Earl Warren: Number 306, Fortner Enterprises Incorporated, petitioner versus United States Steel Corporation.
Kenneth L. Anderson: Mr. Chief Justice and may it --
Earl Warren: Mr. Anderson, now you may proceed with your argument.
Kenneth L. Anderson: Thank you, Your Honor, may it please the Court. This is antitrust suit filed by me and the Federal District for the Western District of Kentucky in 1962 charging the respondents, United States Steel Corporation and its wholly owned subsidiary U.S. Steel Homes Credit Corporation with conspiring to violate Sections 1 and 2 of the Sherman Act. The background of the case is that in December of 1959, Mr. A, B, Fortner of Louisville, Kentucky had an interest in a number of corporations and he had been involved in the real estate business, the real estate development business since approximately 1939. In the period immediately prior to this December 1959 term, Mr. Fortner and one of his business associates and another corporation had commenced development of a subdivision in the Louisville, Kentucky in Jefferson County area. They had in fact, prior to December of 1959, built 250 conventional homes in this subdivision which was called Golden Meadow Subdivision. In December of 1959, Mr. Fortner was approached by representatives of the United States Steel Corporation and their Homes Division which manufactures prefabricated homes. These are house packages that they deliver in a -- on a truck or trailer van and the builder has people there to erect the homes. Now when these people approached Mr. Fortner they approached him on the premise that there were substantial financing benefits to be derived from this second conspirator and we charged her in this case the -- what I call the Credit Corporation. This was a financing subsidiary and its purpose at the beginning was to aid the dealer builders of the Homes Division at U.S. Steel. As we indicate in our brief, this purpose got extended in 1958 just before they -- about a year before they started talking to Mr. Fortner and they decided that they were going to use the financing as their own people have described it as a tool to obtain sales of these prefabricated homes. So Mr. Fortner had numerous discussions with these people and financing offers I believe in construing the evidence of course where we are basically talking about whether the summary judgment should have been given against this that the evidence should be construed most favorably to our side and not the other side. And I think that the inference most reasonably to be drawn from this record is that this financing offers according to Mr. Fortner's affidavits kept getting better and better to the point that they offered Mr. Fortner a 100% money to buy the land and develop the land that had not been develop that was left in the remainder of the subdivision, that they also were going to provide its construction money. All at a 6% interest in 1/2 points, now there are substantial differences between this financing of a 100% at 6% in 1/2 point and other financing available, I believe, generally through out the eastern portion of United States and certainly in Louisville, Kentucky area during this time to dealer builders or to builders. The conventional development and land purchase loan as their own documents show was a 60% loan not a 100%. The other manufacturers who were supposedly in this financing business also were offering 6% interest but 10 points. So that when this offer came to Mr. Fortner this was on exceedingly attractive proposition to him.
Potter Stewart: I'm sufficiently ignorant and naive in this general field of financing so that I don't quite -- I'm not quite sure I understand what 6% interest at 10 points is? Give me an example of that.
Kenneth L. Anderson: The 6% interest would be 6% per year and in terms of the loan, the 10 points would be 10% of the gross amount of the loan.
Potter Stewart: In which way? Now give me an example.
Kenneth L. Anderson: Deducted when the loan proceeds are distributed a 10% is deducted from the amount that is distributed to the person receiving the loan.
Potter Stewart: Borrower?
Kenneth L. Anderson: Yes, the borrower.
Potter Stewart: The borrower.
Kenneth L. Anderson: So that it --
Potter Stewart: The borrower, let's say the borrower borrows a million dollars.
Kenneth L. Anderson: Alright, he gets $900,000.00.
Potter Stewart: He gets $900,000.00 and he pays 6% interest on the million?
Kenneth L. Anderson: On the million.
Potter Stewart: On the million.
Kenneth L. Anderson: Right, and has --
Potter Stewart: And what happens to that difference of a $100,000.00.
Kenneth L. Anderson: Well, as far -- it's in effect, if the Court please, a form of usury which is condoned unfortunately by the courts.
Potter Stewart: The borrower never gets that.
Kenneth L. Anderson: No, sir. That's why a 1/2% and 10% is -- they're so much different.
Potter Stewart: I could see that.
Kenneth L. Anderson: This is why --
Potter Stewart: The loan purporst to my example, it purports to be a million dollar loan you pay 6% of a million dollar but actually all you ever -- all the borrower ever gets get is $900,000.00.
Kenneth L. Anderson: Right.
Potter Stewart: Even though, I mean there's not any sort of an escrow proposition.
Kenneth L. Anderson: No, sir.
Potter Stewart: Or a conditional thing he just never gets that, that less $100,000.00.
Kenneth L. Anderson: He never gets that. As Mr. Flinn points out in his own brief that it's taken off the time.
Potter Stewart: Yeah, okay.
