United States v. United Shoe Machinery Corporation, Civ. A. No. 7198.

• Decision Date: 18 April 1967
• Docket Number: Civ. A. No. 7198.
• Citation: 266 F. Supp. 328
• Parties: UNITED STATES of America v. UNITED SHOE MACHINERY CORPORATION.
• Court: U.S. District Court — District of Massachusetts

266 F. Supp. 328

UNITED STATES of America v. UNITED SHOE MACHINERY CORPORATION.

Civ. A. No. 7198.

United States District Court D. Massachusetts.

April 11, 1967.

As Corrected April 18, 1967.

Margaret H. Brass, W. Randolph Elliott, Robert J. Ludwig, Washington, D. C., Sp. Attys. for the United States, (Donald F. Turner, Asst. Atty. Gen., and Paul F. Markham, U. S. Dist. Atty.) for plaintiff.

Ralph M. Carson, New York City, Robert Proctor, Boston, Mass., Taggart Whipple, Louis L. Stanton, Jr., New York City, Robert D. Salinger, Boston, Mass., Davis, Polk, Wardwell, Suderland & Kiendl, of New York City, Choate, Hall & Stewart, Boston, Mass., Carter, Ledyard & Milburn, New York City, for defendant.

Thomas F. Shannon, James F. Rill, Andrew E. Zelman, Washington, D. C., for amicus curiae, National Footwear Manufacturers Association, of counsel, Collier, Shannon & Rill, Washington, D. C., Benjamin A. Trustman, John R. Hally, Boston, Mass. (of Nutter, McClennen & Fish, Boston, Mass.), amicus curiae, New England Footwear Manufacturers Association, Inc.

OPINION

WYZANSKI, Chief Judge.

The Government and United Shoe Machinery Corporation have each filed a petition for modification of this Court's decree of February 18, 1953, affirmed by the Supreme Court of the United States May 17, 1954, and subsequently modified July 12 and September 17, 1954. See United States v. United Shoe Machinery Corp., 110 F.Supp. 295 (D.Mass.), aff'd United Shoe Machinery Corp. v. United States, 347 U.S. 521, 74 S.Ct. 699, 98 L. Ed. 910.

The Government's petition seeks to have United dissolved into two companies. United seeks to have the restrictions now imposed limited to requirements of sale of any machine types offered for lease, maintenance of a reasonable commercial relationship between sale terms and lease terms, separate charges for service, and avoidance of restrictive clauses such as the full capacity clause. Both petitions rely upon the following language in paragraph 18 of the decree:

"On C Day December 23, 1964 both parties shall report to this Court the effect of this decree, and may then petition for its modification, in view of its effect in establishing workable competition. If either party takes advantage of this paragraph by filing a petition, each such petition shall be accompanied by affidavits setting forth the then structure of the shoe machinery market and defendant's power within that market."

Threshold questions are what is the scope of this Court's power in these proceedings, what standards are to be applied in the exercise of this power, and what issues are before this Court. With respect to the first two questions an authoritative answer is given by United States v. Swift & Co., 286 U.S. 106, 52 S.Ct. 460, 76 L.Ed. 999. A court can modify a continuing injunction not on the basis of conditions that existed at its making, but only on the basis of new and unforeseen conditions. Moreover, the court should require a clear showing of grievous wrong. In Swift, where the Supreme Court denied a defendant's application to have a decree modified, it enunciated the criteria in the following words (286 U.S. at p. 119, 52 S.Ct. p. 464) applicable mutatis mutandis to a plaintiff's application:

"There is need to keep in mind steadily the limits of inquiry proper to the case before us. We are not framing a decree. We are asking ourselves whether anything has happened that will justify us now in changing a decree. The injunction, whether right or wrong, is not subject to impeachment in its application to the conditions that existed at its making. We are not at liberty to reverse under the guise of readjusting. Life is never static, and the passing of a decade has brought changes to the grocery business as it has to every other. The inquiry for us is whether the changes are so important that dangers, once substantial, have become attenuated to a shadow. No doubt the defendants will be better off if the injunction is relaxed, but they are not suffering hardship so extreme and unexpected as to justify us in saying that they are the victims of oppression. Nothing less than a clear showing of grievous wrong evoked by new and unforeseen conditions should lead us to change what was decreed after years of litigation with the consent of all concerned."

