Warren E. Burger: We'll hear arguments next in No. 1560, United States against U.S. Gypsum. Mr. Friedman, you may proceed.
Friedman: Mr. Chief Justice, may it please the Court. The principle question in this criminal antitrust case, which is here on a writ of certiorari to the Court of Appeals from the Third Circuit, is whether sellers who concertedly exchange among themselves information with respect to the current prices which they are selling and other competitive matters conduct that would otherwise violate Section I of the Sherman Act may justify this conduct on the ground that the information they are seeking from their competitors would be helpful to them in establishing a meeting competition defense under Section 2 (b) of the Robinson-Patman Act has a defense to a charge that might be brought against them of price discrimination.
William H. Rehnquist: When you say the principle question presented, you mean the questions presented by the petition for certiorari?
Friedman: By -- by our petition, yes.
William H. Rehnquist: Yes.
Friedman: That's the main issue, that's the main focus in this Court and the reason perhaps --
William H. Rehnquist: Well, you say, “The main focus in this Court,” don't you have a feeling that this had been a dire act case the Third Circuit would have affirmed on the basis of harmless error with an instruction like it?
Friedman: I -- I would -- I don't know, Mr. Justice, but let me explain the reason I say it's the principle case. In addition to this issue, a single judge on the Court of Appeals, two of them, each individually found three other grounds for reversing this conviction in the instructions. One of the judges thought that the instructions were defective in two respects because they failed to specify what was necessary to be shown in order to establish the participation of particular defendants in the conspiracy and also that the instructions were deficient on withdrawal from the conspiracy. Another judge, although not agreeing with those two rulings, sought that the jury had coerced a verdict. So that what you have in this case is the Robinson-Patman Act issue concurred in by two judges of the Court of Appeals, other criminal law rulings concurred in by only one judge of the Court but the two single judges together ended up with a majority that would have resulted in reversal apart from the Robinson-Patman Act question. The indictment in this case, which was returned in December 1937, charged six corporations that manufactured gypsum board and ten of their individual officers with having conspired from before 1960 until the return of the indictment in violation of Section I of the Sherman Act to fix, raise, maintain, and stabilize prices of gypsum board to fix, maintain, and stabilize the terms and conditions of sale and to adopt uniform methods of handling and packaging, two of the corporations and seven of the individual pleaded nolo contendere. After a 19-week trial, the jury convicted the four remaining corporations and the three individual offices of those corporations who are the respondents before this Court. I'd just like to say a word about the gypsum board industry itself because the character of the industry is significant with respect to the issues involved in this case. A gypsum board has largely replaced plaster as the major material used for the interior walls of buildings. Now, the gypsum board, the standard board produced by all manufacturers is the same. You can't tell it one from the other. And as a result of this, the competition among manufacturers of gypsum board is not stressed quality, but rather price, discounts, and service. The product is a heavy product, which means that shipping costs are extensive and it's difficult to serve a very large area from a particular plant. The respondents have plants throughout the county. The industry is also highly concentrated. During the period covered by this indictment, the four corporate respondents had 75% of national sales. They've been the four largest in the industry. The eight largest in the industry had a total of 94% of the -- of the industry. The remaining 6% of the industry was held by seven firms of the so-called “single-plant producers.” A firm that had only one plant and of necessity would serve a much smaller geographical area than the nation companies could serve. These companies came into existence in the 1950s and 1960s and one of the charges in our complaint, which we believe the records supports, is that part of the defendants' conspiracy involved predatory practices directed against the single producers. The indictment charged that the defendants had utilized a number of different means for effectuating the conspiracy and the one that was most litigated in this case was a practice that the defendants referred to as verification. Under this practice, when an official at the headquarters of one of the companies was informed from the field that a customer had been “a lower price by a competitor,” he verified with the company that was reported as giving this price. If the other company denied giving the price, then they normally would not need it. If, however, the other company acknowledged giving the price, then the usual, but not the invariable practice, was for the first company to meet that price. The product was sold at a list price with a discount. The list prices throughout the period were virtually identical by all the manufactures and the -- discussion of verification related primarily to the discounts that would be given off these prices.
Warren E. Burger: If that's all the record showed, what would be your position?
Friedman: Just -- if that -- if that's all you had -- well, we would say that the verification alone, verification alone in the circumstances of this -- well, if that's all they did, if all they were doing was verifying, if that's all that were shown that would not, in our view, be a violation of Section --
Warren E. Burger: I'm not verifying in the meeting --
Friedman: And then that would --
Warren E. Burger: -- the grass cutter.
Friedman: -- meeting -- meeting would be -- that would begin to get more.
Warren E. Burger: Begin, but would it be occurring?
Friedman: I -- I couldn't state without knowing more fact, I think, Mr. Chief Justice, but, and this we think is the critical thing in this case, the charge was and the jury by its verdict must have found that verification if done with either the purpose or the effect of fixing prices would be enough to violate the Sherman Act. That -- that's -- our case is not limited just to the mere act of the verification because there's a lot more. Let me add two things and addition to the verification. It was not only with respect to prices. It was also with respect to various terms and conditions of sale. For example, I would call to ask whether somebody was giving greater credit terms than they were giving. In some instances, they call to ask whether firms with trucking the product to the customer because trucking is more convenient if it's delivered right to your plant than if you have to pick it up at the rail site. And there are instances in which the inquiry related, not just to what was being done with respect to a specific customer but more broadly. What were you doing in a particular city? Is it true you're doing certain things in Texas and so on? The primary justification that the respondents offered for this practice was that they say the need to comply with the Robinson-Patman Act. Now, the Robinson-Patman Act, of course, prohibits generally discriminations in price whose effect may be substantially to lessen competition. It provides a limited exception in 2 (b) which says that, “A person charged with discrimination may justify it by showing that he gave the lower discriminatory price and a good faith attempt to meet the equally low price of a competitor.” The respondents also contended that they needed to engage in this practice in order to protect themselves against what they called “customer fraud.” The customer fraud as they see it being that a customer misrepresented to them that the custom was getting a lower offer from one of the competitors. But at the trial, there were a number of admissions that at least one purpose of this verification was to minimize price competition. As one officer of United States Gypsum stated, he said, “I was attempting to minimize deviations from list price.” That's at page 501 of the record. It's described as another method of keeping prices up, at page 519, to keep market stability, to guard against price erosion.” One of these single-plant producers joined in this conspiracy. He did so after he had attended the first meeting of the Gypsum Association, the trade association at which Mr. Respondent Watt, the executive vice president of U.S. Gypsum Company, said there were certain things that went on in the Gypsum industry. Specifically, he talked about the exchange of price information and the need to be honest. And this man stated that after he had been told that, the reason he engaged in verification was, and this is at 205 of the record, the price in our prime market was rapidly deteriorating and my motive was to try to keep it from deteriorating any further. Now, during the time of this conspiracy --
William H. Rehnquist: Mr. Friedman, what -- what part of the instruction is this part of your argument devoted to? Because the -- or is it devoted to something other than the instruction?
Friedman: No, it's -- it's devoted to the -- the basic question of whether a -- an agreement of price exchange agreement that has the effect of fixing or stabilizing prices may be justified because of a purpose to comply with the Robinson-Patman Act. And our argument on that score primarily is that because this exchange of prices tends to facilitate price maintenance, price stabilization, and price fixing to permit this would create a serious loophole in the Sherman Act, and this is designed to show that the defendants themselves at least recognize and to show what the -- one of the purposes was.
William H. Rehnquist: The Court of Appeals didn't hold. There wasn't substantial evidence to support the verdict, did it?
Friedman: No. It's -- it's unclear exactly what the Court of Appeals held. The Court of Appeals held that there was evidence to support a finding that this was their purpose and it's rather cryptic whether they also held that that was the effect. But presumably, since it remanded for a new trail under the different instruction, the Court of Appeals thought necessary, they must have believed that on the proper instruction a finding of effect would be sustainable.
Harry A. Blackmun: Mr. Friedman, what -- what is the theory of the alleged conspiracy?
Friedman: From the beginning -- prior to 1960 until the return of the indictment in December 1973.
Harry A. Blackmun: You have a statute of limitations that operate somewhere in there, don't you?
Friedman: Yes. That's a five-year statute so the cutoff date is, I think, it's December 27th or something like that.
Harry A. Blackmun: 68?
Friedman: 68.
Harry A. Blackmun: My impressions from your statement of facts, which I think it's about 45 pages long, is that most of the facts you talked about occurred before the period involved in the indictment.