Kenneth L. Anderson: So that this was substantially attractive proposition to this man who is in business and he has a corporation in existence which is called Fortner Enterprises, Inc. That corporation had been in existence for sometime. It has other businessmen do have a corporations available from time to time. The land that was to be the subject matter of this arrangement was available in another corporation. So that when it got to the point of this transaction being consummated, this corporation then had sold to it by the other corporation the land on which they were going to build these homes. Now, the kicker in the case of course and these people started out talking to Mr. Fortner about homes and the whole idea of this thing was you got to take their homes if you're going to borrow this money on these favorable terms from us. So, they prepared three sets of documents a loan agreement, a mortgage, and a set of notes. And the loan agreement is the key document here because that loan agreement specifically provides that on each lot in the subdivision which is the subject matter of these loans that there will be erected a prefabricated house manufactured by United States Steel in its Homes Division. Now, this loan agreement itself was an agreement between the Credit Corporation and Fortner Enterprises, Inc. United States Steel was not a party to this agreement, they were a third party, obviously beneficiary of the agreement. The loan agreement goes on to provide that if the borrower Mr. Fortner and his corporation doesn't do various things like pay on the notes and so forth including if the borrower shall otherwise fail to comply with the terms of this agreement or with the terms and provision of the notes or mortgage. Then in any such a debt, at the option of the lender all obligation on it's part to make further advances on account of the loan shall cease and the lender may enter into possession of the premises and perform any in all work and labor necessary to complete set improvements and direct said dwelling houses. In the said dwelling houses that they are referring to are the U.S. Field Homes prefabricated houses. So they entered into this transaction Mr. Fortner has stated in his affidavit which is in this record that he would not have purchased these homes but for the unique character -- the attractive to him as a consumer and businessmen character of the loans that were offered. He started his project, the record shows quite clearly that they spent large sums of money on advertising that they did, all of the things necessary to get the project going in a proper manner. That there were delays in deliveries, that there were problems. A second loan was made and at the time that the second loan was consummated to cover some additional lots in the subdivision that became available there had been nine closings according to the record. Then after this loan was consummated which did get some additional capital into the corporation things really began to happen. And this is where we get the damage to Fortner Enterprises because the houses as they were occupied began to reveal substantial defects. They couldn't get along and the reputation of the subdivision started going bad. Mr. Fortner's salesmen started not wanting to come out and sell the houses because of the wavy walls and the sink tubs that would swell up. So Mr. Fortner called these people and said “Look I will meet every term of this loan agreement, our people will pay off this loan agreement, the money that you've loaned us but please relieve us of the restrictive provision in the contract. Let us build conventional homes.” This was refused, this was in December of 1961 or January of 1962, matters kept getting worst. So Mr. Hamilton wrote the Homes Division a letter saying, we just can't live with this things and they had a meeting. And at the meeting they again, I guess you would say formally asked the Credit Corporation representatives there, “Let us out of this, so can pay you off, we're ready, willing, and able to pay you off in accordance with the terms of this agreement if you will relieve us of this tie-in arrangement in this loan agreement.” And they were again refused and told that they were going to insists that they fulfill every term of the loan agreement. It was impossible to build these homes and this antitrust suit was filed. A suit was filed charging of course violation of Section 1, the basis of that conspiracy to create the tie-in, the tie-in itself and on the basis of a conspiracy to monopolize between these two corporations under Section 2 of the Sherman Act. The evidence is that in 1960, 68% of all the sales of the Homes Division involved loan agreements with this type of tie-in provision in it. In 1961 it was 70%, in 1962 it was 75% of the 43 people whose names are listed in the record to whom loans were made in excess of $250,000.00 by the Credit Corporation, 29 of those fell under of what they call their special financing program which is this program, where they go beyond convectional means and used whatever really means are necessary to capture a purchaser for these products namely this -- this junk that they called these prefabricated houses.
Potter Stewart: I quite, can't quite see the theory of the conspiracy to monopolize, to monopolize what housing and --
Kenneth L. Anderson: That the --
Potter Stewart: -- the building of new subdivisions in Louisville?
Kenneth L. Anderson: Prefabricated -- house market, yes sir. This is not a charge of monopolization but a charge of conspiracy to monopolize which I view in terms of their own record showing that the purpose of this program was to obtain for them a larger share of the market in the prefabricated home field.
Potter Stewart: Well now that's something short of conspiracy to monopoly.
Kenneth L. Anderson: Well it --
Potter Stewart: I suppose to every businessman is always either on his own or in corporation with others trying to do better, trying to obtain a larger share of the business.
Kenneth L. Anderson: Yes sir, and there are proper ways to do it and improper ways to do it.
Potter Stewart: I didn't -- well, what is the theory of the conspiracy to monopolize. My question is to monopolize what? New housing building in Louisville, in the Louisville market area or?
Kenneth L. Anderson: Well I've regarded it, Your Honor, as their whole market area. Because the evidence is that this was the tool that they were using in their old market area to obtain sales of this product. My point in this summary judgment procedure is that I have enough evidence in the record to at least create a question of fact for a trial.
Potter Stewart: Yeah.
Kenneth L. Anderson: And this is what really this case is all about. I am here being kicked out of court on a motion for a summary judgment filed 11 days before trial after I have had considerable discovery over the years with my client Mr. Fortner's deposition for example had never been taken. So that when I -- in the process of getting ready for trial and confronted 11 days before trial with this motion for summary judgment, I prepare an affidavit of Mr. Fortner and Mr. Howard, which affidavits I felt clearly established at least questions of fact to be decided by a jury and I'm knockout out on my ear. So that's why, that's why I'm here I think I'm entitled to a trial. My position all along in this matter and partly as a technical proposition has been that the evidence in the uncontradicted evidence in the record fulfills the elements of an illegal tie-in agreement. That we have the necessary economic force present under existing case law on tie-ins to establish the requisite economic power of the respondents over the tying element. We have the necessary -- not in substantial amount of interstate commerce in the tied element, i.e. the prefabricated houses and we have admitted it's never been denied but that the tie-in itself exists.
Abe Fortas: Well the tie-in cases are Section 1 cases, aren't they?
Kenneth L. Anderson: Yes sir, they are Section 1.
Abe Fortas: They're not, they're not monopolization.
Kenneth L. Anderson: That is correct, sir. And obviously I feel that my -- the best thrust of my case is the Section 1 violation.
Abe Fortas: Well, the Section 1 violation, what provisions would you have other than what is in the record already?
Kenneth L. Anderson: Well, I'm sure that Mr. Flinn in his brief has apparently completely have changed the respondent's approach to this matter and is now I feel more directly meeting the issues that are involved. There really in his brief, what he is doing is raising a factual question as to the economic power available as to the tying element in this case. He is arguing innuendo and questioning the capabilities of our witnesses whose affidavits are in the record. In an attempt I feel to cast some question on our evidence on this point, I had other witnesses who would collaborate the point of the -- a new uniqueness, this is not in the record I mean this is my statement to the Court. But I had other witnesses who would testify on this element and --
Speaker: What element?
