United States v. International Harvester Co.

Decision Date12 August 1914
Citation214 F. 987
PartiesUNITED STATES v. INTERNATIONAL HARVESTER CO. et al.
CourtU.S. District Court — District of Minnesota

The Attorney General and Edwin P. Grosvenor, Sp. Asst. Atty Gen., for the United States.

John P Wilson, of Chicago, Ill., Wm. D. McHugh, of Omaha, Neb., and Edgar A. Bancroft, of Chicago, Ill. (Philip S. Post and Victor A. Remy, of Chicago, Ill., of counsel), for defendants.

Before SANBORN, HOOK, and SMITH, Circuit Judges.

SMITH Circuit Judge.

The petition in this case was filed April 30, 1912, under section 4 of 'An act to protect trade and commerce against unlawful restraints and monopolies,' generally known as the 'Sherman Law.' Act July 2, 1890, c. 647, 26 Stat 209 (U.S. Comp. St. 1901, p. 3200).

Under that section the Circuit Court was vested with jurisdiction of such suits, but the Circuit Court was abolished by Judicial Code (Act March 3, 1911, c. 231, 36 Stat. 1167 (U.S Comp. St. Supp. 1911, p. 243)) Sec. 289, and by section 291 the jurisdiction under section 4 of the Sherman Law passed to the District Court. The Attorney General having, under Act Feb. 11, 1903, c. 544, 32 Stat. 823 (U.S. Comp. St. Supp. 1911, p. 1383), filed with the clerk of the District Court a certificate that this case is of general public importance the same came on for hearing before the Circuit Judges named, notwithstanding the abolishment of the Circuit Court. Ex parte United States, 226 U.S. 420, 33 Sup.Ct. 170, 57 L.Ed. 281.

The petition makes defendants the International Harvester Company, the International Harvester Company of America, the International Flax Twine Company, the Wisconsin Steel Company, the Wisconsin Lumber Company, the Illinois Northern Railway Company, the Chicago, West Pullman & Southern Railroad Company, Cyrus H. McCormick, Charles Deering, James Deering, John J. Glessner, William H. Jones, Harold F. McCormick, Richard F. Howe, Edgar A. Bancroft, George F. Baker, William J. Louderback, Norman B. Ream, Charles Steele, John A. Chapman, Elbert H. Gary, Thomas D. Jones, John P. Wilson, William L. Saunders, and George W. Perkins.

All of these defendants made answer. The case was tried and has been submitted to the court for a decree. As the pleadings are elaborate, covering more than 130 pages of printed matter, and as no questions have been raised as to the sufficiency of any of them, we will state the facts as shown, contenting ourselves with saying that all of the facts found by the court are either expressly covered by the allegations of the pleadings or are within the necessary implications thereof. In their argument defendants' counsel say:

'This case is one of fact, not of controverted questions of law.'

It will be necessary, therefore, to review the facts fairly, fully, but not elaborately, as there are 18 volumes and nearly 10,500 printed pages in the record.

Agricultural implements may be divided into five classes:

(1) Tillage implements, such as plows, harrows, and other instruments used in keeping the soil in good condition.

(2) Seeding implements, such as corn planters, drills, and seeders.

(3) Harvesting implements, such as harvesters, mowers, mowers, reapers, rakes, and the like.

(4) Threshing machines.

(5) Implements for general agricultural use, such as wagons, manure spreaders, gas engines, cream separators, tractors, and certain similar tools and instrumentalities.

The defendant the International Harvester Company, hereafter called the International Company, was organized on August 12, 1902, under the laws of New Jersey. The objects for which it was organized, as stated in the articles of incorporation, were:

'To manufacture, sell, and deal in harvesting machines, tools, and implements of all kinds, including harvesters, binders, reapers, mowers, rakes, headers, shedders, machinery, engines, wagons, motor vehicles, and vehicles of all kinds; agricultural machinery, tools, and implements of all kinds, binder twine, and all devices, materials, and articles used or intended for use in connection therewith, and all repair parts and other devices, materials, and articles used, or intended for use, in connection with any kind of harvesting or agricultural machines, tools, or implements, or any gasoline, electric, or other vehicles.
'To engage in the manufacture or production of, and to deal in, any materials or products which may be used in, or in connection with, the manufacture of harvesting or agricultural machines, tools, and implements.'

