Suckow Borax Mines Consol. v. Borax Consolidated

• Decision Date: 26 October 1950
• Docket Number: No. 12158.,12158.
• Parties: SUCKOW BORAX MINES CONSOLIDATED, Inc., et al. v. BORAX CONSOLIDATED, LIMITED, et al.
• Court: U.S. Court of Appeals — Ninth Circuit

185 F.2d 196 (1950)

SUCKOW BORAX MINES CONSOLIDATED, Inc., et al. v. BORAX CONSOLIDATED, LIMITED, et al.

No. 12158.

United States Court of Appeals Ninth Circuit.

October 26, 1950.

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Therman Arnold, Washington, D. C., Frank Buren, Los Angeles, Cal., and Sterling Carr, San Francisco, Cal., for appellants.

Maurice E. Harrison, Moses Lasky and Brobeck, Phleger & Harrison, all of San Francisco, Cal., Ray J. Coleman and Coleman & McDonald, all of Los Angeles, Cal., for appellees Borax Consolidated et al.

Maurice E. Harrison, Moses Lasky, and Brobeck, Phleger & Harrison, all of San Francisco, Cal., for appellee Bank of America.

Vincent H. O'Donnell, San Francisco, Cal., for appellee Stauffer Chemical Co.

John L. Reith, Oakland, Cal., for appellee West End Chemical Co.

Joseph W. Burns, Fulton, Walter & Halley, Michael F. McCarthy and Oliver & Donnally, all of New York City, Charles A. Beardsley, Oakland, Cal., for appellee American Potash & Chemical Corp.

Before HEALY, BONE and POPE, Circuit Judges.

BONE, Circuit Judge.

This action was commenced by the four appellants¹ on September 11, 1947. It is a suit for treble damages brought under the antitrust laws of the United States, 15 U.S.C.A. § 15, involves the borax industry, and is based on the claim that appellees² conspired together and drove appellants out of business by wrongful and illegal acts, all of which damaged appellants in the sum of $5,000,000. The prayer of the complaint is for a recovery of three times this amount. The case is here on appeal from the order of the trial court dismissing appellants' second amended complaint and from the denial of a motion to amend the said order so as to permit the filing of a third amended complaint.³

The Complaint

The complaint (in 95 lengthy paragraphs, which occupy 77 pages of the appeal record) recites a history of the development of the borax industry, and charges that since 1929, and many years prior thereto and continuing up until approximately 1945, the defendants conspired to, and did, monopolize and control the mining, production, processing, manufacture, distribution, trade and sale of the world's supply of crude borates, refined borax, and boric acid. This monopoly, it is charged, was achieved by a combination and conspiracy to restrain trade and commerce in violation of the antitrust laws, and pursuant to the terms of a continuing conspiracy (which appellants call the "General Conspiracy") which resulted from an agreement entered into on November 27, 1929 between appellees.

We here endeavor to summarize the essential and controlling averments of this long complaint.

Under this 1929 agreement appellees became members of a conspiracy having for its purpose the creation and perpetuation of a monopoly of the entire borax industry. This was to be accomplished by purchase or lease of approximately 95% of the world's known deposits of borate minerals (including 100% of the known sodium borate deposits — sodium borates are found in purer form than other borate minerals, and hence are more economical to refine) and approximately 90% of the world's known lake brines from which borax may be extracted; by allocation of production and refining of borax; by allocation of markets, trade areas and classes of consumers; by agreements to fix arbitrary and noncompetitive prices, resale prices, freights, discounts, permitted use, and conditions of sale of crude borates, refind borax and boric acid; by blacklisting consumers who dealt with other producers, and by the elimination and destruction, through purchase or otherwise, of all competitors of the defendants, including John K. Suckow and his interests, plaintiffs herein.

It is charged that this 1929 "agreement" was renewable annually; that it was subsequently extended and modified, and as modified, remained in effect until some time in 1944. The remainder of the complaint is concerned with a history of the various and devious methods and plans employed by defendants to bring John Suckow to his knees and it portrays a series of oppressive and coercive acts directed against appellants.