Kenneth L. Anderson: The element, Your Honor that financing on the terms that were offered to Fortner Enterprises was not available at least in our Louisville, Kentucky area from any other source.
Speaker: What are the objects you say they forced you to buy to tie-in?
Kenneth L. Anderson: Yes, they forced us to buy the prefabricated houses.
Speaker: Forced you to buy the prefabricated housing in order to get the loan?
Kenneth L. Anderson: In order to the get the loan, yes, sir.
Speaker: And that's your -- that's the argument you have?
Kenneth L. Anderson: Yes sir, on -- in order to get the loan which was of a particularly appealing nature to this businessman which, was unique in it's properties and that it was not the conventional-type loan shall we say.
Abe Fortas: Well, I wonder if the issue before us can be stated this way, the -- I supposed incontestably there were other sources available for funds by way of loan in the area. There were other sources available from which you could obtain loans according to the opinion of the court below there were great many said sources. But you're point is that it was only from the defendant here, the U.S. Steels Lending Corporation or Financial Corporation or whatever it is that Fortner Enterprises could obtain loans on terms and conditions that were economically possible for the company.
Kenneth L. Anderson: Yes, sir. That's exactly --
Abe Fortas: So that the narrow issue we have is whether the requirement in Northern Pacific and other tie-in cases of an appreciable effect on the market whether the tie-in has an appreciable effect on market or ties up their requisite portion of the market is satisfied by that kind of a showing satisfied so clearly and completely as to justify a summary judgment against you. Is that about the issue before us?
Kenneth L. Anderson: Well, to the -- everything is correct Mr. Justice Fortas except the question of whether, I think it's the converse really because the summary judgment was against me not for me.
Abe Fortas: I know that. Yes, that's what I -- I tried to say that as to justify the entry of summary judgment. We're sitting as an the appellate court and the question is whether the lower court did or did not err in entering the summary judgment against you on the basis of a record which you say was not complete for the record which nevertheless established that the exclusion or the preemption that if it occurred hereby reason of the tie-in was not a preemption of the total financial market but only a preemption of that portion of the financial market which was available to you for the purpose of obtaining loans on this peculiarly advantageous conditions.
Kenneth L. Anderson: Well, --
Abe Fortas: I'm trying not to state this invidiously so far as either side is concerned but it seems to me that --
Kenneth L. Anderson: Well, the --
Abe Fortas: -- perhaps that's the issue.
Kenneth L. Anderson: The -- to -- I'm not trying to evade answering you. Well, to me, the case is a situation where at least the question exists. Was there sufficient evidence on these elements of the tie-in arrangement? Either to create an issue of fact for a jury to trial or even go beyond that and my own feeling is that the as that the evidence is --
Abe Fortas: You know, all I'm asking is whether -- is the dispositive issue of fact that is before us, the question whether or well it's the dispositive issue of law before us depends upon whether we believe that you can establish your case by showing merely this qualified partial preemption of the market that I have described. That is to say preemption of the market of funds, of available funds, of funds available to your needs particularly favorable terms.
Kenneth L. Anderson: Well, I did -- to me the -- I'm accustomed in these tie-in cases to thinking of preemption of the market in terms of the tied product and not of the tie-in element. To me, International Salt, Northern Pacific, Loew's, and the recent Perma Life Muffler case, all teach that some economic power must exists over the tying element to enable it to have the force of a livre for the purpose of creating the tie situation and my point is that in this case, the evidence on the unique character of these loans on this terms satisfies that basic requirement and --
Abe Fortas: Well, you could have gone elsewhere and obtained the loan on -- but not on such available conditions, is that right?
Kenneth L. Anderson: That is correct, Your Honor.
Abe Fortas: You could have gone elsewhere and obtained the prefabricated houses or could have built conventional houses, is that correct?
Kenneth L. Anderson: Before we sign the loan agreement, yes sir.
Abe Fortas: Yes.
Kenneth L. Anderson: Yes, sir. There's of course the --
Abe Fortas: So well, it's the question of the putting to get -- whether the putting together of this constituted an unreasonable restraint of trade under Section 1?
Kenneth L. Anderson: Yes, sir.
Abe Fortas: Or satisfy the perhaps stricter standards of our tie-in cases, is that right?
Kenneth L. Anderson: That's correct sir.
Abe Fortas: And the issue then is whether there was here the kind of market preemption or foreclosure of loan firms available on these peculiarly advantageous terms whether that kind of preemption of foreclosure constitutes a violation of Section 1 when it was coupled with the tie-in arrangement for the prefabricated houses. Am I getting closer to the target now?
Kenneth L. Anderson: I really think that were -- Your Honor is addressing this in terms of the money being the tied element instead tying element. The tying element is the money. The money was the thing that was attractive on its terms. It was the thing that was attractive about (Voice Overlap).
Potter Stewart: The money is the equivalent of what unconventional tie-in cases the copyright of product or the patent of product.
Kenneth L. Anderson: Right.
Potter Stewart: And in order to get that money, you had to take along with it the U.S. Steel houses.
Kenneth L. Anderson: That is correct.
Potter Stewart: And this is therefore exactly the opposite from a case that I seem have to remember, maybe it was the consent decree where the person when he bought a General Motors car and not insure with General Motors had to go to the General Motors Finance Corporation --
Kenneth L. Anderson: Yes, sir, that's --
Potter Stewart: -- just to get the money -- this is exactly the opposite side of the --
Kenneth L. Anderson: This is the opposite of that case and that‘s the U.S. v. General Motors and I believe we cited in our brief and in that case, the tying or the financing was the tied element in that case. Because they have the --
Potter Stewart: Because they want to make --
Kenneth L. Anderson: They want to be sure the (Voice Overlap) --
Potter Stewart: Allegation warrants they want to make a profit out of a loan.
