Opinion ID: 254349
Heading Depth: 1
Heading Rank: 2

Heading: the conviction appeal

Text: 26 Since we have directed a new trial, many of the questions raised by the appeal from the conviction and sentences need not be determined. Thus, there is no occasion to pass upon contentions attacking sufficiency of the evidence or alleging unfairness in the trial other than simply stating that there is no basis in these contentions for ordering acquittal. However, some of the questions presented either would require direction of a verdict of acquittal if decided favorably to appellants or are likely to arise upon retrial. As to the former, we will state briefly our reasons for rejecting them, and as to the latter an expression of our views may be helpful to the trial court. 27 1. The appellants contend that the interstate commerce requirements of sections 1 and 2 of the Sherman Act were not met, in that (1) there was insufficient proof of a conspiratorial restraint on the movement of new linen in interstate commerce; (2) there was insufficient proof of a conspiratorial restraint on the interstate movement of linens to and from laundries; and (3) there was insufficient proof of a conspiratorial restraint on interstate customer servicing. If the alleged conspiracy aimed at restraint or monopolization in any of these three areas, and if the volume of interstate commerce that was affected was substantial, then it matters not 'how local the operation which applies the squeeze.' United States v. Women's Sportswear Mfg. Ass'n, 336 U.S. 460, 464, 69 S.Ct. 714, 716, 93 L.Ed. 805. We find it unnecessary here to discuss contentions (1) and (2) since we are conviced that a restraint on interstate customer servicing was established. If linen suppliers conspiratorially allocate their our-of-state customers to one of the conspirators such customer's range of choice and ability to seek out the supplier who could give him better terms in curtailed. Appellants seemingly rely on a de minimis exception; they argue that interstate customer service amounts to only 1% Of all service. But (even accepting appellants' figures) such 1% Amounted, in 1954, to $523,168 worth of business, a 'volume of business    (which) cannot be said to be insignificant or insubstantial.' International Salt Co. v. United States, 332 U.S. 392, 396, 68 S.Ct. 12, 15, 92 L.Ed. 20. That this substantial amount of interstate commerce amounted to only 1% Of the total industry's volume is without significance. 28 2. Appellants attack their convictions under count 2 of the indictment. They argue that the prosecution failed to prove (a) a specific intent to monopolize, (b) a dangerous probability that monopolization would occur as a result of the conspiracy, and (c) the relevant market sought to be monopolized. As to point (a), it may well be doubted whether the evidence that the defendants agreed to protect old business by allocating customers would be sufficient, if standing alone, to prove a specific intent to monopolize rather than only an intent to restrain trade. But this evidence does not stand alone. Assuming the correctness of Judge Palmieri's findings, the defendants took concerted action to drive independent non-cooperating linen suppliers out of business. In our opinion this was sufficient to support the conclusion that defendants had the specific intent to monopolize. Also promises made to independants that they could raise prices by joining the alleged conspiracy gave further support to this conclusion. As to point (b), it will suffice to say that no authority has been called to our attention which indicates that the Government must prove a dangerous preobability that monopolization will result from such a conspiracy. 13 As to point (c), the charge here is conspiracy to monopolize, not monopolization. In a monopolization case the market must be proved. See International Boxing Club v. United States, 358 U.S. 242, 79 S.Ct. 245, 3 L.Ed.2d 270. This is because such a charge requires a showing of power to exclude competitors, and without an accurate delineation of the market, it is impossible to determine the presence or absence of this power. But where the charge is conspiracy to monopolize, the essential element is not the power, but the specific intent, to monopolize. Section 2 makes it unlawful 'to conspire to monopolize 'and part' of interstate commerce, without specifying how large a part must be affected. Hence it is enough if some appreciable part of interstate commerce is the subject' of the conspiracy. United States v. Yellow Cab Co., 332 U.S. 218, 225-226, 67 S.Ct. 1560, 1564, 91 L.Ed. 2010. See Turner, Anti Trust Policy and the Cellophane Case, 70 Harv.L.Rev. 281, 294, 304-05. 