U.S. v. U.S. Gypsum Co.

• Decision Date: 20 January 1977
• Docket Number: GEORGIA-PACIFIC,Nos. 75-1836,s. 75-1836
• Citation: 550 F.2d 115
• Parties: 1977-1 Trade Cases 61,238 UNITED STATES of America, Appellee, v. UNITED STATES GYPSUM COMPANY, Appellant in 75-1836, et al. Appeal of NATIONAL GYPSUM COMPANY, in 75-1837. Appeal ofCORPORATION, in 75-1838. Appeal of The CELOTEX CORPORATION, in 75-1839. Appeal of Colon BROWN, in 75-1840. Appeal of J. P. NICELY, in 75-1841. Appeal of Andrew J. WATT, in 75-1842. to 75-1842.
• Court: U.S. Court of Appeals — Third Circuit

Page 115

550 F.2d 115

1977-1 Trade Cases 61,238

UNITED STATES of America, Appellee, v. UNITED STATES GYPSUM COMPANY, Appellant in 75-1836, et al. Appeal of NATIONAL GYPSUM COMPANY, in 75-1837 Appeal of GEORGIA-PACIFIC CORPORATION, in 75-1838 Appeal of The CELOTEX CORPORATION, in 75-1839 Appeal of Colon BROWN, in 75-1840 Appeal of J. P. NICELY, in 75-1841. Appeal of Andrew J. WATT, in 75-1842.

Nos. 75-1836 to 75-1842.

United States Court of Appeals, Third Circuit.

Argued June 21, 1976.

Decided Jan. 12, 1977.

As Amended Jan. 20, 1977.

John C. Fricano, Rodney O. Thorson, George Edelstein, L. John Schmoll, Michael A. Rosen, Peter A. Mullin, Dept. of Justice Antitrust Div., Washington, D. C., for appellee.

Robert C. Keck, James G. Hiering, Valentine A. Weber, Jr., Keck, Cushman, Mahin & Cate, Chicago, Ill., Benjamin M. Quigg, Jr., Morgan, Lewis & Bockius, Philadelphia, Pa., for U. S. Gypsum Co.

H. Francis DeLone, Alfred W. Cortese, Jr., John F. Wilson, III, Dechert, Price & Rhoads, Philadelphia, Pa., for Nat. Gypsum Co.

Cloyd R. Mellott, William B. Mallin, Barton Z. Cowan, J. Gary Kosinski, D. Richard Funk, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for Georgia-Pacific Corp.

W. Donald McSweeney, William A. Montgomery, Joseph R. Lundy, Schiff, Hardin & Waite, Chicago, Ill., for The Celotex Corp.

Paul C. Warnke, Thomas Richard Spradlin, Clifford, Warnke, Glass, McIlwain & Finney, Washington, D. C., for Colon Brown and J. P. Nicely.

Fred H. Bartlit, Jr., Thomas A. Gottschalk, Jeffrey S. Davidson, Kirkland & Ellis, Chicago, Ill., for Andrew J. Watt.

Before ADAMS, HUNTER and WEIS, Circuit Judges.

JAMES HUNTER, III, Circuit Judge:

This is an appeal by United States Gypsum Company (USG), National Gypsum Company (National), Georgia-Pacific Corporation (G-P), The Celotex Corporation (Celotex), Andrew J. Watt, Colon Brown, and J. P. Nicely, defendants in a complex case under Section 1 of the Sherman Act, 15 U.S.C. § 1. ¹ Each corporate defendant manufactures, sells, and distributes gypsum board products, which are widely used in the construction industry. Watt is Executive Vice President of USG. Brown is Chairman of National's Board of Directors, and Nicely recently retired as Vice President for Sales in National's Building Products Division. ² For the reasons that follow, we reverse and remand.

I.

Gypsum board is produced in standard sizes, of which 4' X 8' X 1/2 is the most common. It consists of a layer of gypsum rock sandwiched between sheets of heavy paper. Since World War II, it has replaced gypsum plaster as the principal component of interior walls in all types of buildings.

The gypsum board industry is highly concentrated. Between 1960 and 1973, the number of producers varied from nine to fourteen, and the eight major producers accounted for more than ninety-four percent of national sales. The corporate appellants together account for more than seventy-five percent of national sales. There are no significant differences in quality or appearance among the standard types of board produced by the various manufacturers. Demand is determined by activity in the construction industry and is inelastic with respect to price. Because of the homogeneity of the different brands, a buyer's decision to purchase one particular brand is generally based on price. Price discounts and changes in credit terms are the most important form of competition in the industry.

Between 1965 and 1970, the Department of Justice conducted several investigations of possible antitrust violations in the gypsum board industry. In 1971, a grand jury inquiry commenced, and another twenty-eight months of investigation ensued. On December 27, 1973, an indictment was returned in the Western District of Pennsylvania. It named the appellants and nine other defendants ³ as participants in a conspiracy, starting before 1960 and lasting to the date of indictment, (1) to raise, fix, maintain, and stabilize the price of gypsum board; (2) to fix, maintain, and stabilize the terms and conditions of sale of gypsum board; and (3) to adopt and maintain uniform methods of packaging and handling, all in violation of Section 1 of the Sherman Act.