Friedman: Most -- most of them did, Mr. Justice. But we've also explained in our brief that there was evidence that the conduct continued into the limitations period. And of course, if the conspiracy was underway before the limitations period, as long as acts were done in furtherance of the conspiracy during the limitations period that is enough to establish a violation. But there -- there was some continuing activities, some verification, various other things, some price maintenance during the period of the --
Harry A. Blackmun: The -- the application practice after 1968 was at a very substantially low level, as I gathered from --
Friedman: That -- that is -- that is undoubtedly correct. But I -- I think one thing, I may be just mention, in connection with the verification practices rather interesting, the major reason that was suggested, they needed to engage in verification was so they can protect themselves for a meeting competition defense if they were charged with price discrimination, but they kept no records at all of these communications. They kept no records. Indeed, there were policies not to keep records and when one man was asked, “Well, if you needed this for -- in order to protect yourself to establish a Robinson-Patman meeting-competition defense, why didn't you keep any records?” He said, “Well, I can't really answer to that. It just didn't seem necessary.” So, I think that, again, is illustrative of the dangers in this kind of thing. Now, during the period in November and December 1965, following the lead of U.S. Gypsum, all of the respondents announced that they were giving up discounting. They were all going to sell at less prices, identical less prices. And for a year and a half to two years, this happened. And despite the fact that they were not giving any discounts at this period, they still continued to verify. And the lack of discounting and the increased prices took place at a time when there was a decreased in demand for the product and over capacity. The Court gave a lengthy charge to the jury and explained at length the Robinson-Patman Act and what the meeting competition defense involved. And what the Court told the jury was that they could convict the defendants if they found either a purpose to fix and stabilize prices or that the effect of what the defendants had done was to fix those stabilized prices. And it said, “If the effect of such exchanges was to fix -- raise, fix, maintain or stabilize prices, then an agreement to engage in such in exchange is a violation of the Sherman Act, regardless of the specific purpose that the parties to the agreement had in mind.” It was that instruction that the majority of the Court of Appeals held was erroneous.
William H. Rehnquist: Why is this -- are those the same instructions on page 13 (a) of the petition? If you decide the effect of these exchanges was to raise, fix, maintain, and stabilize the prices, then you may consider these exchanges as evidence?
Friedman: Well, no. It went -- it went beyond that. That was the first part of the instruction, Mr. Justice. But over pages 17 -- page 1722 of the record, after they gave that instruction, the Court charged, “If the effect of such exchanges,” and this is about five lines down, “was to raise, fix, maintain, or stabilize prices, then an agreement to engage in such an exchange is a violation of the Sherman Act, regardless of the specific purpose that the parties to the agreement had in their minds.” Therefore, and then goes on in the next paragraph, “The effect was to stay within the parties are presumed as a matter of law who've intended that results.” So the Court charged the jury that they could convict if they found that the effect of this -- at first, that they had to find there was an agreement, and if they found that was an agreement, if they found that the effect of this agreement was to raise, maintain, or stabilize prices that was enough to establish a violation of Section I of the Sherman Act.
William H. Rehnquist: So, you're picking out a part of the instructions that the Third Circuit didn't really deal with that's less favorable to the Government and saying -- or that's more than the instructions, more favorable to the Government and arguing that that should be sustained here.
Friedman: Well, no. I -- I think the Court -- I think the Court of Appeals had fairly read its opinion, said it varied in different places. What it fairly said was that was that if the sole purpose of this verification was to protect, to serve their defense under the Robinson-Patman Act, then that would not be a basis for finding a violation of Section I. I think that's what the Court of Appeals held and the dissenting opinion by Judge Weis in the Court of Appeals concluded that the instruction properly stated the law.
William J. Brennan, Jr.: Of course the trial judge's instructions also said that, “If the sole purpose was good faith in compliance with the Robinson-Patman Act, there's no violation.”
Friedman: No. Mr. Justice, he said, “If the sole purpose was good faith compliance, there was no violation unless, unless it had the effect of fixing, maintaining, or stabilizing prices.” I think, I believe that's -- that -- the instruction is somewhat cryptic, but I think when you read it all together, you'll see what he was telling was, “If you find they had the purpose of fixing, stabilizing prices, then that's bad. If you find, they had no purpose, but no adverse effect, then it would be all right. But if you found that it had an adverse effect without regard to the purpose that was enough to --“
William J. Brennan, Jr.: Well, his first instruction says, “If you decide, this on 1721, that if this was merely done in a good faith effort to comply with the Robinson-Patman Act, then you could not consider verification standing alone as establishing an agreement to fix, raise, maintain, and stabilize prices as charged.” He says, in words, as I read them that if -- if they found compliance with the Robinson-Patman Act to be the sole motive, there is no -- that's the end of the case.
Friedman: Well, no. But he said, “You wouldn't, couldn't consider a verification standing alone --“
William J. Brennan, Jr.: Right.
Friedman: “--as establishing an agreement.” But we had more than just verification in this case. But then he went on to say, “If you decide that the effect of these exchanges, was in the next sentence, to fix, maintain, and stabilize prices, then you may consider these changes as evidence of the mutual agreement or understanding alleged in the indictment to fix, maintain, and stabilize less price.” So, I think what he was --
Potter Stewart: And you think that's to be understood as the instruction of the jury, “Even if the sole purpose of the verification was to establish in this defense under Robinson-Patman Act, if indeed the effect of it was,” then there was (Voice Overlap).
Friedman: That's -- that's correct. Then I think that's -- and I think --
Potter Stewart: Although, he left that -- he left that out of that sentence that you read.
Friedman: Well, it's not --
John Paul Stevens: Well, there should be evidence in that paragraph. He doesn't say -- it says it is sufficient evidence.
Potter Stewart: Right.
Friedman: No, like the jury could infer of what -- could find a violation if --
John Paul Stevens: Well, you're -- it's all right if you want to read it, you're reading it on paper with your opponents in that actual language.
Potter Stewart: Yes.
William H. Rehnquist: Did it surprise you that the jurors were taking pills after delivering for four days under (Voice Overlap)?
Potter Stewart: Luckily, we're only going to be here for an hour.
Friedman: Yes, it doesn't surprise me. Mr. Justice, I was ready to take pills when I was plowing through this record. No, I didn't have any to take.
Warren E. Burger: It was even more extravagant than that that the foreman of the jury reported to the Court here that literally, some of the jurors were ready to jump out the window.
Friedman: Well, I think -- I think --
Warren E. Burger: Do you think that was a little hyperbole?
Friedman: I think so. What he said was there was one woman who was at the window and he thought maybe she was going to jump out, but I -- I don't think he said that. It is clear that some of the --
Thurgood Marshall: Maybe he was just trying to walk.
Friedman: Well, that's not -- that's not unusual, Mr. Justice, with a long case and a complicated, difficult case.
Thurgood Marshall: Well then tell me.
Friedman: Lot of facts, seven defendants, you have to evaluate the evidence against each of them. It is something that would try the temper of I think all people. So, now, let me comment to the -- the gut issue in the case which is whether you can justify an agreement exchanging prices that would otherwise violate Section 1 of the Sherman Act because you say you need and want this information in order to establish a meeting competition defense under the Robinson-Patman Act. Price, exchanges of price information occupy a peculiar place in the learning of this Court. There have been cases which have upheld them, there have been cases which have turned them down and said that the exchange of price information was not permissible. But I think the one thread that runs through all of these cases and culminates in this Court's decision nine years ago in the Container case was that an exchange of current prices, which is what this was, how much they were offering to a particular customer, than an exchange of current prices violates the Sherman Act if either its purpose or its effect was to fix a stabilized or maintain the pricing.
Harry A. Blackmun: And do you read Container as being unanimous in that -- in that respect?
Friedman: I do -- I do, Mr. Justice, because the dissenting opinion in Container specifically refers two or three times, it said they did not think in this case -- in that case, the Government had established either the purpose or the intent to stabilize fixed prices. I think they --
Harry A. Blackmun: Or -- or effect.
