Earl Warren: Number 2 on the docket, Holophane Company, Incorporated, Appellant, versus United States of America. Mr. Stevens.
Mr. Attorney General: May it please the Court. This case is a civil antitrust case originating in the Southern District of Ohio and tried before His Honor Mell G. Underwood. It comes before this Court upon appeal under the Expediting Act of 1903 from an order or judgment in decree entered by Judge Underwood February 8, 1954. A seasonable motion for new trial and other relief after judgment was filed and overruled February 9th, 1955. Thereafter, proceedings were perfected in this Court and jurisdiction noted October 10th, 1955. The complaint charged a violation of Section 1 of the Sherman Act by a reason of agreements existing between the appellant, which was the sole party defendant in this litigation and two foreign corporations. In other words, in general classification, this case is a cartel case. And yet I might say at the outset that if there ever was a case in which that word should not be endowed with talismanic qualities which preclude an examination under the rule of reason, this case is it. The appellant, Holophane Company, Inc. is a Delaware Corporation which has a factory in Newark, Ohio and its general offices in New York City. It manufactures prismatic glassware. That is glassware which is impressed with prismatic contours either in linear or circular form so arranged as to conduce to the projection of light patterns. I think on some of the exhibits Your Honors will see the slogan, “We turn light into illumination.” It is the function of this prismatic glassware to direct and focus or diffuse the light which comes from the source. The products include what are known as reflectors from which the light obviously bounces back, refractors through which the light passes and is bent into one direction or another, and lenses which perform in substance the same function as is performed by refractors. Generally speaking, refractors are used out of doors and lenses are used indoors. Refractors are a prominent element in the street lighting aspect of the Holophane business about which more will be stated later. Those are the physical products which Holophane makes. I might add that it not only makes the glass, but to some extent fabricates lighting fixtures which incorporate this prismatic glassware. It also sells prismatic glassware to other fabricators of lighting fixtures for incorporation by them in their own structures. Because of the oddity of the name, it might be worth just to comment upon that. The name, Holophane derives from two Greek combining forms holo, meaning complete, entire, or whole such as in holograph, holocaust and phane meaning to appear. And so the term in combination means wholly apparent or appearing completely. And I might say that I was delighted to find in the multivolume Oxford Dictionary last week that there actually is a word holophanerous meaning wholly apparent. The facts in this case as presented in the record below were developed by two witnesses who testified in person. One called upon cross-examination by the Government. The other adduced used by the appellant, the defendant below. Both were officers of the appellant. In addition, there are stipulations and numerous documents. The evidence shows in sum that the Holophane Industries as one might call them or industry stemmed from a meaning in 1892 between an American, Otis A. Mygatt, and a French man named Blondel. Professor Blondel had discovered the function performed by the impression of prisms on glassware in the focusing or diffusion of light. In 1898, Mr. Mygatt, the American, formed Holophane Glass Company of New Jersey and it proceeded to manufacture prismatic glassware. In 1912, Mr. Mygatt formed Holophane Limited, a British corporation. Some time between 1912 and 1921, Mr. Mygatt having become a resident of France formed La Societe Anonyme Francaise Holophane. He controlled not only Francaise and Limited, but also the American company which he made a fully own subsidiary of Limited. In 1921, there was in an agreement which appears in the record I believe Government's Exhibit 6 between Limited and Francaise in which Limited granted to Francaise the right or exclusive license to sell in a group of countries surrounding France, Belgium, Switzerland, Italy, Portugal, and Spain. By that agreement, Francaise was not to sell in British territory nor British to sell in French territory. That contract or agreement also provided that Limited was to have a representative on Francaise Board of Directors, with, of course, to have the right to inspect their books. Accountings were regularly to have been made and that the contract was to be construed as made under English law with the appointment of an agent for service of process in England. That was the situation which existed in 1925 when appellant's predecessor came into existence. Holophane Glass Company of New Jersey was, as I've indicated at that point a wholly owned subsidiary of Limited. The evidence shows that in 1925, the American management wished to acquire the American property for themselves that negotiations were conducted and a transaction consummated. That transaction in the record first evidences itself in an agreement between Limited and one Joel Liberman who was counsel for the American company and was associated with Mr. Charles Franck, then the American manager and now, president of Holophane Company, Incorporated, the appellant herein. Mr. Liberman has passed away. In that agreement, which was dated June 1st, 1925, Mr. Liberman acquired the opportunity or option to purchase the assets or the stock of the American company. It in that agreement, it was to be cited that there would be reciprocal recognition of trading areas. That agreement was assigned to a New York Corporation known as Holophane Illuminating Company which was formed along in September 25 and which exercised the option in the Liberman agreement so that in September of 1925, Holophane Illuminating Company, the New York corporation acquired from Limited whose negotiator was one Thompson, the General Manager of Limited acquired from it the stock of Holophane Glass Company, the New Jersey corporation. Immediately there was a change of name of the New York corporation to Holophane Glass Company. A year or so later, the name was changed to Holophane Company, Inc. In 1929, the New York corporation merged into a Delaware corporation which is the present appellant. In September --
Earl Warren: Now who owns -- who owns the Delaware Corporation at the present time? Is that entirely independent?