All defendants moved for dismissal, alleging that unreasonable pre-indictment delay had worked a denial of their rights to due process of law as guaranteed by the fifth amendment to the United States Constitution. This motion was denied after a five-day evidentiary hearing. Subsequently, the nine defendants who are not parties to this appeal were convicted and sentenced on pleas of nolo contendere. ⁴ Trial of the remaining defendants began on March 3, 1975, and the jury brought in its verdict on July 15, 1975. The Government called thirty-five witnesses, appellants thirty. The trial record consists of more than 15,000 pages of transcript and some 6500 exhibits.

II.

At the outset, we are met with appellants' contention that the due process clause of the fifth amendment requires dismissal of the indictment. They allege that the Government unduly delayed bringing the indictment and that this delay impaired appellants' ability to present a defense. We affirm the district court's refusal to dismiss the indictment.

In United States v. Marion, 404 U.S. 307, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971), the Supreme Court indicated that "the Due Process Clause of the Fifth Amendment would require dismissal of the Indictment if it were shown at trial that the pre-indictment delay in this case caused substantial prejudice to appellee's rights to a fair trial and that the delay was an intentional device to gain tactical advantage over the accused." Id. at 324, 92 S.Ct. at 465. Because no prejudice was shown, however, the Marion Court upheld the indictment. Thus, there was no holding as to the specific requirements of a successful showing of prejudicial delay, and it was unclear whether both prejudice and governmental intent are necessary or whether prejudice alone would suffice. See, e. g., United States v. Barket, 530 F.2d 189, 194-195 & n.9 (8th Cir.), cert. denied, 429 U.S. 917, 97 S.Ct. 308, 50 L.Ed.2d 282 (1976). We need not resolve this question, because we find neither undue delay nor substantial prejudice.

We consider first the alleged undue delay. Appellants' major argument is that the Government deliberately postponed empaneling the grand jury to await the outcome of a civil case, Wall Products Co. v. National Gypsum Co.,326 F.Supp. 295 (N.D.Cal.1971), involving charges of the same conspiracy. After a lengthy evidentiary hearing, however, the court below found that the interval between the initial investigations of the gypsum board industry and the bringing of the indictment was not unreasonable in light of the extraordinary magnitude of the case and the frequent dead ends encountered by the investigators. United States v. United States Gypsum Co., 383 F.Supp. 462, 464-70 (W.D.Pa.1974). As the district court noted, id. at 467, any delay in empaneling the grand jury resulted from the Government's reluctance to frame criminal charges against appellants before learning whether plaintiffs in a civil action could carry their burden of proof. The district court's findings are not clearly erroneous.

USG separately argues that the Government is collaterally estopped to deny intentional delay, relying on United States v. United States Gypsum Co., Civil No. 71-2467 (N.D.Cal., filed Dec. 30, 1971). In that suit against six gypsum companies, the Government sought to recover damages accrued before the start of the normal four-year period, claiming that defendants' fraudulent concealment of their conspiracy had tolled the statute of limitations. The district court granted a motion for partial summary judgment, declaring that the Government did know, or should have known, of the alleged conspiracy prior to January 1, 1968. This finding, insists USG, estops the Government from denying delay in this case.

In Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d 840, 844 (3d Cir. 1974), Judge Garth noted three requirements that must be satisfied before collateral estoppel will apply:

a) The issue decided in the prior litigation must be identical with the issue presented in the action in question;

b) The prior litigation must have resulted in a final judgent (sic) on the merits; and

c) The party against whom the estoppel is asserted must have been a party or in privity with a party, to the prior adjudication.

USG's claim does not satisfy the first requirement. Governmental knowledge sufficient to preclude reliance on the doctrine of fraudulent concealment in a civil case is not identical with the availability of evidence sufficient to support the decision to bring criminal charges against the same defendants. Proof of the existence of the former does not entail proof of the existence of the latter. Therefore, there can be no collateral estoppel.

Having found no undue delay, we note that, in any event, appellants have not met their burden of proving substantial prejudice. In United States v. Dukow, 453 F.2d 1328 (3d Cir.), cert. denied, 406 U.S. 945, 92 S.Ct. 2042, 32 L.Ed.2d 331 (1972), this court, following Marion, refused to order the dismissal of an indictment where no substantial prejudice was shown. Accord, United States v. Benson, 487 F.2d 978, 984-85 (3d Cir. 1973). In Dukow, Judge Adams held the deaths of two potential witnesses not prejudicial, because there had been neither an offer of the testimony they would have given nor any indication that they possessed unique knowledge of the transaction in question. Dukow, supra, 453 F.2d at 1330. Here, as in Dukow, appellants argue that potential witnesses died in the lengthy interval between initial investigation and trial, but there is no showing that the deceased would have proffered testimony not merely cumulative of the evidence already at appellants' disposal.

Of the thirty-six deceased potential witnesses listed, only three received particular attention from appe...