Friedman: Or effects. I'm sorry, either the purpose or effect. I think the disagreement between the majority and the minority over what the Government had proved in the case, not over the guiding legal standard. And I think this principle reflects the economic realities of what happens when you have this kind of an exchange of price information. There is very little incentive for one firm to cut its prices if it knows that as soon as it does so, its opponent, its competitors will know about it because as soon it is reported by a customer that the price has been cut, the salesman, wanting to make a sale, will try to get approval from the home office to make the cut. He will have to say who the competitor was that gave the price. The firm, getting this request, will make -- get in touch with the other firm to see whether they did it. Well, this it seems to me -- and correspondingly, you know that if you are giving them price information, they are giving you price information. It seems to me this removes a great deal of the incentive for engaging in price competition because price competition is effective, it is effective when what you have is a first price and it's tried to be done secretly. If -- if your course remained relatively steady, the only reason to cut a price is in the hope of gaining greater volume. You make up in your volume what you lose in the individual sale, but if you know that everyone is going to follow suit, it is no great incentive to do this. And similarly, this kind of verification of prices is a very effective method of policing, of policing an agreement to fix prices because you know that if you deviate from the agreement you will be caught up on it very quickly and the record shows numerous instances where that kind of thing happened. Now, the Container case, we think is very close to this case. There you had a similar situation that the companies reciprocally exchanged their most recent prices on sales to specific customers without even considering the purpose of this arrangement. The Court held the price -- this arrangement was illegal price-fixing because it said it stabilized prices though at a downward level. The inferences are irresistible that the exchange of price-information has had an anticompetitive effect in the industry, chilling the vigor of price competition. The Court of Appeals decision and respondent's argument in this case as to why they should have this exception rest on two words, literally two words in the Container opinion. The opinion in Container began to -- by explaining why this case is unlike any other price decisions we have rendered. And then it distinguished Container from other cases, and it distinguished among other cases the Cement Manufacturers case which had upheld an exchange of price information. And it's noted that while both cases involved an exchange of prices to specific customers, there was absent to controlling circumstances, this, the Cement Manufacturers price exchanges were designed to protect against fraud. And the Court of Appeals and the respondents urged that because this Court, in distinguishing the case used the word “controlling circumstance,” this amounts to a recognition of an exception to the general rule condemning the exchange of price information that has an adverse effect on competition if there is a controlling circumstance that will justify an exception. And then they go and say, “In here, we had a different -- another controlling circumstances, that which to protect themselves from being charged with price discrimination under the Robinson-Patman Act.”
Potter Stewart: Well, wasn't there was an also -- wasn't there the same -- assertively the same controlling circumstances -- circumstance as in Cement, i.e.to protect against customer fraud?
Friedman: Well, that, we think is a different type of customer fraud, Mr. Justice Stewart.
Potter Stewart: Here was the assertion is that it was to protect against being misinformed by a customer that a -- that a competitor had given him a lower price.
Friedman: Yes, yes.
Potter Stewart: What -- what was the customer fraud in Cement?
Friedman: In Cement, the customer fraud was they had an arrangement whereby they would permit people to get a product at a lower price during the duration where they were going to increase the price --
Potter Stewart: Oh, during that protection period, yes.
Friedman: Protection.
Potter Stewart: And they had over (Voice Overlap)
Friedman: And -- and the purpose of the exchange in Cement was to enable a firm to be protected against having to ship. It was the concern. It was the shipment, whereas here the concern was to find out whether a similar arrangement was being offered by a competitor. Now, we -- we don't think that that statement in Container can fairly be read as creating this kind of an exemption. It just -- it was the words that the Court happened to use. The Court could have equally said, instead of saying that that case, there was absence instead the controlling circumstance, there was, “Absent the fact that.” If the Court had said that, which would have been the identical statement, there wouldn't be any basis for this --
Potter Stewart: Well, they have the fact doctrine then.
Friedman: What?
Potter Stewart: It's not unusual experience for any member of this Court to casually use a phrase in an opinion and then it comes back a year or two later as a doctrine.
Friedman: That's right. We don't -- we don't -- we don't think --
Warren E. Burger: Or -- or a test, or a test.
Friedman: Test. We don't think that that's fairly what Container said. I think you've got to look and see what Container held. What Container held was that the exchange of price information there, similar to that that you have here, was an illegal price tampering of price fix and price stabilization under the Sherman Act because of its effect upon prices, because of its effect in prices. There is nothing in the Robinson-Patman Act that says that in order to establish your good faith in giving a discriminatory lower price to show that it was done in good faith to meet the equally low price of a competitor, you've got to check with the competitor to find out how much he is charging. The Federal Trade Commission does not take that position and they -- it is attached to our petition, the letter they sent us advising that and we know of no court cases that take that position. They ruled that the Court of Appeals -- the principle the Court of Appeals has announced and the principle for which the respondents are arguing here, it seems to us, would cut a very wide gap in the Sherman Act because it's not difficult for people who want to facilitate the maintenance of prices to say they have to do it in order to protect themselves against -- protect themselves from a possible charge under the Robinson-Patman Act because the Robinson-Patman Act, they talk about meeting the requirements of 2 (b) of the Robinson-Patman Act. The Robinson-Patman Act, the only requirements of the Robinson-Patman Act are that you cannot discriminate in price where it has anticompetitive effects. 2 (b) is a limited exception to that defense. It is a defense recognizing a specific situation, but it has never been thought, it seems me, that in order to take advantage of a defense like that, you can justify something that otherwise would violate another statute and that is precisely what happens in this case because the claim is that even though this thing has the prohibited effect upon competition, even though this exchanged, has had the effect of stabilizing or fixing prices. Nevertheless, they can justify it because they want this information in order to defend against a possible charge of price discrimination. Now, the argument has been made here that to subject the respondents to conviction for this conduct amounts to a prohibited retroactive application of a new rule of law, we don't think there was any new rule of law that was applied by the District of Court in this case, we think. So I've indicated that principles governing this field are well settled and all the District Court did was to tell the jury to apply these principles to the facts of this case. So on this aspect of the case, we think that --
John Paul Stevens: Mr. Friedman, before you leave this aspect of the case, in Judge Hunter's opinion at pages 28 and 29 of the cert petition, he summarizes what he thinks would be a proper instruction which was not quite given. Would you say that that instruction, had it been given, would have been wrong?
Friedman: Yes, yes, we would say that instruction, that's what we're challenging that instruction. That instruction would have been wrong, we think, because we don't think that if they engage in the practice solely to comply with the strictures of the Robinson-Patman Act, even subject to the other qualification that that would be a justification. Our position is that you cannot justify an exchange of price information that has the effect of fixing prices because of if you wish to even solely to comply with the Robinson-Patman Act. We would not accept that (Inaudible) In fact, that's what the holding, I suppose, of the Court of Appeals is and that's the holding we're challenge. That -- that gives a -- that holding is a narrow rule from the respondents there, but even that rule, in our opinion, is wrong. Now --
Harry A. Blackmun: Mr. Friedman, before you go on, if there is verification of practice widely was in this case and it does not result in stabilizing prices, I take it you wouldn't complain of that?
Friedman: No. If -- if in other words, if I may rephrase your question, Mr. Justice, if we assume that the stable -- the exchange of prices did not adversely affect competition price to price level. If there were mere exchange of prices, we would not question that. And indeed, this Court, in many of its decisions has recognized that a mere exchange of prices itself is not illegal, indeed it may be very useful in some situations.
Harry A. Blackmun: In -- in an industry like this one, where as you stated at the outset, the price is stabilized because of the nature of the commodity and the -- and the nature of the industry. How does this work out in practice? If you were a businessman, what would you do?
Byron R. White: It's the price.
Friedman: Well, the -- it's stabilized through list prices, but what that trying to do is prevent and eliminate the discounting. That's -- that's the problem, it seems to me. I think if -- if I am selling it list price and the customer comes to me and says, “A competitor is offering me a lower price,” I have to decide whether I want to cut the price on that sale or not. I can't check with my competitors. I can make the best judgment, the best judgment I can make on the basis, everything I know. For example, is this customer reliable? How reliable is the salesman? Is this the first --?
Lewis F. Powell, Jr.: You are now saying you would not check with the -- with your --
Friedman: What?
Lewis F. Powell, Jr.: You are now saying you would not check with your --
Friedman: Competitor.
Lewis F. Powell, Jr.: Competitor.
Friedman: No. I think -- I don't think the Sherman Act permits that kind of direct consultation between competitors over the price they are going to charge where it's a widespread practice and where it has the effect that the jury must have found in this case.
Potter Stewart: What if -- Mr. Friedman and I want to be sure I understood your answer to my Brother Powell's question. What if the avowed and acknowledged proven purpose of the exchange of information was to stabilize prices, but that that the effort was unsuccessful and the effect was not and prices were not stabilized, would that -- not -- not be a conspiracy (Voice Overlap)?
