Northern California Pharmaceutical Ass'n v. United States

• Decision Date: 15 October 1962
• Docket Number: No. 17549.,17549.
• Citation: 306 F.2d 379
• Parties: NORTHERN CALIFORNIA PHARMACEUTICAL ASSOCIATION, a Corporation, and Donald K. Hedgpeth, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

306 F.2d 379 (1962)

NORTHERN CALIFORNIA PHARMACEUTICAL ASSOCIATION, a Corporation, and Donald K. Hedgpeth, Appellants, v. UNITED STATES of America, Appellee.

No. 17549.

United States Court of Appeals Ninth Circuit.

June 27, 1962.

Certiorari Denied October 15, 1962.

COPYRIGHT MATERIAL OMITTED

Hanson, Hanson & Cobb, Arthur B. Hanson, Washington, D. C., Broad, Busterud & Khourie, John W. Broad, Michael N. Khourie, San Francisco, Cal., and R. K. Kennon Jones, Washington, D. C., of counsel, for appellants.

Lee Loevinger, Asst. Atty. Gen., Dept. of Justice, Anti-Trust Division, Lyle L. Jones, San Francisco, Cal., Richard A. Solomon, Washington, D. C., Don H. Banks, Gilbert Pavlovsky, San Francisco, Cal., Patrick M. Ryan, attys., Washington, D. C., and Cecil H. Poole, U. S. Atty., San Francisco, Cal., for appellee.

Before ORR, HAMLEY and MERRILL, Circuit Judges.

Certiorari Denied October 15, 1962. See 83 S.Ct. 119.

ORR, Circuit Judge.

Appellants stand convicted of violation of § 1 of the Sherman Antitrust Act, 15 U.S.C.A. § 1 et seq. The indictment charges a combination and conspiracy in restraint of trade and commerce among the several states during the period 1956-1960, consisting of "a continuing agreement, understanding and concert of action among the defendants, co-conspirators, and others to the grand jurors unknown, the substantial terms of which have been and are that they agree:

"(a) To establish and maintain uniform prices for prescription drugs sold to consumers in northern California; and

"(b) To adopt the prescription pricing schedule formulated by appellant Hedgpeth * * *."

Northern California Pharmaceutical Association (hereinafter the "Association") is an incorporated California trade association with headquarters at San Francisco. It has more than 1500 retail pharmacist members, of whom almost three-fourths own and operate their own pharmacies. An annually elected executive board composed of officers and directors is responsible for the conduct of Association affairs. Among other corporate purposes, the Association is "to provide means whereby retail druggists by united or concerted action can and may do such things as will tend to promote * * * their mutual and common interests."

Donald K. Hedgpeth is the owner and operator of West Coast Drug Company, a San Francisco pharmacy. From 1956 to 1960 he served as chairman of the "Suggested Prescription Pricing Schedule Committee" (hereinafter the "Pricing Committee"), organized by the Association's executive board. During this period he formulated and presented to the Committee for its consideration and action a "Suggested Prescription Schedule for Non-Compounded Prescriptions" (hereinafter the "Hedgpeth Schedule").

The appeals before us present numerous grounds. We consider them in order.¹

I. The Charges Against Appellant Hedgpeth.

Starting with a challenge to the sufficiency of the indictment and building from there, we proceed. It is argued for the first time in appellants' closing brief and was not assigned in appellants' specification of errors that the charges against Hedgpeth are based upon activities carried on by him solely in a representative capacity as an official of the Association. It is said that action taken in such a capacity can be reached only by indictment under § 14 of the Clayton Act, 15 U.S.C.A. § 24. Several District Court cases, some of which are now before the Supreme Court for review, are cited in support of this proposition.² We note that in said cases it appears beyond doubt from a reading of either the indictment, a bill of particulars, or a stipulation, that the moving defendants were in fact charged "solely in a representative capacity." In the instant case the indictment, stipulation, and proof reveal that the charges against Hedgpeth are based on acts performed in most part in an individual capacity with few exceptions of a dual capacity. He is described in the indictment as an independent pharmacist, as a past president of the Association, and as chairman of the latter's pricing committee. The stipulation describes him solely as an independent pharmacist. The proof shows that he offered to and in fact did himself formulate and from time to time revise the "Hedgpeth Schedule", proceeding in part at least on formulae which he had personally devised years before. It also appears that he used this pricing schedule in his own pharmacy. The mere fact that Hedgpeth is also described in the indictment as an official of the Association "does not mean that his conduct as such official is complained of, but rather he is charged as an individual together with the Association with violations of the Sherman Anti-Trust Act." United States v. General Motors Corp., 26 F. Supp. 353 (N.D.Ind.1939), affirmed 121 F.2d 376 (7th Cir. 1941), cert. denied, 314 U.S. 618, 62 S.Ct. 105, 86 L.Ed. 497 (1942).³

