Following this Court's affirmance of a district court judgment
in a civil action against United Shoe Machinery Corp. (United), a
manufacturer and distributor of shoe machinery, which the
Government had brought under § 4 of the Sherman Act, Hanover Shoe,
Inc. (Hanover), a shoe manufacturer and customer of United's,
brought this private treble damage suit against United for its
alleged monopolization of the shoe machinery industry in violation
of § 2 of the Sherman Act, by means of its practice of leasing and
refusing to sell its shoe machinery. Hanover, relying on § 5(a) of
the Clayton Act (making a final judgment or decree in a Government
antitrust suit
prima facie evidence as to all matters
respecting which the judgment or decree would be an estoppel
between the parties thereto), submitted the court's findings,
opinion, and decree in the Government's case as its evidence that
United had monopolized the shoe machinery industry and that its
refusal to sell the machines was an instrument of the
monopolization. In 1965, the District Court rendered judgment for
Hanover, holding that it was entitled to damages for the period
from July 1, 1939 (the earliest date permitted by the statute of
limitations), to September 21, 1955, when this suit was filed, in
an amount equal to three times the difference between what Hanover
had paid in rentals and what it would have paid had United been
willing to sell the machines, plus interest. The Court of Appeals
affirmed as to liability, but disagreed with the District Court on
certain aspects of the damage award, including the relevant damage
period. It fixed that period's end date somewhat earlier, and ruled
that its start was June 10, 1946, when this Court decided
American Tobacco Co. v. United States, 328 U.
S. 781, and endorsed the views in
United States v.
Aluminum Co. of America, 148 F.2d 416 (C.A.2d Cir.), prior to
which the Court of Appeals concluded it had been necessary in an
action for violation of § 2 to prove the
Page 392 U. S. 482
existence of predatory practices as well as monopoly power. Both
parties were granted review of the Court of Appeals decision.
United contends that the decision in the Government's suit against
it did not determine that United's leasing practice was an
instrument of monopolization; that Hanover sustained no injury,
since any excess cost of leasing over cost of ownership was not
absorbed by Hanover, but passed on to its customers, and that the
District Court's damage calculations, which the Court of Appeals
upheld, were erroneous because they did not properly allow for the
cost of capital to Hanover as an element of the cost of acquiring
the shoe machinery, the District Court having made an adjustment
only to the extent of deducting a 2.5% interest component from the
profits it thought Hanover would have earned by buying the
machines. Hanover contends that the Court of Appeals erred in
changing the start of the damage period and in ordering the
District Court, on remand, to reduce its damage calculations by
whatever tax advantages Hanover might have obtained by leasing, as
compared with buying, the shoe machinery.
Held:
1. The courts below did not err in holding that United's
practice of leasing and refusing to sell its major machines was
determined to be illegal monopolization in the Government's case,
as reference to the court's findings and opinion, as well as
decree, in that case makes clear. Pp.
392 U. S.
483-487.
2. Hanover proved injury and the amount of its damages within
the meaning of § 4 of the Clayton Act when it proved that United
had overcharged it during the damage period and showed the amount
of the overcharge, and the possibility that it might have recouped
the overcharge by "passing it on" to its customers was not relevant
in the assessment of its damages. Pp.
392 U. S.
487-494.
3. Hanover is entitled to damages for the entire period of the
applicable statute of limitations, since the
Alcoa-American
Tobacco decisions did not fundamentally alter the law of
monopolization in a way which should be given only prospective
effect. Pp.
392 U. S.
495-502.
4. The District Court did not otherwise err in its computation
of damages. Pp.
392 U. S.
502-504.
377 F.2d 776, affirmed in part, reversed in part, and
remanded.
Page 392 U. S. 483
MR. JUSTICE WHITE delivered the opinion of the Court.
Hanover Shoe, Inc. (hereafter Hanover) is a manufacturer of
shoes and a customer of United Shoe Machinery Corporation
(hereafter United), a manufacturer and distributor of shoe
machinery. In 1954, this Court affirmed the judgment of the
District Court for the District of Massachusetts,
110 F.
Supp. 295 (1953), in favor of the United States in a civil
action against United under § 4 of the Sherman Act, 26 Stat. 209,
15 U.S.C. § 4.
United Shoe Machinery Corp. v. United
States, 347 U. S. 521. In
1955, Hanover brought the present treble damage action against
United in the District Court for the Middle District of
Pennsylvania. In 1965, the District Court rendered judgment for
Hanover and awarded trebled damages, including interest, of
$4,239,609, as well as $650,000 in counsel fees.
245 F.
Supp. 258. On appeal, the Court of Appeals for the Third
Circuit affirmed the finding of liability, but disagreed with the
District Court on certain questions relating to the damage award.
377 F.2d 776 (1967). Both Hanover and United sought review of the
Court of Appeals' decision, and we granted both petitions. 389 U.S.
818 (1967).
I
Hanover's action against United alleged that United had
monopolized the shoe machinery industry in violation of § 2 of the
Sherman Act; that United's practice of leasing and refusing to sell
its more complicated and important shoe machinery had been an
instrument of the unlawful monopolization, and that, therefore,
Hanover
Page 392 U. S. 484
should recover from United the difference between what it paid
United in shoe machine rentals and what it would have paid had
United been willing during the relevant period to sell those
machines
Section 5(a) of the Clayton Act, 38 Stat. 731, as amended, 69
Stat. 283, 15 U.S.C. § 16(a), makes a final judgment or decree in
any civil or criminal suit brought by the United States under the
antitrust laws "prima facie evidence . . . as to all matters
respecting which said judgment or decree would be an estoppel as
between the parties thereto. . . ." Relying on this provision,
Hanover submitted the findings, opinion, and decree rendered by
Judge Wyzanski in the Government's case as evidence that United
monopolized and that the practice of refusing to sell machines was
an instrument of the monopolization. United does not contest that
prima facie weight is to be given to the judgment in the
Government's case. It does, however, contend that Judge Wyzanski's
decision did not determine that the practice of leasing and
refusing to sell was an instrument of monopolization. This claim,
rejected by the courts below, is the threshold issue in No. 463. If
the 1953 judgment is not
prima facie evidence of the
illegality of the practice from which Hanover's asserted injury
arose, then Hanover, having offered no other convincing evidence of
illegality, should not have recovered at all. [
Footnote 1]
Both the District Court and the Court of Appeals concluded that
the lease only policy had been held illegal in
Page 392 U. S. 485
the Government's suit. We find no error in that determination.
It is true that § 4 of the decree, [
Footnote 2] on which United relies, condemned only certain
clauses in the standard lease, and that nowhere in the decree was
any other aspect of United's leasing system expressly described or
characterized as illegal monopolization. It is also arguable that §
5 of the decree, which required that United thenceforward not
"offer for lease any machine type, unless it also offers such type
for sale," was included merely to insure an effective remedy to
dissipate the accumulated consequences of United's monopolization.
We are not, however, limited to the decree in determining the
extent of estoppel resulting from the judgment in the Government's
case. If, by reference to the findings, opinion, and decree, it is
determined that an issue was actually adjudicated in an antitrust
suit brought by the Government, the private plaintiff can treat the
outcome of the Government's case as
prima facie evidence
on that issue.
