Earl Warren: Number 232, United States versus Boston & Maine Railroad et al. Mr. Hummel, you may proceed with your argument.
Robert B. Hummel: Mr. Chief Justice, and may it please the Court. This is a direct appeal from the dismissal of Count I of a two-count indictment by the District Court of the District of Massachusetts, Chief Judge Sweeny. The appeal is directly to this Court under the Criminal Appeals Act since the dismissal was based solely on the Court's construction of a statute. The appellees are the Boston & Maine Railroad and three individuals, who held the positions which I shall describe during the pertinent period, Patrick B. McGinnis who was president and director of that railroad, George F. Glacy and Daniel A. Benson, both vice-presidents. The charge was laid under Section 10 of the Clayton Act and, in essence, it was that the appellees -- the appellee, Boston & Maine Railroad, with the aid of and direct participation of the individual appellees, sold 10 railway cars to a company known as International Railway Equipment Corporation without competitive bidding which, in our view, was required by Section 10 of the Clayton Act. We postulate the requirement for competitive bidding on the ground that there existed the interlocking relationships which Section -- Section 10 requires when a railroad is dealing in its own property or in supplies and equipment with another company. Statute provides the following types of interlocking relationships give rise to the necessity for competitive bidding. On the part of the carrier, if the person is a director, president, manager, purchasing or selling officer, or agent in a particular transaction and, on the part of the other company, if he is at the same a director, manager, purchasing or selling officer, or has any substantial interest in the other corporation, firm, partnership, or association, then the requirement for competitive bidding arises. And, in this case, the narrow question is, the meaning of the place, any substantial interest since there's no allegation that the individual appellees held a position as director managing or purchasing or selling officer with the International Company. Our position, in brief, is that if the other firm, the firm with whom the railroad is dealing, is being operated in substantial part for the benefit of the carrier officials who hold the position with the railroad specified in the statute, in that event, carrier officers have a substantial interest in the company and the need for competitive bidding follows.
Arthur J. Goldberg: Where there is one bribe.
Robert B. Hummel: Well, the bribe case, we think, presents a slightly different question. It might depend on the kind of a bribe. If it were a promise of stock to be delivered 20 days after the transaction had taken place, I think it would be -- it would give, perhaps, the bribee very clearly an equitable stock interest in the company. It might not be a --
Arthur J. Goldberg: What about cash payments?
Robert B. Hummel: Cash payment would raise, perhaps to attenuated a -- an -- an interest. I'm not sure it would be substantial -- a substantial interest in that event, although I think, in a -- in appropriate circumstances, it might be sufficient. If you could show a course of dealings which would indicate that the person taking the bribe had a real solid expectation of additional bribes, I think it might meet the -- the test.
Arthur J. Goldberg: Am I wrong in my recollection here that this involved a cash payment?
Robert B. Hummel: Well, these involved payments of $71,500, all except a payment of, I believe it was, $1,500 being subsequent to the transaction. And, the allegation of the indictment is that there was a scheme and arrangement, under which the individual appellees would direct property to the International Company and, in return for that, when the International Company made, for the purpose of producing profits for International and that they would then subsequently receive substantial moneys, now --
Potter Stewart: Why isn't that just a bribe?
Robert B. Hummel: Well, I -- I suppose you could describe any type of grant -- an interest in the company as a bribe. Our position was --
Potter Stewart: Well I understand -- I understand your point that if the bribe were in the form of shares of common stock of the bribing corporation, that would be a substantial interest because that meets the common ordinary sense of that term “substantial interest,” a proprietary interest, an ownership interest. But, that was not this case. This was money and why wasn't it simply a bribe as my brother Goldberg has suggested.
Robert B. Hummel: Well let me suggest, first of all --
Potter Stewart: What made it different?
Robert B. Hummel: -- that calling it a bribe may not mean that they didn't have a substantial interest in the company. And, if I may, I'd like to turn to Count II of the indictment from which it appears that International's business for the year in which this transaction took place amounted to some $480,000, almost all of which was in the property of the Boston & Maine River. It also appears in that count that the International paid for the railway cars which were involved with a postdated check, I think in fair inference, being that the check was postdated because they expected to make it good out of the resale to the Wabash Railroad which was involved. And, in those circumstances, it seems to me that we have what amounts to a joint enterprise. You can call it bribe if you wish, but it seems to me that the International Company and the individual appellees were so closely aligned and the interest of the individual appellees were so tied to the success of the enterprise that they had for purposes of a conflict of interest situation which is what we believe the statute deals with, a substantial interest of the corporation.