Friedman: That -- that would be a violation if there was an agreement and if the purpose was to stabilize prices.
Potter Stewart: Even though wholly unsuccessful?
Friedman: Even though wholly unsuccessful.
Potter Stewart: It would still be a violation, wouldn't it?
Friedman: It would still be a violation.
Potter Stewart: Well then I misunderstood your answer to my Brother Powell's question.
Friedman: Sorry, I --
Byron R. White: Mr. Friedman, why shouldn't there -- why shouldn't the significance of the effect on prices be merely evidence of an agreement to affect prices?
Friedman: Well, it is. It is one element, it is one element.
Byron R. White: Well, should the -- should the jury -- must not the jury have to conclude that there is a conspiracy or agreement to set prices or to affect prices?
Friedman: Oh yes, yes.
Byron R. White: Now, you agree with that?
Friedman: Yes, yes.
Byron R. White: And that the -- and that the -- so that the whole function of proving effect would be to lead the jury to conclude that there is a conspiracy to --?
Friedman: Yes, yes.
Byron R. White: Does that --
Friedman: There has to be -- there has to be two things. There has to be the conspiracy and there also has to be the purpose of the conspiracy. The purpose of the conspiracy has to be to fix, stabilize, or maintain prices. There has to be a conspiracy to fix prices in other words, but you can presume --
Byron R. White: Well, just the bare statement of the Government's position and even the bare statement that you can get on Container, both the majority and the dissent would indicate that if you just have an agreement to exchange price information and you have the effect of -- and you had -- it has an effect on prices that there is -- a violation has been proved.
Friedman: I -- I would think -- think if --
Byron R. White: Well, I know, but you should go through the litany and say if -- if there is an agreement is to exchange price information and then there is an effect on prices, do you say then as a matter of law, it must be concluded that there is an agreement to set, to fix prices?
Friedman: No. I would think that is for the jury to decide, but I would think it's certainly a problem.
Byron R. White: But whichever way you put it, if there is more to it and just -- just saying that you have to have an agreement.
Friedman: Yes, there is more to it, but the reason I am putting it in these terms is because of the -- what we think is the error of the Court of Appeals holding that without regard to the effect on prices or what the agreement was, if the purpose was merely to offer a defense under the Robinson-Patman Act, then that would be sufficient to justify the practice. I would like Mr. Chief Justice, we've dealt with the jury instructions in our brief, I would like to reserve the balance of my time.
Warren E. Burger: Very well. Mr. McSweeney?
W. Donald Mcsweeney: Mr. Chief Justice, and may it please the Court, I am going to deal with the Robinson-Patman verification point as described by Mr. Friedman including retroactivity. Mr. DeLone is going to address himself to the other instructions, namely the one which Judge Hunter found a reversible error on scope and purpose, instruction on scope and purpose and the abandonment and he will also deal with the question of the coercion of the jury. Mr. DeLone will -- Mr. Bartlit thereafter will address himself to some of the issues affecting the individuals. I would say at the outset, if I may, to Your Honors that the question here is -- is of course a very important one and more important than ever in this criminal case because any rule fashioned by this Court will be applicable now in felony cases since December 1974. Sherman Act violation is a felony, and I say that because I want to emphasize, if I may, that it is very important, I think, to retain the law which is that even a price exchange case, even where the price exchange has an effect of stability, the element of purpose in exchanging prices should not be emasculated, and that's what was done.
Byron R. White: Yes. But I just asked -- I just asked the Solicitor General's -- here if -- the effect just as -- is the -- is the instrument to or the vehicle or the evidence of a conspiracy to set prices.
W. Donald Mcsweeney: Well --
Byron R. White: And if there is a conspiracy to set prices, it's purposeful.
W. Donald Mcsweeney: If there is, Mr. Justice White, a conspiracy, a direct agreement, so to speak, to fix prices, he doesn't need to show the effect. But in this case, in this case, in this case there was no direct agreement to fix price. There was only --
Byron R. White: Well, would you say -- would you say that it would be -- that a jury verdict -- if a jury is told that you must find a conspiracy to set prices, which means purposeful agreement, if you must find that but then it is instructed that you may but you need not find it, if you find an agreement to exchange information plus an effect upon prices, now was that --?
W. Donald Mcsweeney: The jury --
Byron R. White: If a jury comes -- if a jury then finds the defendant's guilty, would you say that as a -- should be upset?
W. Donald Mcsweeney: Mr. Justice White, if the jury has the option so that it could have found the defendant guilty on the basis of merely an exchange of prices and price stability, that is error. It should be upset. That's what happened here. The jury, the Government concedes that.
William H. Rehnquist: You say they can't even use it as you know basis for inference.
W. Donald Mcsweeney: No, they could use price stability as a basis of an inference but they must find -- they could infer a purpose which is what I think this Court did in the Container Case from price stability in an exchange of pricing information.
Byron R. White: So you -- you say those two facts aren't enough to infer from which a jury could infer a conspiracy to set prices?
W. Donald Mcsweeney: Mr. Justice White, exactly and that's the central point of this verification issue and this case, that's what -- we don't know what the jury found and the Government shouldn't be talking about what it proved. This isn't a sufficiency of the evidence case. It's here on the instructions.
Byron R. White: We don't think the jury here was instructed that find the defendant is guilty if they found an effect on prices, will you?
W. Donald Mcsweeney: All right, Mr. Justice White, I am confident that the jury here was absolutely instructed if they found an exchange of price information and price stability, they must find that that would be a violation of the Sherman Act --
Byron R. White: Must or may?
W. Donald Mcsweeney: -- that they could find on that basis.
Byron R. White: Yes, that is may?
W. Donald Mcsweeney: Yes, that is may.
Byron R. White: Well, I wanted -- were they required to find it or not?
W. Donald Mcsweeney: They were not required, they were -- but they were not -- they were told to disregard purpose entirely and if I may quote to the instructions and quoting from page 17, 20 -- 22 of the record which is a little but in the charge after. I believe the portion that Mr. Justice Stevens referred to. Go down to the paragraph which begins on that page to those critical words regardless of the specific purpose. Very clearly, the Trial Court said to the jury, you don't have to be concerned with the purpose of complying with the Robinson-Patman Act if you find an exchange of prices and price stability, then you may find and that's the only -- that is what the case is here on because as you will note that the Government concedes --
John Paul Stevens: There's one thing you omit though. He did in that paragraph also require that there be an agreement to exchange the information.
W. Donald Mcsweeney: All right, an agreement to exchange the information and it seems to me --
John Paul Stevens: He says if there is that plus the effect then they can infer purpose.
W. Donald Mcsweeney: Yes, he -- he instructed -- no, he says, regardless of the purpose, Your Honor. He doesn't -- Mr. Justice Stevens, he doesn't require them to find purpose, that's the error of that instruction.
John Paul Stevens: Let's read the whole paragraph. You see a conspiracy to fix prices. It doesn't have to be successful to be unlawful if there was such a thing. Maybe we can (Inaudible) If the effect of such exchanges was to raise, fix, maintain, or stabilize prices, then an agreement to engage in such an exchange is a violation of the Sherman Act regardless of the specific purpose of the parties to the agreement had in their mind. Now, he surely is talking about an agreement.
W. Donald Mcsweeney: He's talking though only about an agreement to exchange prices but not an agreement to fix prices.
John Paul Stevens: But it's the agreement -- with the question, as I understand, is whether the agreement to exchange prices which had an adverse effect on the price level is enough to prove a violation. Isn't that the issue?
W. Donald Mcsweeney: Mr. Justice Stevens in -- in which relates back to the exchange of prices, I don't -- I don't -- it's the exchange of price information which has the stabilizing effect whether they exchanged with an agreement or not, if they exchange --
John Paul Stevens: This is the -- this is the paragraph you contempt as erroneous. This is the paragraph of the instruction? Yes.
William H. Rehnquist: That's not the one that Judge Hunter relied on.
Warren E. Burger: The last (Voice Overlap)--
W. Donald Mcsweeney: Mr. Chief Justice.
Warren E. Burger: They'd left off the five words. You would be satisfied with five or six words about purpose.
W. Donald Mcsweeney: I'm sorry, I don't understand that Mr. Chief --
Warren E. Burger: Well the last five or six words that Mr. Justice Stevens has just read to you from that instruction. I --
W. Donald Mcsweeney: Well, I would --
Harry A. Blackmun: Oh I beg your pardon, to your question as well there's a kind of law.
