United States v. United States Gypsum Company, Crim. No. 73-347.

• Decision Date: 21 October 1974
• Docket Number: Crim. No. 73-347.
• Parties: UNITED STATES of America v. UNITED STATES GYPSUM COMPANY et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

383 F. Supp. 462

UNITED STATES of America v. UNITED STATES GYPSUM COMPANY et al.

Crim. No. 73-347.

United States District Court, W. D. Pennsylvania.

October 21, 1974.

John C. Fricano, Antitrust Div., Dept. of Justice, Washington, D. C., Richard L. Thornburgh, U. S. Atty., Pittsburgh, Pa., for plaintiff.

Cloyd R. Mellott, William B. Mallin, J. Gary Kosinski, Robert J. Tate, Willis A. Siegfried, Jr., Eckert, Seamans, Cherin & Mellott, Malcolm Anderson, Emil E. Narick, Anderson, Moreland & Bush, M. Richard Dunlap, Pittsburgh, Pa., Gordon Johnson, San Francisco. Cal., John L. Doherty, Livingston & Miller, David J. Armstrong, Charles W. Kenrick, J. Tomlinson Fort, John McN. Cramer, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., W. Donald McSweeney, William A. Montgomery, Schiff, Hardin & Waite, Chicago, Ill., Alexander Unkovic, P. Christian Hague, Meyer, Unkovic & Scott, Pittsburgh, Pa., William C. Miller, James J. Walsh, Gary H. Anderson, Pillsbury, Madison & Sutro, San Francisco, Cal., W. Walter Braham, Jr., David L. McClenahan, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., Charles M. Price, Robert C. Keck, James G. Hiering, Douglass F. Rohrman, Price, Cushman, Keck, Mahin & Cate, Fred H. Bartlit, Jr., Thomas A. Gottschalk, Jeffrey S. Davidson, Kirkland & Ellis, Chicago, Ill., William C. O'Neil, William M. Wycoff, Thorp, Reed & Armstrong, Pittsburgh, Pa., H. Francis De Lone, Alfred W. Cortese, Jr., John F. Wilson, III, Dechert, Price & Rhoads, Philadelphia, Pa., William L. Rieth, David K. Floyd, Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N. Y., Paul C. Warnke, Larry L. Williams, Thomas Richard Spradlin, Clifford, Warnke, Glass, McIlwain & Finney, Washington, D. C., for defendants.

OPINION

TEITELBAUM, District Judge.

From September 9, to September 13, 1974, an evidentiary hearing in the above-captioned criminal antitrust case was held before this Court. The evidentiary hearing was held at defendants' request in order to enable them to attempt to prove substantial and intentional¹ pre-accusation delay on the part of the Government in support of their motion to dismiss the indictment brought against them. Having examined the evidence that they have brought forth in support of their position and having considered their legal arguments, I have concluded that defendants' motion to dismiss must be denied.

The wellspring of defendants' position is the following quotation from United States v. Marion, a recent United States Supreme Court case:

"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 appellees' rights to a fair trial and that the delay was an intentional device to gain tactical advantage over the accused." United States v. Marion, 404 U.S. 307, 324, 92 S.Ct. 455, 465, 30 L.Ed.2d 468 (1971).

In considering the import of this quotation, it must be borne in mind: 1) that in the Marion case this position was conceded by the Government in its brief and 2) that neither intentional delay nor actual prejudice to the conduct of the defense were proven in that case. Prejudice was not even alleged. Moreover, Justice White, speaking for the majority in Marion, went on to point out, immediately following the statement quoted above:

"However, we need not and could not now, determine when and in what circumstances actual prejudice resulting from pre-accusation delays require the dismissal of the prosecution. Actual prejudice to the defense of a criminal case may result from the shortest and most necessary delay; and no one suggests that every delay-caused detriment to a defendant's case should abort a criminal prosecution." Id. at 324, 92 S.Ct. at 465 (footnotes omitted)

The Court has indulged defendants in their request to hold an evidentiary hearing on the question of pre-indictment delay here because this is an important case, one with potentially grave consequences for the liberty of ten men and the legal and financial status of six large corporations, and because this Court recognizes its inherent power, springing from its Constitutional mandate to insure fairness and see that justice is done in criminal matters, to dismiss this indictment, or any other, if it were convinced that defendants' fundamental due process rights had been abrogated. But this does not mean that this Court harbors no doubt as to the viability of the legal theory under which defendants proceed or especially that this Court has a mind to setting a precedent of investigating the Government investigators in every criminal case which comes before it. I point this out because I want no misunderstanding of my motives nor any misunderstanding of what I consider to be the decidedly limited precedential value of my approach in this case. Defendants' goal in the hearing was to prove both 1) intentional delay on the part of the Government, inspired by the hope of gaining improper tactical advantage over the defendants, which 2) has worked to the actual prejudice of the conduct of the defense.² They have failed to demonstrate either proposition.