William O. Douglas: The defendant was silent partly, is that your theory?
Robert B. Hummel: I think that's quite true. The alternative to that is the appellee's position which is apparently that the statute covers only a stock interest and what the Court described as a “then present legal interest.” This seems to exclude illegal interests, future interests, equitable interests, contingent interests, all of which it seems to us are fully met in terms of this statute. Once it is appreciated that the statute is dealing with a conflict of interest situation, I've already described the -- some of the elements of the offense and let me -- let me just recapitulate and let me read from the Court's opinion. The Court said that the statute is limited to one who has a then present legal interest in the buying corporation and does not include one whose only interest is in the outcome of what may have been an illegal and illicit plan to siphon off, for his personal benefit, property of the Boston & Maine Railroad through the medium of International. Now, it seems to me that that concept of using International as a medium quite clearly distinguishes this case from the bribe case, although as I said I think the bribe case could straight bribery -- straight cash bribe could still come within the terms of the statute. We believe that when one construes the words “substantial interest” in the context of this statute, it is all important to appreciate that the statute is a conflict of interest statute. Now, the arguments I've made that this is a controlled statute that is an antitrust statute. We agree that it's an antitrust statute and it does have elements of control but, on the face of the statute, seems to us quite clear, that Congress was dealing with the problem of conflicts of interest. It doesn't regulate relationships between railroads. It regulates relationships between railroads and people who deal with the railroads. And, it seems to me that this is the all important factor of this statute in appreciating what the expression “any substantial interest” was designed to cover. The word “interest” can have very broad meanings. We're -- appellees suggest that we're arguing simply an alliance of general concern what a benefit of another corporation. We don't suggest that meaning. We suggest the meaning which is quite concrete in the context of conflict of interest. Rules as to the conflict -- as to conflicts of interests are well known in the law, were laid down many, many years ago are traceable to the Bible that one man can serve -- cannot serve two masters. In this case, it seems quite clear to us that the relationship described as the arrangement and scheme put the individual appellees, McGinnis and Glacy, in the position of serving two masters. This is -- this context of conflict of interest, if there were any doubt about it on the face of the statute, it seems to us, is quite clearly indefinitely established by the legislative history.
Potter Stewart: In a situation presented by this case or at least the allegations of indictment of this case, what's the -- what's the importance of this question? The second count was brought under 18 U.S.C. Section 660 which expressly covered this situation, an officer of a carrier stealing money from it, and that covers it. It covers it explicitly, expressly. What's the importance of the -- of that?
Robert B. Hummel: I suppose there's no importance than that the appellees have violated two counts, two -- I'm sorry, two separate statutes. The elements are different. In this case, it isn't necessary for the government to prove that Boston & Maine did not receive a fair price for the cars. In the Section 660 case, we would have to prove that element. All we need to prove here is that there was a substantial interest and that there was no competitive bidding.
Potter Stewart: And that there was no defense.
Robert B. Hummel: And, this is a misdemeanor. Section 660 is a felony. That's the basic difference between the counts. And, I may also say that, as construed by the lower Court, the statute virtually serves no purpose of protecting against conflicts of interests which makes this matter one of intense concern to the United States. Going back to the legislative history, it arose out of -- the statute arose out of disclosures of railroad mismanagement, manipulation, and intricate web of financial interlocks of all kinds between railroads and banking houses, and railroads and supply corporations. We've set that forth in some detail in our brief. President Wilson delivered a message to the Congress in which he asked, and I quote, for legislation which would prohibit “those who borrow and those who lend are practically one and the same, those who sell and those who buy the same persons trading with one another under different names and in different combinations.” Now, it seems to us that, in this case, we have the buyer and the seller being practically the same person. The House Bill which was passed in response to President Wilson's message simply outlawed the holding of certain positions. It prohibited carrier officers from holding certain positions in other corporations. When the Bill came to the Senate, the Senate approved the House purpose but made some changes in the Bill. With respect to the House purpose, the committee report said that the Bill was “mainly intended to arrest the practice of the same persons occupying conflicting and incompatible relations in the corporate dealings of common carriers often being practically both buyer and seller.” Now, the Senate -- Senate changed the -- the mechanics of the Bill. Instead of outlawing the holding of the positions, it required that when the positions existed there'd be competitive bidding. It then noted that the Bill, while it prohibited certain positions, had a gaping loophole in it, and it added to the House Bill the following expression. “Has any direct or indirect interest in” the other firm. In conference, without explanation, that expression was changed to “any substantial interest” so that the words “direct or indirect” were replaced by the word “substantial.” No explanation. It is clear, however, that the purpose was still broad and the -- we quote in our brief from the supporter of the report before the Senate, Senator Chilton said that the Bill, as passed as it came out of the conference committee “makes it impossible for officers of a common carrier to traffic and deal with those who conduct both sides of the transaction to the profit of individuals who may conduct the negotiations.” He said that its purpose, and I quote again, was to enforce “honest open methods in purchasing and constructing by common carriers. No honest management has anything to fear from this section but it has a severe penalty that will deter the dishonest manipulator.” And, I think this is -- this is relevant with respect to the inquiry about the bribe and the point I was making that if it is a bribe, one does not conclude that, thereby, it is not covered by the -- or therefore, it is not covered by the statute.
