Source: https://www.justice.gov/atr/case-document/united-states-reply-post-trial-brief
Timestamp: 2019-04-20 03:41:47+00:00

Document:
Most of Respondents' post-trial brief, as most of the testimony they offered at trial, is consumed with a desperate attempt to manufacture an ambiguity in the plain language of the Final Judgment where none exists, and with arguments concerning the merits of the transaction under Section 7 of the Clayton Act, an issue completely irrelevant to these contempt proceedings. Ultimately, however, Respondents cannot avoid the fact that, by consummating a joint venture transaction that combined the drilling fluid businesses of Smith and Schlumberger, they willfully violated a clear and unambiguous provision of the Final Judgment. Accordingly, they should be found in civil and criminal contempt, and the Court should order recission of the joint venture and disgorgement of its profits and impose a significant criminal fine.
The plain language of Paragraph IV.F is completely consistent with protecting the U.S. market through divestitures that include foreign assets and operations. That paragraph contains a clear prohibition on the sale to, or combination of the divested drilling fluids business with, certain specified companies, one of which is Schlumberger. The presence of Schlumberger, then a tiny participant in the U.S. market, on this list can only be logically explained by the fact that Schlumberger, as the one of the largest oil field services companies in the world, was viewed as an important potential entrant.(2) Indeed, Smith's outside counsel testified he believed that Schlumberger was included "because people thought at that time that they might grow their business." Tr., 11/22/99, at 28:14-28:21 (Boland).
-- which was a party to the original decree -- that the transaction violated the Final Judgment.(8) Moreover, having failed to seek guidance from the Court, Respondents proceeded with their tortured interpretation at their own risk. See United States v. Greyhound Corp., 508 F.2d 529, 532-33 (7th Cir. 1974).
Respondents also argue that the Court would not have jurisdiction under the antitrust laws to bar a transaction that does not affect U.S. commerce, and therefore, absent proof of such an effect, this transaction is not covered by the Final Judgment. See Resp. Post-Trial Br. at 10-11. But it is no defense to a contempt charge that the Respondents thought the Court could do nothing to punish their violation. A good faith, but mistaken, belief that a court lacks jurisdiction to enforce an order does not provide a defense for a person who willingly engages in conduct falling within the prohibitions contained in the order. Good faith reliance on counsel's advice to violate a court order does not constitute a defense to the specific intent element of a crime. See Cheek v. United States, 498 U.S. 192, 206 (1991); United States v. Armstrong, 781 F.2d 700, 706 & n.4 (9th Cir. 1986); see also In re Novak, 932 F.2d 1397, 1409 (11th Cir. 1991); United States v. Revie, 834 F.2d 1198, 1205-06 (5th Cir. 1987). Even if Smith and Schlumberger genuinely believed this Court lacked jurisdiction over their joint venture, they nonetheless acted willfully to violate the language of the Final Judgment and cannot advance a good-faith defense to criminal contempt.
The evidence adduced at trial proves beyond a reasonable doubt that Smith and Schlumberger acted with reckless disregard for this Court's order, and accordingly they should be found in criminal contempt. See United States v. Rapone, 131 F.3d 188, 192 (D.C. Cir. 1997). Respondents failed to comply with the clear, plain meaning of the Court's order, relying instead on a twisted and tortured interpretation advanced by their outside counsel, U.S. Post-Trial Br. at 6-7 -- which the evidence at trial demonstrated was devised in the face of prior reasoned conclusions that the decree clearly prohibited the joint venture, id. at 10-12. Smith's and Schlumberger's general counsels either failed to read the Final Judgment or did not think about it, id. at 14-15, clearly an unreasonable course for sophisticated, counseled corporations, see John Hopkins Univ. v. CellPro, 978 F. Supp. 184, 190, 194 (D. Del. 1997). Respondents inexplicably continued despite a warning from the Department of Justice that it considered the joint venture to violate the order. id. at 15-19; see United States v. Benson, 941 F.2d 598, 614 (7th Cir. 1991) (discovering reason to doubt the advice will defeat the advice of counsel defense). Most damning, Respondents did not avail themselves of the one fail-safe means of avoiding violation of the decree by steadfastly refusing, despite the availability and ease of the procedure, to approach the Court for modification or clarification. U.S. Post-Trial Br. at 19-20.