See Emich Motors Corp. v. General Motors
Corp., 340 U. S. 558,
340 U. S.
566-569 (1951).
Section 5 of the decree would have been a justifiable remedy
even if the practice it banned had not been instrumental in the
monopolization of the market. But, in our view, the trial court's
findings and opinion put on firm ground the proposition that the
Government's case involved condemnation of the lease only system as
such. In both its opinion with respect to violation and its opinion
with respect to remedy, the court not only dealt with the
objectionable clauses in the standard
Page 392 U. S. 486
lease, but also addressed itself to the consequences of only
leasing machines and to the manner in which that practice related
to the maintenance of United's monopoly power. [
Footnote 3] These portions of the court's opinion
are well supported by its findings of fact, which also estop United
as against the Government and which therefore constitute
prima
facie evidence in this case. We have set out the relevant
findings in an
392
U.S. 481app|>Appendix to this opinion. They are themselves
sufficient to show that the lease only system played a significant
role in United's monopolization of the shoe machinery market. Those
findings were not limited to the particular provisions of
United's
Page 392 U. S. 487
leases. They dealt as well with United's policy of leasing but
not selling its important machines, with the advantages of that
practice to United, and with its impact on potential and actual
competition. When the applicable standard for determining
monopolization under § 2 is applied to these facts, it must be
concluded that the District Court and the Court of Appeals did not
err in holding that United's practice of leasing and refusing to
sell its major machines was determined to be illegal monopolization
in the Government's case. [
Footnote
4]
II
The District Court found that Hanover would have bought, rather
than leased, from United had it been given the opportunity to do
so. [
Footnote 5] The District
Court determined that, if United had sold its important machines,
the cost to Hanover would have been less than the rental paid for
leasing these same machines. This difference in cost, trebled, is
the judgment awarded to Hanover in the District Court. United
claims, however, that Hanover suffered no legally cognizable
injury, contending
Page 392 U. S. 488
that the illegal overcharge during the damage period was
reflected in the price charged for shoes sold by Hanover to its
customers, and that Hanover, if it had bought machines at lower
prices, would have charged less and made no more profit than it
made by leasing. At the very least, United urges, the District
Court should have determined on the evidence offered whether these
contentions were correct. The Court of Appeals, like the District
Court, rejected this assertion of the so-called "passing-on"
defense, and we affirm that judgment. [
Footnote 6]
Section 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 15,
provides that any person
"who shall be injured
Page 392 U. S. 489
in his business or property by reason of anything forbidden in
the antitrust laws may sue therefor . . . and shall recover
threefold the damages by him sustained. . . ."
We think it sound to hold that, when a buyer shows that the
price paid by him for materials purchased for use in his business
is illegally high, and also shows the amount of the overcharge, he
has made out a
prima facie case of injury and damage
within the meaning of § 4.
If, in the face of the overcharge, the buyer does nothing and
absorbs the loss, he is entitled to treble damages. This much seems
conceded. The reason is that he has paid more than he should, and
his property has been illegally diminished, for, had the price paid
been lower, his profits would have been higher. It is also clear
that, if the buyer, responding to the illegal price, maintains his
own price but takes steps to increase his volume or to decrease
other costs, his right to damages is not destroyed. Though he may
manage to maintain his profit level, he would have made more if his
purchases from the defendant had cost him less. We hold that the
buyer is equally entitled to damages if he raises the price for his
own product. As long as the seller continues to charge the illegal
price, he takes from the buyer more than the law allows. At
whatever price the buyer sells, the price he pays the seller
remains illegally high, and his profits would be greater were his
costs lower.
Fundamentally, this is the view stated by Mr. Justice Holmes in
Chattanooga Foundry & Pipe Works v. City of Atlanta,
203 U. S. 390
(1906), where Atlanta sued the defendants for treble damages for
antitrust violations in connection with the city's purchases of
pipe for its waterworks system. The Court affirmed a judgment in
favor of the city for an amount measured by the difference between
the price paid and what the market or fair price would have been
had the sellers not combined,
Page 392 U. S. 490
the Court saying that the city
"was injured in its property, at least, if not in its business
of furnishing water, by being led to pay more than the worth of the
pipe. A person whose property is diminished by a payment of money
wrongfully induced is injured in his property."
Id. at
203 U. S. 396.
The same approach was evident in
Thomsen v. Cayser,
243 U. S. 66
(1917), another treble damage antitrust case. [
Footnote 7] With respect to overcharge cases
arising under the transportation laws, similar views were expressed
by Mr. Justice Holmes in
Southern Pacific Co. v.
Darnell-Taenzer Lumber Co., 245 U. S. 531,
245 U. S. 533
(1918), and by Mr. Justice Brandeis in
Adams v. Mills,
286 U. S. 397,
286 U. S.
406-408 (1932). In those cases, the possibility that
plaintiffs had recouped the overcharges from their customers was
held irrelevant in assessing damages. [
Footnote 8]
Page 392 U. S. 491
United seeks to limit the general principle that the victim of
an overcharge is damaged within the meaning of § 4 to the extent of
that overcharge. The rule, United argues, should be subject to the
defense that economic
Page 392 U. S. 492
circumstances were such that the overcharged buyer could only
charge his customers a higher price because the price to him was
higher. It is argued that, in such circumstances, the buyer suffers
no loss from the overcharge. This situation might be present, it is
said, where the overcharge is imposed equally on all of a buyer's
competitors and where the demand for the buyer's product is so
inelastic that the buyer and his competitors could all increase
their prices by the amount of the cost increase without suffering a
consequent decline in sales. We are not impressed with the argument
that sound laws of economics require recognizing this defense. A
wide range of factors influence a company's pricing policies.
Normally, the impact of a single change in the relevant conditions
cannot be measured after the fact; indeed a businessman may be
unable to state whether,
Page 392 U. S. 493
had one fact been different (a single supply less expensive,
general economic conditions more buoyant, or the labor market
tighter, for example), he would have chosen a different price.
Equally difficult to determine, in the real economic world, rather
than an economist's hypothetical model, is what effect a change in
a company's price will have on its total sales. Finally, costs per
unit for a different volume of total sales are hard to estimate.
Even if it could be shown that the buyer raised his price in
response to, and in the amount of, the overcharge, and that his
margin of profit and total sales had not thereafter declined, there
would remain the nearly insuperable difficulty of demonstrating
that the particular plaintiff could not or would not have raised
his prices absent the overcharge, or maintained the higher price
had the overcharge been discontinued. Since establishing the
applicability of the passing-on defense would require a convincing
showing of each of these virtually unascertainable figures, the
task would normally prove insurmountable. [
Footnote 9] On the other hand, it is not unlikely that,
if the existence of the defense is generally confirmed, antitrust
defendants will frequently seek to establish its applicability.
Treble damage actions would often require additional long and
complicated proceedings involving massive evidence and complicated
theories.