Tom C. Clark: What about the antitrust aspect of the statute? This is an antitrust statute.
Robert B. Hummel: Yes, sir.
Tom C. Clark: Not just a conflict of interest statute. It has something to do with the antitrust laws.
Robert B. Hummel: The antitrust sta --
Tom C. Clark: Which, I would assume, would be directed towards the accumulation of power.
Robert B. Hummel: Let me say, first of all, that Section 660 which is the embezzlement and conversion statute is also one of the antitrust laws. It was Section 9 of the -- of the Clayton Act, as it was passed in 1914, when this Bill was passed. But, in addition, this Bill --
Tom C. Clark: The only thought right here --
Robert B. Hummel: The mere fact that deals --
Tom C. Clark: And, right here, that the carrier can be fined along with the embezzling officer.
Robert B. Hummel: Well, sir, I'll come to that but let me finish about the antitrust aspect of it. It's this, and it does relate to the so-called anomaly. Even if the International Company did not cheat the Boston & Maine Railroad in this transaction, there was a preference given in the sale of these cars. International's competitors were deprived of the fair opportunity to buy the 10 railroad cars. It was a substantial transaction. Railroads at the time this statute was passed and today are charged with aggregation -- of being aggregations of huge amounts of capital. They sell it from time to time. They sell tracks. They sell used equipment. They buy in large quantities. And, those purchases and sales could have a definite effect on the industries with which the railroad is dealing. In this case, for example, it appears from Count II that a Mr. Bugby, a dealer in used railway equipment, first came to the Boston & Railroad-- Boston & Maine Railroad and tried to get an option for $500,000 to buy these cars with the expectation that he would resell them to the Wabash Railroad. Now, he was turned away. Employees of the Boston & Maine were instructed by individual appellees not to deal with him and, to this extent, fair competition was interfered with. This point is also made by the remedy which Congress applied in this situation a competitive bidding. And, the statute also provides that if anyone interferes with that competitive bidding, he is to be treated as an aider and abettor. We derive from the point that this is a conflict of interest statute certain conclusions. First of all, that it doesn't matter whether the interest which the individual appellees had in the International Company is a legally enforceable one. Obviously, if it isn't legally enforceable, it's large or it's entirely because there was a conflict of interest involved. I think if they had not been employees or officers of the Boston & Maine Railroad, it would've been a legal interest, a kind of a finder's arrangement that they would find the property and it would be resold and they would share in the benefits. The same thing applies to the stock interest. What is there about a stock interest which would make it a particular concern in a conflict of interest statute but not make other interest of concern? It can't be the vote in the corporation because the conflict exists because of the pecuniary financial benefit which the officers had in the other corporation, not in their power to control its activities.
Potter Stewart: The real wrong here was the failure of the Boston & Maine to go with these things on a competitive bidding basis the way the statute is read.
Robert B. Hummel: That's correct.
Potter Stewart: And the criminal, the way the statute is written, is the Boston & Maine Railroad which could be fined up to $25,000 or not --
Robert B. Hummel: That's correct. It can be fined.
Potter Stewart: -- selling these cars on competitive bidding.
Robert B. Hummel: That is correct. Now --
Potter Stewart: Now, what kind of a law is it that makes the -- a person who was robbed a criminal because of that robbery and there -- and has to pay $25,000 more?