Kenneth L. Anderson: That is correct, sir.
Abe Fortas: But the court below held that funds were available to you elsewhere --
Kenneth L. Anderson: The court --
Abe Fortas: -- except that they were not available on these terms and conditions?
Kenneth L. Anderson: On these terms and conditions, yes sir. Yes sir. Now --
Abe Fortas: So the narrow question is whether the foreclosure of the availability of funds on this especially favorable terms and conditions satisfies the requirements of our tie-in cases.
Kenneth L. Anderson: I cannot agree with Your Honor's language. If you were talking about the prefabricated houses, that's -- which are the tying element. One of the questions is, is there are not insubstantial amount of interstate commerce involved as far as the tied element is concerned which are the houses. And here we have I think the record shows clearly a substantial amount of money to meet that is as far as the financing is concerned. It seems to me that the question is not whether other people were foreclosed as far as that element is concerned but whether that cost of the peculiar terms and conditions of this could be used in the market place as livre to require the tie-in, in other words the purchase of the prefabricated houses. And to me, this case is very parallel to the Perma Life Mufflers case where this Court, very recently, held that there was a case to track on facts which to me are not as appealing as (Inaudible) because there these -- those people made all sorts of money out of their franchises which they accepted because they were advantageous to them in the business community; whereas in our case the tremendous loss has occurred and no opportunity to be relieved of the restrictive agreement. So, I feel that our case actually is a stronger case in the Perma Life Mufflers case in which this Court said there's evidence of a conspiracy to restrain trade here under Section 1 of the Sherman Act that the case should be sent back for trial.
Speaker: Do you now (Inaudible)?
Kenneth L. Anderson: No, sir. They attempted at the last minute to raise it and the district judge did not allow it or did not answer to be found. This in effect what has occurred or what has happened to us in the district court though, Your Honor and in the Sixth Circuit Court of Appeals.
Speaker: Did you bring the Clayton Act in this at all?
Kenneth L. Anderson: No, sir I didn't and I didn't for one very simple reason. To me, the Clayton Act specifically speaks in terms of goods and wares. And I have not found the case where the Clayton Act had been applied to a financing to loans of money. So rather than -- I felt that I had a clear face under Section 1 of the Sherman Act. So, I didn't performed the record by putting Section 3 of the Clayton Act into the case.
Speaker: Incidentally, what's the trade restraint here, its houses, is it?
Kenneth L. Anderson: Yes, sir.
Speaker: What kind of house?
Kenneth L. Anderson: Prefabricated houses.
Speaker: That's all. Just prefabricated?
Kenneth L. Anderson: Yes, sir. They build the package. They make up --
Speaker: Yes, I'm familiar -- I was interested precisely what the market was that you said that was strange here by this practice?
Kenneth L. Anderson: Well, --
Speaker: On your theories?
Kenneth L. Anderson: As far as the tie-in situation is concerned of course, we really don't need to have a market. I mean but being the closest market is the Louisville, Jefferson County, and surrounding area. I think the evidence shows that it goes far beyond that and covers the whole market area.
Speaker: Doesn't there have to be a restraint of trade here in the housing work?
Kenneth L. Anderson: Yes, sir.
Speaker: Or in the prefabricated part?
Kenneth L. Anderson: I believe they are fairly equal.
Speaker: And the restraint amounts to preempting some 57 acres of land, is it?
Kenneth L. Anderson: No, sir. That's what people have talked about all along here is --
Speaker: But there is -- this is the only land that -- this is the only land that these particular contracts at which your client entered into effect.
Kenneth L. Anderson: This is the land, which was effective. We're talking about approximately $700,000.00 worth of prefabricated homes.
Speaker: Exactly. Exactly, yes.
Kenneth L. Anderson: And the homes of the tied product not the land. The land is as far as I'm concerned, incidentally restrained by this but also, but if the house is -- the interstate commerce in the house is what --
Speaker: Incidentally, you've said a while ago that you could not have paid off this loan.
Kenneth L. Anderson: That -- Your Honor --
Speaker: I mean that you are -- that the lender --
Kenneth L. Anderson: The reputation of the subdivision had gotten so bad but they have the --
Speaker: But the lender refused, do you have permission to pay off the loan?
Kenneth L. Anderson: The lender refused to ask permission to build conventional homes in the subdivision so we could pay them all, yes sir.
Speaker: Of course, the District Court said that any time plaintiff could have liquidated the debt to defendant, Credit Corporation be relieved from all obligations to it including the restriction on the 55 record.
Kenneth L. Anderson: Well, I dispute the District Court's conclusion on that point on the basis of a language that I read to the court at the beginning of my argument from the loan agreement which gives them the right to take possession of our property. But this is the same as in International Salt. They entered -- the lessees in International Salt could have canceled the leases and walked away. We could have possibly paid these people off but I feel if the record shows that because of the bad reputation that this subdivision had gotten that it would have been impossible to go out and borrow the money at that point from anybody else to pay them all for the lump sum. We could and we're ready, willing and able to pay this people off on a lot by lot basis as we built conventional homes on it and they wouldn't let us do it.
Speaker: What you want is to be free from insofar by prefabricated houses to put up on these lands?
Kenneth L. Anderson: Yes, sir.
Speaker: And here, borrow the money on the favor of return?
Kenneth L. Anderson: As the -- as the manner developed, yes sir.
Speaker: That's your question?
Kenneth L. Anderson: Yes, sir. Just as any businessman wants --
Speaker: You say they were engaged -- you say they were engaged in a lending business in the way it would affect the interstate commerce?
Kenneth L. Anderson: Yes, sir.
Speaker: They agreed to lend but they imposed on you in turn of having to get prefabricated houses in order to have the loan?
Kenneth L. Anderson: That is correct sir.
Speaker: Is that your holding?
Kenneth L. Anderson: Sir?
Speaker: Is that the entire issue?
