United States v. Standard Oil Co. of New Jersey

• Decision Date: 07 February 1931
• Docket Number: No. 5371.,5371.
• Citation: 47 F.2d 288
• Parties: UNITED STATES v. STANDARD OIL CO OF NEW JERSEY et al. SAME v. STANDARD OIL CO. OF NEW YORK et al.
• Court: U.S. District Court — Eastern District of Missouri

47 F.2d 288 (1931)

UNITED STATES v. STANDARD OIL CO OF NEW JERSEY et al.

SAME v. STANDARD OIL CO. OF NEW YORK et al.

No. 5371.

District Court, E. D. Missouri.

February 7, 1931.

John Lord O'Brian, Asst. to Atty. Gen., and John Harlan Amen, Sp. Asst. to Atty. Gen. (William D. Mitchell, Atty. Gen., and

Charles H. Weston, Wendell Berge, W. B. Watson Snyder, and Israel B. Oseas, Sp. Assts. to Atty. Gen., and Louis H. Breuer, U. S. Atty., of Rolla, Mo., on the brief), for the United States.

Walker D. Hines and G. H. Dorr, both of New York City, and Lon O. Hocker, of St. Louis, Mo. (A. C. Rearick, Austin T. Foster, L. M. Treadwell, William B. Hubbell, and Hines, Rearick, Dorr, Travis & Marshall, all of New York City, on the brief), for defendants.

Before STONE, BOOTH, and GARDNER, Circuit Judges.

STONE, Circuit Judge.

Heretofore, the United States brought suit against various individual, associated, and corporate parties for violation of the Sherman Anti-Trust Act (15 USCA §§ 1-7, 15) through a conspiracy to restrain interstate and foreign commerce in petroleum and its products and to monopolize such commerce in that regard. In that action, this court entered its decree against seven individual and thirty-eight corporate defendants, including the Standard Oil Company of New York and the Vacuum Oil Company. (C. C.) 173 F. 177, 197. With minor modifications, that decree was affirmed. 221 U. S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734. The only modification affecting the present proceeding was that "the court below to retain jurisdiction to the extent necessary to compel compliance in every respect with its decree." 221 U. S. 1, 82, 31 S. Ct. 502, 524, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734. The original decree was modified, in the respects directed by the Supreme Court, by an entry of record in this court dated July 29, 1911. Thereafter, the decree, in so far as dissolution of the existing unlawful organization was concerned, was fully executed. The New Jersey company (the old holding company) distributed the stocks to the subsidiary corporations, and for almost twenty years the Standard Oil Company of New York and the Vacuum Oil Company (two of such subsidiaries) have existed and conducted their businesses entirely independently of each other and of the other parties to the old combination.

Under this retained jurisdiction "to compel compliance," the United States files this supplemental petition to prevent a contemplated merger of the Standard Oil Company of New York and the Vacuum Oil Company. A certificate of expedition has been filed by the United States and the matter heard by three Circuit Judges under the statute. USCA title 15, § 28. Evidence has been taken by a master, and such evidence, with an excellent summary thereof by the master, has been filed. The defendants will hereafter be designated as Vacuum and as Socony (the trade-name of the Standard Oil Company of New York).

Such petition alleges that these two companies are contemplating a merger, and that such merger is in violation of the above decree. The companies admit the contemplated merger, but deny that it is in violation of the decree. Therefore, whether the decree will be violated by the merger depends upon what the decree enjoined and whether the merger is shown by the evidence to be within the things and matters enjoined. The parties differ widely as to the meaning of the decree and as to the effect of the evidence.

The controversy is over the proper construction of the decree and the effect of the evidence upon the decree so construed. Naturally, the first matter for determination is the construction of the decree.