Mr. Attorney General: It's entirely independent --
Earl Warren: Independent.
Mr. Attorney General: -- Your Honor, yes.
Earl Warren: -- of Francaise and --
Mr. Attorney General: It is. Thank you.
Earl Warren: Yes.
Mr. Attorney General: And I should state at that point that it is an interesting fact that in the acquisition of the American company by the American interests, Mr. Mygatt who, as I have said, originally controlled the entire enterprise owning Francaise, owning Limited, and initially owning the New Jersey corporation purchased all of the preferred shares of the American company, not common shares but the preferred shares and became president of the American Company. That is shown in the record by appropriate exhibits. At the present time, Holophane Company is, as I've indicated, entirely separate in ownership from Limited and Francaise.
Harold Burton: Is Mygatt -- he is not the president now.
Mr. Attorney General: Mygatt is not the president.
Harold Burton: And did he have any of this --
Mr. Attorney General: Mygatt -- Mygatt is -- Mygatt is dead.
Harold Burton: -- first start? Has he evidence of the first start?(Voice Overlap) --
Mr. Attorney General: (Voice Overlap) -- the record does not show that, Your Honor.
Harold Burton: Was that holding stock at all?
Mr. Attorney General: It was not. The record does not show that without --
Harold Burton: So, it was a passing phase that it wasn't --
Mr. Attorney General: It was passing phase.
Harold Burton: (Inaudible)investment which is later was given up.
Mr. Attorney General: I think thats correct, Your Honor. I think it is only fair to infer from that that in the financing of the purchase of the equity by the American management it was necessary for him to take preferred stock in order that the transaction will go forward. In September of 1925 a so-called trading agreement was entered into between the American company and Limited. That agreement which had been referred to in Mr. Liberman's original letter of -- to the company and said that a corresponding agreement might be offered with Francaise included territorial restrictions such that the American company was granted the right to sell Holophane products, all of these companies selling under the name of Holophane, all of them using the same trademark was given the right to sell Holophane products in that area of North America, north of the Panama Canal but exclusive of the West Indies, in Cuba and in Japan, and in the Philippine Islands. That agreement also provided that each party would use its best efforts to prevent exportation for its territory and to the territory of the other that each party would not carry on trade in the territory of the other. That each party will neither apply for nor obtain patent or trademark protection in the territory or countries of the other's territory without the request and -- but for the benefit of the other party. That it will communicate and assign developments, discoveries, designs, and that it will supply the other when requested its products at factory cost plus 30%. Some few months later, the agreement which had been foreshadowed in Mr. Liberman's letter to the company along the same lines was consummated with Francaise and it was substantially the same sort of agreement. Along in 1944 after considerable correspondence and discussion between Limited and Francaise or rather Limited and the appellant about the South American rights to sell Holophane products, Limited granted the right to sell those products in South America to the American company, the appellant for some $40,300. At the same time, the agreement of September 15th, 1925, the trading agreement as I've called it, was renewed and it was designated that it would apply to the South American territory acquired by the American company. Interestingly enough, and in passing, both the original agreement between Mr. Liberman and Limited and the two agreements of 1944 which I have just mentioned, contained clauses which designate that the law of England shall apply and that a firm of solicitors shall be named, in fact, are named upon whom service of process can be made or any matter drawing out of the contract. In 1945, there was a further modification of the agreements which I have referred to, to take care of the percentages to be paid between Limited and the American company for certain additional work when one called upon the other to ship its goods into the territory of the other or when specification work was done by one company for shipment into the territory of the other. Now, in selling its prismatic glassware, Holophane Company, the appellant herein, in essence sells not a physical product but a service. The record is explicit on that subject note 5 on page 7 of the brief of the Government concedes that fact. That is, this is not a product which is sold in large by letter, by telephone but rather it is the result of an engineering service. A study is made by skilled lighting engineers who having perceived the problem, worked out a solution, make a recommendation and only when it is going through that process is the bulk of the business of this company transacted. The evidence shows that 75% of the total volume of Holophane business is done in that way. That there are 25 lighting engineers, sales engineers in its employ and that that is the normal course of business for this company. Now, the size of this company is an extremely interesting thing. As I have said, I believe, in 1925, it was acquired from Limited by the American Management Group for $1,000,000. Yet, in 1940, it had capital stock and surplus of 791,000. The highest reached shown in the record of this case, Your Honors is 1,859,000 in 1949 and in the year immediately prior to the filing of this suit, 1948, it had a total of capital stock and surplus of a 1,453,000. So it is apparent that this is a small company. Not only so because of the capital stock and surplus figures I had given but indeed because of the sales volume. Glassware sales in 1940 were 740,000. The high point shown in the record is 1951, when they ran 2,000,009. Total sales in 1940 were 1,111,000. Sales in 1951, the high point 4,678,000 and in the last year prior to the filing of this suit, some 2,091,000 in glassware and I think 1,000,425 in fixtures.