Robert B. Hummel: Well, I think this derives, in large part, from the concept of the fictional being of the corporation. I think that Congress just assumed that the corporation was responsible for the Act, that the corp -- the obligation should be placed on the corporate entity because it was the entity which would have to have the competitive bidding and that it, thereby, followed that if the competitive bidding wasn't held, that the corporation would have violated the Act. But, the fact that the corporation doesn't hold a competitive bidding is what makes the individual appellees responsible, if they are.
Potter Stewart: But, under the statute, must -- much less punishable by -- much lower.
Robert B. Hummel: The statute recognizes that the corporation is a corporation. It is subject to find -- fine. The individual appellees are subject to punishment for up to a year in jail. Now, I wouldn't call that a lighter punishment.
Potter Stewart: Now, I can see it.
Robert B. Hummel: And -- now, the question arises as to why I put the burden on the corporation, why hold the corporation guilty. Assume there isn't going to be a heavy fine, which I think is a fair assumption to make in a situation where the carrier has in fact been victimized. The district judge passing the sentence would not apt to impose a heavy fine. But, nonetheless, the factor of conviction would serve some purposes. First of all, it would alert the stockholders. He will direct their attention to the fact that their corporation had been guilty of violating the law and might perhaps spark a stockholder's rebellion. The mere fact that certain individuals had been convicted would be something that the corporation might be able to pass off as a matter in which they have not participated, they had not been in on the defense and the corporation, itself, had done nothing wrong. Moreover, we suggest that placing the liability on the corporation makes it the duty of all the officers who are interested in the corporation's welfare to be aware of the fact that, even though they may be convinced the corporation is not being cheated that, they have to watch preferences in the sale of the property -- the sale of railroad's property, and this brings back the antitrust purpose that because, it seems quite clear to me, that even if no one had been cheated, the individual officers would have an interest in protecting the corporation from being fined, that is the individual innocent officers. They would make it their business to find out the activities of other officers as an ancillary means of enforcing statute that seems to me to be reasonable. I might point out in addition, that ordinarily we're dealing here with a question of punishment. Is it wise punishment? And, Congress doesn't ordinarily spell out. Give its reasons for why it imposes punishment and what the way to that punishment would be. In this case, you're faced with an initial problem. We say the corporation doesn't know the reason. It's an unwitting victim bt, the fact is, if you are going to impose liability on a knowing corporation only, how would you get notice to the corporation? Here, you're dealing with the president and two vice-presidents and if the statute required knowledge, it seems to me that this would be the perfect situation for implying knowledge.
Arthur J. Goldberg: (Inaudible)
Robert B. Hummel: Sorry, I don't --
Arthur J. Goldberg: What part of the policy they took the violation at that time.
Robert B. Hummel: The portion which requires the carrier to have competitive bidding when its officers or other employees have certain positions in a corporation with whom the corporation is doing business-- with whom the carrier was doing business to an amount --
Tom C. Clark: Is there -- an interlocking director here or president?
Robert B. Hummel: There is not. We place --
Tom C. Clark: What do you depend upon?
Robert B. Hummel: The words “any substantial interest” in the other corporation.
Tom C. Clark: In the other corporation?
Robert B. Hummel: That's right.
Tom C. Clark: The interest here is in the contract, isn't it?
Robert B. Hummel: Well, sir, this -- I think the answer to that is, yes, there is an interest in the contract but there is also an interest in the corporation, and --
Tom C. Clark: Did they all adopt that?
Robert B. Hummel: They did not.
Tom C. Clark: No -- there's no interest in it then physically, except this contract?
Robert B. Hummel: Well, what there is -- is an arrangement there with the -- the indictment does not allege a contract. It alleges an arrangement, under which these individual carrier officers were securing property of the Boston & Maine for International for the purpose of making money for international.
Tom C. Clark: He had to take that.
Robert B. Hummel: That's right, with one whole scheme involving -- excuse me. Involving their getting the property, the carrier making money out of it and the expectation of -- I don't mean the carrier. I mean the International Company. And, out of that plan, the individuals would receive substantial money. Now, we -- since there's a scheme, co --
Tom C. Clark: I think that arrangement comes within those words of the company and --
Robert B. Hummel: It does and, in our view --
Tom C. Clark: -- the interest in.
Robert B. Hummel: That's correct and what they have is a --
Tom C. Clark: That's what I want to know.
Robert B. Hummel: -- an arrangement, whereby, the corporation is being run, in substantial part, for their benefit. $480,000 are gross sales in the year in which this sale was being made were conducted by International. That was almost exclusively Boston & Maine property and these three individual appellees received back $71,500. We say a scheme of that magnitude of that type gives them a substantial interest in the international company.
