here cautioned the jury in that vein on several occasions. United States v. Fioravanti, 412 F.2d 407 (3d Cir.), cert. denied, 396 U.S. 837, 90 S.Ct. 97, 24 L.Ed.2d 88 (1969). The record does not support the assertion that he impermissibly insisted on a verdict.
The decision to declare a mistrial must in large measure be entrusted to the discretion of the trial judge. He is "on the scene" and is in a position to make an informed judgment on the physical and emotional conditions of the jurors, the difficulties involved in the issues submitted to them, and the likelihood that a verdict will be reached. No record can convey all the imponderable factors to an appellate court, nor does its experience better qualify it in any but the exceptional case to second-guess the trial judge. The fact that the foreman thought no verdict could be reached is not conclusive upon us or the trial judge. It is not uncommon that a verdict is returned after a jury has sincerely thought it was deadlocked. The foreman was not endowed with the experience of the trial judge, and it is understandable that with so many complex issues to be resolved, he became discouraged during the deliberations.
This was a lengthy and vigorously contested case, where the factual issues were close and the mass of exhibits formidable. It would seem inconceivable that any reasoned, responsible verdict could have been reached without extended deliberations. Moreover, the expenditure of time, resources and effort on the part of all concerned obligated the trial judge to exert his best efforts to secure a verdict if one could be reached without injustice or coercion. I am convinced that he properly exercised his discretion. The defendants' contention to the contrary rings somewhat hollow in my ears, particularly in view of their objection to permitting the jurors to return home during the deliberations, at least over the weekend.
Whatever the merits of the Norton holding in the context of informant cases, we do not believe that it should be extended beyond that special context. An informant in a drug case is a potential witness who may be presumed to possess unique knowledge about the transaction. Rovario v. United States, 353 U.S. 53, 64, 77 S.Ct. 623, 1 L.Ed.2d 639 (1957). No such special presumption attaches to the usual witnesses in other cases. See United States v. Dukow, 453 F.2d 1328, 1330 (3d Cir.), cert. denied, 406 U.S. 945, 92 S.Ct. 2042, 32 L.Ed.2d 331 (1972).
Judge Weis's dissenting opinion also attempts to liken the factual setting in the case sub judice to that found violative of the Sherman Act in Container. The dissent notes that the district court in Container found that buyers "on occasion" furnished inaccurate information as to competing sellers' prices, see United States v. Container Corp. of America, 273 F.Supp. 18, 28 (M.D.N.C.1967), and held that the desire to prevent fraud took the container manufacturers outside the Sherman Act ban.
All this is irrelevant to the case at hand. Here, fraud is not at issue. Indeed, the Container opinion makes it clear that mere bad faith bargaining does not amount to "fraud" in the Cement Manufacturers sense.
What appellants urge here, though, is not a desire simply to avert occasional bad faith bargaining, but to comply with the positive duties imposed by another statute, the Robinson-Patman Act. The Robinson-Patman defense was not raised by the Container defendants at trial and was argued to the Supreme Court merely as an afterthought. That Court did not deal with it.
The question before us, then, is not whether occasional, or even widespread, buyer prevarication justifies price information exchanges, but whether the commands of Robinson-Patman may sometimes do so, when accommodated to Sherman Act strictures.
Thus, the trial court never explicitly told the jury that participation in one of the allegedly conspiratorial subsidiary events was insufficient, without more, to support a verdict of guilty.
The lateness the court mentions relates not to the submissions in general, but to the court's ability to rule on them that day so that counsel would be aware of the court's intent when making their closing arguments.
Basically, the Fioravanti charge outlines the responsibilities of each juror during deliberations, including the duties to re-examine one's own predilections and to deliberate with a view towards reaching a verdict, if possible. For the text of the recommended instruction, see 412 F.2d at 420.
In this Circuit at least, the Fioravanti charge supersedes a supplemental instruction approved in Allen v. United States, 164 U.S. 492, 17 S.Ct. 154, 41 L.Ed. 528 (1896). In essence, the Allen charge cautioned the minority within a jury to "see the error of its ways." 412 F.2d at 417. Caustically denominated as the "dynamite" charge (see Green v. United States, 309 F.2d 852, 853 (5th Cir. 1962)), the Allen instruction had been criticized by eminent scholars and jurists as having an inherently coercive influence on jury deliberations. Consequently, this Court suggested the more neutral statement of juror responsibilities embodied in the Fioravanti instruction.
In Kefauver, The Legality of Dissemination of Market Data by Trade Associations: What does Container Hold? 57 Cornell L. Rev. 777, 788 (1972), the author states: "The majority in Container of course found an effect of price stabilization, but nothing in the opinion indicated that they had found a purpose on the part of defendants to achieve such an effect." "Container placed a new emphasis on the effect of competitors' exchange of market information." Id. at 791. Professor Handler noted that a contrary result would promote evasion. Cf. Eaton, The Robinson-Patman Act: Reconciling the Meeting Competition Defense with the Sherman Act, 18 Antitrust Bull. 411, 427 (1973). ("There is however a great potential for abuse in any `lying buyer' defense. Its applicability may therefore be somewhat limited.")
A deliberate scheme to fix prices is, of course, illegal, even if unsuccessful, and in such a case the "purpose" of the defendants would be relevant to establish intent.