Kenneth L. Anderson: That is the issue --
Speaker: You claim that you were denied the opportunity to present evidence, to show which factor?
Kenneth L. Anderson: I was -- we were denied the opportunity to have a trial before a jury of these issues, Your Honor. These issues which I ---
Speaker: Did he -- did the court tried to issue himself?
Kenneth L. Anderson: Well, --
Speaker: Was it getting a trial before the jury?
Kenneth L. Anderson: No, sir. The court entered the summary judgment --
Speaker: I understand that.
Kenneth L. Anderson: He asked -- he asked --
Speaker: (Voice Overlap) some issues.
Kenneth L. Anderson: Well, he heard argument on some issues. Then the respondents at its request prepared what he called and what they called findings of fact and conclusions of law and they were tendered to the court.
Speaker: Two claims that were done by the jury?
Kenneth L. Anderson: Yes, sir and --
Speaker: And that they are -- there were disputed questions?
Kenneth L. Anderson: Yes sir, at least disputed questions.
Speaker: They decided among the affidavit matters?
Kenneth L. Anderson: That is correct sir and we had a proper demand for jury trial in the record.
Speaker: (Voice Overlap) the Court's decision was that (Inaudible) there is no dispute, as a matter of law (Inaudible)?
Kenneth L. Anderson: Well, that is the -- I believe that any time, a court signs a document called summary judgment that that is suppose to be what is the court is intending to do. As counsel for respondents point out even in their brief, its obvious from reading the court's memorandum opinion which is really these findings of fact in conclusions of law with the name changed that erroneous grounds were relied on by the court all the way through. As a matter of fact really, the district judge just sort of threw up his hands and said I don't see how financing, even if it's unique, can be a tying element. That's not what is in his memorandum because he didn't write the memorandum but that's the basis on which the case was dismissed. And to me, it's clearly wrong. It's -- we were clearly entitled to a trial in this case.
Speaker: If you assume, I guess your argument -- if you assume that favorable term using were designed using gauge in the business in fact it come, he had no power or the judge has no power or right to determine that issue. Those issues of facts that he has without you being allowed to introduce more and you did not as I understand it as that. Now you assert that that could have been effective which would have shown that you are entitled to recover?
Kenneth L. Anderson: Your Honor, it's my position that the record as its stands now is sufficient to at least create issues of fact on the varying elements of the tie-in arrangement if not established --
Speaker: How do you make findings of fact if they were not essential in judgment?
Kenneth L. Anderson: I don't know Your Honor. I'd point it out to the court and then get it --
Speaker: But it was essential.
Kenneth L. Anderson: No, sir.
Speaker: The findings of facts?
Kenneth L. Anderson: No, sir. Not in the -- under the federal rules on the summary judgment. You simply enter a judgment saying the complaints dispute.
Speaker: But if he was -- if he is going to be arested on the facts as to what the facts were, I guess they have to be found that these were the facts.
Kenneth L. Anderson: Well, except that all the facts and his memorandum opinion, Your Honor, are the facts relied upon by the respondent.
Speaker: Are you claiming those facts of the inferences found should have been drawn by a jury and not by the (Voice Overlap)?
Kenneth L. Anderson: Yes, sir exactly. Thank you.
Earl Warren: Mr. Flinn.
Macdonald Flinn: Mr. Chief Justice, may it please the Court. Subject to the wishes of the Court I planned that the bulk of my argument today to what conceive to be the central legal issue in this case, that issue turns upon the first of the two elements requisite the proof of a Sherman Act per se time violation. Specifically the question raised is this, if the court drawing every reasonable inference in favor of the plaintiff concludes that the evidence shows that defendants financing of the plaintiffs was one more favorable terms that are available from any other source, there's that fact standing by itself established the requisite sufficient economic power over the tying element to appreciably restrain trade in the tied product, here prefabricated homes. First, I would like to touch briefly upon the facts and two subsidiary issues. The plaintiff has argued that summary judgment was inappropriate but discovery was full and complete. To my knowledge there was never any claim by plaintiff that additional facts needed to be put in the record, there was never any request when the defendant summary judgment motion was filed for additional time to prepare affidavits or otherwise come forward with the showing that Rule 56 (e) requires that there is evidence on material facts in dispute. In addition, the plaintiff has advised this Court as it did the courts below that all of the evidence essential to its case is in the record now before the Court. On that record --
Speaker: I gather that they aren't given inferences shown by the court from that were not enough.
Macdonald Flinn: Mr. Justice we urge this Court to draw its own inferences and I am sure that the Court will draw those inferences fully in favor of the plaintiff. We recognize that that is the burden upon us, we welcome it.
Speaker: Further, there are conflicts of fact here. There are conflicts of judgment as to market I suppose but the question -- the issue may be whether assuming all of the facts to be as the plaintiff urges them to be was most ambitious statement of the fact if you will. Making that assumption does has a plaintiff stated a cause of action that would entitle him to recover under Section 1 of the Clayton Act?
Macdonald Flinn: Sherman Act, sir.
Speaker: Of the Sherman Act, I mean and I take it from reading the opinion of the District Court that which was adopted as I remember by the Court of Appeals, is that right?
Macdonald Flinn: Mr. Justice there was per curiam affirmance by the Court of Appeals.
Speaker: Yeah. Alright. That the reading of opinion of the District Court I take it that the District Court concluded that making that assumption, everything the plaintiff contends for to be established still does not constitute as a manner of law violation of Section 1.
Macdonald Flinn: I believe that as a fair interpretation.
Speaker: Well, why don't you tell us succinctly as you can their reason for the District Court's legal conclusion?
