118 F.Supp. 621 (S.D.N.Y. 1953), Civ. A. 43-757, United States v. Morgan

Docket NºCiv. A. 43-757
Citation118 F.Supp. 621
Party NameUnited States v. Morgan
Case DateOctober 14, 1953
CourtUnited States District Courts, 2nd Circuit, United States District Courts. 2nd Circuit. Southern District of New York

Page 621

118 F.Supp. 621 (S.D.N.Y. 1953)

UNITED STATES

v.

MORGAN et al.

Civ. A. No. 43-757.

United States District Court, S.D. New York.

Oct. 14, 1953

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Victor H. Kramer, Washington, D.C., Richard B. O'Donnell, New York City, Walter K. Bennett, Margaret H. Brass, Washington, D.C., Harry G. Sklarsky, Francis E. Dugan and Herman Gelfand, New York City, for plaintiff.

Breed, Abbott & Morgan, New York City, for defendant Eastman, Dillon & Co.; Herman A. Heydt, Jr., New York City, of counsel.

Cahill, Gordon, Zachry & Reindel, New York City, for defendants Dillon, Read

Page 625

& Co., Inc. and Stone & Webster Securities Corporation; Mathias F. Correa, R. Graham Heiner, Loftus E. Becker, David Ingraham and Lawrence W. Keepnews, New York City, of counsel.

Covington & Burling, Washington, D.C., for defendant Smith, Barney & Co.; W. Graham Claytor, Jr. and William Stanley, Jr., Washington, D.C., of counsel.

Cravath, Swaine & Moore, New York City, for defendants Kuhn, Loeb & Co. and Union Securities Corporation; Wm. Dwight Whitney, Geo. Stephen Leonard and Henry R. Nolte, Jr., New York City, of counsel.

Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, for defendants Morgan Stanley & Co. and Harriman Ripley & Co., Incorporated; John W. Davis, Ralph M. Carson, Leighton H. Coleman, Edward R. Wardwell, Francis W. Phillips, George Edward Cotter and Warren W. Eginton, New York City, of counsel.

Donovan, Leisure, Newton & Irvine, New York City, for defendant Harris, Hall & Company (Incorporated); Roy W. McDonald, Thomas K. Fisher, New York City, Douglas V. Lewis, Rockville Center, N.Y., John J. O'Connell, Jr., and John F. Seiberling, Jr., New York City, of counsel.

Drinker, Biddle & Reath, Philadelphia, Pa., and Emmet, Marvin & Martin, New York City, for defendant Drexel & Co.; Henry S. Drinker and John G. Williams, Philadelphia, Pa., of counsel.

Shearman & Sterling & Wright, New York City, for defendant White, Weld & Co.; Walter K. Earle and Lauretta D. Robinson, New York City, of counsel.

Sullivan & Cromwell, New York City, for defendants Blyth & Co., Inc., Glore, Forgan & Co., Goldman, Sachs & Co. and Lehman Brothers; Arthur H. Dean, Edward H. Green, Eustace Seligman, John F. Dooling, Jr., William Piel, Jr., Roy H. Steyer, Francis E. Barkman, Robert Lockwood, William H. Buchanan, Jr., Roderick J. Kirkpatrick, John R. Miller, Anthony Chandler, and Marvin S. Sloman, New York City, of counsel.

Sullivan & Cromwell, New York City, and Choate, Hall & Stewart, Boston, Mass., for defendant The First Boston Corporation; Arthur H. Dean, William Piel, Jr., Roy H. Steyer and Robert T. Quittmeyer, of Sullivan & Cromwell, New York City, and Robert Proctor and Brinley Hall, of Choate, Hall & Stewart, Boston, Mass., of counsel.

Webster, Sheffield & Chrystie, New York City, for defendant Kidder, Peabody & Co.; Bethuel M. Webster, Edward L. Rea and Bancroft G. Davis, New York City, of counsel.

TOPICAL ARRANGEMENT OF OPINION

Introduction.

The Offense as Charged in the Complaint.

Certain Alleged Unifying Elements

Abandoned or Disproved.

The Applicable Law Relative to Conspiracy.

PART I:

The Investment Banking Business.

