148 F.2d 416 (2nd Cir. 1945), 144, United States v. Aluminum Co. of America

Docket Nº:144.
Citation:148 F.2d 416, 65 U.S.P.Q. 6
Case Date:March 12, 1945
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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148 F.2d 416 (2nd Cir. 1945)

65 U.S.P.Q. 6




No. 144.

United States Court of Appeals, Second Circuit.

March 12, 1945

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Charles Fahy, Sol. Gen., of Bashington, D.C., and Lawrence S. Apsey, of New York City (Norman A. Adler, of New York City, Edward S. Stimson, Robert L. Stern, and Aute L. Carr, all of Washington, D.C., Jesse R. O'Malley, of Cincinnati, Ohio, Marcus A. Hollabaugh, of Washington, D.C., Maurice Godin, of New York City, and Irving Lipkowitz, of Washington, D.C., on the brief), for appellant.

William Watson Smith, of Pittsburgh, Pa. (Frank B. Ingersoll and Leon E. Hickman, both of Pittsburgh, Pa., and Charles E. Hughes, Jr., and William T. Gossett, both of New York City, on the brief), for appellees Aluminum Co. of America and others.

Timothy N. Pfeiffer, of New York City (Morris Hadley, Rebecca M. Cutler, and Rudolph B. Schlesinger, all of New York City, on the brief), for appellees Aluminum Limited and others.

A. L. Nash, of Manitowoc, Wis., and Roger S. Baldwin and E. Raymond Shephard, both of New York City, for Aluminum Goods Mfg. Co.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

This appeal comes to us by virtue of a certificate of the Supreme Court, under the amendment of 1944 to § 29 of 15 U.S.C.A. The action was brought under § 4 of that title, praying the district court to adjudge that the defendant, Aluminum Company of America, was monopolizing interstate and foreign commerce, particularly in the manufacture and sale of 'virgin' aluminum ingot, and that it be dissolved; and further to adjudge that that company and the defendant, Aluminum Limited, had entered into a conspiracy in restraint of such commerce. It also asked incidental relief. The plaintiff filed its complaint on April 23, 1937, naming sixty-three defendants: ten of these were not served and did not appear; one died, and one corporate defendant was dissolved before the action was brought: the complaint was dismissed against another. At the date of judgment there were fifty-one defendants who had been served and against whom the action was pending. We may divide these, as the district judge did, into four classes: Aluminum Company of America, with its wholly owned subsidiaries, directors, officers and shareholders. (For convenience we shall speak of these defendants collectively as 'Alcoa, ' that being the name by which the company has become almost universally known.) Next, Aluminum Limited, with its directors, officers and shareholders. (For the same reason we shall speak of this group as 'Limited.') Third: the defendant, Aluminum Manufactures, Inc., which may be treated as a subsidiary of 'Alcoa.' Fourth: the defendant, Aluminum Goods Manufacturing Company, which is independent of 'Alcoa, ' as will appear. The action came to trial on June 1, 1938, and proceeded without much interruption until August 14, 1940, when the case was closed after more than 40, 000 pages of testimony had been taken. The judge took time to consider the evidence, and delivered an oral opinion which occupied him from September 30, to October 9, 1941. Again he took time to prepare findings of fact and conclusions of law which he filed on July 14, 1942; and he entered final judgment dismissing the complaint on July 23rd, of that year. The petition for an appeal, and assignments of error, were filed on September 14, 1942, and the petition was allowed on the next day. On June 12, 1944, the Supreme Court, declaring that a quorum of six justices qualified to hear the case was wanting, referred the appeal to this court under § 29 of Title 15, already mentioned. The district judge's opinion, reported in D.C., 44 F.Supp. 97, discussed the evidence with the utmost particularity; it took up every phase and every issue with the arguments of both parties, and provided a reasoned basis for the subsequent findings of fact and conclusions of law. For the purposes of this appeal we need not repeat the greater part of the facts; so far as it is necessary, we do so, leaving acquaintance with the remainder to the opinion itself. Although the plaintiff challenged nearly all of the 407 findings of fact, with negligible exceptions these challenges were directed, not to misstatements of the evidence, but to the judge's inferences- alleged to be 'clearly erroneous.' For convenience

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we have divided our discussion into four parts: (1) whether 'Alcoa' monopolized the market in 'virgin' aluminum ingot; (2) whether 'Alcoa' was guilty of various unlawful practices, ancillary to the establishment of its monopoly; (3) whether 'Limited' and 'Alcoa' were in an unlawful conspiracy; and whether, if not, 'Limited' was guilty of a conspiracy with foreign producers; (4) what remedies are appropriate in the case of each defendant who may be found to have violated the Act.