I. Construction of the Decree.

The decree (sections 1 to 4, inclusive) declared that the Standard Oil Company of New Jersey held a majority of the capital stock of the other companies, and exercised complete control thereover; that this arrangement was in pursuance of a conspiracy to, and resulted in a combination to, restrain trade in violation of section 1 of the Anti-Trust Act; and that such combination was a monopoly in violation of section 2 of the act. Sections 5 to 7, inclusive, set forth the remedy applied by the court. Section 7 (as modified) enjoined the named defendants from engaging in interstate commerce after a six-month period allowed for dissolution of the combination. Section 5 enjoined the New Jersey company from voting the stock of, or exercising any control over, the subsidiaries, and enjoined the subsidiaries from declaring or paying any dividends to the New Jersey company and from permitting it to exercise any control over them, but the defendants were permitted to distribute the shares in the several corporations ratably to the shareholders of the New Jersey company. These two sections (5 and 7) were designed to compel dissolution of the existing combination by distribution to the stockholders of the New Jersey company of the shares in the several companies held by it, so that such companies would go forward as separate units, freed from the central control and domination of the New Jersey company. Section 6 was designed to meet the situation after the above dissolution and to prevent a re-creation or reformation of another and new combination by any participant in the existing combination — it was to preserve, as to such participants, the situation designed to be brought about by section 5, that is, a continued effective dissolution of the unlawful combination. Section 5 has been fully complied with. We are here concerned with section 6. Therefore, the controversy here is over the meaning of section 6. That section is as follows:

"Section 6. That the defendants named in section 2 of this decree, their officers, directors, agents, servants, and employees are enjoined and prohibited from continuing or carrying into further effect the combination adjudged illegal hereby, and from entering or performing any like combination or conspiracy, the effect of which is, or will be, to restrain commerce in petroleum or its products among the States, or in the Territories, or with foreign nations, or to prolong the unlawful monopoly of such commerce obtained and possessed by defendants as before stated, in violation of the act of July 2, 1890, either (1) by the use of liquidating certificates, or other written evidences, of a stock interest in two or more potentially competitive parties to the illegal combination, by causing the conveyance of the physical property and business of any of said parties to a potentially competitive party to this combination, by causing the conveyance of the property and business of two or more of the potentially competitive parties to this combination to any party thereto, by placing the control of any of said corporations in a trustee, or group of trustees, by causing its stock or property to be held by others than its equitable owners, or by any similar device; or (2) by making any express or implied agreement or arrangement together, or one with another, like that adjudged illegal hereby, relative to the control or management of any of said corporations, or the price or terms of purchase, or of sale, or the rates of transportation of petroleum or its products in interstate or international commerce, or relative to the quantities thereof purchased, sold, transported, or manufactured by any of said corporations which will have a like effect in restraint of commerce among the States in the Territories, and with foreign nations to that of the combination the operation of which is hereby enjoined."

The pertinency of section 6 is that it forbids, under conditions therein expressed, "the conveyance of the physical property and business" of one of these defendants to another, and that the contemplated merger confessedly intends the conveyance of the property and business of the Vacuum to the Socony.

The construction contended for by the plaintiff is as follows:

"Section 6 sets out specific acts which the court will consider as tending to recreate the old combination or tending to create a similar one, and that the court will, therefore, consider such conduct to be a violation of the decree." Plf. Br., p. 40. The same thought is again expressed as that the decree forbids "certain types of transactions which were considered unlawful because tending to defeat the purpose of the decree. The types of agreement which the court does not consider normal and lawful under the circumstances are set out in Section 6 of the decree, and among such unlawful agreements are combinations of competitors, because such combinations do tend to recreate the illegal combination dissolved." Plf. Br., p. 51.

The construction urged by the defendants is as follows:

"* * * In Section 6, it the trial court directed the language of injunction against the continuing of the old and the `entering or performing of any like conspiracy or combination the effect of which is, or will be, to restrain commerce * * * in violation of the Act of July 2, 1890,' by various enumerated acts instead of as in Section 5 specifically enjoining the doing of particular acts without any reference to whether or not they constituted the entering or performing any combination or conspiracy. The court thus clearly recognized that the particular acts referred to in Section 6 might or might not be an `entering or performing of any like combination or conspiracy,' and that these or any similar devices only come within the purview of the decree when by doing them the defendants are in fact entering or performing such combination or conspiracy. The court did not attempt to forbid absolutely under all future circumstances particular transactions which would normally be lawful and which would only be unlawful if in fact done as a part of or in effecting that `like combination or conspiracy' which this decree in terms enjoins the defendants from `entering or performing.'" Def. Br., ...