Macdonald Flinn: Very well, Your Honor and I would say before attempting to answer to this question we do urge that regardless of the basis for the District Court's decision in reliance upon Helvering and Gowran on the unbroken line of precedence. In a summary judgment situation such as urged here where only questions of law are presented to the reviewing court both the Court of Appeals and this Court, whether or not the grounds stated by the District Court were right or leave out or ambiguous, this Court is as fully able as the District Court was to reach the purely legal conclusions that are necessary in these circumstances. In essence, I think the one aspect to the District Court decision which plaintiff has most frequently pointed to as suggesting that there was a misconception on the part of the district judge as to what was requisite to establish a cause of action for per se time violation under Section 1 whether embellished or not by a Section 2 conspiracy to monopolize charge was the District Court's reference to the amount of land that was affected by the arrangement between these parties in comparison with the total land that was available in Louisville, Kentucky for house developed. I would urge that clearly that market fact by itself should not be determinative in a per se time situation. I would urge equally strongly however, that the fact is clearly not irrelevant to the facts of the these cases where the tying arrangement is one between if you will a raw material supplier and his dealer, a middleman who is taking the houses and then making them available to the ultimate consumers, the house residents. I submit that in terms of a full analysis of this kind of tying arrangement it is a appropriate to look to the question where other prefabricated house manufacturers were the sellers of conventional house building materials and any significantly way excluded from the market whether it's confined to Louisville, Kentucky or more broadly. Now, if I may try to articulate our position, so that the Court understands clearly why we urge that summary adjustment judgment is appropriate on this case, I will proceed.
Hugo L. Black: I might -- I can't understand you but just answer one question.
Macdonald Flinn: Yes, Mr. Justice.
Hugo L. Black: You might be happy to give and you might not want one of these. Who was the person who ask you of the loyalty have been making among all and there required that he, to get the loan, have to use prefabricated material to build on these houses, would that (Inaudible)?
Macdonald Flinn: I would urge not, Mr. Justice Black.
Hugo L. Black: Well that's what I suppose?
Macdonald Flinn: In now way. Now --
Earl Warren: We're going to argue both the monopolization theory as well as the tie-in, are you?
Macdonald Flinn: I'm going to urge Mr. Chief Justice that the monopolization theory as I understand it to be stated in the petition and the plaintiff's main brief before this Court is not properly before this Court.
Earl Warren: But assuming at least should this disagree with you or not, are you going to argue that merits of --
Macdonald Flinn: I am going to argue very -- I am going to argue very simply and succinctly Mr. Chief Justice that this record is barren of the requisite evidence to evidence to establish the elements of a conspiracy to monopolize specific intent the relevant market in this as Mr. Justice Brennan suggested. I believe that your decision in Walker process, three terms ago, indicates that in attempt our conspiracy to monopolize the relevant market is an issue. As I believe Mr. Justice Brennan's question suggest correctly there would be a most substantial case of question in this case as to whether the market can be limited to prefabricated houses or whether the element of cross-elasticity of demand does not bring conventional houses into the market. Now, on that in essence is my argument under conspiracy to monopolize a part from my principal argument that the kind of conspiracy to monopolize which I understand the plaintiff to be urging now was never urged before either the District Court or the Court of Appeals. Now, back to the summary judgment if I may, we urge the Court and we know that it will and should reach its own determination as to what the reasonable inferences to be drawn from this record are. We submit that plaintiff has not shown any fact material to its antitrust claim to be in dispute to require resolution by a jury whether in terms of witness credibility, conflicting evidence or otherwise. In fact, the plaintiff has claimed continuously indeed in his main brief to this Court that on this record it is entitled to a directed verdict. Now, in those circumstances I submit that there can be no question but that summary judgment is appropriate that the question is what --
Abe Fortas: Well, however then may be to establish the plaintiff's cases, he's got to show according to our cases. Monopoly power or at least to very higher degree of economic control on the market for the tie-in service, the tie-in factor here being the loan.
Macdonald Flinn: Financing, yes sir.
Abe Fortas: And he's got to show that the tie-in results in a substantial restraint upon the competition in the market. For the tied article that the tied article being the prefabricated house. Right?
Macdonald Flinn: Yes, Mr. Justice.
Abe Fortas: Now, as I read the opinion of the court below and perhaps I'm wrong, the court below said that he had not shown either of those, is that right or wrong?
Macdonald Flinn: I believe that is right.
Abe Fortas: And the question is whether that conclusion made the case appropriate for summary judgment or whether the plaintiff was entitled to submit the disputed questions of the fact to a jury and the jury decide on those elements and that's right?
Macdonald Flinn: If there were any disputed issues in fact, yes Mr. Justice.
Abe Fortas: Alright.
Macdonald Flinn: Now--
Earl Warren: We'll recess Mr. Flinn.
Macdonald Flinn: Yes, Mr. Chief Justice.
Earl Warren: Mr. Flinn, you may continue your argument.
Macdonald Flinn: Mr. Chief Justice, may it please the Court. If I may very briefly return to and disposed of my argument in connection with this summary judgment question, I would like to briefly state some consideration which I hope will assist the Court and in any event make clear the defendants' position. At most, we have differed with the plaintiff only as to some of it's characterizations of the evidence. In our brief, we have tried to set forth the evidence of records cited by the plaintiff essentially verbatim from the record and have compared it with a certain characterizations by the plaintiff. I think that clearly the most perhaps the only significant area where we differ with the plaintiff's characterizations is in connection with the evidence relied upon by the plaintiff to establish it's claim that the defendants' financing extended to the plaintiffs was on more favorable terms than available from any other source including our competitors, other prefabricated manufacturers. But in the final analysis that the determination is for the Court and for the Court alone, and we expect the Court to draw every reasonable inference in favor of the plaintiff and if the in --
Byron R. White: Let's assume -- assume for the moment there was no argument whatsoever which I take it certainly as your -- the core of your argument that there's no dispute about historical facts in the sense of who did what to whom or things like that but if there's been a jury trial, what question would have gone to the jury?
Macdonald Flinn: Mr. Justice White, I would answer --
Byron R. White: It would not have been just historical facts, would it?