Felix Frankfurter: Will these figures be a factor in your argument and (Voice Overlap) --
Mr. Attorney General: They will indeed.
Felix Frankfurter: On conditions that this is not a violation of the Act?
Mr. Attorney General: They will indeed, Your Honor. Now, on that background, it's interesting to see what competition this company has. Prismatic glassware, I have described, its competition, Your Honors, includes some nine companies in this country making products in prismatic glassware some of which this company does not make, many of which it does. Its competitors include such concerns as Corning Glass Works, one of the largest of the companies of its kind.
Felix Frankfurter: Are you now referring to the competition within Continental America or competition dragging within its ambit restriction of territory both here and abroad?
Mr. Attorney General: I'm referring to competition within this country. It also has as a competitor in this country, (Inaudible) which is even larger than Corning Glass Works.
Felix Frankfurter: But the case ought to be, is it not, I'm asking, I don't know I must tell you is partly on the interrelation of what happens here or what happens abroad and the division of territory is that it?
Mr. Attorney General: That's correct, Your Honor. That's correct.
Felix Frankfurter: So that mere competition within the United States is being Holophane and A, B, C, D competitors isn't -- doesn't -- doesn't overlap. The problem is presented by the record in this case.
Mr. Attorney General: It is not necessarily conclusive but we submit that it is the fact that's for consideration.
Felix Frankfurter: Does it bear on the question of dividing territory?
Mr. Attorney General: We think, Your Honor that -- that it does in this sense. That the record in this case shows that the only competition which has ever been affected is competition between or among the three Holophane companies that no competition outside or with outsiders has, in anyway, been affected. And that it is solely a matter of competition among those companies. Now, as I have said --
Felix Frankfurter: It's all independent companies which are also independent?
Mr. Attorney General: Which are independent companies?
Felix Frankfurter: Don't (Voice Overlap)
Mr. Attorney General: Oh, yes. Yes, it is.
Felix Frankfurter: (Inaudible) friendly relationship they are independent.
Mr. Attorney General: They are independent companies (Inaudible)
William J. Brennan, Jr.: Do your competitors give the same service that you do in the lighting service?
Mr. Attorney General: Well, it's my understanding that they are thoroughly competitive. I --
William J. Brennan, Jr.: Do they make the same kind of glass that you have?
Mr. Attorney General: -- it's my understanding they do. The record supports that. As to these agreements, I should say with the greatest candor that there is no doubt but what the appellant has lived up to them. As a matter of fact, counsel at trial told the Court that it was hardly necessary to examine the multitude of documents to determine that. That the appellant thought the agreements were legal to start with. Still thought they were legal and had adhered to them. And so, the fact is that we have carried out our end of the bargain which was entered into.
Felix Frankfurter: Is there in the record anything that bears on that statement, namely, that this agreement was entered into, in the utmost good faith and if you please with -- to reasonably entertain legal views by counsel. The reason I ask that question is because for me at least that may bear somewhat on some aspect of the decree.
Mr. Attorney General: Well I think it does, Your Honor. I think the record does bear that out. I think that the record shows that, as I have said, the American management wished to buy the American company for itself. Mr. Mygatt controlled all of the companies. His manager of Limited, a man named Thompson, insisted that these provisions for an entry of appearance in England be it part of the contract. It is our submission on that subject that the American Holophane Company could never be -- have been born as an independent unit but for the acceptance of this territorial limitations anymore than if I undertake to borrow money from a bank I can get it without signing a cognovit note. That the same type of dominant compulsion which inserts the waiver and entry of appearance in a cognovit note existed here to compel that these gentlemen acquiring the American company agree to enter their appearance in any matter stemming from these contracts which might arise and enter it in England. And not only was that so, but the compulsion existed as long as 1944 when supplemental agreements were made.
Harold Burton: Mr. Stevens, is this an appropriate time to ask you to give your explanation and answer to the opening statement of the Government in its summary of argument which it said in the court below appellant tried to impose findings of conclusions?