'ALCOA'S MONOPOLY OF 'Virgin' Ingot.

'Alcoa' is a corporation, organized under the laws of Pennsylvania on September 18, 1888; its original name, 'Pittsburgh Reduction Company, ' was changed to its present one on January 1, 1907. It has always been engaged in the production and sale of 'ingot' aluminum, and since 1895 also in the fabrication of the metal into many finished and semi-finished articles. It has proliferated into a great number of subsidiaries, created at various times between the years 1900 and 1929, as the business expanded. Aluminum is a chemical element; it is never found in a free state, being always in chemical combination with oxygen. One form of this combination is known as alumina; and for practical purposes the most available material from which alumina can be extracted is an ore, called, 'bauxite.' Aluminum was isolated as a metal more than a century ago, but not until about 1886 did it become commercially practicable to eliminate the oxygen, so that it could be exploited industrially. One, Hall, discovered a process by which this could be done in that year, and got a patent on April 2, 1889, which he assigned to 'Alcoa, ' which thus secured a legal monopoly of the manufacture of the pure aluminum until on April 2, 1906, when this patent expired. Meanwhile Bradley had invented a process by which the smelting could be carried on without the use of external heat, as had theretofore been thought necessary; and for this improvement he too got a patent on February 2, 1892. Bradley's improvement resulted in great economy in manufacture, so that, although after April 2, 1906, anyone could manufacture aluminum by the Hall process, for practical purposes no one could compete with Bradley or with his licensees until February 2, 1909, when Bradley's patent also expired. On October 31, 1903, 'Alcoa' and the assignee of the Bradley patent entered into a contract by which 'Alcoa' was granted an exclusive license under that patent, in exchange for 'Alcoa's' promise to sell to the assignee a stated amount of aluminum at a discount of ten per cent below 'Alcoa's' published list price, and always to sell at a discount of five per cent greater than that which 'Alcoa' gave to any other jobber. Thus until February 2, 1909, 'Alcoa' had either, a monopoly of the manufacture of 'virgin' aluminum ingot, or the monopoly of a process which eliminated all competition.

The extraction of aluminum from alumina requires a very large amount of electrical energy, which is ordinarily, though not always, most cheaply obtained from water power. Beginning at least as early as 1895, 'Alcoa' secured such power from several companies by contracts, containing in at least three instances, covenants binding the power companies not to sell or let power to anyone else for the manufacture of aluminum. 'Alcoa'- either itself or by a subsidiary- also entered into four successive 'cartels' with foreign manufacturers of aluminum by which, in exchange for certain limitations upon its import into foreign countries, it secured covenants from the foreign producers, either not to import into the United States at all, or to do so under restrictions, which in some cases involved the fixing of prices. These 'cartels' and restrictive covenants and certain other practices were the subject of a suit filed by the United States against 'Alcoa' on May 16, 1912, in which a decree was entered by consent on June 7, 1912, declaring several of these covenants unlawful and enjoining their performance; and also declaring invalid other restrictive covenants obtained before 1903 relating to the sale of alumina. ('Alcoa' failed at this time to inform the United States of several restrictive covenants in water-power contracts; its justification-which the judge accepted- being that they had been forgotten.) 'Alcoa' did not begin to manufacture alumina on its own behalf until the expiration of a dominant patent in 1903. In that year it built a very large alumina plant at East St. Louis, where all of its alumina was made until 1939, when it opened another plant in Mobile, Alabama.

None of the foregoing facts are in dispute, and the most important question in the case is whether the monopoly in 'alcoa's' production of 'virgin' ingot, secured

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by the two patents until 1909, and in part perpetuated between 1909 and 1912 by the unlawful practices, forbidden by the decree of 1912, continued for the ensuing twenty-eight years; and whether, if it did, it was unlawful under § 2 of the Sherman Act, 15 U.S.C.A. § 2. It is undisputed that throughout this period 'Alcoa' continued to be the single producer of 'virgin' ingot in the United States; and the plaintiff argues that this without more was enough to make it an unlawful monopoly. It also takes an alternative position: that in any event during this period 'Alcoa' consistently pursued...

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