Page 392 U. S. 494
In addition, if buyers are subjected to the passing-on defense,
those who buy from them would also have to meet the challenge that
they passed on the higher price to their customers. These ultimate
consumers, in today's case, the buyers of single pairs of shoes,
would have only a tiny stake in a lawsuit, and little interest in
attempting a class action. In consequence, those who violate the
antitrust laws by price-fixing or monopolizing would retain the
fruits of their illegality because no one was available who would
bring suit against them. Treble damage actions, the importance of
which the Court has many times emphasized, would be substantially
reduced in effectiveness.
Our conclusion is that Hanover proved injury and the amount of
its damages for the purposes of its treble damage suit when it
proved that United had overcharged it during the damage period and
showed the amount of the overcharge; United was not entitled to
assert a passing-on defense. We recognize that there might be
situations -- for instance, when an overcharged buyer has a
preexisting "cost-plus" contract, thus making it easy to prove that
he has not been damaged -- where the considerations requiring that
the passing-on defense not be permitted in this case would not be
present. We also recognize that, where no differential can be
proved between the price unlawfully charged and some price that the
seller was required by law to charge, establishing damages might
require a showing of loss of profits to the buyer. [
Footnote 10]
Page 392 U. S. 495
III
The District Court held that Hanover was entitled to damages for
the period commencing July 1, 1939, and terminating September 21,
1955. The former date represented the greatest retrospective reach
permitted under the applicable statute of limitations, and the
latter date was that upon which Hanover filed its suit. In addition
to somewhat shortening the forward reach of the damage period,
[
Footnote 11] the Court of
Appeals ruled that June 10, 1946, rather than July 1, 1939, marked
the commencement of the damages period. June 10, 1946, was the date
this Court decided
American Tobacco Co. v. United States,
328 U. S. 781,
which endorsed the views of the Court of Appeals for the Second
Circuit in
United States v. Aluminum Co. of America, 148
F.2d 416 (1945). In the case before us, the Court of Appeals
concluded that the decisions in
Alcoa-American Tobacco
fundamentally altered the law of monopolization -- that, prior to
them, it was necessary to prove the existence of predatory
practices as well as monopoly power, whereas, afterwards, proof of
predatory practices was not essential. The Court of Appeals was
also of the view that, because, in prior litigation, United's
leases had escaped condemnation as predatory practices illegal
under § 1, United's conduct should not be held to have violated § 2
at any time prior to June 10, 1946. 377 F.2d at 790. This holding
has been challenged, and we reverse it.
Page 392 U. S. 496
The theory of the Court of Appeals seems to have been that, when
a party has significantly relied upon a clear and established
doctrine, and the retrospective application of a newly declared
doctrine would upset that justifiable reliance to his substantial
injury, considerations of justice and fairness require that the new
rule apply prospectively only. Pointing to recent decisions of this
Court in the area of the criminal law, the Court of Appeals could
see no reason why the considerations which had favored only
prospective application in those cases should not be applied as
well as in the civil area, especially in a treble damage action.
There is, of course, no reason to confront this theory unless we
have before us a situation in which there was a clearly declared
judicial doctrine upon which United relied and under which its
conduct was lawful, a doctrine which was overruled in favor of a
new rule according to which conduct performed in reliance upon the
old rule would have been unlawful. Because we do not believe that
this case presents such a situation, we have no occasion to pass
upon the theory of the Court of Appeals.
Neither the opinion in
Alcoa nor the opinion in
American Tobacco indicated that the issue involved was
novel, that innovative principles were necessary to resolve it, or
that the issue had been settled in prior cases in a manner contrary
to the view held by those courts. In ruling that it was not
necessary to exclude competitors to be guilty of monopolization,
the Court of Appeals for the Second Circuit relied upon a long line
of cases in this Court stretching back to 1912. 148 F.2d at 429.
The conclusion that actions which will show monopolization are not
"limited to manoeuvres not honestly industrial" was also premised
on earlier opinions of this Court, particularly
United States
v. Swift & Co., 286 U. S. 106,
286 U. S. 116
(1932). In the
American Tobacco case, this Court noted
Page 392 U. S. 497
that the precise question before it had not been previously
decided, 328 U.S. at
328 U. S. 811,
and gave no indication that it thought it was adopting a radically
new interpretation of the Sherman Act. Like the Court of Appeals,
this Court relied for its conclusion upon existing authorities.
[
Footnote 12] These cases
make it clear that there was no accepted
Page 392 U. S. 498
interpretation of the Sherman Act which conditioned a finding of
monopolization under § 2 upon a showing of predatory practices by
the monopolist. [
Footnote
13] In neither case was there such an abrupt and fundamental
shift in doctrine as to constitute an entirely new rule which in
effect replaced an older one. Whatever
Page 392 U. S. 499
development in antitrust law was brought about was based to a
great extent on existing authorities, and was an extension of
doctrines which had been growing and developing over the years.
These cases did not constitute a sharp break in the line of earlier
authority or an avulsive change which caused the current of the law
thereafter to flow between new banks. We cannot say that, prior to
those cases, potential antitrust defendants would have been
justified in thinking that then-current antitrust doctrines
permitted them to do all acts conducive to the creation or
maintenance of a monopoly so long as they avoided direct exclusion
of competitors or other predatory acts. [
Footnote 14]
United relies heavily on three Sherman Act cases brought against
it or its predecessors by the United States and decided by this
Court. United argues that these cases demonstrate both that, before
Alcoa-American Tobacco, the law was substantially
different, and that its leasing practices had been deemed by this
Court not to be instruments of monopolization.
United States v.
Winslow, 227 U. S. 202
(1913);
United States v. United Shoe Machinery Co. of New
Jersey, 247 U. S. 32
(1918);
United Shoe Machinery Corp. v. United States,
258 U. S. 451
(1922). In our opinion, however, United overreads and exaggerates
the significance of these three cases. In
Winslow, the
Government charged the three groups of companies which had merged
to form United with a violation of § 1. The trial court construed
the indictment to pertain only to the merger of the companies, and
not to business practices which resulted from the merger; most
significantly, it excluded United's leasing policies
Page 392 U. S. 500
from consideration. The Court specifically stated that "[t]he
validity of the leases or of a combination contemplating them
cannot be passed upon in this case." 227 U.S. at
227 U. S.
217.
The third case, decided in 1922, was brought under § 3 of the
Clayton Act, rather than § 2 of the Sherman Act. This Court
affirmed a decree enjoining United from making leases containing
certain clauses, terms, and conditions. Nothing in that case
indicates that predatory practices had to be shown to prove a § 2
monopoly charge or that the leases, or the clauses in them which
were left undisturbed, would not adequately demonstrate
monopolization by an enterprise with monopoly power.
Of the three cases, the 1918 case most strongly supports United.
It involved a civil action by the United States charging violations
of §§ 1 and 2 of the Sherman Act. The Government contended that
United's machinery leases and license agreements had been used to
consummate both violations. A three-judge court dismissed the bill,
and this Court affirmed by a vote of 4 to 3. There is no question
but that the leases, as they were then constituted, were held
unassailable under § 1; the reasons for this ruling are not clear.