I. Prior to the First World War.

II. Between World War I and the Securities Act of 1933.

III. Further Developments 1933-1949.

IV. How the Investment Banker Functions.

PART II:

The Seventeen Defendant Investment Banking Firms.

1. Morgan Stanley & Co.

2. Kuhn Loeb & Co.

3. Smith Barney & Co.

4. Lehman Brothers.

5. Glore Forgan & Co.

6. Kidder Peabody & Co.

7. Goldman Sachs & Co.

8. White Weld & Co.

9. Eastman Dillon & Co.

10. Drexel & Co.

11. The First Boston Corporation

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12. Dillon Read & Co., Inc.

13. Blyth & Co., Inc.

14. Harriman Ripley & Co., Incorporated.

15. Stone & Webster Securities Corporation.

16. Harris Hall & Company (Incorporated).

17. Union Securities Corporation

PART III:

The Syndicate System.

I. Did the Seventeen Defendant Investment Banking Firms Use the Syndicate System as a Conspiratorial Device in Connection with Any Integrated Over-all Combination?

II. Alternate Claims Belatedly Attempted to Be Asserted against the Investment Banking Industry as a Whole.

A. The Rule of Reason. B. The Securities Act of 1933, the Securities

Exchange Act of 1934, and the Amendments Thereto; the Rules, Interpretations and Releases of the SEC Thereunder; and the Organization and Functioning of the NASD.

C. The Opinion of the SEC in the Public Service

Company of Indiana Case.

Some Interim Observations.

PART IV:

Did the Seventeen Defendant Investment Banking Firms Combine for the Purpose of Dominating and Controlling and Did They in Fact Dominate and Control the Financial Affairs of Issuers by Directorships and Solicitation of Proxies?

Proxies.

Burlington Mills.

Jewel Tea.

The Evidence Generally Applicable to Directorships Discloses No Conspiratorial Pattern but Rather the Contrary.

First Boston.

Addinsell and Phillips Petroleum.

Harriman Ripley.

United Air Lines.

Union Securities.

Directorship Evidence against Goldman Sachs, Lehman Brothers, Kuhn Loeb, Dillon Read and Blyth.

Goldman Sachs.

Lehman Brothers.

Cluett Peabody.

Food Fair.

Allied Stores.

Aviation Corporation.

Sears Roebuck.

Cleveland Cliffs Iron Co.

Kuhn Loeb.

Franklin Simon.

Miscellanea.

Dillon Read.

National Cash Register.

Amerada Petroleum.

Outlet Company.

Beneficial Industrial Loan.

Union Oil.

Commercial Investment Trust.

Rheem.

Blyth.

Rayonier.

Pan American Airways.

Anaconda Copper.

Iron Fireman.

Some Further Interim Observations.

PART V:

The 'Triple Concept'. Semantics. 'Historical Position'. Chicago Union Station. The Alleged 'Practice' of 'Traditional Banker' and 'Successorships'.

1. Morgan Stanley.

The 'Master Mind'. The Telephone Business. Consumers Power.

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The Alleged 'Caretaker' Situations. Dayton Power & Light. Atlantic Coast Line, Toledo & Ohio Central, Chicago &

Western Indiana, Nypano (New York, Pennsylvania & Ohio) and Dominion of Canada.

2. Kuhn Loeb.

The Otto H. Kahn 'Show Window'. Bulgaria. Commonwealth of Australia. Armstrong Cork. Bethlehem Steel. R. H. Macy & Co. Crucible Steel. General Cable.

3. Smith Barney (Edward B. Smith & Co.).

What Is Now Taking Shape Is Not a Static 'Mosaic' of

Conspiracy but a Constantly Changing Panorama of Competition Among the Seventeen Defendant Firms.

Wilson & Co. Rochester Gas & Electric. A. E. Staley Manufacturing Co. Aluminum Koppers, Jones & Laughlin, Lone Star Gas, Gulf

Oil.

Southern Pacific. Standard Oil of New Jersey.

4. Lehman Brothers.

Crown Zellerbach. Giannini Interests. The So-Called 'Treaties' Between Lehman Brothers and

Goldman Sachs.

National Dairy Products. Butler Bros., Associated Gas & Electric, Indianapolis

Power & Light and Tidewater Associated Oil.

