U.S. v. BNS Inc.

• Decision Date: 15 September 1988
• Docket Number: 88-5850,Nos. 88-5849,s. 88-5849
• Citation: 858 F.2d 456
• Parties: , 1988-2 Trade Cases 68,223 UNITED STATES of America, Plaintiff, v. BNS INC.; Gifford-Hill & Co., Inc., Defendants-Appellants, v. KOPPERS COMPANY, INC., Participant-Appellee. UNITED STATES of America, Plaintiff-Appellant, v. BNS INC.; Gifford-Hill & Co., Inc., Defendants, v. KOPPERS COMPANY, INC., Participant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 456

858 F.2d 456

57 USLW 2197, 1988-2 Trade Cases 68,223

UNITED STATES of America, Plaintiff, v. BNS INC.; Gifford-Hill & Co., Inc., Defendants-Appellants, v. KOPPERS COMPANY, INC., Participant-Appellee.

UNITED STATES of America, Plaintiff-Appellant, v. BNS INC.; Gifford-Hill & Co., Inc., Defendants, v. KOPPERS COMPANY, INC., Participant-Appellee.

Nos. 88-5849, 88-5850.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 13, 1988.

Order May 27, 1988.

Decided Sept. 15, 1988.

Robert B. Nicholson, John P. Fonte, Dept. of Justice, Washington, D.C., for plaintiff-appellant U.S.

Mark Leddy, Cleary, Gottlieb, Steen & Hamilton, Washington, D.C., Gregory P. Stone, Munger, Tolles, & Olson, Los Angeles, Cal., for defendants-appellants BNS Inc. and Gifford-Hill & Co.

John Bodner, Jr., Howrey & Simon, Washington, D.C., William C. Conkle, Conkle & Olesten, Los Angeles, Cal., for participant-appellee Koppers.

Timothy E. Carr, Carr & Mussman, San Francisco, Cal., for amicus.

Appeal from the United States District Court for the Central District of California.

Before PREGERSON, BOOCHEVER and BEEZER, Circuit Judges.

BOOCHEVER, Circuit Judge:

In these consolidated appeals, BNS Inc. and its affiliate, Gifford-Hill & Co. (collectively referred to as BNS), and the United States of America challenge a preliminary injunction issued by the district court on April 4, 1988 pending completion of proceedings under the Antitrust Procedures and Penalties Act (APPA), 15 U.S.C. Sec. 16(b)-(h) (1982). The injunction prohibited BNS from consummating a proposed hostile takeover of Koppers Co. through a $1.7 billion cash tender offer. BNS and the government are parties to a proposed antitrust consent decree. Koppers, which was allowed to "participate" in the APPA proceedings, 15 U.S.C. Sec. 16(f)(3), requested the injunction to maintain the status quo while the court determined whether approval of the consent decree was in the public interest.

Briefing and argument to this court were expedited. On May 27, 1988, with one judge dissenting, we issued an order upholding the district court's jurisdiction to issue a preliminary injunction pending its APPA evaluation, while extensively modifying the injunction that had been entered in the case. United States v. BNS Inc., 848 F.2d 945 (9th Cir.1988).

Our order provided, inter alia, that the injunction barring the tender offer would remain in force only until a trustee was appointed by the district court to operate at BNS' expense Sully-Miller Contracting Co., Koppers' wholly-owned subsidiary. If BNS thereafter acquired a controlling interest in Koppers, the trustee would manage the specific portion of Sully-Miller at issue in the government's antitrust complaint separately and independently from the other assets owned by Koppers and BNS, while maintaining the confidentiality of all records and plans pertaining to that operation. Id. at 947.

Because of the expedited nature of these appeals, we did not attempt to discuss the reasons for our decision in detail. Id. This opinion therefore supplements our previous order.

I

BNS is a Delaware corporation created for the limited purpose of making a tender offer for the shares of Koppers. BNS is owned by subsidiaries of Beazer PLC (Beazer), an English builder, developer, contractor, and producer of road and construction materials, and by Shearson Lehman Brothers Holdings, Inc., and NatWest Investment Bank, Ltd. Gifford-Hill is a Beazer subsidiary. Through its affiliates, Beazer is active in the aggregate, ¹ ready-mix concrete, and cement markets in Southern California. Koppers, a multinational corporation, ranks among America's largest producers of road and construction materials. Koppers' subsidiary, Sully-Miller, is similarly involved in the Southern California aggregate, ready-mix, and asphalt markets.

On March 3, 1988, BNS made a cash tender offer to purchase all of the outstanding shares of Koppers for $45 per share. This offer was eventually increased to $60 per share, for a total of $1.7 billion. Pursuant to the premerger notification requirements of the Hart-Scott-Rodino Act, 15 U.S.C. Sec. 18a (1982), BNS submitted market data to the United States Department of Justice and the Federal Trade Commission. The Justice Department was given investigation responsibility for the proposed acquisition because it was already familiar with the Southern California road and building material markets from a previous case. United States v. Industrial Asphalt, 1987-2 Trade Cas. (CCH) p 67,826 (C.D.Cal.1987) (four-year investigation and litigation of merger involving aggregate and concrete industries).