Hugo L. Black: Was International organizing this whole thing?
Robert B. Hummel: Well, the record doesn't show. There -- it does appear in the argument on Count II that Henry Mercy was the sole stockholder of International. You have what amounts to a corporation's soul and it's true that the individual appellees held no stock in that corporation, but it seems to us that you have here an arrangement which is comparable to a partnership, if you will, in corporate form. And, in that circumstance, we think, certainly, there's a substantial interest. These officers had a substantial interest in the corporation.
Hugo L. Black: Well, doesn't the section then precisely cover the funds without any stretching of language?
Robert B. Hummel: Well, if we prove an embezzlement and a conversion, then Section 660 does cover it. That's the embezzlement from -- or a conversion of property of a railroad.
Hugo L. Black: Anything about fraud?
Robert B. Hummel: The statute --
Hugo L. Black: Do you have anything in the statute that would cover it under fraud?
Robert B. Hummel: The sta -- the particu-- Section 660 covers embezzlement, stealing, conversion, misapplication. It doesn't specifically mention fraud. And, these appellees were indicted under Section 660 as well.
Hugo L. Black: That's all they can see.
Robert B. Hummel: That's correct.
Hugo L. Black: If you've used it, that's not here.
Robert B. Hummel: That is correct.
Hugo L. Black: Well, I was asking because --
Robert B. Hummel: I'm aware of no other.
Hugo L. Black: -- it does require the following -- excluding a criminal statute that deals with our custom to be very careful without stretching it beyond what the man would expect it to leave.
Robert B. Hummel: I recognize that and our -- it is for this reason that I developed -- we developed in our brief the notion that conflicts of interest give a color to the word interest that is quite clear and I might quote from this Court's opinion in Pepper versus Litton, 308 U.S. 295, at page 307 where this Court said, for that standard of fiduciary obligation is designed for the protection of the entire community of interests in the corporation-creditors as well as stockholders. Now, it seems to me that a creditor relationship is within the community of interests. It is an interest in the corporation within strict legal sense by this Court's opinions, and we are asking for no stretching of the word “interest,” only that it'd be utilized in this context in recognition of the fact that Congress was dealing with a conflict of interest and that the statute, on its face, deals with conflicts of interest. In this context, we think that this is not a broad meaning of the word, but a normal meaning of the word.
Hugo L. Black: What was that case?
Robert B. Hummel: Pepper versus Litton, Your Honor.
Hugo L. Black: It's a civil case, is it not?
Robert B. Hummel: That's correct.
Byron R. White: Is it cited in the brief?
Robert B. Hummel: It's cited in the Boston & Maine brief at page 9.
Byron R. White: But why wasn't -- why wasn't this carrier officer an agent of the other corporation?
Robert B. Hummel: Well, sir, if he was --
Byron R. White: Was he or not? He was an officer or a stockholder, but why wasn't he an agent?
Robert B. Hummel: I think you could argue that he was an agent. The indictment did not go on that premise, and then, we would have the problem. We would then have the --
Byron R. White: Is the agent covered in this statute?
Robert B. Hummel: Yes, sir. The selling -- the selling agent is covered. But, only a buying officer -- in other words, on the part of the carrier, an agent in a particular transaction is covered but he would have to be an officer or a buying or selling officer on the part of the carrier and the other corporation in order to be covered by the statute. In other words, agent is only covered in the carrier positions. In addition, you'd have the problem of where -- was the corporation dealing through this agent as an undisclosed principle, which would again raise a nutty problem of how you-- whether the statute deals with indirect relationships of the statute.
Earl Warren: Mr. Proctor.
Edward O. Proctor, Sr.: Mr. Chief Justice, and may it please the Court. The government, in securing this indictment and in its Bill of Particulars has used a number of words attempting to define what constitutes a substantial interest in this public corporation. They have used these terms “the substantial interest” of the defendants, McGinnis and Glacy in International consisted, first, an understanding, an agreement, relationship, arrangement, and concert of action among the said defendants and International. For among the purpose of producing profits for International and, pursuant to which, the defendants, McGinnis, Glacy, and Benson, were to and did receive substantial moneys. Now, I think it must be clear that none of those nouns represents what we commonly understand as an interest in a corporation. Understanding, agreement, relationship, arrangement, all of those speaks in terms of dealing with an outsider either by way of contract or informal agreement or understanding.
