United States v. Borden Co.

• Decision Date: 13 July 1939
• Docket Number: No. 31197.,31197.
• Citation: 28 F. Supp. 177
• Parties: UNITED STATES v. BORDEN CO. et al.
• Court: U.S. District Court — Northern District of Illinois

28 F. Supp. 177

UNITED STATES v. BORDEN CO. et al.

No. 31197.

District Court, N. D. Illinois, E. D.

July 13, 1939.

William J. Campbell, U. S. Dist. Atty., of Chicago, Ill., Thurman Arnold, Asst. Atty. Gen., and Leo F. Tierney, Maurice L. A. Gellis, Christopher Del Sesto, Daniel B. Britt, H. Douglas Weaver, Thomas H. Daly, Geo. P. Alt, and Sheridan Morgan, Sp. Assts. to Atty. Gen., for plaintiff.

Frederic Burnham, Donald F. McPherson, Cecil I. Crouse, Howard Neitzert, and Miles G. Seeley, all of Chicago, Ill., for defendants Borden Co. and others.

Louis E. Hart, Irving Herriott, and L. Edward Hart, Jr., all of Chicago, Ill., for defendants Bowman Dairy Co. and others.

Gann, Secord, Stead & McIntosh, Loy N. McIntosh, and Bernhardt Frank, all of Chicago, Ill., for defendants Sidney Wanzer & Sons, Inc. and others.

Charles S. Deneen, Roy Massena, and Donald N. Schaffer, all of Chicago, Ill., for defendants Hunding Dairy Co. and others.

Isidore Fried, Herbert B. Fried, and Bernard A. Stol, all of Chicago, Ill., for defendants Capitol Dairy Co. and others.

Edward H. Murnane and James A. Harrington, both of Chicago, Ill., for defendants Western United Dairy Co., Inc., United Dairy Co., Western Dairy Co., and others.

Russell J. McCaughey, Fred C. Nonnamaker, Jr., and Packard, Barnes, McCaughey & Schumacher, all of Chicago, Ill., for defendants Associated Milk Dealers, Inc., and others.

George W. Lennon, W. C. Graves, Martin Burns, Schuyler & Hennessy, and Henry E. Jacobs, all of Chicago, Ill., for defendants Pure Milk Ass'n and others.

Joseph A. Padway, of Milwaukee, Wis., and David A. Riskind, of Chicago, Ill., for defendants Milk Wagon Drivers Union, Local 753, and others.

Kirkland, Fleming, Green, Martin & Ellis, of Chicago, Ill., for Leslie G. Goudie.

Isham, Lincoln & Beale, Ben H. Matthews, and James P. Dillie, all of Chicago, Ill., for Arbitration group—Leland Spencer and W. A. Wentworth.

Thomas Dodd Healy, of Chicago, Ill., for Daniel A. Gilbert.

Charles F. Rathbun, of Chicago, Ill., for Herman N. Bundeson, Paul Krueger and William J. Guerin, of Board of Health.

WOODWARD, District Judge.

This matter comes up on the several demurrers and motions to quash an indictment in four counts, charging fourteen corporations and associations and forty-three individuals with engaging in an unlawful combination and conspiracy in restraint of interstate commerce in fluid milk in violation of Section 1 of the Sherman Act, 15 U.S.C.A. § 1.

The averments of the indictment may be condensed and summarized as follows:

The city of Chicago, Illinois, has a population in excess of three and one-half million people. In excess of a million quarts of fluid milk are distributed and sold each day in the city of Chicago. The production of milk destined for ultimate distribution and sale as fluid milk in the city of Chicago, its transportation to the city, its preparation for distribution and sale within the city, and its distribution and sale within the city are regulated by an ordinance of the city of Chicago and by rules and regulations promulgated by the Board of Health. Under the ordinance and under the regulations of the Board of Health, fluid milk distributed and sold in the city of Chicago must be produced on a dairy farm approved by the Board of Health. Such dairy farm is known as an approved dairy farm.

In the states of Illinois, Indiana, Michigan and Wisconsin there are more than fifteen thousand approved dairy farms. More than fifty per cent of the approved dairy farms are located in states other than Illinois. Of the fluid milk produced on approved dairy farms, approximately forty per cent is produced on approved dairy farms in Indiana, Michigan and Wisconsin.

Fluid milk produced on approved dairy farms is transported to Chicago in two ways: (a) From approved dairy farms to country stations where it is commingled and combined with fluid milk from other approved dairy farms and thereafter transported from the country stations to Chicago by motor vehicle or by railroad; and (b) directly from approved farms by motor vehicle.