II. Appellants' Motion for Change of Venue.

Appellants were indicted and arraigned in the latter half of December, 1960. In late January, 1961, they entered pleas of not guilty. In mid-March they presented two motions for a continuance, the second of which ultimately resulted in a postponement of the trial date until almost the beginning of June. On March 24th, appellants moved under F.R.Cr.P., rule 21(a), 18 U.S.C.A. for a change of venue. The purported grounds for the motion were great community bias and prejudice alleged to have been caused by newspaper reports of certain remarks made by the judge who heard and granted the second motion for a continuance. During the course of that hearing, the judge in giving reasons against any further delay in going to trial said:

"If the charges or the allegations made by the Government in this indictment are true, it means that every person who has ever paid for a prescription drug during the period which is within the statute of limitations has a treble-damage anti-trust action."

These remarks, accompanied by innocuous commentary, were carried by four Bay Area newspapers in editions which appeared immediately after the hearing. The articles were not remotely inflammatory and one undertook to challenge the court's views on the question of private suits. Apparently appellants' contention is that some readers of said reports would conceive the idea that it would redound to their interest if appellants were convicted. No abuse of discretion on the part of the trial court in denying the motion appears. See Callanan v. United States, 223 F.2d 171 (8th Cir.), cert. denied, 350 U.S. 862, 76 S.Ct. 102, 100 L.Ed. 764 (1955).

The mere general showing of publicity thought to be adverse to a party is not sufficient to require a change of venue except in the most extraordinary cases.⁴ In the usual situation, the movant must at least make a showing that the allegedly prejudicial material reached the veniremen, so that a foundation is laid for the possibility of actual bias. Blumenfield v. United States, 284 F.2d 46 (8th Cir.), cert. denied, 365 U.S. 812, 81 S.Ct. 693, 5 L.Ed.2d 692 (1961). Not only have appellants failed to show that any juror read, much less remembered these reports, the voir dire examinations of the jurors are not before us. The factors of, (a) the two and one-half month lapse from publication to trial,⁵ (b) the routine nature of the reports,⁶ (c) the size and general news inundation of the community,⁷ (d) the precautionary instruction given on the subject by the trial court,⁸ and (e) the trial court's finding of a resultant substantial burden on the parties and numerous witnesses if the motion were granted, amply sustain the denial of the motion.

III. Professional Status as a Defense Under the Sherman Act in the Case of an Agreement to Fix Prices.

Appellants claim for themselves an exemption from the Sherman Act by reason of their alleged status as "professionals." The gist of their argument is that the practice of pharmacy is a "learned profession," and that the activities with which the instant indictment charges them are merely reasonable regulations of various aspects of that "profession". Appellants' evidence tends to establish that in certain limited respects the practice of pharmacy, (as presently practiced at the local retail level,⁹) could be characterized at least as "quasi-professional." To understand why that fact is nevertheless utterly irrelevant in the instant case, it is necessary to review the nature of the present charges and the Government's establishment of a prima facie case of an agreement to fix prices in a commodity.

The indictment charges a classic case of an agreement to fix prices in a commodity, to wit, a prescription drug. Although dispensed by one who requires special training for some aspects of his occupation, the prescription drug no less than the law book, the text on bacteriology, or the handbook on accounting, is an article of trade or commerce. Simply because the prescription drug is potentially dangerous if taken in the wrong amounts or by the wrong people and is therefore subject to close public regulation in many respects, does not change the character of the drug or put every action of its handlers beyond the reach of the Sherman Act. Compare Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 404, 31 S.Ct. 376, 55 L.Ed. 502 (1911). It is evident that what is involved here is a plain and simple agreement to fix prices, as will more fully appear, infra, under our discussion of the sufficiency of the evidence of an agreement. We deem it advisable at this point to sketch the Government's basic proof regarding the make-up of the price of a prescription drug.

The charges and proof center around the handling and pricing of what is defined in the indictment as a "precompounded prescription drug." This is a drug which passes from the manufacturer through the hands of the local pharmacist without undergoing further compounding or basic change in form. It is established that these drugs are handled by manufacturer,...