Arthur J. Goldberg: (Inaudible) and if I have a contract with a corporation, after 20 years, I would receive 50% of the profits of that corporation. Would I have a substantial interest in that corporation by your definition of the term?
Edward O. Proctor, Sr.: No, Your Honor.
Arthur J. Goldberg: It would not?
Edward O. Proctor, Sr.: It would not, although --
Arthur J. Goldberg: What do we have to have?
Edward O. Proctor, Sr.: -- although I don't have to go so far as --
Arthur J. Goldberg: I understand.
Edward O. Proctor, Sr.: -- to substantiate my argument.
Arthur J. Goldberg: I understand (Voice Overlap) because you were mentioning definitions.
Edward O. Proctor, Sr.: Yes, that's right.
Arthur J. Goldberg: Your theory is that I would have to have a stock interest.
Edward O. Proctor, Sr.: A stock interest or a beneficial stock interest. I'm not claiming it need be a legal ownership of the stock, but it must be something which is equivalent or like being a director or officer in the corporation because the statute refers to them and, interchangeably, it must be either an officer or agent in the corporation or having a substantial interest. It may speak --
Potter Stewart: It has to involve some control.
Edward O. Proctor, Sr.: I think it -- I think it involves an element of control or partial control. A control which is --
Potter Stewart: Because Mr. Justice Goldberg's hypothetical case gave you the nicest part of being a stockholder, that is, 50% of the profits is equivalent of 50% of the stock.
Edward O. Proctor, Sr.: That might be that it might --
Potter Stewart: The only thing it's lacking is control.
Edward O. Proctor, Sr.: I think that is true. I think that the element of control or partial control, as the history of the statute shows which I hope to develop in the time I have, shows that that is what is meant. I was about to say that these relationships that I describe speak in terms, really, of contract or agreements or arrangement with somebody in the outside. Perhaps the term “arrangement” and “concert of actions” speaks in terms of conspiracy. Again, in which these men, Glacy, Benson, and McGinnis, they're not within this corporation. They have no position of control within it, no ownership of any kind within it, but they are using it for which, if this indictment is sustained, as the government claims, they receive bribes. And, I should like also to emphasize that much of my brother's argument is based upon facts which are alleged in Count II which are no part of Count I, which are -- which are not incorporated into Count I in any way and if there's anything clear under the decisions of this Court is that an indictment-- the count in an indictment stands on its own bottom and not with relation to other counts in the declara -- in the indictment. I think it's quite important in this instance to have that in mind because the government's procured another indictment within the last month against these same men and alleging the same things that are alleged in these particulars, but the Count II -- there's no Count II there like this Count II. So, I say that the Court should not construe Count I as incorporating in anyway of allegations of Count II, unless they want every -- every time this allegation is made for us to have to come up here and decide whether or not it connects with another count. It means something different. Now -- so, I say that this falls short of alleging anything which, in common definition, common understanding, amounts to an interest in a corporation. The first branch of my argument is, of course, that this is a criminal statute and, as such, should be strictly construed, as Mr. Justice Black indicated in his question to my brother. And, it is also important that the language be of sufficient clarity to inform individuals of the kind of things that they're not forbidden to do. That was decided only last Monday in an opinion written by Mr. Justice Goldberg in Cox against Louisiana.
Hugo L. Black: Mr. Proctor, are you representing both the railroad and the individuals?
Edward O. Proctor, Sr.: Your Honor, when a case is put on the list of where we have only a half-hour to argue, I understand that only one counsel may argue, unless their interests are, in effect, different so as to permit two would argue. In this case, (Inaudible) and Gray who represent the railroad have us made to argue in their behalf as well as in behalf of the individual defendants.
Hugo L. Black: But I was wondering if --
Edward O. Proctor, Sr.: So, I do speak in my --
Hugo L. Black: Do I understand that the government is arguing that the railroad has substantial interest in this contract? I can understand that the officials who are going to get something out of it might have known. Are they arguing that the railroad have a substantial interest?
Edward O. Proctor, Sr.: No, they don't argue that. The statute, Your Honor, provides no common carrier and so forth engaged in comments shall have any dealings in securities, supplies, or other articles of colors or make any contracts for construction and maintenance to an amount of more than $50,000 in any year with another corporation, firm, partnership, or association when the said common carrier shall have up on its board of directors or its president, manager, or its purchasing or selling officer, or agent in a particular transaction any person who, at the same time, a director, manager, or purchasing agent or selling officer, or who has any substantial interest in the other corporation. And, that I think that answers Mr. Justice White's question of my brother as to whether the statute did make provisions for agency relations between the two. It does, as in the clause that I have just read. If any of these directors are selling agents of the Boston & Maine are also directors or selling agents of the purchasing operation, then the statute does affect them and the Boston & Maine is liable, as well as the defendants.