As for the § 2 charge, we cannot read the opinion as specifying
what course of conduct would amount to monopolization under § 2 if
engaged in by a concern with monopoly power. At most, the holding
was that the leases themselves did not prove a § 2 charge -- did
not themselves prove monopoly power, as well as monopolization. But
the issue in the case before us now is not whether United's leasing
system proves monopoly power, but whether, once monopoly power is
shown, leasing the way United leased sufficiently shows an intent
to exercise that power. There is little, if anything, in the 1918
opinion which is illuminating on this issue. Indeed, it may fairly
be read as holding that United did not have monopoly power over the
market at all, for, in rejecting the claim that United's practice
of
Page 392 U. S. 501
leasing was illegal when used by a corporation dominant in the
market, the Court said:
"This, however, is assertion, and relies for its foundation upon
the assumption of an illegal dominance by the United Company that
has been found not to exist. This element, therefore, must be put
to one side, and the leases regarded in and of themselves and by
the incentives that induced their execution. . . ."
247 U.S. at
247 U. S.
60.
Any comfort United might have received from the 1918 case with
respect to the legality of its leasing system when employed by one
with monopoly power should have been short-lived. In the third
case, which was brought under § 3 of the Clayton Act and in which
all the remaining Justices making up the majority in the 1918 case
except Mr. Justice McKenna voted with the Court, the opinion for
the Court described the 1918 decision as follows:
"That the leases were attacked under the former bill as
violative of the Sherman Act is true, but they were sustained as
valid and binding agreements within the rights of holders of
patents."
258 U.S. at
258 U. S. 460.
This view was supported by other references to the 1918 opinion
which described the question at issue there as being whether
United's leases went beyond the exercise of a lawful monopoly.
One might possibly disagree with this reading of the 1918
opinion, but it was an authoritative gloss. After 1922, and after
the expiration of the patents on its major machines, there was no
sound basis to justify reliance by United on the 1918 case as a
definitive pronouncement that its leasing system provided legally
insufficient evidence of monopolization, once United's power over
the market was satisfactorily shown. The prior cases immunized
United's monopoly insofar as it originated
Page 392 U. S. 502
in a merger of allegedly competing companies, and perhaps are of
some help to United in other respects. But they do not establish
either that, prior to 1946, there was a well defined interpretation
of the Sherman Act which was abruptly overruled in
Alcoa-American Tobacco, or that United's leasing system
could not be considered an instrument for the exercise and
maintenance of monopoly power.
In these circumstances, there is no room for argument that
Hanover's damages should reach back only to the date of the
American Tobacco decision. Having rejected the contention
that
Alcoa-American Tobacco changed the law of
monopolization in a way which should be given only prospective
effect, it follows that Hanover is entitled to damages for the
entire period permitted by the applicable statute of limitations.
[
Footnote 15]
IV
Two questions are raised here about the manner in which damages
were computed by the courts below. Hanover argues that the Court of
Appeals erred in requiring the District Court, on remand, to take
account of the additional taxes Hanover would have paid had it
purchased machines, instead of renting them, during the years in
question. The Court of Appeals evidently
Page 392 U. S. 503
felt that, since only after-tax profits can be reinvested or
distributed to shareholders, Hanover was damaged only to the extent
of the after-tax profits that it failed to receive. The view of the
Court of Appeals is sound in theory, but it overlooks the fact
that, in practice, the Internal Revenue Service has taxed
recoveries for tortious deprivation of profits at the time the
recoveries are made, not by reopening the earlier years.
See
Commissioner v. Glenshaw Glass Co., 348 U.
S. 426 (1955). As Hanover points out, since it will be
taxed when it recovers damages from United for both the actual and
the trebled damages, to diminish the actual damages by the amount
of the taxes that it would have paid had it received greater
profits in the years it was damaged would be to apply a double
deduction for taxation, leaving Hanover with less income than it
would have had if United had not injured it. It is true that
accounting for taxes in the year when damages are received, rather
than the year when profits were lost can change the amount of taxes
the Revenue Service collects; as United shows, actual rates of
taxation were much higher in some of the years when Hanover was
injured than they are today. But because the statute of limitations
frequently will bar the Commissioner from recomputing for earlier
years, and because of the policy underlying the statute of
limitations -- the fact that such recomputations are immensely
difficult or impossible when a long period has intervened -- the
rough result of not taking account of taxes for the year of injury,
but then taxing recovery when received seems the most satisfactory
outcome. The District Court therefore did not err on this question,
and the Court of Appeals should not have required a
recomputation.
United contends that, if Hanover had bought machines, instead of
leasing them, it would have had to invest its own capital in the
machines. United argues that the District Court erred in computing
damages, because it did not properly take account of the cost of
capital to
Page 392 U. S. 504
Hanover. The District Court found that, in the years in
question, Hanover was able to borrow money for between 2% and 2.5%
per annum, and that, had Hanover bought machines, it would have
obtained the necessary capital by borrowing at about this rate. It
therefore deducted an interest component of 2.5% from the profits
it thought Hanover would have earned by purchasing machines. Our
review of the record convinces us that the courts below did not err
in these determinations; on the basis of the determinations of
fact, Hanover's damages were properly computed. [
Footnote 16]
The judgment of the Court of Appeals is affirmed in part and
reversed in part, and the cases are remanded for further
proceedings consistent with this opinion.
It is so ordered.
MR. JUSTICE MARSHALL took no part in the consideration or
decision of these cases.
|
392
U.S. 481app|
APPENDIX TO OPINION OF THE COURT
Excerpts From Judge Wyzanski's Opinion in
United States v. United Shoe Machinery
Corp.,
110 F.
Supp. 295, 323-325 (D. Mass.1953).
Effects of the Leasing System
The effect of United's leasing system, as it works in practice,
may be examined from the viewpoints of United, of the shoe
manufacturers, and of competitors -- potential or actual.
Page 392 U. S. 505
For United, these are the advantages. (a) United has enjoyed a
greater stability of annual revenues than is customary among
manufacturers of other capital goods. But this is not due
exclusively to the practice of leasing, as distinguished from
selling. It is attributable to the effects of leasing when, as is
the case with United, the lessor already has a predominant share of
the market. (b) United has been able to conduct research activities
more favorably than if it sold its machines outright. The leasing
system, especially the service aspect of that system, has given
United constant access to shoe manufacturers and their problems.
This has promoted United's knowledge of their problems, and has
stimulated United's shoe machinery development. This research
knowledge would not be diminished substantially if United's service
activities covered fewer factories. But if all access to shoe
factories were denied, the diminution would be of great consequence
to research. (c) The steadiness of revenues, attributable, as
stated above, not to the leases alone, but to leases in a market
dominated by the lessor, has tended to promote fairly steady
appropriations to research. But these appropriations declined in
the 1929 depression. Research expenditures might or might not be
increased if competition were increased. The experience of United
when faced with Compo's cement process suggests that declining
revenues, no less than steady revenues, may promote research
expenditures. (d) United has kept its leased machines in the best
possible condition. (e) Under the leasing system, United has
enjoyed a wide distribution of machinery in a relatively narrow
market. But this is merely another way of saying that United's
market position, market power, lease provisions, and lease
practices give it an advantage over competitors.