Macdonald Flinn: Mr. Justice, I would answer that question by saying that I think upon the plaintiff's own characterization of the record, i.e. that it is a record that entitles it to directed verdict. It is quite possible that after a trial with the jury sitting and hearing the evidence there would have been no submission to the jury that the court would have directed the verdict --
Byron R. White: Do you have to say -- do you have to say definitely that there wouldn't have been any submission, don't you?
Macdonald Flinn: Yes, Sir. I'm prepared to say that. On this record --
Byron R. White: Don't you have say that?
Macdonald Flinn: I do say it, Mr. Justice.
Byron R. White: (Voice Overlap) that could have been no other conclusion.
Macdonald Flinn: That in essence is my argument Mr. Justice because we are prepared to accept any inferences that the plaintiffs can reasonably argue from this record. And they have told us, they have to the court that the record is complete. And indeed today, I believe the plaintiff's counsel has advised the Court that at most any other evidence that he would have put on would have been cumulative of what is now in this record before the Court. Now, for the balance of my argument, I shall assume arguendo that the plaintiff's claim that the defendants' financing was extended on a more favorable terms than available elsewhere is the fair inference and in the inference that this Court will draw because as I am find to make clear we in no way dispute the evidence and we will accept whatever the Court concludes are the reasonable inferences from that evidence. I would like to point only to one aspect of this record and ask the Court particularly to notice, nowhere is there any evidence that the plaintiff objected the defendants' houses or in any way found the burdensome or noncompetitive at the time these arrangements were negotiated and entered into. Similarly, there is no evidence that the plaintiff would have bought houses or building materials from any other source absent to financing that was made available to it by the defendants.
Byron R. White: You're arguing -- you're assuming then that the uniqueness of the loan satisfied the first prong of the tying or not?
Macdonald Flinn: I am assuming Mr. Justice that the loan was offered, the commitment was made on more favorable terms than were available elsewhere to this plaintiff.
Byron R. White: Namely?
Macdonald Flinn: I will argue that that is not uniqueness within the sense of the per se doctrines spelled out in Loew's case.
Byron R. White: You mean it's not, that doesn't show the crucial economic power in the tying product.
Macdonald Flinn: Exactly. Exactly, it does not permit such an inference Mr. Justice.
Byron R. White: But you -- even if it did, I take it that you're arguing you should win because of the lack of effect on --
Macdonald Flinn: That would be a second prong to my argument. I think very honestly Mr. Justice, the more significant argument is that, the claim, that a tying element involves sufficient the economic power appreciably the restrain commerce --
Byron R. White: Well, then you do have to contend with Loew's, the --
Macdonald Flinn: Definitely.
Byron R. White: -- statement in Loew's that, “a showing of market dominance, the crucial economic power may be inferred from the tying product's desirability to consumers or from the uniqueness in its attributes.”
Macdonald Flinn: Clearly Mr. Justice, I must face up to that case. Now to dispose of what I believe is the last subsidiary issue. This question of the conspiracy to monopolize, our position is very simple. We admit that the plaintiff has always alleged and argued a conspiracy to monopolize in violation of Section 2. The point we make is very simple. Before both courts below and indeed we think on a fair reading of the plaintiff's brief before this Court, it has always urged that that conspiracy indeed its entire case turned upon the existence of a per se time violation either as the objective or the means of affecting the violation of both Sections 1 and 2 to the extent that the plaintiff's brief and I am still uncertain after listening to counsel's argument today but to the extent that plaintiff's brief argues before this Court that its conspiracy to monopolize does not turned upon, does not require proof of a per se time violation. That is an argument that was never presented to the courts below. Now, turning to this --
Byron R. White: Do you think the statement I read to you out of Loew's was the holding or is there any case that that holds that or?
Macdonald Flinn: Mr. Justice, my idea of Loew's is that honestly, I don't know exactly what the Court meant when it use the term unique there. I would like to discuss that case in considerable detail as well as its place against the background of all these courts significant time rule cases. Now, let's again come back to the basic --
Speaker: Although that's a the question that we can resolve.
Macdonald Flinn: No question about that Mr. Justice, if I can give any assistance that would be the only reason from my offering argument. To come to back to the central contention by the plaintiff, it's very simple. It claims that because the financing extended by defendant require the plaintiff to place no equity into the land portion of the loan commitment which was something else than 15% of the total commitment extended by the defendants. This was more favorable and available from any other source and therefore within the meaning of the Loew's case was unique and consequently establishes the requisite sufficient economic power over the tying element. Our contention very simply is that as a matter of logic supported by the decision of this Court, you cannot infer simply from the fact that the time element is offered on more favorable terms than available elsewhere that there is economic power in that tying element. Now coming Mr. Justice White to the Loew's decision, as this Court well knows it involved the block-booking of copyrighted movie films. It held that the requisite economic power over the time element, it presumed when the tying element is either patented or copyrighted. Moreover, as the Court well knows, the tied products there were frequently forced upon unwilling purchases. Now, outside the patent and copyright areas, I urged that the Court has not defined uniqueness and I concede my inability to tell this Court what it meant when it use the term unique in the Loew's case. I would urge however that to the extent that it coupled with that a reference to desirability to consumers, I think that this must as a matter of common sense than intended by the Court to mean something more than desirable in the sense that one consumer buys 10 cents worth of a tying element. That would establish sufficient economic power and practically every product is sold. I think the Court meant something in terms of some in addition of meaningful economic power. Indeed, the Court has never merely assumed the existence of economic power and I would point to the other significant tying decisions of the Court. Times-Picayune examined market share and it was held there that 40% was not a dominant position when the other two sellers each had 30% of the relevant market. Now, in Northern Pacific, the Court found substantial economic power the tying land on a combination effective specifically the extensive landholdings of the defendant there. Secondly, the strategic location of the land. Third, the land was frequently essential to the businesses of the buyers and lessees who were subjected to the tying conditions. Fourth, the host of tying arrangements affected by the defendant without any reasonable explanation for the existence of the restraint. And finally, this Court concluded that the defendants' purpose there obviously was to fence out competitors and the nature of the tie was that the fencing out would be for an indefinite period of time. It was the sale of land where the covenant running with the land indefinite leases of long terms. Now, concededly there may be cases where economic power over the tying element can be inferred indirectly from proof that the buyers were economically coerced to accept knowingly an inferior burdensome or noncompetitive tied product. But pointing back to the facts or the absence of facts that I've tried to bring to the Court's attention a moment ago, here in this case, there is no evidence that the plaintiff consider the defendants' houses the tied product to be of this character when it negotiated the arrangements now challenged, consequently we urged this is not a case of economic coercion.