Swift has been followed consistently. Morse-Starrett Products Co. v. Steccone, 205 F.2d 244 (9th Cir.); Bigelow v. Twentieth Century-Fox Film Corp., 183 F.2d 60 (7th Cir.); United States v. Lucky Lager Brewing Co. of San Francisco, 209 F.Supp. 665 (D.Utah).

Nothing in paragraph 18 of the decree departs from Swift's teaching or purports to confer upon this Court a broader power to alter its decree, or authority to apply different standards. The requirements remain (1) a clear showing of (2) grievous wrong (3) evoked by new and unforeseen conditions. Indeed if paragraph 18 gave this Court the power to alter a decree on any lesser showing the decree would not have been final and appealable to the Supreme Court.

What paragraph 18 does is to direct the parties to an issue: the decree's "effect in establishing workable competition" the phrase was unfortunate because it has no precise legal meaning. But if paragraph 18 be read against the accompanying opinion, United States v. United Shoe Machinery Corp., D.C., 110 F.Supp. 295, it is apparent that what the Court was inviting was information as to how successful the decree had been in gradually eroding United's 1953 power to monopolize the market. The opinion makes it plain that the object of the decree was during a ten year period not to restore so-called workable competition but to move toward establishing it.

The issue now raised requires that this Court first state what it knew at the time of the decree and what it then chose.

The following were among the facts of which this Court was aware in 1953. United had by far the largest financial and patent resources in the shoe machinery industry. It was the only company that offered a wide line of machine types. If United were allowed to continue leasing, even on a basis that gave shoe factories an alternative to purchase the leased machine at an equivalent price, almost all shoe factories would prefer to lease their new and more complicated machines. That preference would enable United to continue its visits to most shoe factories. It would permit United to place machines on lease on an experimental basis. It should make it difficult for any competitor to succeed in connection with the marketing of complicated expensive types of machinery for which there was a thin market unless the competitor had resources adequate to offer a long line of machine types, to accept compensation in the deferred form of rental payments, to make its lease terms the commercial equivalent of its sale terms, and to withstand the at least temporary inconvenience of having leased machines returned after a short rental period. In short, this Court was quite cognizant of the fact that permitting United to continue as a single enterprise engaged predominantly in leasing rather than selling made it almost certain that at the end of a decade, absent a strong outside challenger, United's market power would be merely diminished not destroyed.

Yet this Court chose not to dissolve United, and not to prohibit leasing, but merely to purge the leases of certain specific restrictive clauses, to require United to offer lessees the alternative of purchasing, and to require United to take certain miscellaneous steps which need not now be recited. Among the reasons that this Court made this choice were that the Supreme Court had approved the constitution of United as a single enterprise, that it had permitted United to proceed with leasing as an exclusive method of distributing machines, that United had engaged in no predatory or immoral practices, and that United owed much of its position to superior products and services, to its own inventions, and to other results of United's skill, ability, and efficiency.

Both parties have submitted requests for findings. They have been helpful in directing this Court's attention to what the decree has accomplished, to what are the dynamics of the 1963-1964 hereafter sometimes called "the present" shoe machinery market, to the freedom of choice now enjoyed by the shoe factory users of shoe machinery, and to the freedom of competitors in the present market structure. But those topics need not be covered by this Court in detail and hence, so far as not granted herein, all requests for findings are denied.

Paragraph 18 of the decree by referring to affidavits indicated that this would be a summary proceeding. It is important not to plague anti-trust law by establishing a precedent which might lead to full scale second trials of anti-trust cases on every claim that, as shown by its effects, an outstanding decree was too lenient or too severe. The only findings which this Court deems appropriate and necessary follow in numbered paragraphs.

1. United complied fully with this Court's decree.

2. Before the 1953 decree United's share of the shoe machinery market by any measure was about 85 per cent. While in 1953 there was no specific finding with respect to United's then share of the revenue from shoe machinery sold and leased, it is a fair inference that, because of its strong position in the distribution of major machines yielding the largest revenue, United's share of the total revenue exceeded 85 per cent. In 1963 it had declined to about 62 per cent of the current shoe machinery market.

3. That market now includes machines for the manufacture of vulcanized rubber footwear because such machines are competitive with injection moulding machines and other shoe machinery, are used in conventional shoe factories, and are used for both leather-upper and fabric-upper footwear.

4. The aforesaid revenue percentage of the shoe machinery market is a far more satisfactory index of share of the...