Warren E. Burger: About purpose.
W. Donald Mcsweeney: The Act does not require a specific purpose to restrain trade, that's -- that's the error. He left that off, it might have been. All right, if the instruction --
Warren E. Burger: Might have been or would have been?
W. Donald Mcsweeney: Yes.
Warren E. Burger: Would you be attacking it if he'd left --?
W. Donald Mcsweeney: Well, if he said earlier, Mr. Chief Justice, regardless of the specific purpose, I would still be attacking it because -- because I must read the whole -- the whole thing because that's what the jury heard, Mr. Chief Justice. And when he clearly, from this instruction, instructed that purpose in a price exchange information case was not an element and that's error. The Government here concedes if you know that, the Government brief page 72, in foot note 67, it says, “The verdict must be treated as if it stored entirely on the jury's conclusion that the information exchange affected prices, that the information exchange affected prices.” Now, that's not the way they charge us in the indictment and that I would come to in my -- our point that the charge had a fatal variance. So the instructions to the jury varied from the charge in the indictment. That's not the way the case was tried below. That's not the way the prosecutor argued it to the jury, he was telling they had to find a purpose, but the Court said, “You don't have to find a purpose.” So the full -- although, we don't know from a general verdict, what was proved, we must assume that the jury could have convicted us on the basis of an exchange of price information and price stability.
William H. Rehnquist: Could you look at the third paragraph of the instruction of the petitioner on page 13 (a), which is a part of the Court of Appeals opinion beginning, “However, if you decide that the effect to the exchanges was to raise, fix, maintain, and stabilize the price of gypsum wallboard, then you may consider these exchanges as evidence of the mutual agreement or understanding alleged in the indictment to raise, fix, maintain, and stabilize list prices.” Do you think that's an erroneous statement of the law?
W. Donald Mcsweeney: I think they may consider it. They have to find --
William H. Rehnquist: But Judge Hunter said they couldn't. He said that was an erroneous statement, didn't he?
W. Donald Mcsweeney: Well, I think what the Court of Appeals found to be erroneous was the omission from the charge of the necessary element of purpose in the exchange of price information. That's the -- that's the error here.
Potter Stewart: Well, the instruction that which my Brother Rehnquist has just referred to, told the jury that they could infer a purpose from the exchange and from the effect of the exchange if the effect was to stabilize prices, then they could infer a purpose. That's in short what this instruction says, isn't it?
W. Donald Mcsweeney: I think if -- yes. I think it does. I think if they can -- I think that I'm not arguing that purpose cannot be -- could not be inferred from price information exchanges and resulting stability but they must determine there was purpose.
Potter Stewart: Yes.
Byron R. White: So you wouldn't -- if the jury were properly instructed that they must find a purposeful agreement to set prices and then said, but you may, but you didn't infer such an -- no legal conspiracy from an agreement to exchange prices plus stability and the jury came back with a verdict and that's all the facts there were. Would you think the jury was -- if -- wouldn't step with the verdict stand up? Would there be enough evidence to sustain that?
W. Donald Mcsweeney: I think the jury should be told you have to find purpose in an exchange of price information in order to -- in order -- in a price --
Byron R. White: (Voice Overlap)
W. Donald Mcsweeney: -- information exchange -- I think that I would object to that and find that reversible and certainly in a criminal case where purpose is such a vital element and especially if we are going into felony cases.
William H. Rehnquist: Are you assuming you're turning it for the Government or for the defendant?
W. Donald Mcsweeney: For the defendant, I would --
William H. Rehnquist: But you're -- you're saying that a charge for the judges you may infer and you're saying the charge should be you must infer.
W. Donald Mcsweeney: Well, no.
Warren E. Burger: I didn't -- I didn't understand you dissent.
W. Donald Mcsweeney: He could find --
Warren E. Burger: (Voice Overlap) they must find a purpose.
W. Donald Mcsweeney: They must find purpose.
Potter Stewart: Must find purpose and they may infer it from the certain --
W. Donald Mcsweeney: They may infer it from all the circumstances.
Potter Stewart: But you insist that the jury must be instructed that they must find a purpose to stabilize prices.
W. Donald Mcsweeney: That's correct Mr. Justice Stewart.
Potter Stewart: And you further insist that there was no such instruction in this case.
W. Donald Mcsweeney: That's -- that's my position and I say that -- that this has been the law for 50 -- 50 years starting with -- in 1925 of Maple Flooring and Cement Manufacturers which were both, although civil, purpose cases and Cement Manufacturers, of course, also had in it the element of the -- of custom of fraud with respect to the job protection plan. And those cases stand for the proposition that you must find in a price exchange because we have a circumstantial case on the base of price exchanges you must find that the reason for exchanging prices was for the purpose of fixing prices or an anticompetitive purpose. The -- the Government, of course, relies heavily here on the Container. And there, the Court, finding no controlling circumstance analogize the price exchange in those cases to -- to what had had already found to the cases in American Linseed Oil and American Column & Lumber Company which were purpose cases. I say that the Container case that the Court had to have been inferring purpose in that case though I recognize that the case -- that the Court did not expressly say that in its opinion, but that is the only way it can be reconciled with the decisions both before Container and indeed after Container. And after Container, I mentioned reconciliation with the C&S Bank case. And indeed, the Court itself in the majority opinion in Container did reconcile by analogizing two, American Linseed Oil and American Column & Lumber, it said, “The agreement in the present case, in the Container case, though somewhat casual is analogous to those in American Column & Lumber and American Linseed Oil.” But the trial court, in our case, permitted a conviction without the requisite essential element of purpose. Now, moreover, with respect to Container, even if my reading of Container is not accepted by this Court, they -- excuse me -- my reading is that they had to infer a purpose, but if you read -- if you read -- if this Court should read Container to say all you need is information exchange plus price stability, that still wouldn't govern here because they do recognize the controlling circumstance, whether it's a doctrine or otherwise, they recognize it and use that word. And they said a controlling circumstance such as that was -- as was present in Cement would -- would save a price information exchange even if it had a stabilizing effect.
Warren E. Burger: And you've emphasized very -- very properly that this is a criminal felony case as suppose to take an analogy that maybe farfetched the -- in a charge for the felony of assault with intent to kill, the jury was instructed to -- to try to make it parallel to this instruction that if you find that the defendant had a gun on his hand, that he knew it was loaded, that he cock the gun and pointed it at the victim and pulled the trigger, you may infer an intent to commit the crime charged in the indictment. Would that be an appropriate charge?
W. Donald Mcsweeney: I think -- I think you -- Mr. Chief Justice, you -- thus, you may infer it from these circumstances but you must infer it to convict him.
William J. Brennan, Jr.: Well, you -- you must find it. You must find it somewhere.
W. Donald Mcsweeney: You must find it -- find it whether you infer it.
William J. Brennan, Jr.: You may refer it for --
W. Donald Mcsweeney: You may use these circumstances for such an inference but whatever basis, you must find it to convict the man.
Warren E. Burger: (Inaudible) a little bit to make it restricted parallel. You may consider these circumstances that I've just described as evidence of an intent to commit the crime charge and that -- that would be an appropriate instruction.
W. Donald Mcsweeney: Consider those circumstances, they must find the purpose. Now, I refer this Court to Citizens & Southern Bank and I say merely there in Citizens & Southern Bank, the defendants were trying to avoid violating a state law, the anti-branch banking law and -- and like we hear in this case, we're trying to avoid violating a federal law, the Robinson-Patman Act. And there, the Court found that despite -- despite an exchange of pricing information in a stabilizing effect that there was not a violation of the -- of the Sherman Act. I would like to talk and mention briefly that -- that what is a variance from -- between what we were charged with. We were charged with a purpose case and that sure the Government in the indictment talked about effects but in paragraphs or Section 5 the indictment, they said what we were charged with. In Section 6, they said what the effects were. But if you go to the -- to the bill of particulars, you'll see that we were charged very definitely when it was explained there with a purpose -- purpose and I refer to page 37 of Volume 1 of the appendix in particular is read paragraph 12. It said -- it said, the bill of (Inaudible), “This mutually agreed upon illegal course of conduct of exchanging was for the purpose of raising and fixing prices.” Finally and in conclusion, may I say that in the event the Court should not accept my reading of Container and apply Container as the Government reads it, that should be applied only retroactively and -- and it also should at -- we should at least get the benefit in a retrial of the instruction saying of applying Container only to the conduct of the parties prior to the decision in Container. Thank you.