John Suckow, a medical practitioner, fortuitously discovered a vein of borate ore in 1912 while drilling for water upon his farm in the Mojave desert in California. Shortly thereafter Suckow, not knowing its true worth, sold his interest in a portion of the land to agents of U. S. Borax for a nominal sum. In ensuing years Suckow attempted to develop the borate deposits on the remaining portion of the land owned by him, and on another section of land upon which he had meanwhile filed patents. These development attempts were opposed by various of appellees herein by means of claim-jumping, forced sales, employment of undisclosed agents, and other tactics. In 1926 Suckow discovered a rich and deep deposit of sodium borate ore on a section of land then owned jointly by Suckow and Pacific Coast. (It is alleged that Pacific Coast had no rightful interest in this land.) From that time on he was harassed by a series of law suits and foundless claims brought by Borax Ltd. and its subsidiaries and agents.

In 1929 Suckow formed the Suckow Co. and transferred all of his borax interests to said corporation. During that same year he succeeded in negotiating a contract with Gembo, a Dutch corporation, for the marketing and sale of borax mined and processed by Suckow Co. When defendants learned that despite their carefully drawn schemes for controlling the markets Suckow had found an outlet for his products they renewed their efforts to force him to sell out or to terminate his operations. In an equity action for an accounting Borax, Ltd. persuaded the court (in 1932) that the value of the ore was $21.89 per ton. Suckow was compelled to pay to Borax Ltd. one-half of that amount for every ton of ore removed; this forced him to cease operations (in or about 1933). In a bankruptcy proceeding brought at approximately the same time agents and attorneys of Borax Ltd. succeeded in convincing the bankruptcy court that the value of Suckow's ore was only $2.50 per ton.

Various other suits were filed by some of the appellees. On March 2, 1933, Suckow Co. was adjudged a bankrupt but only after Borax Ltd. or its agents had, by the use of false testimony and fictitious claims, caused the bankruptcy referee to scale down the value of the assets of Suckow Co. to a fraction of their true value and build up the amount of its liabilities by including nonexistent claims (one of which was a purported claim of Dr. Suckow himself for $76,922 which he insisted was not owed and never had been owed to him by the Suckow Co.).

On April 17, 1934, the trustee in bankruptcy leased the interest of the Suckow Co. in the calcining plant to Pacific Coast for a period of five years.

On August 18, 1934 three different proceedings or orders, which had been brought or instigated by defendants, were pending against Suckow or Suckow Co. in the trial court, and five which had been decided adversely to him were pending on appeal. On that date Suckow and his wife Ruth entered into a settlement agreement with Pacific Coast wherein it was agreed that the Suckows and/or Suckow Co. would convey certain property to Pacific Coast, would execute, together with the trustee, a more favorable lease of the mine to Pacific Coast (for a ten year period) and would dismiss all of the appeals and release all possible claims against Pacific Coast Borax Ltd., and U. S. Borax. In return Pacific Coast agreed to dismiss certain actions against Suckow and Suckow Co., file satisfactions of certain judgments, execute or obtain certain releases, and pay Suckow the sum of $150,000. The conditions of this settlement agreement of August 18, 1934 were fulfilled by all parties.

It is alleged that Suckow would not have entered into the said settlement agreement but for his desperate financial condition which had been caused by defendants' schemes and activities and but for his complete ignorance of the existence of the illegal "General Conspiracy."

In 1938 the royalties from the lease had paid off all of the bankruptcy creditors and the expenses of administration. In consequence the bankruptcy proceedings of Suckow Co. were terminated and the property in the hands of the trustee was returned to the Suckow Co. This consisted primarily of an undivided one-half interest in the reversion of the mine property, and in a right to royalties upon one-half of the ore extracted by the lessee, Pacific Coast.

In December of 1942 Suckow Co. entered into an agreement with Pacific Coast whereby the Suckow Co., for the sum of $350,000 in cash, sold to Pacific Coast all of its interest in the borax property, real and personal, and released Pacific Coast and Borax Ltd. from all claims, demands, and causes of action.

It is alleged that the officers of the Suckow Co. entered into this 1942 agreement and sale only because they were discouraged by the continued harassment by defendants. Specifically, lessee Pacific Coast had substantially impaired future mining and production of ore by inefficient and unminer-like methods of mining and by causing, through negligence or design, cave-ins which blocked access to productive areas of the mine, threatened to totally exhaust the ore and refuse to deliver possession of the mine and equipment to Suckow Co. upon the termination of the lease. Appellees threatened further prospective legal entanglements with which Suckow Co. feared it would be unable to cope. Also appellees had by then taken over all of Suckow's former customers and markets.

All of the aforesaid acts were done in pursuance of the said "General Conspiracy," and in order to control the world borax market and destroy appellants' business and competitive activities. The "General Conspiracy" was a continuing conspiracy and plaintiffs had no knowledge of its existence until about September, 1944, at which time the United...