Upon shoe manufacturers, United's leasing system has had these
effects. It has been easy for a person with modest capital and of
something less than superior efficiency
Page 392 U. S. 506
to become a shoe manufacturer. He can get machines without
buying them; his machines are serviced without separate charges; he
can conveniently exchange an older United model for a new United
model; he can change from one process to another, and his costs of
machinery per pair of shoes produced closely approximate the
machinery costs of every other manufacturer using the same
machinery to produce shoes by the same process. Largely as a
consequence of these factors, there were, in 1950, 1,300 factories
each having a daily production capacity of 3,000 pairs a day or
less; 100 factories each having a capacity of 3,000 to 8,000 pairs,
and 40 larger manufacturers. Many of these larger manufacturers,
who collectively account for 40% of the shoe production of the
United States, started in a small way and flourished under United's
leasing system. Moreover, the testimony in this case indicates
virtually no shoe manufacturers who are dissatisfied with the
present system. It cannot be said whether this absence of expressed
dissatisfaction is due to lack of actual dissatisfaction, to
practical men's preference for what they regard as a fair system,
even if it should be monopolistic, or to fear, inertia, or
reluctance to testify.
However, while United's system has made it easier to enter the
shoe manufacturing industry than to enter many, perhaps most, other
manufacturing industries, it has not necessarily promoted in the
shoe manufacturing field the goals of a competitive economy and an
open society. Without attempting to make findings that are more
precise than the evidence warrants, this much can be definitely
stated. If United shoe machinery were available upon a sale basis,
then --
(a) Some shoe manufacturers would be able to secure credit
whether by conditional sales, chattel mortgages, or other
devices.
Page 392 U. S. 507
(b) Under such a system, there is no reason to suppose that a
purchaser's first installment on a machine would significantly
exceed the deposit now often required of a new shoe manufacturer by
United.
(c) A few shoe manufacturers would be able to borrow at rates of
interest comparable to the interest rates at which United borrows,
or raises capital.
(d) Some shoe manufacturers would be able to provide for
themselves service at a cost less than the average cost to United
of supplying service to all lessees of its machines.
(e) Those manufacturers who bought United machines would not be
subject, as are those manufacturers who lease United machines, to
the unilateral decision of United whether or not to continue or
modify those informal policies which are not written in the leases
and to which United is not expressly committed for any specific
future period. While there is no evidence that United plans any
change in its informal policies, and while United has not
heretofore proceeded to alter its informal policies on the basis of
its approval or disapproval of individual manufacturers, United has
not expressly committed itself to continue, for example, its 1935
plan for return of machines, its right of deduction fund, its
waiver for 4 months of unit charges, or its present high standard
of service. United's reserved power with respect to these matters
gives it some greater degree of psychological, and some greater
degree of economic, control than a seller of machinery would
have.
(f) Some manufacturers who had bought machinery would find that
financial and psychological considerations made them more willing
than lessees would be to dispose of already acquired United
machines and to take on competitors' machines in their place.
In looking at United's leasing system from the viewpoint of
potential and actual competition, it must be
Page 392 U. S. 508
confessed at the outset that any system of selling or leasing
one company's machines will, of course, impede to some extent the
distribution of another company's machines. If a shoe manufacturer
has already acquired one company's machinery, either by outright
purchase, by conditional purchase, or on lease on any terms
whatsoever, the existence of that machine in the factory is a
possible impediment to the marketing of a competitive machine.
Yet, as already noted, a shoe manufacturer may psychologically
or economically be more impeded by a leasing than by a selling
system. And this general observation is buttressed by a study of
features in the United leasing system which have a special
deterrent effect. Though these features are stated separately, and
some of them alone are important impediments, they must be
appraised collectively to appreciate the full deterrent effect.
(a) The 10-year term is a long commitment.
(b) A shoe manufacturer who already has a United leased machine
which can perform all the available work of a particular type may
be reluctant to experiment with a competitive machine to the extent
he would wish. He may hesitate to ask for permission to avoid the
full capacity clause. If permission is given for an experimental
period, he may find the experimental period too short
Thus, a competitor may not get a chance to have his machine
adequately tried out by a shoe manufacturer. If a shoe manufacturer
prefers a competitive machine to a United machine on hand, he may
not know the exact rate at which future payments may be commuted.
If he knows, he may find that a fresh outlay to make those commuted
payments (which admittedly are not solely for revenue, but also are
for protection against competition, and which admittedly
discriminate in favor of a lessee who takes a new United machine
and not a competitor's machine) plus the rentals he has already
Page 392 U. S. 509
paid cost him more than if he had bought a similar machine in
the first place and were now to dispose of it in trade or in a
second-hand market. Thus, for a maker of competitive machines, he
may be a less likely customer than if United had initially allowed
him to buy the machine.
(c) United's lease system makes impossible a second-hand market
in its own machines. This has two effects. It prevents United from
suffering that kind of competition which a second-hand market
offers. Also it prevents competitors from acquiring United machines
with a view to copying such parts of the machines as are not
patented, and with a view to experimenting with improvements
without disclosing them to United.
(d) United's practice of rendering repair service only on its
own machines and without separate charge has brought about a
situation in which there are almost no large-scale independent
repair companies. Hence, when a typical small shoe manufacturer is
considering whether to acquire a complicated shoe machine, he must
look to the manufacturer of that machine for repair service. And a
competitor of United could not readily market such a complicated
machine unless, in addition to offering the machine, he was
prepared to supply service. As the experience of foreign
manufacturers indicates, this has proved to be a serious stumbling
block to those who have sought to compete with United.
(e) If a shoe manufacturer is deciding whether to introduce
competitive machines (either for new operations or as replacements
for United machines on which the lease has not expired), he faces
the effect of those decisions upon his credit under the Right of
Deduction Fund. If he already has virtually all United machines,
and if he replaces few of them by competitive machines, the Fund
will take care of substantially all his so-called deferred charges,
and may cover some of his minimum payments. This is because credit
to the Fund earned
Page 392 U. S. 510
by a particular machine enures to the benefit of all leased
machines in the factory, and the maximum advantage to the shoe
manufacturer is to have a large number of United machines to which
the credit can be applied. This advantage to the shoe manufacturer
of acquiring and keeping a full line of United machines deters,
though probably only mildly, the opportunities of a competing shoe
manufacturer.
* Together with No. 463,
United Shoe Machinery Corp. v.
Hanover Shoe, Inc., also on certiorari to the same court.
[
Footnote 1]
Following the District Court's rejection of United's
construction of Judge Wyzanski's opinion and decree, United filed a
motion requesting that the District Court certify the question of
construction to Judge Wyzanski. United contends that the District
Court erred in denying this motion, but we need not pass upon the
merits of United's novel request, for the District Court clearly
acted within its proper discretion in denying as untimely
certification to another court of a question upon which it had
already ruled.
[
Footnote 2]
"4. All leases made by defendant which include either a ten-year
term, or a full capacity clause, or deferred payment charges, and
all leases under which during the life of the leases defendant has
rendered repair and other service without making them subject to
separate, segregated charges, are declared to have been means
whereby defendant monopolized the shoe machinery market."