Warren E. Burger: Very well, Mr. McSweeney. Mr. DeLone?
H. Francis Delone: I'm sure that Mr. McSweeney meant Container could only be applied -- applied prospectively. It would offend the principle against retroactivity.
Warren E. Burger: I took it that it should not be applied retroactively.
H. Francis Delone: If the Court please, I want to try to deal with the three additional reasons for which or -- led Justices Hunter and Adams to believe that this case should be sent back for a new trial. Two of those deal with the charges of the Court with reference to conspiracy. The third deals with the subject of the hung jury or jury coercion. To deal with the instructions, it is important to recall as Justice Powell pointed out -- Mr. Justice Powell pointed out earlier, “The Government here charged a 13-year nationwide conspiracy involving all told some 12 defendants and some 160 coconspirators.” And this fits with a current proclivity if we might call with that of the antitrust division in any of the nationwide price-fixing cases that are brought. If you'd look at the cases brought within the -- the last 10 years, you'll see the average duration of the alleged conspiracy is approximately 10 years, five more than the statute of limitations. The Government's brief as you all have seen contains what is really in their factual statement, a hodgepodge of separate episodes which they refer to as subsidiary agreements, subsidiary to some overall price-fixing agreement. And these with the exception of a couple of pages out of the 44 are all agreements which were alleged to have occurred back prior to the beginning of the statutory period, prior to December 27, 1948 which is five -- I'm sorry 1968 which is five years prior to the indictment. To illustrate, included in their hodgepodge are a -- are the -- are transaction concerning applicator discounts in Oregon and Washington in 1965. Another “subsidiary agreement” is a transaction concerning the withdrawal of wooden pallets in Michigan in 1971, and a third concerns alleged predatory pricing back in 1962 in Texas. You have to realize there is such a hodgepodge in order to understand the need for the instruction which we sought and did not get in this case from the trial court. And that was an instruction not just as he did charge that the jury would have to determine first whether there was an overall conspiracy; and second, whether each individual separately as each -- whether that individual joined the conspiracy. But as the Second Circuit recognized in the Borelli case on, which we modeled our requested instruction, it was necessary with all these separate and distinct episodes that were placed before the jury over this 30-year period. It was necessary for something more to be said so that jury could not draw from the fact that an individual participated, for instance, in something to do with applicator discounts in 1965 in Washington. They could not draw from that alone the fact that -- that that individual joined some vast overall conspiracy but rather they would be required to look at the situation of that individual and what his understanding was of what he was doing and what he was joining. We did not get such an instruction as was requested. And the prosecution dismisses this as a semantical nicety. That's the language which they picked up from Judge Weis' dissent. But is it really? If you're going to convict individuals in a case such as this a semantical nicety to require that they really know and understand what is this conspiracy that I'm charged with before they can be convicted of it because that is really what we are dealing with. I submit the prosecutions claim as semantical nicety is really a cynical disregard of the whole jury system as we know it. And then the prosecution in order to get rid of the Borelli case says, “There were -- there was either one overall agreement or none and the subsidiary episodes were simply manifestations of the conspiracy in action. They could not have taken place without an umbrella agreement or understanding.” Yet they never explained nor was it ever argued why there had to be some single overall umbrella understanding in order for two or three individuals to do something about applicator discounts on the west coast or about pallets in Detroit or to bring it down more specifically to the case of the Defendant Colon Brown. There was only evidence as Judge Hunter points out in his opinion of his involvement in some transactions about price and credit in 1965 and 1966 and Judge Hunter side comments that's really all the evidence was. What is there to suggest that Colon Brown, an individual defendant here, knew from whatever the jury may have deduced he did back in '65 and '66, that he was joining some price-fixing or price verification conspiracy that continued on up into '68, '69, '70, and '71. Indeed, Judge Zirpoli in the companion civil case held that whatever conspiracy may have existed in '65 and '66 was fully terminated and abandoned by 19 -- by January 1, 1968, long before the statute here. Likewise, as to Defendant Nicely, his -- the evidences to him concern almost entirely one sales call in Texas in 1962, but the jury was never told. Did Mr. Nicely join this overall conspiracy, the one with which we were charged?He never told to focus on what Mr. Nicely's understanding was when he made that phone call. And we contend that we were entitled clearly to such an instruction on the scope and purpose and the knowledge of the individual who allegedly joined the conspiracy. The other aspect of the instructions concerns withdrawal, and on that, the charge is so brief that it's easy to understood, I think, if I reach -- it's -- the Court said simply, “In order to find that a defendant abandoned or withdrew from a conspiracy prior to December 27, 1968, you must find from the evidence that he or it took some affirmative action to disavow or defeat its purpose. Mere inaction would not be enough to demonstrate abandonment,” and so far, we have no quarrel with that charge, we agree with it. The Court went on to withdraw, a defendant either must have affirmatively notified each other member of the conspiracy, he will no longer participate in the undertaking, so they understand they can no longer expect his participation or of -- or acquiescence or he must make disclosures of the illegal scheme to law enforcement officials.” Now, the Government hardly recognizes that isn't the law, that isn't the law as it's been declared by this Court. A defendant is not a member -- an alleged member of a conspiracy is not limited to just two ways, notify all the other members. Here are some 160 or go to the cops if I could use that expression, not at all. You can disavow participation in a conspiracy by conduct, but the Court ruled that out.
Warren E. Burger: Are you suggesting that at that stage it might be something like a class action or a problem of identifying who was a member of the class of the conspiracy?
H. Francis Delone: On the bill of particulars here, I think we did have problems of identifying who were the members, but in any event, sir, I think that it's perfectly clear from the decided cases of this Court and the lower courts that just as you can infer participation in a conspiracy, you can infer withdrawal so long as the conduct which indicates withdrawal is known to the others allegedly involved in the conspiracy --
Warren E. Burger: (Voice Overlap)
H. Francis Delone: -- and that's what we had here because we had evidence of vigorous price, vigorous competition among these companies prior to the beginning of the statutory period. We had evidence that the Defendant Andrew Watt instructed USG not to verify at all, again prior to the beginning of the statutory period as part of this competitive scheme.
Warren E. Burger: Of course the bill of particulars identifying all these people wasn't available back in 1965, 1967, and 1968, was it?
H. Francis Delone: It was not, sir. We did not have the bill of particulars.
William J. Brennan, Jr.: (Voice Overlap)
H. Francis Delone: But -- but basically, to limit the method of withdrawal to two things, one, notify fellow conspirators whoever they may be or notify the law enforcement authorities is, I think, the Government concedes too narrow a method for abandonment or withdrawal and there was evidence here which should have been submitted to the jury under a proper charge that we were entitled to and -- so -- so that we could have been held that the jury founded that we had withdrawn or some of the defendants --
Harry A. Blackmun: Mr. DeLone.
H. Francis Delone: -- had withdrawn for the conspiracy.
Harry A. Blackmun: May I -- may I ask to inquire about the procedure in the trial court.
H. Francis Delone: Yes.
Harry A. Blackmun: As I understand, as I get -- get from the briefs, the trial judge spoke more or less extemporaneously without a written set of instruction.
H. Francis Delone: He had some notes, sir, but he was unable to repeat his charge when several times asked by the jury to do so, so that he clearly didn't have a full script.
Harry A. Blackmun: And it went on apparently for several hours as far as I can tell (Voice Overlap)
H. Francis Delone: Yes, it was an extended charge.
Harry A. Blackmun: And at the end of the period, he asked for objections to what you'd all heard.
H. Francis Delone: Yes, he did.
Harry A. Blackmun: In that period, did you call his attention to the error in the abandonment instruction?
H. Francis Delone: Well, I didn't personally, but Mr. Keck who represents USG did and we had a ground rule in the case that an objection made by one and (Voice Overlap).
Harry A. Blackmun: (Voice Overlap)
H. Francis Delone: That objection appears at page 1757 of the transcript, Your Honor.
Harry A. Blackmun: Thank you.
H. Francis Delone: And we had requested an instruction along these lines also, which appears at 1856, I mean one which did not limit us to these two methods of withdrawal but one which recognize that competitive behavior which -- which others were aware would itself be a basis for finding of abandonment or withdrawal. That request appears at 1856 and I did accept to the refusal to give that or all of the points that he refused and he -- he said, "Fine. You don't have to say anymore. You have an exception to any other points which you asked us to give and which I didn't.” So we really covered it both ways. And I might say the suggestion which the Government -- the only way they seem to -- they just say it's hardly likely the jury paid any attention of the third -- third sentence in view of the generality of the first and second in this charge.
