Court Opinion

ID: 9467928
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:59:46.326295+00
Date Added: 2024-06-11T17:40:35.709782
License: Public Domain

MacKINNON, Circuit Judge
(dissenting):
The majority concludes that “[t]he FTC has met the heavy standard set forth in Virginia Jobbers Ass'n v. Federal Power Comm’n, 259 F.2d 921, 925 (D.C.Cir.1958) ....,” Op. at 741, but ignores facts essential to a correct application of that standard and in effect erroneously places the burden of persuasion on the defendants.
Under Virginia Jobbers, the FTC must justify the extraordinary relief of an injunction pending appeal on the basis of four factors:
(1) Has the petitioner made a strong showing that it is likely to prevail on the merits of its appeal? ... (2) Has the petitioner shown that without such relief, it will be irreparably injured? ... (3) would the issuance of a stay substantially harm other parties interested in the proceedings? ... (4) Where lies the public interest? .... The public interest may, of course, have many faces .... We must determine, these many facets considered, how the court’s action serves the public best.
In my view the majority errs by (1) exaggerating the strength of the FTC’s case by not considering all of the criteria under which it should be judged, (2) ignoring the FTC’s inability to demonstrate irreparable harm, (3) excessively discounting the substantial harm that granting interim relief may do to the shareholders of Menasha, and (4) being unduly selective in determining which facets of the public interest it will consider.

Likelihood of success on the merits

Was there a “strong showing that [the FTC] is likely to prevail on the merits of its appeal’? Virginia Jobbers, supra, 259 F.2d at 925 (emphasis added). The majority relies heavily, if not exclusively, on its conclusion that “[a] strong showing has been made that the merger in this case violates Section 7 of the Clayton Act.” Op. at 741. But the Commission’s appeal is not from an adjudication of the legality of a merger under Section 7. It is an appeal from a denial of injunctive relief under Section 13(b) of the Federal Trade Commission Act, which invokes not simply “the Commission’s likelihood of ultimate success [here, under Section 7],” but also a “weighing [of] the equities” by the district court. It was from a weighing of the equities that Judge Pratt determined to deny the Commission’s request for a Section 13(b) injunction notwithstanding its likelihood of ultimate success in an FTC proceeding brought to enforce Section 7. Since the equities played a decisive role in the district court’s decision, they cannot be ignored under Virginia Jobbers in evaluating the Commission’s likelihood of success on appeal.
Judge Pratt identified the equities as follows:
The evidence shows three equitable interests which would be advanced by this acquisition: (1) the interest of Menasha’s shareholders in restructuring the firm in a way that permits them to redeem their stock; (2) the almost certain increase of linerboard supply through construction of a new liner mill at Menasha’s undeveloped mill site; and (3) the increase of employment in the North Bend community which is suffering acutely from the decline in the housing market.
District Court Findings of Fact and Conclusions of Law 157. He then elaborated: Menasha is a family-owned and operated company whose shareholders have no market opportunity to realize the value of their stock; it is infeasible to trade it publicly. The stock is the
sole substantial asset for all but one shareholder [, and] [t]he problems presented by the stock’s lack of liquidity have become acute with the passage of generations and the decrease in the number of shares held by individual shareholders.
Id. If 58. The Weyerhaeuser acquisition provided a solution to this serious problem. Moreover, the acquisition would have freed Menasha “to expand and improve efficiency at [its] Otsego mill on an expedited basis.” Id. 164. *743made that the merger in id. H 58. The Weyerhaeuser acquisition provided a solution to this serious problem. Moreover, the acquisition would have freed Menasha “to expand and improve efficiency at [its] Otsego mill on an expedited basis.” Id. H 64.
The court also discussed the “public equities”:
Consummation of this acquisition and Weyerhauser’s subsequent development of a linerboard mill at the vacant North Bend mill site would advance two other important interests: (1) increasing liner-board supply on the West Coast, and for exports; and (2) increasing employment in the North Bend area. Menasha is unwilling to sell only the mill site. Although Weyerhaeuser would not be bound to develop the site once it had been acquired, there would be strong economic incentives to do so. Consequently, the court finds that the acquisition will likely increase liner supply and permanent employment in the North Bend area, but that the timing and magnitude of these benefits is uncertain.
Id. II66.
Finally, the district court noted:
In the acquisition context, it is generally preferable that the acquiring company bear the risk of resultant antitrust litigation, including the risk that the value of the assets acquired will decline. FTC v. Exxon Corp., 636 F.2d 1136, 1143 n. 26. Entry of a preliminary injunction here would shift this risk to the Menasha shareholders, who are least able to bear it. (The financial risk to them as Weyerhaeuser stockholders from ultimate divestiture is far smaller because of the large scale of Weyerhaeuser’s order operations.)
Id. 170.
In light of these findings by the district court, I cannot agree that the district court relied solely on the interest of the Menasha shareholders, as the majority suggests, see Op. at 741. The court also relied on the public equities in increasing product output and providing employment. All of the equities, public and private, deserve weight, and convince me that the FTC does not have an unassailable case.