110 F. Supp. at 352.
[
Footnote 3]
In its opinion on remedy, in answering United's objection to its
conclusion that the decree should require United to offer machines
for sale as well as for lease, the court plainly said that
United
"has used its leases to monopolize the shoe machinery market.
And if leasing continues without an alternative sales system,
United will still be able to monopolize that market."
110 F. Supp. at 350. Clearly, if, after purging the leases of
objectionable clauses, United would still be monopolizing by
leasing but not selling its machines, the lease-only policy must
also have made a substantial contribution to United's
monopolization of the market during the period prior to the entry
of the judgment. Moreover, in its opinion on violation, where the
three principal sources of United's market power were identified,
the court pointed to "the magnetic ties inherent in its system of
leasing, and not selling, its more important machines" and to the
"
partnership'" aspects of leasing but not selling those
machines. 110 F. Supp. at 344. The leases assured
"closer and more frequent contacts between United and its
customers than would exist if United were a seller and its
customers were buyers."
Id. at 343. A shoe manufacturer, by leasing, was
"deterred more than if he owned that same United machine, or if
he held it on a short lease carrying simple rental provisions and a
reasonable charge for cancelation before the end of the term."
Id. at 340. The lease system had "aided United in
maintaining a pricing system which discriminates between machine
types,"
id. at 344, discrimination which the court later
said had evidenced "United's monopoly power, a buttress to it, and
a cause of its perpetuation. . . ."
Id. at 349.
[
Footnote 4]
In its brief on appeal from the judgment and decree rendered in
the Government's case, United recognized that
"[t]he principal practices which the [District] Court stressed
were that defendant offered important complicated machines only for
lease, and not for sale, and that defendant serviced the leased
machines without a separate charge."
Brief for Appellant 6,
United Shoe Machinery Corp. v. United
States, 347 U. S. 521
(1954). United also said that
"[e]vidently the Court below regarded the fact that United
distributes its more important machines only by lease and not by
sale as the basic objection to the system."
Id. at 170.
[
Footnote 5]
The Court of Appeals affirmed this finding, and we do not
disturb it.
See also n 16,
infra. We also agree with the courts below
that, in the circumstances of this case, it was unnecessary for
Hanover to prove an explicit demand during the damage period.
See Continental Ore Co. v. Union Carbide & Carbon
Corp., 370 U. S. 690,
370 U. S. 699
(1962).
[
Footnote 6]
The chronology of events with respect to this issue in the lower
courts was as follows: after the pretrial conference, a separate
issue which was thought might determine the action was set for
trial pursuant to Fed.Rule Civ.Proc. 42(b). The general question
was whether, assuming that Hanover had paid illegally high prices
for machinery leased from United, Hanover had passed the cost on to
its customers, and, if so, whether it had suffered legal injury for
which it could recover under the antitrust laws. After evidence had
been taken on the issue, Judge Goodrich, sitting by designation,
ruled that, when Hanover had been forced to pay excessive prices
for machinery leased from United, it had suffered a legal injury:
"This excessive price is the injury."
185 F.
Supp. 826, 829 (D.C.M.D.Pa.1960). He also rejected the argument
"that the defendant is relieved of liability because the plaintiff
passed on its loss to its customers."
Ibid. In his view,
it was unnecessary to determine whether Hanover had passed on the
illegal burden, because Hanover's injury was complete when it paid
the excessive rentals and because "
[t]he general tendency of
the law, in regard to damages at least, is not to go beyond the
first step'" and to exonerate a defendant by reason of remote
consequences. Id. at 830 (quoting from Southern
Pacific Co. v. Darnell-Taenzer Lumber Co., 245 U.
S. 531, 245 U. S. 533
(1918)). The Court of Appeals heard an interlocutory appeal
pursuant to 28 U.S.C. § 1292(b) and affirmed. 281 F.2d 481 (C.A.3d
Cir.1960). Certiorari was denied. 364 U.S. 901 (1960). United
preserved the issue and presented it again to the Court of Appeals
in appealing the treble damage judgment entered after trial of the
main case. The Court of Appeals adhered to the principles of its
prior decision. United brought the question here.
[
Footnote 7]
"It is, however, contended that, even if it be assumed the facts
show an illegal combination, they do not show injury to the
plaintiffs by reason thereof. The contention is untenable. Section
7 of the act gives a cause of action to any person injured in his
person or property by reason of anything forbidden by the act and
the right to recover three-fold the damages by him sustained. The
plaintiffs alleged a charge over a reasonable rate and the amount
of it. If the charge be true that more than a reasonable rate was
secured by the combination, the excess over what was reasonable was
an element of injury.
Texas & Pacific Ry. Co. v. Abilene
Cotton Oil Co., 204 U. S. 426,
204 U. S.
436. The unreasonableness of the rate and to what extent
unreasonable was submitted to the jury, and the verdict represented
their conclusion."
243 U.S. at
243 U. S.
88.
[
Footnote 8]
Southern Pacific Co. v. Darnell-Taenzer Lumber Co.,
245 U. S. 531
(1918), involved an action for reparations brought by shippers
against a railroad. The shippers alleged exaction of an
unreasonably high rate. To the claim that the shippers should not
recover because they were able to pass on to their customers the
damage they sustained by paying the charge, the Court said that the
answer was not difficult:
"The general tendency of the law, in regard to damages at least,
is not to go beyond the first step. As it does not attribute remote
consequences to a defendant, so it holds him liable if proximately
the plaintiff has suffered a loss. The plaintiffs suffered losses
to the amount of the verdict when they paid. Their claim accrued at
once in the theory of the law, and it does not inquire into later
events. . . . The carrier ought not to be allowed to retain his
illegal profit, and the only one who can take it from him is the
one that alone was in relation with him, and from whom the carrier
took the sum. . . . Probably, in the end, the public pays the
damages in most cases of compensated torts."
245 U.S. at
245 U. S.
533-534.
Adams v. Mills, 286 U.
S. 397 (1932), is to the same effect.
See also
I.C.C. v. United States, 289 U. S. 385
(1933).
Keogh v. Chicago & N.W. R. Co., 260 U.
S. 156 (1922), is relied upon by United as stating a
contrary rule. There, the Court affirmed a judgment on the
pleadings in a shipper's action under the antitrust laws charging a
conspiracy among railroads to set unreasonably high rates. Because
the rates had been approved as reasonable after a proceeding before
the Interstate Commerce Commission, the shipper was held to have no
cause of action under the antitrust laws. After giving this and
other reasons for its judgment, the Court ended its opinion by
saying that it would have been impossible for the shipper to have
proved damages, since no court could say that, if the rate had been
lower, the shipper would have enjoyed the difference; the benefit
might have gone to his customers. The Court, however, was careful
to say earlier in its opinion that the result would have been
different had the rate been unreasonably high, an approach
confirmed by Mr. Justice Brandeis in
Adams v. Mills,
supra. We ascribe no general significance to the
Keogh dictum for cases where the plaintiff is free to
prove that he has been charged an illegally high price. It should
also be noted that the Court, in speaking of the impossibility of
proving damages, indicated no intention to preclude recovery in
cases such as
Chattanooga Foundry or
Thomsen v.