Byron R. White: (Inaudible) with the other corporation?
Edward O. Proctor, Sr.: No, Your Honor.
Byron R. White: He'd have to be a purchasing or selling officer.
Edward O. Proctor, Sr.: That's right. It could be a purchasing or selling officer. That's right to that extent --
Byron R. White: If it's just an agent of the other corporation is not sufficient.
Edward O. Proctor, Sr.: Only an agent who is a purchasing or selling officer or director.
Byron R. White: -- which makes quite a difference.
Edward O. Proctor, Sr.: Yes, a difference in degree, certainly.
Byron R. White: Because you -- you wouldn't -- I suppose you could -- it wouldn't be too hard to find that these -- the officers of the carrier here were agents of the other company.
Edward O. Proctor, Sr.: Well, it's not alleged. It's not alleged (Voice Overlap)
Byron R. White: Even if you found that, you wouldn't have satisfied the statute.
Edward O. Proctor, Sr.: No. That's correct, Your Honor. That's correct. Now, I have in my sec -- in brief and -- and the Boston & Maine Railroad has in its brief also citations of cases in which the common usage, the common meaning of the word “interest” in a company or corporation is dealt with and, invariably, it refers to it as a proprietary interest. There are three will cases that are cited where a person leaves my interest in such and such a company and it is held that that does not -- does not convey debts -- an indebtedness that is owed to a stockholder of the corporation and, the same -- the same decisions have been made in statutes involved in regard to taxing statutes and in regard to statutes relating to the reaching and applying of property in attachment on mean process. That kind of an interest is not an interest in a corporation. I will pass over those cases because they aren't cited at length in the brief and, in connection with that, I want to point out, and this is an answer to one of the questions from the bench, I think Mr. Justice Black asked whether there were any other similar statutes. Now, there are any -- there are a number of statutes dealing with conflicts of interests, but they never speak in terms of an interest in the other company or corporation. They speak of interests in a transaction, interest in a contract, interest in the proceeds of a transaction. Such was the Dixon-Yates case and such are the rules of the S.E.C. and -- in the domain case. Those all -- all those conflict of interest statutes, never speak in terms of interest in a company, but interest in a transaction and, in those cases, you get the result that you would expect where a person does have an interest in a transaction or the proceeds of the transaction. He is guilty of violating those statutes. Now --
Arthur J. Goldberg: (Inaudible) this statute, while we're dealing here with a corporation, also applies to a partnership.
Edward O. Proctor, Sr.: I think that would mean -- I think that would mean, Your Honor either a known or a silent partner. I think it would --
Arthur J. Goldberg: Now, there, perhaps what would you do with my example with a partnership where you have --
Edward O. Proctor, Sr.: I should think--
Arthur J. Goldberg: -- 50% of the profits?
Edward O. Proctor, Sr.: I should think that if it -- if it went to the point of representing a share in the partnership over a very long period of years that might well be an interest in the company.
Arthur J. Goldberg: Now, we deal here with the indictment in the Bill of Particulars.
Edward O. Proctor, Sr.: Yes sir.
Arthur J. Goldberg: We don't deal with Count II. I think you correctly pointed out.
Edward O. Proctor, Sr.: Yes.
Arthur J. Goldberg: And, as I read the Bill of Particulars, it's not limited in time. It's arrangement. I'm looking at page 24 of the record. And, since you have to deal with it on its face, this would -- could be interpreted as a continuing arrangement between these individual defendants and International.
Edward O. Proctor, Sr.: I think that if you read the whole indictment, Your Honor, and not merely the -- the Bill of Particulars, you'll find that they relate to this particular transaction only.
Byron R. White: (Inaudible)
Edward O. Proctor, Sr.: No, sir. We're really --
Byron R. White: It's all in Count I?
Edward O. Proctor, Sr.: I think that's correct, Your Honor.
Byron R. White: Is that in Count I?
Edward O. Proctor, Sr.: That's what I --
Byron R. White: (Inaudible) Count I that its one transaction.
Edward O. Proctor, Sr.: Well, it's on page 9.
Byron R. White: Of the record?