5. Glore Forgan.

Indianapolis Power & Light.

6. Kidder Peabody.

Pennsylvania Power & Light.

7. Goldman Sachs.

Pillsbury.

8. White Weld.

9. Eastman Dillon.

10. Drexel.

11. First Boston.

Province of Cordoba, Androscoggin Electric Corp., and

Central Maine Power.

12. Dillon Read.

Scovill Manufacturing Co., Scripps, Porto Rican American

Tobacco Co., Argentine Government, American Radiator and Grand Trunk Western.

United Drug. Shell Union Oil.

13. Blyth.

Pacific Gas & Electric. Competition for Leadership 1934-1936. The Alleged Overly-Large Syndicate Formed By Blyth in

Connection with the $80,000,000 Issue of March 27, 1945.

The Sale in 1945 of 700,000 Shares of Common Stock of

Pacific Gas & Electric Held by North American.

14. Harriman Ripley.

Scandinavian Financings.

15, 16 and 17. Stone & Webster, Harris Hall and Union Securities.

PART VI:

Alleged Conspiratorial Opposition of the Seventeen Defendant Banking Firms to 'Shopping Around,' and to the Campaign for Compulsory Public Sealed Bidding; and the Alleged Adoption of Devices to Sabotage SEC Rule U-50 and Compulsory Public Sealed Bidding in General.

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General Views on Competitive Bidding and the Advantages to Issuers Arising Out of Continuing Banker Relationships.

The Eaton-- Young-- Halsey Stuart Campaign.

Responses to Requests from SEC to Express Views Relative to Proposed Rule U-20 and Further Amendments to Rule U-12F-2.

Alleged Overly-Large Syndicates and Other 'Devices' to Sabotage Public Sealed Bidding.

PART VII:

The 'Insurance Agreement,' Alleged to Have Been Made on December 5, 1941, and 'Approved' on May 5, 1942.

PART VIII:

Conclusion.

Administrative Features and Statistics of the Trial

Summary, Rulings on Motions and Dismissal.

APPENDIX:

Summary Description of Statistical Compilations, Tables and Charts.

MEDINA, Circuit Judge.

Introduction

This is a civil action in equity to restrain the continuance of certain alleged violations of Sections 1 and 2 of the Sherman Act, Act of Congress of July 2, 1890, c. 647, 26 Stat. 209, 15 U.S.C. §§ 1, 2, 4. It is charged that defendants entered into a combination, conspiracy and agreement to restrain and monopolize the securities business of the United States and that such business was thereby unreasonably restrained and in part monopolized.

The 'securities business' which is the subject of these charges is defined in the complaint in terms that are uncertain and in part contradictory. In the clarifying process of pretrial hearings and trial, however, counsel for plaintiff receded in part from the allegations of the complaint. As finally re-defined, plaintiff's position is that the 'security issues' to which the charges of the complaint should be understood to relate are intended to include new issues, and secondary offerings registered with the Securities and Exchange Commission under the Securities Act of 1933, 15 U.S.C.A. § 77a et seq., of securities of domestic and foreign business corporations and foreign governmental units and...

