United States v. American Bakeries Company, Crim. No. 7656.

• Decision Date: 04 June 1968
• Docket Number: Crim. No. 7656.
• Citation: 284 F. Supp. 864
• Parties: UNITED STATES of America, Plaintiff, v. AMERICAN BAKERIES COMPANY et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

284 F. Supp. 864

UNITED STATES of America, Plaintiff, v. AMERICAN BAKERIES COMPANY et al., Defendants.

Crim. No. 7656.

United States District Court W. D. Michigan, S. D.

June 4, 1968.

John Edward Burke, Dept. of Justice, Chicago, Ill., for plaintiff.

Warner, Norcross & Judd, Harold S. Sawyer, Grand Rapids, Mich., Covington & Burling, Gerald P. Norton, Washingtion, D. C., for defendants Continental Baking Co. and Ray W. Moore.

Cholette, Perkins & Buchanan, Grant J. Gruel, Grand Rapids, Mich., Hopkins, Sutter, Owen, Mulroy, Wentz & Davis, William I. Goldberg, Chicago, Ill., for defendant American Bakeries.

Wheeler, Upham, Bryant & Uhl, Gordon B. Wheeler, Grand Rapids, Mich., Kirkland, Ellis, Hodson, Chaffitz & Masters, Ronald J. Wilson, Washington, D. C., for defendants Rainbo Bread Co., Samuel A. McLaughlin, and Charles A. Stewart.

Glassen, Parr, Rhead & McLean, Lloyd D. Parr, Lansing, Mich., for Schafer Bakeries, Inc., Russell E. Kisor, Gase Baking Co. and Eugene J. Gase.

Dickinson, Wright, McKean & Cudlip, John A. Krsul, Jr., Detroit, Mich., for defendant Michigan Bakeries, Inc.

McCobb & Heaney, Bruce K. Carroll, Grand Rapids, Mich., for defendant Harold C. Overholt.

Hillman, Baxter & Hammond, Douglas W. Hillman, Grand Rapids, Mich., for defendant Norman V. Clexton.

Charles E. Hopfl, New York City, for defendants Ward Foods, Inc. and William J. Coughlin.

Luyendyk, Hainer & Karr, John D. B. Luyendyk, Grand Rapids, Mich., for defendants Grocers Baking Co. and L. S. Parsons.

Chadwell, Keck, Kayser, Ruggles & McLaren, David J. Gibbons, Chicago, Ill., for Koepplinger Bakery, Inc. and Robert Bohringer.

Edward L. Cobb, Jackson, Mich., for defendant Way Baking Co.

Varnum, Riddering, Wierengo & Christenson, F. William Hutchinson, Grand Rapids, Mich., for Roskam Baking Co. and Donald O. Roskam.

Paulson, Bennett, Palmer & Lewis, Robert A. Palmer, Kalamazoo, Mich., for

Dutch Treat Bakers, Inc. and Walter Henley, Jr.

Foster, Campbell, Lindemer & McGurrin, Richard B. Foster, Lansing, Mich., for defendant Michigan Bakers Association, Inc.

Goldstein, Judd & Gurfein, Edward Brodsky, New York City, for defendant Silvercup Bakeries, Inc.

Miller, Johnson, Snell & Cummiskey, Stephen C. Brandsdorfer, Grand Rapids, Mich., for defendant John H. Way, Sr.

OPINION

FOX, District Judge.

This case arises upon the motions of several defendants, corporate and individual, for permission to change their pleas of not guilty to pleas of nolo contendere.

On October 4, 1967, a grand jury sitting in this district and division returned an indictment charging in substance that between January 1964 and October 1966, defendants had entered into and engaged in a conspiracy to fix prices and agree upon bids in violation of Section 1 of the Sherman Act. On December 11, 1967, the Government filed a companion civil case (Civil Action No. 5787), alleging the same offense charged in the indictment and requesting injunctive relief. This court, on stipulation, stayed the proceedings in the civil action pending disposition of the criminal charge.

Also on December 11, 1967, defendants moved that the indictment be dismissed because the grand jury had not been selected in accordance with the law. To avoid litigating this point, the Government moved to dismiss the indictment. The motion was granted, and the Government filed a new criminal action covering the matters alleged in the indictment. Defendants' motions for return of documents subpoenaed by the grand jury, suppression or impounding of transcripts of testimony before the grand jury and preclusion of the use by the Government of any information obtained through the grand jury were taken under advisement by the court.

On February 15, 1968, defendants were arraigned and entered pleas of not guilty. Later the same day, certain defendants requested that they be permitted to change their pleas to nolo contendere. The Government opposed this request, as did the State of Michigan as amicus curiae.

The defendant bakeries may be easily divided into two groups, for purposes of analysis. The majors, Continental Baking Company, Rainbo Bread Company (a subsidiary of Campbell Taggart Associated Bakeries, Inc.), American Bakeries Company, and Ward Foods, Inc., operate in several states and have a net worth of over ten million dollars each. The independents, the remaining defendants, operate primarily within the State of Michigan and have net worths ranging from one and a half million dollars to one hundred thousand dollars.

