United States v. Milk Distributors Association, Inc.

• Decision Date: 29 December 1961
• Docket Number: Cr. No. 25658.
• Parties: UNITED STATES of America v. MILK DISTRIBUTORS ASSOCIATION, INC., National Dairy Products Corporation, Cloverland Farms Dairy, Incorporated, The H. E. Koontz Creamery, Inc., Green Spring Dairy, Incorporated, Royal Farms Dairy, Inc., Will's Dairy, Incorporated, Aristocrat Dairy, Penn Dairies, Inc., John M. Lescure, Maurice M. Thomas, George C. Oursler, James J. Ward, Jr.
• Court: U.S. District Court — District of Maryland

200 F. Supp. 792

UNITED STATES of America v. MILK DISTRIBUTORS ASSOCIATION, INC., National Dairy Products Corporation, Cloverland Farms Dairy, Incorporated, The H. E. Koontz Creamery, Inc., Green Spring Dairy, Incorporated, Royal Farms Dairy, Inc., Will's Dairy, Incorporated, Aristocrat Dairy, Penn Dairies, Inc., John M. Lescure, Maurice M. Thomas, George C. Oursler, James J. Ward, Jr.

Cr. No. 25658.

United States District Court D. Maryland.

December 29, 1961.

Joseph D. Tydings, U. S. Atty., John R. Hargrove, Asst. U. S. Atty., Baltimore, Md., Lewis A. Rivlin, Antitrust Division of the United States Department of Justice, Washington, D. C., for the Government.

Alva P. Weaver, III, Baltimore, Md., for Milk Distributors Ass'n.

J. Cookman Boyd, Jr., Baltimore, Md., for National Dairy Products Corp.

Nathan Patz, Baltimore, Md., for Cloverland Farms Dairy, Inc.

Richard C. Murray, Towson, Md., for H. E. Koontz Creamery.

David R. Owen, Baltimore, Md., for Green Spring Dairy, Inc.

Nathan Patz, Baltimore, Md., for Royal Farms Dairy, Inc.

William H. Zimmerman, Baltimore, Md., for Will's Dairy, Inc.

Z. Townsend Parks, Jr., Baltimore, Md., for Aristocrat Dairy.

George W. Constable, Baltimore, Md., for Penn Dairies, Inc.

J. Cookman Boyd, Jr., Baltimore, Md., and John T. Chadwell and Richard W. McLaren, Chicago, Ill., for John M. Lescure.

W. Lee Harrison, Towson, Md., for Maurice M. Thomas.

W. Lee Harrison, Towson, Md., for George C. Oursler.

Ward B. Coe, Jr., and G. C. A. Anderson, Baltimore, Md., for James J. Ward, Jr.

R. DORSEY WATKINS, District Judge.

Question Presented.

By their motion to dismiss the second count of a two-count information, the individual defendants charged therein with violation of the anti-trust laws, for acts done while acting solely in their capacities as officers, directors, or agents who authorized, ordered or did some of the acts constituting in whole or in part the violations alleged also to have been committed by the corporations with which they were associated as officers, directors or agents, have presented the question of whether they must be prosecuted under section 14 of the Clayton Act, 15 U.S.C.A. § 24,¹ or may, at the option of the Government, be prosecuted either under section 14 of the Clayton Act, or under section 1 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2.² Three well-reasoned opinions have reached the conclusion that under the stated circumstances the provisions of section 14 are exclusive, and prosecution of the individuals must be had under that section, if at all. United States v. National Dairy Products Corp., D.C.W.D.Mo.1961, 196 F.Supp. 155; United States v. A. P. Woodson Company, D.C.D.C.1961, 198 F. Supp. 582; United States v. American Optical Company, D.C.E.D.Wis., oral opinion November 3, 1961, not officially reported. The only law review article brought to the attention of the court considers this result to be correct. Whiting, Antitrust and the Corporate Executive, 47 Va.L.Rev. 929, 945.

This court is in accord with the results reached, and much of the reasoning, in the above-cited opinions. However, as the matter is one of substantial importance which has not been passed upon by any appellate court;³ as it was thoroughly briefed and argued;⁴ and as the Government insists that two points not previously urged have been presented to this court, some further consideration, without undue repetition, seems justified and perhaps required.⁵

Background.

On March 22, 1961, the United States Grand Jury for the District of Maryland returned a two-count indictment for alleged violation of section 1 of the Antitrust Laws. Count I attempted to charge certain corporations with engaging, during a period beginning prior to 1946 and ending in 1957, in a combination and conspiracy to suppress and eliminate competition in the sale of milk in the City of Baltimore for use in public schools, in unreasonable restraint of trade and commerce.