Prior to that time the principal manufacturers of harvesting implements in the United States had been:

First. The McCormick Harvesting Machine Company, a corporation, of Chicago, Ill., founded about 1849;

Second. D. M. Osborne & Co., a New York corporation, with a plant or plants at Auburn, N.Y., founded about 1860;

Third. The Warder, Bushnell & Glessner Company, an Ohio corporation, with its manufacturing plant at Springfield, Ohio, and its offices at Chicago, Ill., which manufactured under the name of the Champion, founded about 1869;

Fourth. The Deering Harvester Company, a copartnership, of Chicago, Ill., founded about 1875;

Fifth. The Milwaukee Harvester Company, of Milwaukee, Wis.; and

Sixth. The Plano Manufacturing Company, of West Pullman, Ill.

While these were the leading manufacturers of harvesting machines, they had other, but not general, lines of manufacture of agricultural implements.

On June 24, 1902, P. D. Middlekauff secured, in his own name, an option on the stock and plant of the Milwaukee Harvester Company, for $3,123,691.90. He did this in fact as agent, though it does not clearly and certainly appear who his principal was, whether J. P. Morgan & Co., George W. Perkins, or the McCormick Harvesting Machine Company. He did it, however, at the direct instance of the McCormick Harvesting Machine Company, but whether it was acting as principal or agent is left in some slight doubt.

On June 25, 1902, Mr. Middlekauff went to New York with a letter from an officer of the McCormick Company, authorizing him to assign this option to J. P. Morgan & Co., of which George W. Perkins was a member, or to any one they might designate, and reciting that the option had been obtained 'for us.' Mr. Middlekauff remained in New York until July 30, 1902, aside from being absent a small portion of the time in Philadelphia and Washington on business for Mr. Perkins.

On August 11, 1902, a new contract was made for the purchase of the Milwaukee Harvester plant by Mr. Middlekauff, and on the same day he assigned his contract to Mr. William C. Lane, a New York banker and then president of the Standard Trust Company.

In July, 1902, the representatives of the McCormick, the Deering, the Warder, Bushnell & Glessner, and the Plano were all in New York, but stopping at different hotels and not seeing one another. They were all seeing, however, Mr. George W. Perkins. On July 28, 1902, they met and gave separate contracts to William C. Lane, heretofore referred to, and his assigns, to sell all their tangible property and specified portions of their bills receivable. These agreements all contained a recital that the purchaser, upon his acquisition of the property, intended to transfer the same to a corporation to be organized under the laws of Illinois, or some other state, called the 'purchasing company.' It was in each case, except that of the Warder, Bushnell & Glessner Company, stipulated that the entire purchase price should be paid in fully paid nonassessable stock of the purchasing company.

On August 11, 1902, the companies all signed an agreement for the immediate delivery of their plants and property, without waiting for any appraisement theretofore stipulated for in each instance.

On August 12, 1902, the very day of the organization of the International Harvester Company with a total capital of $120,000,000, Mr. Lane appeared before the board of directors and offered to sell the Milwaukee Harvester Company plant as a going concern, including its bills receivable and the plants of the McCormick Harvesting Machine Company, the Deering Harvester Company, the Plano Manufacturing Company, and the Warder, Bushnell & Glessner Company, and to furnish $60,000,000 of working capital, to be represented by accounts and bills receivable of the McCormick Harvesting Machine Company, the Deering Harvester Company, and the Plano Manufacturing Company, or in cash, for the $120,000,000 of the capital stock of the company, and on August 13, 1902, this proposition was accepted. The property turned in was of greater value than the stock issued for it. This case, therefore, involves no question of overcapitalization.

In pursuance of this agreement there was turned over to the company $40,000,000 of the bills receivable of the McCormick Harvesting Machine Company, the Deering Harvester Company, and the Plano Manufacturing Company, guaranteed by them, respectively. In all Mr. Lane did in this matter he was acting upon the suggestion of his counsel, Messrs. Guthrie, Cravath & Henderson. He was compensated, but there never was any idea upon his part that he owned any of the properties. He was a mere conduit or instrumentality in the transaction.

The International Company shortly acquired all the stock of the Milwaukee Harvester Company, as it had already acquired the plant. It reduced the capital of the Milwaukee Harvester Company to $1,000,000 and changed the name to the International Harvester Company of America, hereafter called the America Company. It was for a considerable time officered by the same men who held the offices in the International Company. A contract was entered into between the International Company and the America Company by which the former contracted to sell to the latter its entire output and...

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    ...Sherman Act, although such restraint or monopoly may not have been actually attempted to any harmful extent. See United States v. International Harvester Co., D. C., 214 F. 987; Id., 274 U.S. 693, 47 S.Ct. 748, 71 L.Ed. 1302. * * * the material consideration in determining whether a monopol......
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