Cayser, supra.
That is where the matter stood in this Court when the issue came
to be pressed with some regularity in the lower federal courts in
treble damage suits brought by customers of vendors who were
charged with violating the Sherman Act by price-fixing or
monopolization. Some courts sustained the defense both where the
plaintiff complained of overcharging for materials or services used
by him to produce his own product,
e.g., Wolfe v. National Lead
Co., 225 F.2d 427 (C.A. 9th Cir.),
cert. denied, 350
U.S. 915 (1955), and where the price-fixing concerned articles
purchased for resale,
e.g., Miller Motors, Inc. v. Ford Motor
Co., 252 F.2d 441 (C.A.4th Cir.1958);
Twin Ports Oil Co.
v. Pure Oil Co., 119 F.2d 747 (C.A. 8th Cir.),
cert.
denied, 314 U.S. 644 (1941). Others, beginning with Judge
Goodrich's 1960 decision in the case before us, deemed it
irrelevant that the plaintiff may have passed on the burden of the
overcharge. Recently, for example, the defense was rejected in the
cases brought against manufacturers of electrical equipment by
local utilities who purchased equipment at unlawfully inflated
prices and used it to produce electricity sold to the ultimate
consumer.
E.g., Atlantic City Electric Co. v. General Electric
Co., 226 F. Supp.
59 (D.C.S.D.N.Y.),
interlocutory appeal refused, 337
F.2d 844 (C.A.2d Cir.1964).
Concerning the passing-on defense generally,
see Clark,
The Treble Damage Bonanza: New Doctrines of Damages in Private
Antitrust Suits, 52 Mich.L.Rev. 363 (1954); Pollock, Standing to
Sue, Remoteness of Injury, and the Passing-On Doctrine, 32 A.B.A.
Antitrust L.J. 5 (1966); Note, Private Treble Damage Antitrust
Suits: Measure of Damages for Destruction of All or Part of a
Business, 80 Harv.L.Rev. 1566, 1584-1586 (1967).
[
Footnote 9]
The mere fact that a price rise followed an unlawful cost
increase does not show that the sufferer of the cost increase was
undamaged. His customers may have been ripe for his price rise
earlier; if a cost rise is merely the occasion for a price increase
a businessman could have imposed absent the rise in his costs, the
fact that he was earlier not enjoying the benefits of the higher
price should not permit the supplier who charges an unlawful price
to take those benefits from him without being liable for damages.
This statement merely recognizes the usual principle that the
possessor of a right can recover for its unlawful deprivation
whether or not he was previously exercising it.
[
Footnote 10]
Some courts appear to have treated price discrimination cases
under the Robinson-Patman Act as in this category.
See, e.g.,
American Can Co. v. Russellville Canning Co., 191 F.2d 38
(C.A. 8th Cir.1951);
American Can Co. v. Bruce's Juices,
187 F.2d 919,
opinion modified, 190 F.2d 73 (C.A. 5th
Cir.),
petition for cert. dismissed, 342 U.S. 875
(1951).
[
Footnote 11]
The Court of Appeals held that Hanover was entitled to damages
only up to June 1, 1955, the date upon which Judge Wyzanski
approved United's plan for terminating all outstanding leases and
converting the lessee's rights to ownership. Because Hanover could
have legally required United to convert from leasing to selling as
of June 1, 1955, the Court of Appeals held it was not entitled to
damages for United's failure to offer machines for sale after that
date. This determination has not been challenged in this Court.
[
Footnote 12]
Although the defendants in
American Tobacco had been
found guilty of conspiracy to restrain trade and of attempt and
conspiracy to monopolize as well as of monopolization itself, the
grant of certiorari was "limited to the question whether actual
exclusion of competitors is necessary to the crime of
monopolization under § 2 of the Sherman Act." 324 U.S. 836 (1945).
After noting that "§§ 1 and 2 of the Sherman Act require proof of
conspiracies which are reciprocally distinguishable from and
independent of each other . . . ," 328 U.S. at
328 U. S. 788,
the Court determined that the jury could have found that the
defendants had combined and conspired to monopolize,
id.
at
328 U. S. 797,
and that it would be "only in conjunction with such a combination
or conspiracy that these cases will constitute a precedent,"
id. at
328 U. S. 798.
The Court stated that
"[t]he
authorities support the view that the material
consideration in determining whether a monopoly exists is not that
prices are raised and that competition actually is excluded, but
that power exists to raise prices or to exclude competition when it
is desired to do so,"
328 U.S. at
328 U. S. 811
(emphasis added), and quoted with approval from
United States
v. Patten, 187 F. 664, 672 (C.C.S.D.N.Y. (1911)),
reversed
on other grounds, 226 U. S. 525
(1913), that, for there to be monopolization "[i]t is not necessary
that the power thus obtained should be exercised. Its existence is
sufficient." The Court also said:
"A correct interpretation of the statute
and of the
authorities makes it the crime of monopolizing, under § 2 of
the Sherman Act, for parties, as in these cases, to combine or
conspire to acquire or maintain the power to exclude competitors
from any part of the trade or commerce among the several states or
with foreign nations, provided they also have such a power that
they are able, as a group, to exclude actual or potential
competition from the field and provided that they have the intent
and purpose to exercise that power.
See United States v.
Socony-Vacuum Oil Co., 310 U. S. 150,
310 U. S.
226, n. 59 and authorities cited."
"It is not the form of the combination or the particular means
used, but the result to be achieved that the statute condemns. It
is not of importance whether the means used to accomplish the
unlawful objective are in themselves lawful or unlawful."
328 U.S. at
328 U. S. 809.
(Emphasis added.)
The Court also welcomed the opportunity to endorse, 328 U.S. at
328 U. S.
813-814, the following views of Chief Judge Hand in
Alcoa, 148 F.2d at 431-432:
"[Alcoa] insists that it never excluded competitors; but we can
think of no more effective exclusion than progressively to embrace
each new opportunity as it opened, and to face every newcomer with
new capacity already geared into a great organization, having the
advantage of experience, trade connections and the elite of
personnel. Only in case we interpret 'exclusion' as limited to
manoeuvres not honestly industrial, but actuated solely by a desire
to prevent competition, can such a course, indefatigably pursued,
be deemed not 'exclusionary.' So to limit it would, in our
judgment, emasculate the Act; would permit just such consolidations
as it was designed to prevent."
"
* * * *"
"In order to fall within § 2, the monopolist must have both the
power to monopolize and the intent to monopolize. To read the
passage as demanding any 'specific' intent makes nonsense of it,
for no monopolist monopolizes unconscious of what he is doing."
[
Footnote 13]
Any view of the earlier law of monopolization which would
attempt, erroneously in our opinion, to find a requirement of
predatory practices must rely heavily on certain dicta in
United States v. United States Steel Corp., 251 U.
S. 417,
251 U. S. 451
(1920) (Mr. Justice McKenna for a four-to-three Court), and
United States v. International Harvester Co., 274 U.
