United States v. EI du Pont de Nemours and Company
| Decision Date | 03 December 1954 |
| Docket Number | Civ. A. No. 49 C-1071. |
| Citation | 126 F. Supp. 235 |
| Parties | UNITED STATES of America, Plaintiff, v. E. I. DU PONT DE NEMOURS AND COMPANY, General Motors Corporation, United States Rubber Company, Christiana Securities Company, Delaware Realty & Investment Corporation, Pierre S. du Pont, Lammot du Pont, Irenee du Pont, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Stanley N. Barnes, Asst. Atty. Gen., and Victor H. Kramer, Washington, D. C., Earl A. Jinkinson and Willis L. Hotchkiss, Sp. Assts. to the Atty. Gen., Ewart Harris, Paul V. Ford, Charles W. Houchins, Chicago, Ill., Margaret H. Brass, Washington, D. C., Dorothy M. Hunt, Francis C. Hoyt, and Raymond P. Hernacki, Chicago, Ill., for the United States.
Covington & Burling, Washington, D. C., by John Lord O'Brian, Hugh B. Cox, Charles A. Horsky, Daniel M. Gribbon, Wilbur R. Lester, Washington, D. C., Sidley, Austin, Burgess & Smith, Chicago, Ill., by Howard Neitzert George Ragland, Jr., Chicago, Ill., for defendant E. I. du Pont de Nemours and Co.
Root, Ballantine, Harlan, Bushby & Palmer, New York City, by John M. Harlan, Philip C. Scott, New York City, Sidley, Austin, Burgess & Smith, Chicago, Ill., by Howard Neitzert, George Ragland, Jr., Chicago, Ill., for defendants Pierre S. du Pont, Irenee du Pont, Christiana Securities Co. and Delaware Realty and Investment Corp.
Pope & Ballard, Chicago, Ill., by Ferris E. Hurd, Frank F. Fowle, Jr., Chicago, Ill., Henry M. Hogan, and Robert A. Nitschke, Detroit, Mich., James D. Carpenter, Jersey City, N. J., William A. Grier, New York City, for defendant General Motors Corp.
Snyder, Chadwell & Fagerburg, Chicago, Ill., by John T. Chadwell, Rudy L. Ruggles, James A. Rahl, Chicago, Ill., Arthur, Dry & Dole, New York City, by Paul H. Arthur, Morris E. Dry, Nelson F. Taylor, Walter Barthold, Jr., New York City, for defendant United States Rubber Co.
Howard Ellis, Chicago, Ill., A. Leslie Hodson, Chicago, Ill., guardian ad litem for certain minor defendants.
Andrew J. Dallstream, Chicago, Ill., guardian ad litem for certian minor defendants.
Claude A. Roth, Chicago, Ill., guardian ad litem and Atty., for Henry Belin du Pont, III.
Moore, Prangley & Clayton, Chicago, Ill., by Mark H. Clayton, Chicago, Ill., Berl, Potter & Anderson, Wilmington, Del., by William S. Potter and William Poole, Wilmington, Del., Morris, Steel, Nichols & Arsht, Wilmington, Del., by Alexander L. Nichols, Wilmington, Del., for certain individual defendants.
Winston, Strawn, Black & Towner, Chicago, Ill., by Guy A. Gladson and Thomas A. Reynolds, Chicago, Ill., Richards, Layton & Finger, Wilmington, Del., by Robert H. Richards, Jr., Wilmington, Del., for defendant Wilmington Trust Co.
LA BUY, District Judge.
This action is brought by the United States Government for alleged violation by defendants of Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2, declaring illegal every contract, combination or conspiracy in restraint of trade and prohibiting monopolization or the attempt to monopolize trade and commerce, and Section 7 of the Clayton Act, 15 U.S.C.A. § 18, declaring illegal the acquisition of stock by a corporation in another where the effect of such acquisition may be to substantially lessen competition or tend to create a monopoly.
The defendants against whom the action is brought are named and identified in the amended complaint as follows:
The three defendant "manufacturers": E. I. du Pont de Nemours and Company, General Motors Corporation, and United States Rubber Company. All of these companies transact business within the Northern District of Illinois and are found here.
The three "corporate" defendants: Christiana Securities Company; Delaware Realty & Investment Corporation; and Wilmington Trust Company, individually and as trustee.
The remaining defendants come within the categoric description of "members of the du Pont family." These members of the du Pont family are divided into the following:
The three "defendant individuals": Pierre S. du Pont and Lammot du Pont, for whom Suggestions of Death were filed May 6, 1954 and January 16, 1953, respectively; and Irenee du Pont.