Irreparable injury absent injunction

It is not enough to conclude, as the majority does, that “it is far from clear that a ‘hold separate’ order will be adequate .... ” Op. at 741. That phrase confounds the placement of burdens. It was the FTC, not defendants, who bore the burden on this question. The FTC was required to prove irreparable injury, yet failed to do so. Virginia Jobbers, supra, 259 F.2d at 925, 926.
Judge Pratt found that eventual divestiture would prevent any long run harm to the FTC’s interest in enforcing the antitrust laws, and that a “hold separate” order would prevent any anticompetitive harm in the interim, i. e., until final adjudication of the validity of the proposed merger. Findings and Conclusions HH71, 73. The hold separate order would
assur[e] that the North Bend mill’s management, supply, production, sales, and pricing decisions are insulated from Weyerhaeuser, and assur[e] that the mill is guaranteed sufficient capital to maintain its operations and expand its capacity as demand requires.
Id. 1173. The district court’s order gave the FTC 30 days to “propose such additional measures as may be necessary to insulate the North Bend mill’s supply, sales, pricing, production and other management decisions from Weyerhaeuser ... during the pendency of the Commission proceedings.” Order at 2-3.
It was up to the FTC to show in this court in its motion for interim relief that the district court’s hold separate order would be ineffective. It has made no serious attempt to do so and thus has failed to show irreparable harm. For this reason alone an injunction pending appeal is unwarranted.

*744
Substantial harm to interested parties

The interim injury suffered by Menasha shareholders has already been noted. Further harm to them inheres in the fact that the March 31 deadline the defendants agreed to has now slipped by, relieving Weyerhaeuser of its obligation to purchase the assets of Menasha. This generates the possibility that Menasha shareholders will never be able to sell their shares at anything near their value. The FTC’s lack of irreparable injury is particularly prominent in these circumstances, where this court’s injunction may well have the effect of giving the FTC the complete relief it seeks. Where lies the public interest?
If the merger is determined to be invalid Weyerhaeuser can be forced to divest itself of its Menasha assets. These assets perhaps will have to be sold at a loss, but that is a risk Weyerhaeuser has been willing to assume. And, again assuming the merger will be held invalid, there need be no anti-competitive harm in the interim, for the district court ordered Weyerhaeuser to maintain the acquired Menasha assets as a “separate and ongoing entity.” Order at 2. The FTC was free to propose supplemental directives to implement the purpose of the order.
If, on the other hand, the merger would be adjudicated valid, the interim relief ordered by the majority ensures that Weyerhaeuser will not be investing in the new mill facilities for some time, and reduces the likelihood that the beneficial effects of the merger will ever come to pass.
The FTC has shown at most a likelihood of ultimate success on its Section 7 claim. This is insufficient to warrant the extraordinary relief of an injunction pending its appeal. I therefore dissent.