Mr. Attorney General: I'll be very happy to, Your Honor, (Voice Overlap) --I was going to state that --
Harold Burton: In addition of the markets among itself and Limited and Francaise are illegal and therefore not in the position to go ahead and --
Mr. Attorney General: I'll be very happy to discuss that. When the facts had been presented to the Court as I have outlined -- now, Judge Underwood asked that counsel submit suggested or proposed findings of fact and conclusions of law and a proposed judgment and decree. That was done. The judgment and decree and the findings of fact and conclusions of law submitted by the appellant were submitted in this context. There had been discussion that Holophane Company wished to terminate this litigation. Counsel for the Government had been advised, Judge Underwood had been advised. It was apparent that at that time, 1953, the Timken decision having been made in 1951 being the latest, most thoroughly litigated decree in the field. That an irreducible minimum at which the appellant could hope to terminate this litigation was the general type of decree set forth or approved in the Timken case. And so in the proposed findings of fact and conclusions of law which the appellant gave to Judge Underwood it did have provisions which declared these contracts to be illegal and that is shown and discussed thoroughly, if the Court please, beginning on page 3 of the reply brief which we have filed. Just to set that matter in context and move on, my associate, Mr. Broad, seated at my left put it very colorfully. He said, at page 665 of the record, now on page 3 of my reply brief, "My version of it is simply this. Feeling as strongly as we do that the agreements were essentially legal to begin with and perhaps are still legal, we can't afford the luxury of carrying on this expensive litigation which will put us out of business anyway. So we said to the Court and to the Government, very well we will concede the agreements are illegal. We will concede to the cancellation. We will concede never again, directly or indirectly, to be involved in any such agreements, but please leave us alone." The Government isn't content with that. It wants this little business out of Newark, Ohio to become a worldwide business. We haven't the capital, we haven't the manpower, we haven't the know-how to spread ourselves all over the world. And yet, if we are to comply with the decree that the Government submitted to Your Honor, we have one of these two desperate choices either to immediately cease doing business or to go broke within a year or two then we say that that's an imposition far beyond our means.
Felix Frankfurter: Mr. Stevens, does that generally too often broad refer to paragraph 8, 9, and 10 of the decree? Does that --
Mr. Attorney General: It refer -- it refers, Your Honor to --
Felix Frankfurter: -- the Government to --
Mr. Attorney General: -- it refers --
Felix Frankfurter: -- get this --
Mr. Attorney General: -- Your Honor to the entire proposal which we made, which included the provisions under which the Court might then find illegality in the agreements about which we are concerned.
Felix Frankfurter: Yes, I understand that. But first statement, “the Government didn't contend with that.”
Mr. Attorney General: Yes, that's --
Felix Frankfurter: You can leave us alone. Now, is that especially directed towards the --
Mr. Attorney General: That -- that --
Felix Frankfurter: -- decree towards the duties enjoined upon you by the paragraph 8, 9, and 10 of the decree.
Mr. Attorney General: Yes. That specifically applies to portions of the decree which Mr. Broad colorfully described as (Inaudible). That is obliging this small American company to go abroad and perform affirmative acts abroad out of the jurisdiction of this country and in sovereignties where it does not have the protection of the decree which the District Court provided us.
Felix Frankfurter: Provided the remarks with the decree which we have now before us -- before the Court in --
Mr. Attorney General: Your Honor, this decree was subsequently added wherein --
Felix Frankfurter: I know it wasn't obtained but was there already a submission by the Government --
Mr. Attorney General: -- there was.
Felix Frankfurter: -- of a proposed decree of which this became formalized.
Mr. Attorney General: Essentially so.
Felix Frankfurter: Alright.
Mr. Attorney General: Essentially so.
Felix Frankfurter: And it was to that that this would be marked or addressed.
Mr. Attorney General: Correct, Your Honor.
Felix Frankfurter: Alright.
Harold Burton: Mr. Stevens --
Mr. Attorney General: Yes, sir.
Harold Burton: -- at that time and at this time you object to the language of a decree in the affirmative provisions in -- in the decree.
Mr. Attorney General: That is correct.
Harold Burton: At that time, you were ready to yield on the legality point are you now?
Mr. Attorney General: We're not, Your Honors. We're not. And we say we have neither waived nor conceded because the statements which were made in the proposals which were submitted to His Honor, Judge Underwood, were made in the context in which we were saying if this decree which we deemed to be in the form of the Timken decree applied to this case is accepted while we don't like it. We will take it and abide by it.
Earl Warren: When the trial judge requested you to prepare your findings and proposed decree did he put it in that context or -- or did you put it in that context?
Mr. Attorney General: I think it is fair to say I was not in the trial, Your Honor. I think it is fair to say that that was the context which existed at the time we were brought into the litigation.
Earl Warren: By -- what do you mean yourself the person?
Mr. Attorney General: I -- I mean our office.