Count II attempted to charge the corporations named in Count I, two other corporations, and individuals, with engaging in a similar conspiracy, but with respect to sales to schools in Baltimore County and Baltimore City, during the spring or early summer of 1959 to the end of that year.

The alleged participation of the individual defendants is set forth in paragraph 16 of the indictment, as follows:

"Each of the individuals listed below in this paragraph, is hereby indicted and made a defendant herein. Each is or has been employed by one or more of the corporate defendants or co-conspirators and has held or now holds the title or position set forth opposite his name. Each of these individual defendants, during the applicable period of the statute of limitations, has been actively engaged in the management, direction, or control of the affairs, policies or activities of the defendant or co-conspirator with which he has been associated and within such period of time has authorized some or all of the acts and things herein charged: * * *".

The individual defendants moved to dismiss Count II as to them, on the grounds that their alleged participation in the conspiracy charged an offense punishable only under section 14 of the Clayton Act, while the indictment charged them only under section 1 of the Sherman Act.

At the hearing on the motion, the court pointed out what it considered to be certain vagueness and ambiguity in Counts I and II. The Government agreed to revise the allegations in these respects, and to proceed by way of an Information. As, however, the Government indicated that there would be no substantive change in the Information; that the theory of liability of the individual defendants would be the same as that under the indictment; that it was the Government's position that the individual defendants were liable under section 1 of the Sherman Act; and the Government proposed so to proceed, the Government was asked to state, in the nature of a bill of particulars, exactly what was the illegal conduct with which the individual defendants were charged. The reply was:

"The Government states that the defendants, the individual defendants actively and directly engaging in the alleged offenses are alleged to have been acting solely in their capacities as officers, directors or agents who authorized, ordered or did some of the acts constituting in whole or in part the violations alleged also to have been committed by the corporations with which they were associated as officers, directors or agents."

Thereafter, on July 17, 1961, a two-count information was filed, charging violation of "15 U.S.C.A. § 1."

The first count was confined to corporate defendants and a partnership, for the period prior to 1946 to the fall of 1957. Count II included the defendants named in Count I, and added two more corporate defendants, and the individual defendants. Paragraph 16 of the Information is substantially verbatim of paragraph 16 of the Indictment, quoted above.

New motions to dismiss were filed by the individual defendants, again on the ground that the offenses charged against them were alleged to have been done in their representative, not their individual capacities; that they were therefore liable to prosecution only under section 14 of the Clayton Act, and not under section 1 of the Sherman Act.

At the hearing on the motions, the Government agreed with its statement in the nature of a bill of particulars, quoted above, as to the kind of alleged illegal conduct with which the individual defendants were charged. The court pointed out that from the court's point of view it would have been preferable if this language had been incorporated in the Information. In order that there might be no misapprehension or later dispute, the court stated that it understood the concluding language of paragraph 16 to mean the same as if it read:

"* * * Each of these individual defendants, during the applicable period of the statute of limitations, has been actively engaged in the management, direction, or control of the affairs, policies or activities of the defendant or co-conspirator with which he has been associated and within such period of time and solely in such representative capacity has authorized, ordered, or performed some or all of the acts and things herein charged * * *."

The Government agreed that with this modification, the sentence in substance correctly represents the totality of the written and oral statements with respect to the alleged liability of the individual defendants.⁶

Position of the Parties.

The position of defendants has been adequately heretofore stated.

The position of the Government seems⁷ to be that although all that the individual defendants are charged with doing was done by them in a representative capacity, it was of such a character as to impose upon them the liability they would have had, had they been acting as individuals. The Government therefore contends that although the individual defendants are clearly liable under section 14 of the Clayton Act, they are also guilty of violation of section 1 of the Sherman Act; that the Government may proceed under either section; that if it proceeds under section 1 and the evidence fails to suffice for a conviction, the same evidence may justify a verdict under section 14;⁸ and that in Count II of the Information it is proceeding under section 1 of the Sherman Act. The Government admits⁹ that "it is literally impossible to charge a corporate officer with violating section 1 of the Sherman Act in his official capacity without using the language of section 14 to describe his offense * * *."

In opposition to the motions of the individual defendants to dismiss Count II as to them, the Government contends that:

1. Before the enactment of section 14 in 1914, corporate officials acting in their representative capacity were subjected to criminal prosecution under section 1.

2. Congress did not intend by the enactment of section 14 to relieve corporate officials of...