The five "individual defendants": Lammot du Pont Copeland; Colgate W. Darden, Jr.; Henry Belin du Pont; Pierre S. du Pont III; and George P. Edmonds. These defendants are alleged to be members of the du Pont family and to hold substantial amounts of voting stock of the defendant United States Rubber Company.
The twenty-six "beneficiary" defendants, ten of whom are minors, also identified as "party in interest" defendants, who are not named as conspirators and who are beneficiaries of one or more trusts of which the defendant Wilmington is trustee.
With the exception of the twenty-six beneficiary defendants, all defendants are alleged to have participated in acts which violate the anti-trust statutes.
The Government's statement of the offense is stated as follows:
The Amended Complaint charges that the defendants have engaged in a conspiracy to restrain trade in certain products produced by the du Pont Company, United States Rubber, and General Motors, in violation of Section 1 of the Sherman Act, and to monopolize a substantial part of such trade in violation of Section 2 of the Sherman Act. It also alleges that the defendant du Pont Company has acquired a controlling interest in the stock or other share capital of General Motors in violation of Section 7 of the Clayton Act. The Amended Complaint states further that the defendants have done the things which they conspired to do, namely, that they have restrained trade and monopolized a part of the commerce in certain products. (Post-trial Brief, U.S., Vol. I, p. 3.)
In its summary of the statement of evidence the Government states that the evidence, when viewed as a whole, shows that the defendants have designed and followed a pattern of business conduct which has three basic objectives. The first of these objectives has consisted of obtaining control of the management and policies of the three manufacturing defendants, du Pont, General Motors, and United States Rubber. The second of these objectives has consisted of the creation and exploitation of protected markets for certain of the products produced by du Pont and United States Rubber, to the exclusion of competitive suppliers. The third of these objectives has consisted of the reservation of certain exclusive fields of production to the du Pont Company. These three purposes have been served by the fostering of a network of interrelationships among the corporate and individual defendants. This has insured the perpetuation of control of the corporate entities under persons possessing in essence the same interests, and has enhanced the market position of each of the manufacturing defendants.
The Government further charges that the central thread of the entire pattern of conduct is the acquisition of interlocking stock controls and the use of such controls to dominate the management of the controlled corporations. (Post-trial Brief, U.S., Vol. I, p. 5.)
There is no dispute regarding the facts culminating in the formation of the present du Pont Company. From 1802 to 1899 it was operated as a family partnership. The first corporate predecessor to du Pont was formed in 1899. In 1902 T. Coleman du Pont, Alfred I. du Pont, and Pierre S. du Pont acquired the assets of the 1899 company pursuant to a proposal advanced by Alfred I. du Pont. These assets were later taken over by the 1903 company. Until 1915, T. Coleman du Pont was the largest stockholder in du Pont; his holdings being about equal to the combined holdings of Alfred I. du Pont and Pierre S. du Pont. The present du Pont Company was organized in 1915 to succeed the 1903 company.
The factual approach to the issues involved herein will be clarified and simplified by division of this memorandum into two general categories: First, the aspects of alleged control reflected in stock holdings, selection of officers, board and committee members; and, second, the trade aspects. The issue of conspiracy underlying as it does both phases of the case is of necessity interwoven and inseparable and is an ultimate fact which permeates the entire case.
In December 1914 T. Coleman du Pont offered to sell a substantial block of his du Pont stock to du Pont for resale by the company to its principal younger executives, but the offer was rejected since the price was considered too high.
In the early part of 1915 T. Coleman du Pont offered to sell his stock to Pierre S. du Pont and others at a higher price.
It is admitted that in 1915 Christiana was formed by a syndicate composed of Pierre S. du Pont, Lammot du Pont, Irenee du Pont, together with A. Felix du Pont, R. R. M. Carpenter, and John J. Raskob, for the purpose of acquiring this stock.
The evidence shows that Christiana was organized so that members of the syndicate could use the stock of the corporation as security for a loan it was necessary for them to obtain to buy the stock of Coleman du Pont.
This block of stock consisting of 63,314 shares of common and 14,599 shares of preferred was transferred to Christiana along with 28,177 shares of du Pont common transferred to it by the six syndicate members. The six incorporators of Christiana held all of the 75,000 shares of Christiana. The day after Christiana was organized each returned to its treasury approximately 15% of the Christiana stock to be distributed to the chairman of the Executive Committee of du Pont, the eight department heads of du Pont, and the General Counsel of du Pont under an agreement that the stock so assigned to each would become his property if he continued in the employ of the company for one year and that no assignee would sell or hypothecate the stock for three years. After this allocation, the six incorporators held 68,250 shares of the 75,000 outstanding shares of Christiana.
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