The investigation confirmed what BNS had acknowledged at the time of its tender offer. A competitive "overlap" existing between Beazer and Koppers affiliates in the aggregate market in the Irwindale, California area created a possible antitrust violation. The government determined that this was the only market adversely affected by the proposed acquisition, and that the problem would be eliminated if BNS sold Koppers' Irwindale aggregate facility once it was acquired. BNS agreed to cooperate.

On March 18, the government filed suit against BNS under the anti-merger provisions of section 7 of the Clayton Act, 15 U.S.C. Sec. 18 (1982 & Supp. IV 1986). The complaint alleged:

24. The effect of the proposed acquisition by BNS of Koppers may be substantially to lessen competition in the aforesaid trade and commerce ... in the following ways, among others:

a. actual and potential competition between Gifford-Hill and Koppers in the extraction, processing and sale of aggregate in the Irwindale Aggregate District will be eliminated; and

b. competition generally in the extraction, processing and sale of aggregate in the Irwindale Aggregate District may be substantially lessened.

Pursuant to the APPA, the government filed a proposed consent decree with the district court along with its complaint. The decree provided for divestment by BNS of Koppers' Irwindale aggregate facility by January 1, 1989. If this deadline was not met, a trustee would be appointed "to accomplish the divestiture at the best price then obtainable upon a reasonable effort."

The proposed consent decree also contained a "Preservation of Assets" section requiring BNS to "preserve, hold, and continue to operate as a going business the Assets to be Divested, with its assets, management and operations separate, distinct and apart." This "hold separate" provision likewise barred BNS from transferring any assets from the Irwindale aggregate facility pending its divestiture.

The APPA was enacted in 1974 to preserve "the integrity of and public confidence in procedures relating to settlements via consent decree procedures." H.R.Rep. No. 1463, 93rd Cong., 2d Sess. 6 (1974), reprinted in 1974 U.S.Code Cong. & Admin.News 6535, 6536 (House Report). It mandates public notice of a proposed consent decree, a "competitive impact statement" by the government, a sixty-day period for written public comments, and published responses to the comments. 15 U.S.C. Sec. 16(b)-(d). In order to prevent " 'judicial rubber stamping,' " House Report at 8, 1974 U.S.Code Cong. & Admin.News at 6538, district courts are required to make an independent evaluation of proposed decrees: "Before entering any consent judgment ... the court shall determine that the entry of such judgment is in the public interest." 15 U.S.C. Sec. 16(e).

To facilitate its APPA review, a district court may "authorize full or limited participation in proceedings before the court by interested persons or agencies." Id. Sec. 16(f)(3). Koppers, the target of BNS' proposed acquisition, was granted leave to "participate" by Chief Judge Manuel L. Real on March 25. Koppers requested the court to issue a temporary restraining order to block the tender offer. Judge Real granted the TRO and scheduled a preliminary injunction hearing for April 4.

Koppers' moving papers stated that an injunction was needed to allow the court "to protect and preserve its jurisdiction so as to effectuate its statutory duty under the APPA." Koppers claimed that the government had performed an inadequate investigation, that divestment of the Irwindale aggregate facility was not feasible, and that the acquisition, if consummated, would substantially lessen competition in the cement and ready-mix concrete markets. At the hearing, the government's investigation, the aggregate market, and the "hold separate" provision of the consent decree were discussed. Argument centered, however, on the possible implications of an extensive divestiture agreement between BNS and the California Attorney General's office which was filed with the court less than two hours before the hearing. This agreement dealt primarily with the ready-mix market. ²

At the conclusion of the hearing, Judge Real, after voicing his disapproval of the State's "separate deal" with BNS, granted the preliminary injunction "to maintain my jurisdiction over the consent decree, the matter of this merger." BNS and the government immediately filed interlocutory appeals under 28 U.S.C. Sec. 1292(a)(1) (1982). Pursuant to local rules, Koppers lodged proposed findings of fact and conclusions of law with the district court on April 14. After considering written objections, the court adopted the findings and conclusions verbatim on April 19.

II

Our review of a district court's decision whether to issue a preliminary injunction is quite limited. Lou v. Belzberg, 834 F.2d 730, 733 (9th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1302, 99 L.Ed.2d 512 (1988). We will reverse or modify an order granting such an injunction, however, if the court (1) based its decision on erroneous legal standards; (2) relied on clearly erroneous findings of fact; or (3) otherwise abused its discretion. See id. We conclude that while there was a proper legal and factual basis for issuing a preliminary injunction, the district...