Earl Warren: Well, when what --
Mr. Attorney General: And that at that time, there was discussion between the Government and Holophane with the Court upon the basis upon which this whole thing might be terminated. And it is in that context that these submissions were made.
Earl Warren: Is there anything written by the Government or -- or stated by the judge in the record to the effect that the -- the -- one of the findings prepared in the -- in the light of some such understanding?
Mr. Attorney General: There is not, Your Honor. There is not. It's fair to state that. I -- I think when Your Honors examined however, the discussion of this subject in our reply brief, each will find that it is irrevocably documented that counsel for the Government understood that we were undertaking to work out in effect a final determination of the decree of the case at the trial court level by submission of what we considered to be a decree along the Timken lines.
Harold Burton: But if you -- if you were wholly successful here or being in this Court, you would then have one of the competitors to deal with United States?
Mr. Attorney General: We would have nine competitors.
Harold Burton: Well -- now are you speaking of those who are here now?
Mr. Attorney General: Those who are here now.
Harold Burton: To say one additional competitor or that would be the Cellophane -- Cellophane Company of France or --
Mr. Attorney General: Well, if we are successful in this case and the decree of Judge Underwood is set aside, then the contracts which have existed would still be in existence and neither process nor limited would export to this country.
Harold Burton: And if you were not successful then you will --
Mr. Attorney General: If we weren't --
Harold Burton: -- will open it to the --
Mr. Attorney General: -- we would -- we would open it to some degree to both limited and processed, correct.
Harold Burton: But if you were successful, you wouldn't have to carry out other (Inaudible) would you compete with them --
Mr. Attorney General: That is correct.
Felix Frankfurter: Mr. Stevens, you are the best in the -- you will do your best how to use your time and speaking for myself, there are real problems about the decree and as I understand it --
Mr. Attorney General: I'm -- I'm --
Felix Frankfurter: -- you only can go to 2 o'clock now if you get around the decree.
Mr. Attorney General: I'm very interested.
Felix Frankfurter: Well , I know but it takes time.
Mr. Attorney General: I'm sure. Thank you. The decree which was ultimately entered by the Court, not only had a provision Section 5 which canceled these contracts and I suggest again that there was only one defendant before the Court, the American company, that Limited and Francaise were not before the Court. Not only cancel those contracts but ordered this company with $1,500,000 to $2,000,000 of networks. To perform affirmative acts abroad, we were directed in paragraph 11 set out in our brief, the principal brief pages 13 and 14, 15 to do specific things in paragraph (c) and then more broadly to use reasonable efforts including but not limited to the use of present or subsequent distributors or wholly owned subsidiaries. To promote the sale and the distribution of said products in foreign markets including the territories of Limited and Francaise. Now that, in substance, is the point which we are driving at. And on the background of facts which I have described, we have two large questions of law. We have one which is strictly an antitrust question. And that is, whether or not, the bare fact of territorial divisions and agreements existing between a company such as Holophane and foreign competitors makes that agreement per se illegal having in mind the size and market position of Holophane, having in mind the prior common ownership, and having in mind the fact that foreign commerce is involved. I set at the outset --
Earl Warren: Now your point about common ownership, I don't get that. That doesn't exist where it's applied.
Mr. Attorney General: -- it does not exist but that point, Your Honor, is this. That if one takes a rule of reason approach rather than a flat per se test here, there is no way in which Holophane Company, the appellant, could have come in to existence but for the acceptance of the territorial limitations about which we are discussing. And in that context, in other words coming from the point of common ownership when obviously Limited would not sell and create a competitor, obviously Limited was bound to Francaise by its own agreements and couldn't create a competitor for Francaise. This company, if it came into existence, had to come into existence on that basis. I have said that this case among cartel cases is a refreshing one. We don't here have Your Honors the 100% control and domination of the nylon market for example such as existed in the Imperial Chemicals Du Pont case. We don't have here the 90% domination of the titanium market which we had in the National Lead case. We certainly don't have the 90% domestic market and the 80% non-domestic market which existed in (Inaudible), nor do we have the 70% to 80% domination of domestic market in Tapered Roller Bearings, and the 25% domination of added friction bearings at large which we had in the Timken case. Here we have a concern which sells prismatic glassware. Not a scrap of evidence was introduced to show the position of that concern in the prismatic glassware industry. Nothing suggests that it even remotely dominates it. In the complaint, there was an allegation that we had some 95% of the market in prismatic glassware for the street lighting industry, but the proof showed that the most we have is 3%.
Felix Frankfurter: Well this is -- your argument gets down to the proposition, this is only a little one.
Mr. Attorney General: This is only a little one among other things.
Felix Frankfurter: But now assuming -- assuming that you, when you're on a decree, assuming that it's to be condemned under the Sherman law, what do you say about the decree and what's your objection?