Edward O. Proctor, Sr.: Well, I think I'm referring now to -- yes, on the record -- page 9 of the record. The event says, on August 14, 1958, the B & M violated Section 10 by having dealings in certain articles of commerce amounting to more than $50,000 with another corporation, when the said defendant, B & M had up on its Board of Directors and so forth with he who had a substantial interest.
Arthur J. Goldberg: I agree, Mr. Proctor, that this was a (Inaudible)
Edward O. Proctor, Sr.: That's right.
Arthur J. Goldberg: (Inaudible) transaction could take place pursuant to continuing arrangement and, when you look at the Bill of Particulars, what we have before us is a document which looks like it's a continuing arrangement, out of which this particular transaction group.
Edward O. Proctor, Sr.: Well, I should think that that -- I should think that --
Arthur J. Goldberg: (Inaudible)
Edward O. Proctor, Sr.: The rest of the count which I'm reading says that the aforesaid dealings consisted of the sale with International of eight stainless cars and passenger coaches and two stainless and combination baggage coaches. And, that's the single transaction, waiting for these particular transactions and it said that it takes place on August 14, 1958. I submit that that does not indicate or riveting the price to even the presumption --
Arthur J. Goldberg: Mr. Justice Goldberg's point is, as I understand it, the question is, a single transaction can be -- can be violative of the statute if there's no competitive bidding, but there's no -- but the substantial interests could be a continuing substantial interests. I mean, let's say -- let's say these individual defendants had been directors of International, there'd be no question about that, about the guilt of the Boston & Maine or about their guilt on the basis of a single transaction. Is that right?
Edward O. Proctor, Sr.: I think that's right.
Potter Stewart: And, there's no -- there's no indication on page 24 and 25 that the understanding agreement, relationship, arrangement, and concert of action was the same thing as the single transaction on August 14. If that's being hypothetical then I think that as a matter of literal accuracy, is correct.
Edward O. Proctor, Sr.: I -- my time is getting pretty short, if I hope to finish this afternoon, and I had hoped to. And, I -- I -- it is very important that this is an anti-trust statute. This was passed 50 years ago in response to a message from President Wilson, and that it was -- it was designed to supplement the Sherman Act and other -- other antitrust Acts and was to nip in the butt, as the cases have said, or in its -- or to prevent in its incipiency conspiracies and so forth in restraint of trade. And, there were certain wrongs of certain evils which were pointed out by President Wilson in his message and -- and in the reports of the committee both of the House and Senate in connection with this major. One was tying clauses in contracts, another was holding companies, and another was interlocking and price -- and price discrimination. The original House Bill dealt with the interlocking evil by forbidding it altogether. The House Bill forbid interlocking altogether and made it a crime. The Senate felt that that was too drastic in connection with railroads and parties -- and companies with whom they dealt, and substituted this bidding, this requirement for competitive bidding, believing that that was adequate to cover the evil. And, when they did that, the statute merely related to interlocks. It had no provision about substantial interests, but the Senate believed that there was an opportunity for evasion -- ready evasion, by having some relative or your lawyer on the Board instead, and so they suggest -- suggested that, to prevent that evasion, they would make -- put in this clause about, first they said, direct or indirect interest, and then in conference it was changed to “any substantial interest.” And, I submit that, in that history of the -- of the statute, it is directed against a particular form of conflict of interest. It is not a conflict of interest statement -- statute like these others that I have referred to. It is not a general conflict of interest statute. It is a conflict of intereststatute which consists of interlocking or of measures taken to evade the interlocking provisions. I have of course argued, as the Boston & Maine have argued even more eloquently in their brief, that the statute, stated in such general terms as substantial interest, should not be stretched into an implausible and unusual meaning, particularly where the effect of it is to impose upon the Boston & Maine Railroad, an innocent party, the liability -- criminal liability for acts and conduct for which, in the very nature of things, they would be unaware. Admittedly, the statute does make the Boston & Maine Railroad liable when the acts are committed where there is an interlocking, perhaps the Senate or perhaps Congress assumed that there would be means by which a railroad would know about interlocking, perhaps even of stock interests in other companies. But, the argument is not that that cannot be done but that it is -- but that the statute ought not to be stretched, so to speak, to give an unusual meaning to the term “interest” in a corporation or other business entity when the effect of it would be to make an innocent railroad liable for conduct against its own interest which they could not possibly be made aware. Thank you, Your Honor.
Earl Warren: We will adjourn.
Speaker: The Honorable Court is --