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43 practice notes
  • 286 F.2d 786 (2nd Cir. 1961), 51, Blau v. Lehman
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • 20 Diciembre 1961
    ...brief to certain general statements in the findings contained in the opinion in United States v. Morgan et al., D.C.S.D.N.Y.1953, 118 F.Supp. 621. These must be understood against the background of the entire history of the investment banking business in the United States Page 790 that was ......
  • 61 F.R.D. 453 (S.D.N.Y. 1973), MDL-56A, In re Penn Central Commercial Paper Litigation
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • 29 Noviembre 1973
    ...(1972) [hereinafter cited as SEC Report]. [4] For an exhaustive account of the investment banking business see United States v. Morgan, 118 F.Supp. 621, 635-655 (S.D.N.Y.1953) (per Medina, Circuit [5] Pierson, Heldring & Pierson; First Boston; Glore Forgan; N.M. Rothschild & Sons an......
  • 424 F.2d 63 (2nd Cir. 1970), 61-63, S.E.C. v. North Am. Research & Development Corp.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • 25 Marzo 1970
    ...See SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186-187, 84 S.Ct. 275, 11 L.Ed.2d 237 (1964); United States v. Morgan, 118 F.Supp. 621, 691-692 (S.D.N.Y.1953); 6 L. Loss, Securities Regulation 3915-16 (1969). Thus the courts have recognized in regard to other securities statut......
  • 367 F.Supp. 91 (S.D.N.Y. 1973), 61 Cr. 772, United States v. Chas. Pfizer & Co., Inc.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • 30 Noviembre 1973
    ...proof, finds guidance for the decisional process in Judge Medina's statement in the Investment Bankers' case, United States v. Morgan, 118 F.Supp. 621, 634 (S.D.N.Y. 1953). True it is that conspiracies whether by business men or others engaged in unlawful schemes are often hard to detect. N......
  • Request a trial to view additional results
40 cases
  • 286 F.2d 786 (2nd Cir. 1961), 51, Blau v. Lehman
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • 20 Diciembre 1961
    ...brief to certain general statements in the findings contained in the opinion in United States v. Morgan et al., D.C.S.D.N.Y.1953, 118 F.Supp. 621. These must be understood against the background of the entire history of the investment banking business in the United States Page 790 that was ......
  • 61 F.R.D. 453 (S.D.N.Y. 1973), MDL-56A, In re Penn Central Commercial Paper Litigation
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • 29 Noviembre 1973
    ...(1972) [hereinafter cited as SEC Report]. [4] For an exhaustive account of the investment banking business see United States v. Morgan, 118 F.Supp. 621, 635-655 (S.D.N.Y.1953) (per Medina, Circuit [5] Pierson, Heldring & Pierson; First Boston; Glore Forgan; N.M. Rothschild & Sons an......
  • 424 F.2d 63 (2nd Cir. 1970), 61-63, S.E.C. v. North Am. Research & Development Corp.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Second Circuit
    • 25 Marzo 1970
    ...See SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186-187, 84 S.Ct. 275, 11 L.Ed.2d 237 (1964); United States v. Morgan, 118 F.Supp. 621, 691-692 (S.D.N.Y.1953); 6 L. Loss, Securities Regulation 3915-16 (1969). Thus the courts have recognized in regard to other securities statut......
  • 367 F.Supp. 91 (S.D.N.Y. 1973), 61 Cr. 772, United States v. Chas. Pfizer & Co., Inc.
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • 30 Noviembre 1973
    ...proof, finds guidance for the decisional process in Judge Medina's statement in the Investment Bankers' case, United States v. Morgan, 118 F.Supp. 621, 634 (S.D.N.Y. 1953). True it is that conspiracies whether by business men or others engaged in unlawful schemes are often hard to detect. N......
  • Request a trial to view additional results
1 firm's commentaries
  • Writing for Mealey's, Tom Bush Analyzes Antitrust Issues with Joint Underwriting
    • United States
    • JD Supra United States
    • 26 Febrero 2015
    ...221-23 (1940). 41. Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 21-23 (1979); see United States v. Morgan, 118 F. Supp. 621, 686-91 (S.D.N.Y. (finding syndicates of securities underwriters legal under the rule of reason). 42. Broadcast Music, supra; NCAA v. Board......
2 books & journal articles
  • Shortcuts to 'truth': the legal mythology of dying declarations.
    • United States
    • American Criminal Law Review Vol. 35 Nbr. 2, January 1998
    • 1 Enero 1998
    ...they assume that the end justify the means. But that theory can never be sustained in a court of law."); United States v. Morgan, 118 F. Supp. 621, 634 (S.D.N.Y. 1953) ("[Contentions by defendants do not represent] the law but only another aspect of the false but seductive doctrin......
  • A capital markets approach to mass tort bankruptcy.
    • United States
    • Yale Law Journal Vol. 104 Nbr. 2, November - November 1994
    • 1 Noviembre 1994
    ...For a thorough review of the development of the securities underwriting industry in the United States, see United States v. Morgan, 118 F. Supp. 621, 635-55 (S.D.N.Y 1953). (181). Cf. Roe, supra note 74, at 559-62. Roe, to the best of my knowledge, was the first to suggest that the capital ......