Mr. Attorney General: That is the second large area of our discussion. We say first of all that there is not power in a District Court to order affirmative acts abroad. We say Your Honors that international law is intricately a part of our law. That one facet of international law forbids the intrusion by decree of this Court or the District Court into the affairs of other sovereignties.
Felix Frankfurter: I had assumed that there's an actual or potential contradiction.
Mr. Attorney General: That it does.
Felix Frankfurter: Certainly the court of equity having the defendant report and make him do things and transfer land outside of the country.
Mr. Attorney General: There's no doubt about that but --
Felix Frankfurter: Now, what is there -- what is there if the only escape clause in paragraph 11 acquires those?
Mr. Attorney General: I don't believe there is an escape clause in paragraph 11. I don't think the word reasonable is an escape clause. I think we're talking as a matter of fact about power, Your Honor.
Felix Frankfurter: No, but there's the sentence following your reasonable efforts then comes the clause nothing contained in this paragraph shall be construed in requiring the defendant to export any said products in violation of the valid transfer trademark of any foreign country.
Mr. Attorney General: Because, Your Honor, that's only part of it. And the very language Your Honor has read indicates in part the fallacy of the decree below, because the Government was most circumspect in saying, “Oh, no, we will not intrude upon the patent or trademark law in the territory of Limited and Francaise. All we will do is violate fundamental contractual rights which exist there.” And we say that there are fundamental inviolable contractual rights recognizable under the law of England which exists in Limited and we believe recognizable under the law of France which exists in Francaise.
Felix Frankfurter: Are you saying that this decree doesn't free you from subjection to an enforceable contract of English and French courts? Is that what you're saying?
Mr. Attorney General: Well, that's in part. That's it. And we say that when we are obliged to go abroad, Your Honor, particularly in England where we already have an entry of appearance that the District Court has asked this company to expose itself in a foreign jurisdiction to a decree in a court of equity or a money judgment in a court of law.
Felix Frankfurter: What would you say if the District Court requires you to go to an English court and get a declaration to its possibility of the form of the district contract and if you were to agree with the American court?
Mr. Attorney General: I would say as a matter at bar the District Court had no right to do it.
Felix Frankfurter: Well it's asking you that this, the selling point is the filing of a violating of an American law.
Mr. Attorney General: That's correct.
Felix Frankfurter: (Inaudible)
Mr. Attorney General: That's right.
Felix Frankfurter: Therefore, to effectuate the violation you say that everything can be done but they didn't affect us generally.
Mr. Attorney General: Within this country, yes.
Felix Frankfurter: I -- I don't think that's on the necessary limitation for the court of equity can make, it seems outside of it.
Mr. Attorney General: But the court of equity --
Felix Frankfurter: The moment you don't collide potentially with the other countries.
Mr. Attorney General: And I'm submitting to Your Honor that you do collide with it that the British Nylon Spinners, Imperial Chemical Litigation, with which I know Your Honors are familiar demonstrates that you collide with it and that this Court in its opinion in Steelville, Bolivia and its Footnote 17 I believe --
Felix Frankfurter: I --
Mr. Attorney General: -- so recognizes that as I --
Felix Frankfurter: Mr. Stevens --
Mr. Attorney General: -- believe Your Honor will know.
Felix Frankfurter: Mr. Stevens, I've suggested an alternative that doesn't appeal. And I hope the Government will address itself here to cull out the real problem in this case namely, not to make you include things (Inaudible) to make you go to the English court and say, “The American decree to which we are subject subjects us to the enforceability of the contract which for them is illegal but in this country it may not be illegal. We therefore ask a declaration from chancery that this -- that there is the jury and that we need to create it then, the impossibility of restoration, impossibility of performance, why shouldn't we be asked to go to the English court to get a declaration --
Mr. Attorney General: No, I think --
Felix Frankfurter: -- that will leave your responsibility for a contract on the English law with the American court where you should disregard it.
Mr. Attorney General: -- I think, Your Honor that we should not be asked to that. I think that the British law is plain that this -- that these contracts are valid.
Felix Frankfurter: I don't think you can say that British laws claim the right of the means (Inaudible)
Mr. Attorney General: I respectfully suggest to Your Honor the British Monopolies Act does not touch this subject --
Felix Frankfurter: I'll have no power --
Mr. Attorney General: -- and at this time to --
Felix Frankfurter: I didn't say tag. I'm saying you didn't play.
Mr. Attorney General: Well, if I may proceed, I've to reserve my last one.
Earl Warren: Very well. Mr. Friedman.