Fluid milk by its nature is perishable. It cannot be stored and it must reach the consumer within a short time after its production. Pursuant to the ordinance of the city of Chicago and to the rules and regulations of the Board of Health, all fluid milk transported to Chicago for sale and distribution therein must be delivered daily to a place, premise or establishment where milk is collected preparatory to pasteurization elsewhere, or to a pasteurization plant where milk is handled or otherwise prepared for distribution and sale as fluid milk.

More than one hundred twenty-five distributors, some of whom are made defendants under the designation "major distributors", purchase fluid milk from producers for distribution and sale in the city of Chicago. The major distributors commingle the fluid milk from Indiana, Michigan and Wisconsin with milk produced in Illinois and then sell the commingled milk in Chicago as one product.

The individual defendants, except a police officer of the city of Chicago, the officers of the Chicago Board of Health, and two arbitrators, are associated with or employed by the corporation and association defendants.

Each of the major distributors is an Illinois corporation engaged in the sale and distribution of fluid milk in the city of Chicago. Approximately sixty-five per cent of the fluid milk sold in the city of Chicago is sold by the major distributors. All major distributors maintain country stations in states outside of Illinois, receive fluid milk at such country stations and transport it to Chicago.

The Associated Milk Dealers, Inc., is an Illinois corporation. Substantially all the members of the Associated Milk Dealers, Inc., are distributors doing business in the city of Chicago. The major distributors dominate and control its activities.

The Pure Milk Association is a corporation organized under "The Cooperative Marketing Act" of Illinois, Ill.Rev. Stat.1937, c. 32, § 440 et seq. It has a membership in excess of twelve thousand producers, approximately fifty per cent of whom are located outside of Illinois.

It is constituted the sole and exclusive agent for marketing the milk of its members. In excess of eighty per cent of the milk produced by its members is produced on approved dairy farms, seventy-five per cent of which is purchased by the major distributors.

The Milk Dealers Bottle Exchange is an Illinois Corporation. The major distributors own in excess of eighty per cent of its outstanding capital stock and dominate and control its activities and business. It is engaged in collecting, exchanging and distributing milk bottles, cans and other containers used by distributors. Special discounts are allowed to stockholders which are not allowed to non-stockholders on charges for services rendered.

The Milk Wagon Drivers Union, Local 753, International Brotherhood of Teamsters, Chauffeurs, Stablemen and Helpers of America is a voluntary unincorporated association and is affiliated with the American Federation of Labor. Its members are employed by distributors in connection with the distribution and sale of fluid milk in the city of Chicago. Approximately seventy-five per cent of all its employed members are employed by the major distributors.

Daniel A. Gilbert is a public officer of the city of Chicago.

The officers of the Board of Health are charged with the administration of the milk ordinance of the city of Chicago and the rules and regulations promulgated thereunder.

The two arbitrators were members of an arbitration board which arbitrated a dispute between the major distributors and the Pure Milk Association.

The indictment charges that commencing in the month of January, 1935, and continuously thereafter until the presentation of the indictment, the defendants engaged in an unlawful conspiracy in restraint of trade and commerce in fluid milk among the several states.

Count 1:

Count 1 charges a conspiracy "to arbitrarily fix, maintain and control artificial and non-competitive prices to be paid to all producers by all distributors for all fluid milk produced on approved dairy farms located in the states of Illinois, Indiana, Michigan and Wisconsin", and shipped to Chicago.

The means and methods whereby the conspiracy was intended to be effected are set forth at length. It is necessary to state only the general scheme. The major distributors, the Pure Milk Association and the Associated Milk Dealers, fixed and agreed upon uniform terms and conditions for the purchase of fluid milk from the Pure Milk Association, including price provisions. Through price letters and a monthly periodical, the Pure Milk Association fixed the prices to be paid for fluid milk by all independent distributors to independent producers. The arbitrator defendants sat on a board of arbitration which arbitrated a dispute between the Pure Milk Association and the major distributors. The Bottle Exchange discriminated against distributors who refused to purchase fluid milk at the prices thus fixed. Local 753, its adviser and the police officer, by threats, intimidation and acts of violence interfered with the business of independent distributors. The Board of Health defendants gave preferential treatment to member-producers and discriminated against independent producers.

The gravamen of the offense charged in this count is the fixing, maintaining and controlling of prices to be paid fluid milk producers.

Count 2:

Count 2 charges a conspiracy "to fix and maintain by common and concerted action, uniform, arbitrary and non-competitive prices for the sale by the distributors in the city of Chicago of fluid milk shipped into the said city from the states of Illinois, Indiana, Michigan and Wisconsin."

Again the means and methods are set forth at length. The major distributors, the Pure Milk Association and the Associated Milk Dealers, agreed and fixed upon...