29 3. Consolidated Laundries Corporation contends that it withdrew from the conspiracy prior to the five year limitation period prescribed by18 U.S.C.A. 3282, i.e. before January 31, 1952. It argues that the prosecutor's failure to connect it with any conspiratorial activities after that date would justify an inference of withdrawal. However, it is clear that a confederate, once shown to have been such, has the burden of satisfying the trier of fact that he had withdrawn from the enterprise. United States v. Cohen, 2 Cir., 145 F.2d 82, 90, certiorari denied 323 U.S. 799, 65 S.Ct. 553, 89 L.Ed. 637; United States v. Compagna, 2 Cir., 146 F.2d 524, 527, certiorari denied 324 U.S. 867, 65 S.Ct. 912, 89 L.Ed. 1422. We cannot hold erroneous Judge Palmieri's conclusion that Consolidated had not carried this burden. 30 4. Consolidated also argues that it was improper for the trial court to impose sentence under the July 7, 1955 amendment to the Sherman Act, which increased the maximum permissible fine from $5,000 to $50,000. This contention is only a restatement of its argument, already discussed, that it had withdrawn from the conspiracy before January 31, 1952. 31 5. Appellant Radnitz also contends that the increased penalty provisions of the July 1955 amendment were inapplicable to him. His argument differs from that of Consolidated Laundries Corporation and rests on firm ground. In April 1955 he was arrested and arraigned upon an indictment making the very charges which were subsequently incorporated in the 1957 indictment upon which he was convicted. The 1957 indictment 'superseded' a 1955 indictment in the Southern District of New York and a 1955 information filed in the District of New Jersey. That the arrest of a conspirator removes the presumption of continuing participation by him in the conspiracy is well established. United States v. Carminati, 2 Cir., 247 F.2d 640, certiorari denied 355 U.S. 883, 78 S.Ct. 150, 2 L.Ed.2d 113; United States v. Russano, 2 Cir., 257 F.2d 712, 715-716; Sandez v. United States, 9 Cir., 239 F.2d 239, 243; Cleaver v. United States, 10 Cir., 238 F.2d 766, 769. Unless the Government proves on retrial not only that the conspiracy continued after July 7, 1955 but also that Radnitz continued his participation therein after his arrest in April 1955, the increased penalties provided by the amendment will be inapplicable to him. This applies not only to Radnitz but to other individual defendants, if any, who are shown to have been arrested on the 1955 indictment or information. 32 6. All defendants contend that the trial court erred in refusing to apply the reasonable doubt test in ruling upon their motion for acquittal at the close of the Government's case. Judge Palmieri held that the applicable standard is whether he could, not whether he would, find the accused guilty on the Government's evidence. His opinion in support of the ruling appears as United States v. Cascade Linen Supply Corp., D.C., 160 F.Supp. 565. We agree with it. 33 7. Error is asserted in the trial court's denial to defendants of full access to the grand jury testimony of witnesses for the prosecution who testified at the trial. Judge Palmieri's opinion on this subject is reported in United States v. Consolidated Laundries Corporation, D.C., 159 F.Supp. 860. He held that defense counsel are not entitled to have the complete grand jury testimony turned over to them for use on cross-examination without prior scrutiny by the court. We agree with his opinion. See also the subsequent decisions of this Circuit in United States v. Giampa, 2 Cir., 1961, 290 F.2d 83; United States v. Hernandez, 2 Cir., 1961, 290 F.2d 86. In Giampa, which was also tried without a jury, we said that the correct procedure was for the trial judge to read the grand jury minutes and turn over to the defense any portions of a witness' testimony inconsistent with the story he told at the trial. 