Mr. Attorney General: May it please the Court. I would like first to discuss the question of violation and then the question of relief. On the question of violation, briefly touching on the question of the concession which the appellant made in the court below, we just want to point out that this case did not come before the District Court in the context of consent negotiations. This Court came before the District Court on a trial on the merits and after the trial had been completed, the District Judge directed both parties to file proposed findings and proposed conclusions. And the Government part had proposed findings and proposed conclusions in which it made various suggestions and concluded the violation of the Sherman Act had been shown. The appellant did not file a conclusion that a violation of the Sherman Act have not been shown on the contrary after the filing counter proposals on the facts, it then came along and filed a proposed conclusion of law that the agreements are illegal and further provided a proposed form of decree in it which is suggested that these agreements were -- should be cancelled and that where they had judged and adjudicated to be illegal in violation of the Sherman Act.
Felix Frankfurter: Mr. Friedman, in this case were the Court's procedure followed that the abolishment (Inaudible) couldn't be a fair amount of cases with your, namely, the counsel first argued before the Court independently, that's up to divisions under the Sherman law and though they asked that judgments were granted on that -- on that issue of their illegal proceedings, it doesn't mean that the appropriate decree for the prior findings of the prior adjudication on the Sherman law. Or was it higgledy-piggledy (Inaudible)
Mr. Attorney General: Well it was, Your Honor, it was higgledy-piggledy but it was divided into two parts. There were two arguments before the District Court. There was first a trial on the merits but before the Court decided the case, the proposed findings, and proposed judgment was submitted.
Felix Frankfurter: I understand that but the plan and I have only the knowledge (Inaudible) The trial was concluded long before there was the argument before the judge handled it to the Court of which this colloquy took place. Is that right?
Mr. Attorney General: That is correct, Mr. Justice, but the --
Felix Frankfurter: It wasn't exactly that these show that they knew the axe would fall or the axe had to fall on the religious (Inaudible) what kind of religion, what kind -- they knew what it was like.
Mr. Attorney General: -- they -- they didn't know that the axe had fallen but certainty they filed papers which suggested that they accepted the (Voice Overlap) --
Felix Frankfurter: I'm saying that -- I'm saying they were stopped from making a decision.
Mr. Attorney General: Well, I hesitate to use the word stopped but I -- I say that --
Felix Frankfurter: I commend you for that.
Mr. Attorney General: But, we -- we think it's -- it's rather odd after they make these concessions in the trial court for them to be now arguing before this Court as to the legality of the agreement. And that we're not questioning -- to question the decree because these concessions only went to the finding a violation of justice.
Hugo L. Black: Where is the proposal in the record of the -- of the side that asked the Court to find that their business was illegal?
Mr. Attorney General: I'm sorry, Mr. Justice.
Hugo L. Black: I understood you to say that they proposed in the findings of fact to the effect that they had been conducting the business in violation of the Sherman Act.
Mr. Attorney General: Mr. Justice, that is --
Hugo L. Black: Where is that?
Mr. Attorney General: -- that is --
Hugo L. Black: Where is that proposed?
Mr. Attorney General: -- record numbers -- page 648 which --
Hugo L. Black: Yes.
Mr. Attorney General: -- is proposed conclusion of law number three. And then at Record 650 to 651, paragraph 4 of their proposed judgment beginning each of the following agreements is hereby declared and they judged it to be illegal.
Hugo L. Black: Well, what was the other one? Six what?
Mr. Attorney General: 650 and 651, Paragraph IV.
Hugo L. Black: That's your judgment, you said.
Mr. Attorney General: No, Mr. Justice. That is the defendant --
Hugo L. Black: (Inaudible)
Mr. Attorney General: That is their proposed judgment.
Hugo L. Black: And that section to which you refer, they asked the Court to find.
Mr. Attorney General: They so --
Hugo L. Black: Did he find it was illegal?
Mr. Attorney General: Yes, he did, Mr. Justice.
Felix Frankfurter: But don't you agree paragraph 3 with the preceding paragraph 2 under this lawyer documents (Inaudible) now, already to have you find it's fair? Is that fair? Is it one of those few?
Mr. Attorney General: I think so, but I don't believe it -- that they proposed this in terms of saying, “We will concede the illegality of the agreements on condition --
Felix Frankfurter: No.
Mr. Attorney General: -- that the Court could not impose a decree greater than we proposed.
Felix Frankfurter: They were -- they've been glad that they thought of that and nothing else.
Mr. Attorney General: It's not --
Hugo L. Black: Well --
Felix Frankfurter: It's done.
Hugo L. Black: Was this proposed to the final judgment submitted just in the form of the news here without any discussion when they presented it to you in court?
Mr. Attorney General: This was submitted to the Court together with a subsequent brief and then there were hearings three months after these proposals had been filed of which they argued the question of what form of the judgment should be.