Speaker: It's a case of economic coercion with respect to the tie-in product of financing if what petitioner represent is true namely that it was only by virtue of obtaining this loan on the favorable on this uniquely favorable terms that petitioner was able to go ahead with its business of constructing (Voice Overlap) how time went in --
Macdonald Flinn: Well, Mr. Justice, I would --
Speaker: -- constructing houses. So that in that sense so as the economic coercion, question is whether that was the kind of economic coercion or the greater extent of the economic coercion that satisfies the requirements of buyer tie-in cases. It is not a copyrighted product that, perhaps it does not have elements of uniqueness in the same sense of the motion picture film has but the petition argues that it was essential to its conduct of business. I suppose, petitioner might say that it's more like Northern Pacific.
Macdonald Flinn: Mr. Justice, I think perhaps you and I differ with all due respect somewhat in our somatic use of the phrase “economic coercion.” I am using economic coercion in the sense of Mr. Justice Harlan's dissenting opinion in the Northern Pacific case. Economic coercion in a tie-in context where at fair inference of economic power over the time element can be drawn from the fact that it is obvious from the arrangement, that the buyer has had force upon him something that he either cannot use, doesn't want, or is noncompetitive and therefore --
Speaker: Well, that's precisely the submission here that petitioner says he should have been allowed to present jury.
Macdonald Flinn: My point Mr. Justice is, he never made that contention until months after the arrangement had been entered into until months after he had come back for a second helping of more of the same kind of financing. So, his frame of mind which I believe --
Speaker: So what is that a pari delicto argument?
Macdonald Flinn: No sir, it is not.
Speaker: What is it?
Macdonald Flinn: It is a an assertion if Your Honor will that one element which may have to be looked at in reaching a conclusion as to economic power over the tying element is, what was the state of mind --
Speaker: Well, if --
Macdonald Flinn: -- of the buyer at the time he entered into.
Speaker: Well, that sounds like in a statement on your part that it would be the most regrettable error or mistake of judgment from the jury to decide --
Macdonald Flinn: No, my --
Speaker: -- that this is economic coercion. But that doesn't get you --
Macdonald Flinn: My argument -- my argument Mr. Justice is that the economic coercion, if it arises as in the tying case exists at the time the parties effectuate the arrangements between them. It is only in terms of the buyer's state of mind at that time that you can ascertain whether or not there was economic coercion. Now, to go on with your question, it seems to me that if your question fairly states the plaintiff's position that he could not have gotten into the building business through any other financing media but for the more favorable terms obtained from the defendants, then the case is dispose off automatically without getting into the question of sufficient economic power. It follows that there was no foreclosure of competition. This plaintiff would have been unable to buy any competitor's prefabricated houses, any competitor's conventional house building materials. Now, we fully recognized that this Court approaches tying arrangements quite properly so with suspicion. Indeed, the Court has repeatedly said that they serve hardly any purpose beyond discretion of competition. At the same time, even under the more easily established standards of Section 3 of Clayton Act that Court has recognized the tying arrangements are not inevitably anticompetitive. And without going into the details we respectfully refer the Court to the Sinclair Refining case which is cited at some detail in our brief. We urge that where a tying product is claimed to be unique solely because it is offered at a lower price or on more favorable terms, it cannot logically be inferred from that fact standing alone that there is a sufficient economic power over the tying element to constitute a per se violation. I would ask the Court to consider the following few examples. A buyer may take a tied product as the condition of paying a lower price for the tying product, simply because he considers the package to offer the best available terms for the combination of products he wants not because the seller has economic power over the tying element or because the buyer is coerce to take a tied product that he does not want. Indeed, the fact that the tying product must be offered on more favorable terms, may suggest that it lacks even competitive parity in part of the tying product. Further, even a seller with no economic power may use a tying product is a lost leader to promote the sale of the tied product by selling the tying product at a loss, in effect he reduces the prices of the tied product that he is selling. Now, we respectfully submit that in Northern Pacific, this Court appears to have recognized that offering the tying product on more favorable terms may imply the absence of economic power. Specifically, the majority opinion there appears to have given weight to the fact that that the defendant there made no claim that the tying land came any cheaper than if the tying condition had not been imposed. Finally, my time is about to expire, we ask the Court to consider the particular nature, the tying element involved here, financing, a commitment to lend money credit. If this case has any significance for others than the parties to it, it is most likely in connection with this respect, with this aspect of the case. Dealer, financing by sellers upon the condition of the seller's goods be purchased is widespread in the business community. Indeed, we argue that it is inevitable because every sale on credit involves a tie-in, financing by the seller upon the condition that the buyer purchase the seller's goods, unless the seller either increases his price for his goods or recovers in the form of interest the full cost of his foregoing prompt receded the funds, he has reduced the price of his goods. If the seller offers credit or financing on more favorable terms than available elsewhere, to that extent, he has also reduced the price of his goods. We submit that such financing, unique because offered on more favorable terms than available elsewhere is price competition in the goods sold. As such, the financing challenge by the plaintiff here was an integral element of the price of the defendants' prefabricated houses. For all of these reasons, we submit the judgment below should be affirmed. If the Court has no further question, I shall conclude Mr. Chief Justice.