Respondents' action in consummating a transaction that is expressly enjoined by a consent decree is almost unprecedented in the long annals of antitrust enforcement. For this reason, as Respondents correctly point out, there is little case law specifically discussing the appropriate remedy for such a brazen violation. Where, as here, a party has violated a clear and unambiguous order, the appropriate remedy in civil contempt is the remedy that most effectively restores the status quo ante. In this case, that remedy is recission, and Respondents have offered no convincing reason for any lesser remedy.
Whether the transaction violates Section 7 is completely irrelevant to the issue of whether Respondents are in contempt and it is likewise irrelevant to the appropriate remedy. Indeed, introducing Section 7 issues into the remedy formulation would undermine the very purpose of antitrust consent decrees. The Government enters into consent decrees to settle antitrust cases because a decree provides a remedy for competitive concerns without the burden and expense of fully litigating an antitrust case. If the Government were forced to prove that every decree violation was also a substantive antitrust violation in order to get relief, the effectiveness of consent decrees as an enforcement tool would be eviscerated.
The evidence in this case shows that Respondents have willfully violated a clear and unambiguous provision of the Final Judgment. Respondents should be held in civil and criminal contempt, and the Court should order the recission of the joint venture and disgorgement of its profits and impose a significant criminal fine.
1. Respondents' reliance on the United States' willingness to consent to modification of the decree in 1996 is also misplaced. United States v. Atlantic Refining Co., 360 U.S. 19, 22 (1959), does not support their argument. In that case, the Supreme Court held that a previously advanced authoritative interpretation could bind the government. Id. In this case, neither the United States nor the Court purported to interpret the decree. Moving for modification in a particular instance simply does not amount to an "interpretation" of the decree.
2. As Respondents' own witnesses testified, other drilling fluid companies with larger shares of the U.S. drilling fluid business than Schlumberger were not included on the list of prohibited buyers. Tr., 11/23/99, at 62:11-63:2 (Grijalva).
3. Respondents attempt to further confuse the issues in this case by citing the Department's reference to the Alcoa/Reynolds matter. Resp. Post-Trial Br. at 14 n.11, 17. Collier, Shannon, Rill & Scott and specifically Sean Boland, counsel for Smith in this case, was also counsel for Reynolds in the Alcoa/Reynolds matter and know full well that there too, one of the companies said it had made an "irrevocable" business decision to exit that it claimed should eliminate any concern by the Division about the transaction. But in fact, the Reynolds facility that was the subject of the Division's investigation and subsequent suit under Section 7 of the Clayton Act (a suit dismissed by the United States after the transaction was abandoned) is still operating and did not exit the market. Similarly, Schlumberger is still capable of competing in the U.S. drilling fluid business in the future, as it possesses both assets and people in the United States with which it could compete (see the United States proposed reply findings of fact).
4. In ITT Continental Baking, the complaint was a permissible aid to construction when "the agreement incorporate[d] by reference an 'appendix,' which set forth at length the background leading to the complaint and the proposed order." Further, "the agreement provide[d] that 'the complaint may be used in construing the terms of the order.'" Id. No such express incorporation of the complaint or competitive impact statement can be found in the decree in this case.
5. See ITT Continental Baking, 420 U.S. at 237 (referring to external sources to amplify a question which the decree did not address); United States v. Western Elec. Co., 894 F.2d 1387, 1391-92 (D.C. Cir. 1990) (confirming interpretation of text by considering the competitive impact statement); United States v. NYNEX Corp., 814 F. Supp. 133, 137 (D.D.C.), rev'd, 8 F.3d 52 (D.C. Cir. 1993) (bolstering interpretation by reference to the competitive impact statement).