Hugo L. Black: I'm just trying to find out whether it was made in the in the form of a -- just a matter -- or whether it was made in a quick session, would that show from the brief that they filed, that we have brief here?
Mr. Attorney General: It is not a part of the record, Mr. Justice. It could apply --
Hugo L. Black: But it was filed with the proposed final judgment.
Mr. Attorney General: I believe so, Mr. Justice.
Hugo L. Black: Have you in mind whether or not that explained why they were submitting this? As for example that they did not concede the impropriety or the illegality of what they've been doing but they were willing to do -- to concede it to escape as I understood counsel for the expense was bearing on the litigation?
Mr. Attorney General: I couldn't state that, Mr. Justice. They did so state at the subsequent hearings on the judgment.
Hugo L. Black: Where does that appear in the record?
Mr. Attorney General: Yes, Mr. Justice. That's at 660 -- 665 it stated at one point and then began at 689. And turning now to the question of the legality of the agreements --
Hugo L. Black: Before you do that, would mind -- I hate to ask you? I would like to follow up. Do you say that the Court found that this was illegal that they requested. Where is that finding and conclusion and judgment?
Mr. Attorney General: The provision and the judgment, Mr. Justice Black, is at 695, paragraph 5. And the conclusion of law is at -- conclusion of law number 2 of Record 707-708 and then at Record 707, Findings 17, 18, 19, and 20, the Court found that the -- the agreements were illegal.
Hugo L. Black: What -- what's the last page?
Mr. Attorney General: 707, Mr. Justice.
Hugo L. Black: Now, that reference which you gave on page 695 seemed -- refers to both contracts. Are the same contracts that were included in the request of findings that they were illegal at page 651?
Mr. Attorney General: I believe so, Mr. Justice. Yes, Mr. Justice, they're the same thing. Now, coming to the question of violation, that this Court repeatedly and consistently has condemned the agreements for the division of markets. It's condemned them in the foreign field. It's condemned them in the domestic field. And the amount of commerce involved has never been deemed significant. This is not a Section 2 case where we have to look to the definition of the relevant market. This is a Section 1 case involving agreements for the division of markets. And this Court --
Earl Warren: Mr. Friedman, may I interrupt just a moment before we get too far away from what we've just been discussing. You point out that paragraph 4 on page -- starts at the bottom of page 650 and going until 651 there are -- there are four contracts that are listed in -- in that proposal of the appellants. Then over on page 695, paragraph 5, the Court lists four other -- four contracts using the same language that -- that is used by the appellants but I noticed that the second one is dated 1925, September 15, 1925 between Holophane Glass Company and La Societe, et cetera, is dated September 15, 1925, (Inaudible) 695, it's dated September 15, 1923. Is that -- is that (Inaudible)?
Mr. Attorney General: I believe so, Mr. Justice.
Earl Warren: So, it should be -- they should be the same date?
Mr. Attorney General: Yes, because that is commonly referred to as the trading agreement --
Earl Warren: Yes.
Mr. Attorney General: -- agreement of September 15. I'm advised by Mr. Stevens that that date was corrected later on. I think it is a typographical error --
Earl Warren: I'm sure it was.
Mr. Attorney General: -- in the record.
Earl Warren: Thank you. In the National Lead case and the Timken case this Court condemned agreements for the provision of markets. And I think it's significant that in the Timken case, as in this case, the agreements for the formation of the French company were entered into between the British company and the American company. So that the fact that you had -- had at the time of the execution of the agreements common control and common ownership of these company, does not save them from a concerned condemnation of the Sherman Act. Furthermore, there's nothing in this record to support the suggestion that if it hadn't been for these restricted provisions, the American company would never have been created. Some of the participants in this transaction were available as witnesses at the time of trial. They were not called. As far as the record in this case shows, we have an agreement for the sale of a portion of a business followed by an agreement not to compete, followed nine months later by an agreement not to compete with a third company that wasn't even a party to these negotiations. So we think that under the -- this Court's repeated holdings, these agreements are per se illegal. And we don't think that even if they were to be examined under the rule of reason, this can be justified as appellant seeks to do as an ancillary of strength. They're not limited in time, they're of indefinite duration, they're in existence at the time of the trial. They're not limited to territories where the companies were doing business, but broadly extended to the whole world. They contained numerous other restricted provisions going beyond merely staying out of the market areas, and finally, the agreements included a party which was not concerned directly with the transaction that's fair.
Felix Frankfurter: Is it the Government's position, Mr. Friedman, that division of territory but getting on foreign, division of the territory is a violation per se (Inaudible)
Mr. Attorney General: Yes, Mr. Justice.
Felix Frankfurter: (Inaudible)
Mr. Attorney General: Yes, Mr. Justice.
Earl Warren: We'll recess now.