Potter Stewart: And then they -- and then they make the point that the -- that counsel were allowed to argue this to the jury.
H. Francis Delone: Well, as a matter of fact, if you'd look at it, counsel never argued it and we wouldn't have been that foolish. If we know the judge is not going to charge it, we're not going to argue it because that's the best way to have the jury feel. The rug has been pulled out from under counsel. That's lie under Federal Rule Civil Procedure 30. You'll find out first, “What's the judge going to rule?” So you know how to argue the case and we were told that we wouldn't get that point. So we couldn't argue withdrawal and abandonment for the jury and -- and you can search the speeches and there is no argument -- so that's a hollow privilege, I might say, if there could be one. I'd like to turn finally to the question of the coerced verdict. This has to be viewed, not the way the Government would have Your Honors view it, simply taking one sentence. It'll exchange between the foreman and the trial judge at the end of their meeting, but it has to be viewed in the context of what was the total setting of these jury deliberations. And if I may, I want to take you through that as quickly as I can, but, so you may understand the flavor of it. The jury started his deliberations on Tuesday, July the 8th at about five o'clock in the afternoon and deliberated from nine in the morning until ten at night, daily, Tuesday -- (Inaudible) Tuesday, Wednesday, Thursday, Friday. As the judge questions, asks about exhibits, requests for further instructions, it was a very active, lively jury, and that went on until Friday when we got worried that there was something about the juror's health that was -- the judge called us into a meeting, we met with the foreman of the jury. At that time, the counsel and the foreman were all present and the judge interrogated the -- the foreman and we learned that jurors were fatigued, that the ladies were crying, that there were health problems, not an awful lot more than that but sufficient, so the jury begged that they work shorter hours and the judge said they'd have some break, shorter time over the weekend and we would work -- they would only deliberate from nine until six. Actually, I usually started a little earlier, nine I think but that was the official starting time right straight along. And -- sorry, I see that the -- my time has gone up and I will have to advert to the brief because I have to leave Mr. Bartlit five minutes of time as I undertook to do. It is in the brief. The jury coercion subject is fully doubt with there and I will urge, Your Honors because it is a very critical point to ask. I would urge, Your Honors, to look at the transcript with care. It starts at page 1837, even that portion where the judge interrogates the jury foreman in the final session after he has been told by notes from a jury that they could only decide on the basis of compassion for fellow jurors after he's been told, “No testimony, no document would change their views.” They were hopelessly deadlocked. And at that time, the judge tries to see if excusing one juror would help because we agreed to take the verdict of 11. When he finds that it won't help, that both of them abandoned that effort, the judge did as we contend in our brief coerced verdict.
Warren E. Burger: Mr. Bartlit.
Fred H. Bartlit, Jr.: Mr. Chief Justice, may it please the Court. For an hour, we've heard very distinguished antitrust counsel debate serious complex issues on antitrust policy and economic policy. I think it would be helpful to bring this down to the brass tax of the individuals in this case. A man like Andrew Watt, an executive of this company could, under the instructions given by the trial judge, be convicted of a crime where his sole purpose was to comply with the law and where it was reasonable for him to believe that. Now, Mr. Watt went with USG in the early 1960s. The company was the subject of many Robinson-Patman suits. He was instructed by the lawyers hired by his employer that if he didn't comply with the Robinson-Patman Act, he can lose his job. He was told that price verification was for the purpose of complying with the act. He was told that it was lawful. He complied with that advice. Container came down in early 1969 within a month. From the time Container came down, Mr. Watt talked to his lawyers again and sent a letter to everybody in US Gypsum and said, “Don't verify anymore on any products.” He himself had stopped from in gypsum some months earlier. His conduct in verifying was upheld by a federal district judge after a full trial in 1971. Since that time, three Courts of Appeals, the Ninth Circuit including Judge Lumbard sitting from the Second Circuit, the Third Circuit, and the Tenth Circuit have all in one way or another approved the concept of complying with the Robinson-Patman Act as a -- an exception or whatever you want to call it as not a violation of the Sherman Act. Mr. Watt was indicted and convicted for conduct that eight appellate judges thought was lawful. Mr. Watt, I represent him at trial tendered the only instruction at that time that had ever been approved by any reviewing court. We have no choice. That was the only law we have. The Ninth Circuit said in the Gray case that it was plausible under existing law for an individual to believe that verification was required to conform with Robinson-Patman obligations. It was a fact issue for the jury. Now, if the Ninth Circuit thought that it was plausible in 1972 to believe that you were complying with the Robinson-Patman Law in verifying, how could Mr. Watt or his lawyers believe to the contrary?The trial court said that it would give the substance of that instruction but it did not. Marks versus United States, decision of this Court says that, “Persons have the right to fair warning that their conduct -- fair warning of the kind of conduct that gives rise to criminal penalties.” Individuals have that right and this Court said it's a fundamental constitutional right. If all of those appellate court judges both couldn't perceive that Robinson-Patman verification was unlawful, how could Andrew Watt have fair warning? With regard to the other issues, it seems to me that the Government has made a -- quite a concession in its reply brief. In the reply brief, the Government states that the -- at page 15, that the judge told the foreman that he preferred a verdict to a hung jury. Now, I don't know think -- I think that the facts are much stronger than that concession because I think you can look at what the foreman said and what the jury was saying and it's easy to conclude that the jury was convinced that a deadlock was not acceptable. But the Government conceives that the trial judge told the foreman that he preferred a verdict to a hung jury.
Potter Stewart: Well, there's nothing -- can a trial judge instruct the whole jury that the -- not on a -- but the law preferred a verdict to a hung jury. That's --
Fred H. Bartlit, Jr.: Yes, sir, he can.
Warren E. Burger: This is considerably less than the Allen charge.
Fred H. Bartlit, Jr.: Yes, sir. I think you have to consider this against the background of what have gone before. And if we had known, for example, that the trial judge was going to tell the foreman that he preferred a hung jury then we would have been entitled to an instruction which inform the jury that the jury also has a right to deadlock if those are their honest beliefs. Mr. Watt, Colon Brown, J. Nicely, the individual defendants on this case, if the Court please, were entitled to have the jurors cling to their honestly held beliefs if they were those beliefs. And when the judge indicated his desire, his preference that the jury not deadlock, we were entitled to an instruction that the jury was entitled to hold those beliefs and a deadlock was constitutionally acceptable.
Warren E. Burger: Do you think there is a problem of the judge telling that to one member of the jury, that is the foreman with his special status of authority and depending upon that individual to carry the message back accurately and faithfully to the other 11?
Fred H. Bartlit, Jr.: I think there's a problem, Your Honor, whenever there's a private meeting between the judge and one member of the jury. We consented to that meeting because we felt we had no choice. I think that there's a reason why there's a rule against hearsay. I think the reason is that secondhand statements are generally don't come out the way they were intended and I think it's clear here that chances of the foreman reemphasized the judges' statement and the judges' belief that a deadlock was unacceptable or great.
Lewis F. Powell, Jr.: Mr. Bartlit, before you sit down, you consented to the private meeting. Did you consent to the fact that there would be a transcript to that and that you would not have access to the transcript?
Fred H. Bartlit, Jr.: No, sir. We asked for the transcript immediately and as the -- excuse me --
Lewis F. Powell, Jr.: Did you know in advance there would be a transcript?
Fred H. Bartlit, Jr.: Yes, sir.
Lewis F. Powell, Jr.: You did? I see.
Fred H. Bartlit, Jr.: We feel that the voice of the meeting was not that it was private because I consented to that.
Lewis F. Powell, Jr.: Right.
Fred H. Bartlit, Jr.: I consent to it again. The voice of the meeting was what judge said about the meeting and, you know, candor his description of a meeting to us which was found by the Court of Appeals not to be accurate and prevented us then from asking for the kind of instruction to which were entitled. That was the voice of the meeting.
Lewis F. Powell, Jr.: Am I correct You got access to that transcript only by requesting it from the Court of Appeals after you filed your Notice of Appeal. Is that right?
Fred H. Bartlit, Jr.: Yes, sir, that's right.