34 The grand jury testimony was referred to seven times during the trial to refresh the recollection of Government witnesses. As to these witnesses the appellants argue that they are entitled to receive the transcript of all their testimony before the grand jury. The argument is fallacious. See United States v. Socony Vacuum Oil Co., 310 U.S. 150, 233-234, 60 S.Ct. 811, 84 L.Ed. 1129. There the Court held that the trial judge has broad discretion to determine how much of the grand jury minutes need be made available when the minutes are used to refresh the recollection of a Government witness. In accord is Continental Baking Company v. United States, 6 Cir., 281 F.2d 137, 146-148. In that case, as here, the defendants did not request the trial court to exercise its discretion to turn over parts of the grand jury minutes, but demanded the minutes as a matter of right. The right they urged does not exist. 35 8. It is contended that the trial court erred in applying the per se rule to the restraints charged. It is true that section 1 of the Sherman Act proscribes only unreasonable restraints of trade. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619. But certain types of restraint of trade are unreasonable per se, including territorial division of markets. See Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545; Las Vegas Merchant Plumbers Ass'n v. United States, 9 Cir., 210 F.2d 732, 741, certiorari denied 348 U.S. 817, 75 S.Ct. 29, 99 L.Ed. 645; Pennsylvania Water & Power Co. v. Consolidated Gas, Electric Light & Power Co., 4 Cir., 184 F.2d 552, 558, certiorari denied 340 U.S. 906, 71 S.Ct. 282, 95 L.Ed. 665; United States v. Addyston Pipe & Steel Co., 6 Cir., 85 F. 271, affirmed 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136; United States v. National Lead Co., D.C.S.D.N.Y., 63 F.Supp. 513, 523, affirmed 332 U.S. 319, 67 S.Ct. 1634, 91 L.Ed. 2077; but see Timken Rooler Bearing Co. v. United States, 341 U.S. 593, 605, 71 S.Ct. 971, 95 L.Ed. 1199 (dissenting opinion); United States v. National Football League, D.C.E.D.Pa., 116 F.Supp. 319. Assuming that customers were allocated in the case at bar, no more need be proved; we agree that the per se rule should be applied. We fail to see any significant difference between an allocation of customers and an allocation of territory. See United States v. American Linen Supply Co., D.C.N.D.Ill., 141 F.Supp. 105, 115. Suppose for illustration, that appellants had allocated the Bronx to Consolidated, Brooklyn to General, and Queens to Modern Silver, reserving the right to compete with each other in Manhattan. Clearly this hypothetical division of markets would be unreasonable per se, notwithstanding the open competition in Manhattan. 14 Similarly their agreement to suppress all competition as to one phase of their business, i.e., old customers, should be per se illegal irrespective of their competition for new customers. And when, as here, the allocation is coupled with predatory practices against independent linen suppliers in order to compel them to join the conspiracy or be put out of business, there is even more reason not to permit the conspirators to justify their activities on the ground that business expediency makes them reasonable. 36 9. Concerning the asserted erroneous admission of evidence relating to the so-called Ullman-Goldberg story, comment should be made only in general terms because the future trial judge will have to cope with these evidentiary problems in the light of the circumstances in which they may arise. However, the Ullman-Goldberg conversations played such an important part in the case and in the ultimate findings that some consideration should be given to the problems presented. 37 When the question of the admissibility of the Ullman-Goldberg conversations first arose, defense counsel objected on the ground of hearsay, claiming that there was no allegation 'that Mr. Goldberg was in any way related with any of the defendants.' To this, Government counsel replied, 'That is right.' Upon request of the trial court to explain how the Government intended to connect the conversation, counsel replied, 'I expect the testimony of this witness to show that Goldberg was initially believed by Messrs. Spatt, Radnitz, Gordon and Maslaw, to be connected with New Sanitary, and they called him to a farm in Pennsylvania to talk to him about it. When they discovered he wasn't, they then made him their agent to keep sounding out the possibilities of Mr. Ullman selling out to them,   .' The court then said, 'What you say, in substance, is that you expect to establish that Goldberg was acting as the agent for the several defendants. On that basis, his testimony is admissible.' 