Court Opinion

ID: 9423942
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:09:41.720061+00
Date Added: 2024-06-11T17:22:47.241291
License: Public Domain

Mr. Justice Stewart,
dissenting.
Prior decisions of this Court have made it clear that a failing company cannot combine with a competitor if its independence could be preserved by sale to an outsider.1 Today’s decision for the first time lays down the blanket rule that the failing company defense is forfeited by a company which cannot show that it made substantial affirmative efforts to sell to a noncompetitor. That precise quantum and quality of proof may be a reasonable and effective prophylactic standard to ensure that the company could truly not have been sold. But proof of unsuccessful efforts to sell the company is not, as a logical, evidentiary matter, the only possible conclusive proof that it was not marketable. In many cases other evidence might make equally clear that any such efforts would surely have been fruitless. The Court’s new rule, in other words, has validity only as a standard imposed on future conduct and not as an unrebuttable evidentiary presumption with respect to past events. Therefore, the inflexible enforcement of that rule should be limited to those who — unlike the appellants — were on notice of their obligation to be able to prove that they made tangible efforts, however futile, to find an outside buyer.
It cannot be said that the appellants in the District Court did not adduce convincing evidence that the Citizen was failing so woefully that no outsider would have considered purchasing it. On the contrary, they intro*144duced not only substantial evidence of the dire financial condition of the Citizen 2 and of the newspaper industry generally,3 but also specific testimony by experts that in the prevailing business climate the Citizen could not possibly have been sold to an outsider.4 In the face of such an offer of proof, this Court does not find that the company was, in fact, salable. It affirms the judgment only because of the appellants’ failure to prove their defense in a particular way — a requirement imposed for the first time today.
*145The District Judge did not resolve the central factual issue against the appellants. He made no finding that the company was salable. Indeed, the judge refused even to consider the appellants’ evidence in connection with the issues under § 1 of the Sherman Act. With respect to the § 1 count, he excluded the evidence altogether on the erroneous ground that the failing company defense was wholly unavailable to participants in the kind of joint operating agreement involved in this case. And while he admitted the evidence at trial on the other counts, he explicitly limited its relevance to the question of the bona fides of the Star owner’s belief that his company was not monopolizing the market. In view of these rulings and the absence of any pertinent findings, it is clear that the appellants have not had their day in court on the critical issue in this case.
The District Court did find that
“at the time the agreement became effective, Citizen Publishing was not then on the verge of going out of business, nor was there a serious probability at that time that Citizen Publishing would terminate its business and liquidate its assets unless Star Publishing and Citizen Publishing entered into the operating agreement.” 280 F. Supp. 978, 980.
I do not believe this finding supports the conclusion that Citizen was not a failing company, or even that the District Court thought it was not a failing company. Every other material finding of the District Court was to the effect that Citizen was dying.5 The only subsidiary finding consistent with the conclusion that Citizen was not then on the verge of immediate demise was that Small, by his own admission, was “prepared to *146finance the losses of Citizen Publishing for some little time thereafter from resources available to him other than the earnings or assets of Citizen Publishing.” Id., at 980.
As stated above, the District Judge mistakenly thought that the failing company defense was unavailable in a case like this under § 1 of the Sherman Act. But he made clear his view that, if the failing company defense had been available — as in a total merger, for example— that defense would have prevailed:
“Mr. MacLaury: Well, would Your Honor then think if they had dissolved Star or Citizen or both and simply merged them all into one company, then the failing company doctrine would apply?

“The Court: I think if Star acquired all of Citizen's assets and gave stock to the owners of Citizen, it probably would. I would say that the Government wouldn’t have much chance in this particular case of attacking that acquisition.” (Emphasis supplied.)
Because the question whether Citizen was a failing company has not yet been properly determined, I would vacate the judgment and remand the case to the District Court, so that this dispositive question may be fully canvassed.

 International Shoe Co. v. FTC, 280 U. S. 291; United States v. Diebold, Inc., 369 U. S. 654. Cf. United States v. Third National Bank, 390 U. S. 171, 190-192.

 Small worked as publisher of the paper without a salary. Yet as of December 31, 1939, Citizen Publishing owed approximately $79,000 to its stockholders for advances of working capital; it had current liabilities of over $47,000, as opposed to current assets of $16,525 in accounts receivable, $420 in bank deposits, and $66 cash on hand. Its liabilities exceeded its assets, exclusive of goodwill, by some $53,400.

 “The period 1937 through 1943 constituted the most dismal era in 20th century newspaper history; more than half of the net decrease of daily newspapers since 1909 occurred during those seven years.” Ray, Economic Forces as Factors in Daily Newspaper Concentration, 29 Journalism Quarterly 31, 34 (1952).

 Newspaper brokers and publishers who testified that they were intimately familiar with the newspaper industry and aware of the situations of the Citizen and the Star, gave their opinions that there was no market for the Citizen unless it could somehow be joined with the Star. E. g.:
“Mr. Manno: I do not think that the Citizen Publishing Company was salable in 1940, except on what I would describe as a distress basis.
“Mr. MacLaury: Would it have been salable to an outside publisher who intended to, or who would have had a reasonable expectation of operating Citizen at a profit?
“Mr. Manno: No, sir, its potential salability would be based on the possibility of a prospective purchaser contemplating that he could possibly buy it and then go into a mutual production plan with the Star, or resell the Citizen to the Star at a potential profit.”
It does not appear that any testimony to the contrary was introduced by the Government.

 See, e. g., the following two specific findings:
“12. From 1932 to 1940, Citizen Publishing operated at a substantial loss. Its losses were defrayed by contributions made by its *146stockholders. Star Publishing from 1932 to 1940 operated at a profit.

“15. For many years prior to 1940, Citizen Publishing had been unable to pay a dividend. Prior to 1940, Mr. Small, Sr., received no salary and by March, 1940, Citizen Publishing owed debts of more than $109,000. Of this indebtedness, about $79,000 was to stockholders of Citizen Publishing.”