THE ISSUE OF INTENTIONAL DELAY

In order to provide a background for the discussion which will follow, it is necessary to provide a synopsis of the major events which preceded the return of the indictment in this case. In 1923, as a result of much litigation and negotiation between the parties, the major gypsum wallboard producing corporations in this country became signatories, along with the United States, to a consent decree on the issue of price controls within the industry. In 1928, an amendment to the 1923 consent decree was contractually agreed to by the parties and in 1951 yet another consent decree was signed.

In March of 1961, Claude Huckleberry, president of the Texas Gypsum Co., met at the behest of his Congressman with the then Attorney General of the United States, Robert Kennedy, to complain that his company had been the target of allegedly predatory price fixing practices by the major gypsum producing corporations, members of the Gypsum Association.³ Huckleberry's apparent intention in this meeting was to seek an investigation by the Antitrust Division of the majors' activities. Huckleberry was subsequently informed that his complaint had been referred to the Attorney General of the State of Texas for possible action under that state's antitrust laws.

In March of 1962, Texas Gypsum filed a private treble damage action against each of the companies who are defendants in this case (except Georgia-Pacific), and the American Gypsum Company, in addition. Discovery by means of deposition and interrogatories took place, but in April of 1965 the case was settled out of court, soon after the Texas Gypsum Company was acquired by another concern.

In the meantime, in August of 1964, Huckleberry had complained to the Federal Trade Commission (FTC) about alleged price fixing in the gypsum industry and had supplied that agency with documents from the Texas Gypsum case as support for his charges. In October of 1964, Huckleberry's complaints were referred to the Antitrust Division.

From late 1964 until the fall of 1966, as revealed by internal Government memoranda, the focus of FTC and Justice Department personnel was upon 1) the promulgation of trade practice rules for the gypsum industry and 2) the possibility of action against the Texas Gypsum defendants for violation of the judgments entered against them some years earlier in the District of Columbia and the Southern District of New York. No fair analysis of the Government's activity could conclude that anything like a full-scale investigation of the gypsum industry with an eye to possible criminal indictments was taking place during this period.

On March 23, 1966, Pensinger Builders Supply Co. v. Kaiser Gypsum Co., C.A.No. 5923-PHX, (D.Ariz.) was filed in Federal District Court in Phoenix, Arizona. Pensinger was the first drop in what was to become a torrent of private treble damage actions alleging, inter alia, price fixing against the major gypsum producers. The Pensinger case was later settled out of court. On January 25, 1967, Wall Products Co. v. National Gypsum Co., 326 F.Supp. 295 (N.D.Cal.1971); 357 F.Supp. 832 (N.D. Cal.1973), a private treble damage, action was filed in the Northern District of California. This was the first of 143 cases against the gypsum corporations which were ultimately filed in San Francisco or transferred there by the Panel on Multidistrict Litigation and assigned to District Judge Alfonso Zirpoli. The Wall Products litigation, having begun in January of 1967, was not ultimately concluded until midsummer of 1974 when the final order on attorney's fees was entered.

On October 25, 1966, Baddia Rashid, Deputy Director of Operations of the Antitrust Division wrote to Alan Dobey, then Chief of the Antitrust Division's Trial Section, to authorize a "full investigation of the gypsum industry" by the Division's Central Office in Washington, with the pending investigations then ongoing in the Chicago and Philadelphia offices to be consolidated. This "full investigation" was, of course, mammoth in its scope and, as a consequence, quite time-consuming. It is clear that the very nature of the investigation— with its hundreds of people to be questioned, its mountains of documents to be examined and analyzed and its inherent difficulties of orchestration— led inevitably to a four-year delay before the Assistant Attorney General was in a position to make a decision as to whether a grand jury should be empaneled. As an example, it is apparent that the investigation floundered for many months while Justice Department investigators decided whether and whether it was possible to pursue a "shared monopoly" theory against the companies as opposed to a strict conspiracy theory.⁴ In general, it is clear that the inherently cumbersome nature of the investigation serves to...