The information charged defendants with "a hard-core price-fixing and bid rigging conspiracy," state-wide in scope, over at least two and a half years, involving bakery products sold in excess of two million dollars in wholesale sales. The Government opposes acceptance of the nolo contendere pleas because of the seriousness of the charges, the lack of deterrent value a judgment on nolo contendere would have, the time and money already expended by the Government in the case, and the possibility of substantial private treble damage actions. To this end, the State of Michigan has appeared as amicus to oppose acceptance of nolo contendere pleas because it would preclude the use of a judgment as prima facie evidence in a treble damage suit being contemplated by the State, which has purchased through various schools and other institutions baked goods well in excess of a million dollars.

The defendants argue that nolo contendere pleas have been, and should be accepted as a matter of course, unless there are very special circumstances which are not present here. The independents argue further that if they must bear the heavy burden of antitrust litigation they may go out of business. The independents also claim that if they are guilty of antitrust violations, it is a result of pressure from the majors.

To evaluate these various arguments, it is necessary to inquire into the nature of the nolo contendere plea and its relation to the antitrust laws. To help in the enforcement of antitrust laws and to increase their deterrent effect, Section 4 of the Clayton Act (15 U.S.C. § 15) provided that persons injured by an antitrust violation could sue for treble damages. "The years that followed the enactment of the treble damage provision revealed that few private litigants had the resources or staying power to conduct a protracted and difficult antitrust case. And those who were able and willing to assume the staggering costs of litigation were frequently worn out by their opponents by sheer attrition." United States v. Standard Ultramarine & Color Co., 137 F.Supp. 167, 171 (S.D. N.Y.1955).

President Wilson asked Congress in a Special Message, January 20, 1914, to remedy this situation by allowing private persons to make use of the facts and judgments in government actions. 51 Cong.Rec. 1964. As a result, Congress enacted Section 5 of the Clayton Act (15 U.S.C. § 16), which allows final judgments or decrees rendered in a government action to be used as prima facie evidence against the same defendant in any subsequent private treble damage action. The purpose of Section 5, as shown in the President's message and the Congressional debate, was to increase the deterrent effect of treble damages by minimizing "the burdens of litigation for injured private suitors by making available to them all matters previously established by the Government in antitrust actions." Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568, 71 S.Ct. 408, 413, 95 L.Ed. 534 (1950); H.R.Rep. No.627, 63d Cong. 2d Sess. 14 (1914); S.Rep.No.698, 63d Cong. 2d Sess., 10, 45 (1914); 51 Cong.Rec. 9270, 9490, 13851, 16046 (1914).

There is, however, an important proviso to Section 5: "This Section shall not apply to consent judgments or decrees entered before any testimony has been taken * * *" A judgment entered upon a plea of nolo contendere has been held to fall within this proviso. As stated in Commonwealth Edison Co. v. Allis-Chalmers Mfg. Co., 323 F.2d 412, 414-415 (C.A.7, 1963), cert. den. 376 U.S. 939, 84 S.Ct. 794, 11 L.Ed. 659, "* * * Judgments entered on pleas of nolo contendere are within the proviso and thus are unavailable for the prima facie benefit of § 5(a). We agree with Judge Learned Hand's statement that such judgments are `plainly * * * within the exclusionary proviso * *' Pfotzer v. Aqua Systems, Inc., 162 F.2d 779, 784 (C.A.2, 1947)." See also City of Burbank v. General Elec. Co., 329 F.2d 825 (C.A.9, 1964); Barnsdall Refining Corp. v. Birnamwood Oil Co., 32 F.Supp. 308 (E.D.Wis., 1940).

Rule 11 of the Federal Rules of Criminal Procedure allows a defendant to "plead not guilty, guilty or, with the consent of the court, nolo contendere." (Emphasis supplied.) Thus, it is within the discretion of the court whether to allow the plea of nolo contendere, precluding the potential prima facie effect of any judgment which might be reached and consequently undermining the purpose of Section 5, or to reject the plea, forcing the parties to the time and expense of litigation.

It should be emphasized that it is the duty of the court to hear and decide any request to plead nolo contendere. Some courts always reject this plea, on grounds that defendant is either guilty or not guilty; other courts accept the plea as a matter of course. But the fact that acceptance of the plea is discretionary does not mean that full consideration should not be given to any request to plead nolo. It is a plea authorized by statute, just as are pleas of guilty and not guilty.¹

The basic standard to apply in deciding whether to accept nolo contendere is the public interest. United States v. Jones, 119 F.Supp. 288 (S.D. Cal., 1954); United States v. Standard Ultramarine & Color Co., supra; United States v. Safeway Stores, 20 F.R.D. 451 (N.D.Tex., 1957).

The public interest is served by preserving the deterrent value of the antitrust laws. The plea of nolo contendere is traditionally a plea for mercy, and has the same...