Potter Stewart: Mr. Bartlit, you mentioned right at the clause of your remarks that the names of Mr. Colon Brown and Mr. J.P. Nicely on whose behalf a separate brief has been field here and who make quite a separate kind of an argument including among other things, the double jeopardy clause. Their claim basically is to understand that that there -- simply there was insufficient evidence to sustain a verdict of guilty as against them and that they are constitutionally entitled, if they're correct, not to be tried again among other things.
Fred H. Bartlit, Jr.: Yes, sir.
Potter Stewart: Nobody has early represented them here?
Fred H. Bartlit, Jr.: No, sir. That issue is not before this Court, as I understand it, and we are addressing only the issues. The sufficiency issue is not before this Court, as I understand.
Potter Stewart: Do you represent Mr. Brown and Mr. Nicely?
Fred H. Bartlit, Jr.: I represent only Andrew Watt, Your Honor.
Potter Stewart: Now, is the --
Fred H. Bartlit, Jr.: I undertook to the extent that the instructional errors and the jury coercion bore on the rights of those two individuals' honest appeal I undertook to.
Potter Stewart: You have a community of interest.
Fred H. Bartlit, Jr.: That's right.
Potter Stewart: But they also have seemed to make -- be making a separate argument. But your understanding is that's not within the grant of certiorari.
Fred H. Bartlit, Jr.: That's my understanding. The petition is still pending. Their petition for separate belief --
Potter Stewart: (Voice Overlap)
Fred H. Bartlit, Jr.: -- on a sufficiency point is still pending. It's not been acted on by this Court.
Potter Stewart: Right.
Fred H. Bartlit, Jr.: Thank you.
Warren E. Burger: Mr. Friedman.
Friedman: Mr. Chief Justice, the final words that the judge gave to the juror at this meeting he had with him at page 80 and 140 is you tell them to keep deliberating and see if they can come to a verdict. That's the last thing he told them.
Warren E. Burger: But then I'll put to you the question that I had put to your friend. How do we know that that very sensitive aspect of the case was communicated to the other 11 jurors in the same way the judge communicated it on the record to the foreman?
Friedman: Well, we don't know specifically of course what the judge --
Warren E. Burger: We can assume. I would assume he -- he did his best, but it's now the lawyer train the nuances --
Friedman: That's right. But I think there are two things about this. First, three times before this meeting with the foreman, the Court specifically instructed the jury that while he would like him to come to a verdict, then they should reexamine their beliefs. They should not give up a belief consciously held either because the views of other jurors or because of their wish to reach a verdict. This in effect is a modification of the Allen charge that the Third Circuit has developed. So, the jury was told repeatedly, they were not to surrender their independent judgment. Secondly, after the foreman returned to the jury, as far as we can tell, the jury deliberated for about eight hours longer before coming to a verdict. The juror -- the jury would turn to its deliberations at 12:04. We assume they deliberate at that day until 6 or 6:30, they -- it only began at 8 in the morning. They brought in the verdict at 10:45 the next day. So, we had a substantial period of further deliberations.
Thurgood Marshall: None of us in this room know what he told the jury.
Friedman: That -- that is correct.
Thurgood Marshall: But isn't that a problem?
Friedman: I -- I don't think so -- I don't think so, Mr. Justice, because before, before it should be held that a jury has been coerced, it seems to me we need something more than this dialog where the foreman had again request to the judge saying the verdict of the jury is a hung jury and we like -- we think we've had enough of this and the judge said, “I want you to go back,” he said at 1839, “I want you to go back and deliberate again." And --
Potter Stewart: In any event, of all these practices, maybe very dubious and front with all sorts of risks. In any event, it was agreed to by counsel of the defense in this case.
Friedman: Oh yes. It was specifically agreed to and the judge told counsel not only that he planned to do this but that he would not make the transcript available. And he told counsel, “If any of you have any objection to this, if any of you have any objection to this, I will tell the foreman, ‘No, I will meet with him.” He then in turn called the jury and wanted to be sure that it was the request of the whole jury, not just that of the foreman.
Thurgood Marshall: Why -- why didn't he call the whole jury in and tell them his last statement?
Friedman: Well, because Mr. -- two reasons, Mr. Justice. First of all, nobody knows what the foreman was going to say and it was a request for the jury that he meets with the foreman. That was the first thing. The second thing about this whole procedure is, that if the judge starts telling the jury, starts instructing the jury that they have a right not to return a verdict, that it seems to me, it's not the way it's done because that encourage the jury in a hard case to say, “Well, we have the option.”
Thurgood Marshall: Well, it's already to tell -- the foreman to tell.
Friedman: No, all -- no. All he told -- all he told the foreman was --
Thurgood Marshall: Not that I'm saying that he could then have called the jury in and said, “The foreman has told you this and I want to tell you, this is what I have to say.”
Friedman: Well, he could have done that --
Thurgood Marshall: Then he at least would have known that the jury got the correct information.
Friedman: He could have done that, but I don't think it was necessary, Mr. Justice, in light of the previous charges, in the light of what was said to him by the foreman. The -- the purpose of this discussion, as he indicated, the foreman was trying to convince the Court that the jury was hopelessly deadlocked and that the jury should be discharge. And he said, “No, I want you to go back and deliberate some more.” He didn't tell them they had to reach a verdict.
Warren E. Burger: Well, Mr. Friedman, when the lawyers agreed that he could receive the foreman of the jury, isn't it reasonable that they should thank that he was merely going to listen and not give any additional instructions?
Friedman: Well, I --
Warren E. Burger: That's number one and you can address both at once. And then number two, suppose hypothetically the foreman in the exhausted state, he described himself and out of the jury, went back into the jury and then started relaying it is -- was told him that a judge went in and said, the judge says, “We've got to get a verdict.” What if he said that?
Friedman: Well, this --
Warren E. Burger: Do you think that would -- and if we knew that, wouldn't you think that would taint this verdict?
Friedman: That -- that might -- that would -- would well be a serious problem, Mr. Chief Justice. But, but I respond to that that there is a strong policy against looking behind the jury and see what influenced their verdict. Now --
Warren E. Burger: That would be a certainly strong policy against -- I should think in 40 some years, I've never heard of a judge visiting with one member of the jury for anything except the communication of the message by the jury to the judge.
Friedman: Well, but --
Warren E. Burger: And that's a very high policy.
Friedman: That is -- that is quite true, Mr. Chief Justice. But this was consented to, not only by the four counsel for the corporation's consent. Each individual defendant was specifically asked if he consented and they said, “Yes, the Court in this colloquy did not instruct the jury either than to tell the jury to go back and deliberate some more.” That seems to me to be a fairly of reasonable response when the jury said, “I think --” the foreman said, “I think the jury is hopelessly deadlocked. We would like to be discharged. The Court said, “Go back. Deliberate some more and see if you can come to a verdict,” and they deliberated some more. They deliberated for eight hours --
William J. Brennan, Jr.: Mr. Friedman.
Friedman: -- and they came --
William J. Brennan, Jr.: And when they consented, what options did the judge give them? What were the options open to the defendant?
Friedman: The option was that either they would consent or he would tell the juror or the foreman, “No, I will not meet with you.” That was the chase. He said, “Either you -- this is the way I think it should be done. I don't want this transcript made public because something maybe said that would be inappropriate and either if you don't consent, I'm not going to do this unless everyone consents. And if you don't consent, I will say no to the jury," and then I supposed they'd go on in their deliberations or maybe they would send another note. They say they felt coerced, but it would seem to me it was a -- a free acknowledgement indeed. One of the counsels, Mr. Keck, not only consented but urged the judge to meet with the foreman.
William J. Brennan, Jr.: Rather they're not talking to him at all?
Friedman: Yes.
William H. Rehnquist: Mr. Friedman, I noticed the Government doesn't urge what -- I kept thought it usual to urge in criminal cases that the instruction should be considered as a whole and no one singled out. Does that mean that you want to win only by an essay on antitrust law from this Court?
Friedman: No, no. We did -- we did -- I believe we did indicate in our brief, Mr. Justice, that of course the instructions have to be viewed as a whole. Of course, they have to be viewed a whole in the light of this lengthy trial and the lengthy instructions. And let me just add if I may with respect to one other point, which was whether the instructions were adequate to show participation in the conspiracy, the judge repeatedly, repeatedly charged the jury. In order to convict, they had to determine that each defendant individually knowingly joined in the conspiracy charged in the indictment.
Warren E. Burger: Thank you, gentlemen. The case is submitted.