228(a), 229(a). The trial court refused to force the Government to indicate the manner in which it expected to connect Goldberg with the defendants, although defense counsel pointed out that, 'If Mr. Goldberg were going to testify, Mr. Goldberg would be the one to testify before this witness.' 203(a). Thereupon, Ullman proceeded to tell of his conversation with Goldberg wherein Goldberg had told him that he (Goldberg) had been contacted by the big fellows in New York from whom he (Ullman) was taking business and that it would be wise for Ullman to sell out to them. A second Ullman-Goldberg conversation took place in which Goldberg told Ullman that he had visited with the defendants who had accused him (Goldberg) of being the actual owner of New Sanitary and discussed with him the possibility of his acting as an emissary to try to get Ullman to agree to sell his business to them. 38 Goldberg told Ullman 'that he was speaking in behalf of the four big companies that wanted me (Ullman) out of the business.' 233(a). Later on, another conversation took place to the same effect. Subsequent to the New Sanitary strike in the Fall of 1951, Goldberg told Ullman 'that as a result of the strike, the trailing and loss of a few large accounts he thought it advisable at this time to either straighten away with the big fellows or sell out to them.' 249(a). Subsequently, the defendant Spatt told Ullman that he had spoken to Goldberg and that he (Spatt) thought that Ullman intended to meet with the big fellows and sell his business to them. A meeting between Ullman, Spatt and Radnitz was held thereafter, at which negotiations for the sale of Ullman's business were commenced. At this point defense counsel moved to strike the testimony 'on the ground that the alleged agency by Mr. Goldberg may not be proved by the statements of witness of what the alleged agent told him.' The trial court, however, ruled that Goldberg's agency had been sufficiently spelled out by Ullman's testimony 'with respect to the statements attributed to any one of several of the defendants and by any number of surrounding facts and circumstances to which he has also testified.' He, therefore, held that Goldberg's agency was not based upon 'unsupported declarations of agency.' 252(a). 39 It is axiomatic that agency cannot be proved solely by declarations of the alleged agent, but must be established by independent proof. Schauffler v. Highway Truck Drivers & Helpers, 3 Cir., 1956, 230 F.2d 7, 10; McWhorter v. United States, 6 Cir., 1922, 281 F. 119; 4 Wigmore, Evidence, 1078 (3rd Ed., 1940). 40 The independent proof may be circumstantial, but it must be 'substantial,' Ong Way Jong v. United States, 9 Cir., 1957, 245 F.2d 392, 395, and not 'too slight.' United States v. Stromberg, 2 Cir., 1959, 268 F.2d 256, 267. 41 The trial court found that Goldberg 'was used by them' (defendants Gordon, Spatt, Maslow and Radnitz) as an intermediary and agent in their contacts with Paul Ullman (Finding #47) and that Ullman's decision to sell New Sanitary was made only after being told by Goldberg 'who is acting as agent for the said defendants' and that 'he thought it advisable for Ullman either to 'straighten out with the big fellows or sell out to them (Finding #52). 42 No restatement need be made of the reasons for the hearsay exclusion rule. It is based upon the common experience that the most trustworthy evidence usually comes from the original source undiluted by hearsay repetition. Upon any new trial these precepts should be kept in mind. Goldberg may well have been an 'intermediary' but his conversations with Ullman are admissible agains the defendants, only if it be established that he was acting for and representing them. The other facts and circumstances may be sufficient to establish agency even though Goldberg's own declarations of his status to Ullman would not qualify under the law as establishing this status or Goldberg himself may testify. Because at this time there is no way of knowing what proof may be adduced upon any new trial, no guide other than the generalities set forth can be or should be set forth. 43 The judgments of conviction and sentence are reversed and the cause is remanded for further proceedings in conformity with the foregoing opinion. 44 On Petition for Rehearing. 45