6. In White, plaintiffs argued that decree provisions requiring certain procedures in a city welfare program prevented the city from abolishing the program. 689 F.2d at 119. The court, looking at the decree as a whole, found that its purpose related solely to procedural protections and created no requirement that the program be continued. Id. at 120-21. In so doing, the Seventh Circuit kept within the four-corners rule of Armour. See id. at 119 (citing Armour, 402 U.S. at 681-82).
7. Speculation by a person not party to decree negotiations on what the parties must have meant is unreliable and entitled to little weight. See Keith v. Volpe, 118 F.3d 1386, 1392 & n.8 (9th Cir. 1997) (rejecting affidavits of persons not involved in negotiating decree).
8. Again demonstrating their dogged refusal to confront the plain language of any document that does not serve their purposes, Respondents claim that they did not understand from the Nannes letter why the Department of Justice took the position that the joint venture violated the decree. Resp. Post-Trial Brief at 20. In fact, the letter quoted the relevant language of Paragraph IV.F and stated that the joint venture would violate the decree. If Respondents truly did not understand the letter they could have inquired. In fact they did not because by that time they had decided to close the transaction despite the prohibitory language of Paragraph IV.F and despite the Nannes letter. They had decided to roll the dice, calculating that the United States might take no action, and that even if it did the Court might buy their tortured reading of the decree, and that even if the Court found a violation they might get off with a civil fine. See GX 15; Sutton Dep. at 201:12-204:1 (Tr., 11/18/99, at 169:24-172:8). The calculus was very clear.
9. Respondents cite repeatedly to their own witnesses' self-serving testimony that there are no "adverse effects." The United States offered no evidence on this irrelevant issue.
10. The Court's jurisdiction over foreign firms and their assets in antitrust cases is firmly established, and U.S. courts may order relief involving foreign firms and foreign assets to protect competition in the United States. See United States v. Jos. Schlitz Brewing Co., 253 F. Supp. 129, 145, 147-48 (N.D. Cal.), aff'd, 383 U.S. 37 (1966); United States v. True Temper Corp., 1959 Trade Cas. (CCH) ¶ 69,441, at 75,663 (N.D. Ill. 1959); see also United States v. Imperial Chem. Indus., Ltd., 105 F. Supp. 215, 237 (S.D.N.Y. 1952). The standards for extra-territorial application of the antitrust laws are irrelevant here, as this is a contempt proceeding to enforce a lawfully entered court order, not a Clayton Act or Sherman Act case. Even if this were an antitrust action, extraterritorial standards would have no applicability, as Respondents' joint venture operates in the United States and is a combination of two firms operating in the United States.
11. Floershiem v. Engman, 494 F.2d 949 (D.C. Cir. 1973), which Respondents cite four times in their Post-Trial Brief, merely states some basic propositions in dictum on its way to dismissing the case for a lack of subject-matter jurisdiction. Id. at 952-53, 954.
12. Two cases cited by Respondents are completely inapposite. In United States v. Automatic Fire Alarm Co., 1969 Trade Cas. (CCH) ¶ 72,696 (D.R.I. 1968), the court declined to impose criminal contempt sanctions where it concluded the violation was not willful. The court in Suntex Dairy v. Bergland, 591 F.2d 1063, 1067-68 (5th Cir. 1979), reviewing a federal milk marketing order, held that it had no power to invalidate the order based on an alleged violation of an antitrust consent decree entered by another court.
13. Respondents quote out of context a statement by the court in Coca-Cola that there may be an equitable argument against recission in merger cases because the seller cannot technically violate Section 7, which bars acquisitions (rather than sales) that may tend to lessen competition. 575 F.2d at 230. This argument has no applicability here, where the Court may hold both Respondents in contempt for violation of the Final Judgment.

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