S. 693,
274 U. S. 708
(1927) (Mr. Justice Sanford reiterating the dicta in
U.S.
Steel). The commentators cited by United for the proposition
that predatory practices were required prior to
Alcoa-American
Tobacco place major reliance on these dicta. In any event, the
cursory and conclusory nature of these writings clearly does not
provide sufficiently strong proof of a prevailing opinion as to the
law to have permitted the sort of justifiable reliance which alone
could generate a prospectivity argument.
[
Footnote 14]
United makes the independent argument that Judge Wyzanski's
decision in the Government's case so fundamentally altered the law
of monopolization that it should not be held liable for damages
prior to the date the decision was handed down, February 18, 1953.
We reject this contention for the reasons set forth in the textual
discussion of
Alcoa-American Tobacco and the previous
United cases.
[
Footnote 15]
United has also advanced the argument that, because the earliest
impact on Hanover of United's lease only policy occurred in 1912,
Hanover's cause of action arose during that year, and is now barred
by the applicable Pennsylvania statute of limitations. The Court of
Appeals correctly rejected United's argument in its supplemental
opinion. We are not dealing with a violation which, if it occurs at
all, must occur within some specific and limited time span.
Cf.
Emich Motors Corp. v. General Motors Corp., 229 F.2d 714 (C.A.
7th Cir.1956), upon which United relies. Rather, we are dealing
with conduct which constituted a continuing violation of the
Sherman Act and which inflicted continuing and accumulating harm on
Hanover. Although Hanover could have sued in 1912 for the injury
then being inflicted, it was equally entitled to sue in 1955.
[
Footnote 16]
United also says that, because Hanover's managers would have
computed their capital costs differently, they would not, in fact,
have decided to stop leasing machines and to begin purchasing them.
The District Court found, however, that Hanover, had it been given
the opportunity, would have bought, rather than leased, the
machines offered by United. This finding, affirmed by the Court of
Appeals, is supported by the evidence, and we do not disturb
it.
MR JUSTICE STEWART, dissenting.
Hanover sued United under the Clayton Act for damages allegedly
flowing from United's practice of offering its machines for lease,
but not for sale. Hanover did not attempt to prove as an original
matter that this practice violated the antitrust laws. Instead, it
relied exclusively upon § 5(a) of the Clayton Act, 38 Stat. 731, as
amended, which provides:
"A final judgment or decree heretofore or hereafter rendered in
any civil or criminal proceeding brought by or on behalf of the
United States under the antitrust laws to the effect that a
defendant has violated said laws shall be
prima facie
evidence against such defendant in any action or proceeding brought
by any other party against such defendant under said laws . . . as
to all matters respecting which said judgment or decree would be an
estoppel as between the parties thereto. . . ."
15 U.S.C. § 16(a).
Hanover recovered an award of treble damages solely upon the
theory that the 1953 judgment and decree in
United States v.
United Shoe Machinery Corp., 110 F.
Supp. 295,
aff'd per curiam, 347 U.
S. 521, had established the unlawfulness of United's
practice of making its machines available by lease only. So it
follows, as the Court says,
"[i]f the 1953 judgment is not
prima facie evidence of
the illegality of the practice from which
Page 392 U. S. 511
Hanover's asserted injury arose, then Hanover, having offered no
other convincing evidence of illegality, should not have recovered
at all."
Ante at
392 U. S.
484.
I think that the 1953 judgment did not have the broad effect the
Court attributes to it today. On the contrary, that judgment, it
seems evident to me, held unlawful only particular kinds of leases
with particular provisions, not United's general practice of
leasing only. [
Footnote 2/1]
The only precedent cited by the Court for its expansive
application of § 5(a) is
Emich Motors Corp. v. General Motors
Corp., 340 U. S. 558.
That case dealt with the estoppel effect of a general jury verdict
in a criminal case. We deal here with a civil case which was tried
to a federal judge, who rendered a thoroughly considered opinion
and carefully precise decree.
One section of the decree, § 2, broadly set out what the court
found United's antitrust violations to be:
"Defendant violated 2 of the Sherman Act, 15 U.S.C.A. § 2, by
monopolizing the shoe machinery trade and commerce among the
several States. Defendant violated the same section of the law by
monopolizing that part of the interstate trade and commerce in
tacks, nails, eyelets, grommets, and hooks, which is concerned with
supplying the demand for those products by shoe factories within
the United States. . . ."
110 F. Supp. at 352.
Another section of the decree, § 4, clearly specified the
unlawful means by which these antitrust violations had been
accomplished, and United's general leasing practice was not one of
those means:
"All leases made by defendant which include either a ten-year
term, or a full capacity clause, or deferred
Page 392 U. S. 512
payment charges, and all leases under which during the life of
the leases defendant has rendered repair and other service without
making them subject to separate, segregated charges, are declared
to have been means whereby defendant monopolized the shoe machinery
market."
Ibid.
In addition to these two sections setting forth the violations
found, the decree contained some 20 remedial sections. Section 3
enjoined the violations found in § 2. Section 6 prohibited the
particular types of leases found to be unlawful in § 4. Another
section of the decree, § 5, went further and provided that, in the
future, United's machines must be offered for sale, as well as for
lease. But it is a commonplace that "relief, to be effective, must
go beyond the narrow limits of the proven violation,"
United
States v. Gypsum Co., 340 U. S. 76,
340 U. S. 90.
United States v. Loew's Inc., 371 U. S.
38,
371 U. S. 53;
United States v. Bausch & Lomb Co., 321 U.
S. 707,
321 U. S.
724.
I can find nothing in Judge Wyzanski's written opinion in the
1953 case to suggest that he found United's lease-only practice, as
such, to be a violation of the antitrust laws or illegal in any
way. [
Footnote 2/2] To the
contrary, that opinion repeatedly emphasized the anticompetitive
effects of the particular types of leases held illegal, and
carefully explained that the purpose of requiring that
customers
Page 392 U. S. 513
in the future be given an option to purchase was to create an
eventual second-hand market in United's machines and to make the
machines available to United's competitors, so that they might
study and copy them. 110 F. Supp. at 349-350. The opinion
specifically stated that the reason for ordering United to offer
its machines for sale was
not to widen the choices
available to customers. [
Footnote
2/3]
The Court today adds as an
392
U.S. 481app|>Appendix to its opinion -- like a
deus ex
machina -- Judge Wyzanski's findings of fact. But it is
irrelevant with respect to § 5(a) that the 1953 findings describe
United's lease-only practice when neither the decree nor the
opinion held that practice to be unlawful.
The real key to why the Court has gone astray in this case is to
be found, I think, in the concluding sentence of Part I of the
Court's opinion. For there, the Court reveals that it is really not
trying to determine what Judge Wyzanski decided in 1953, but is
determining instead how this Court would decide the issues if the
1953 case were before it as an original matter today. [
Footnote 2/4]
In my view, the 1953
United Shoe decision does not
establish United's liability to Hanover. I do not reach, therefore,
the other questions dealt with in the Court's opinion.
I would reverse the judgment of the Court of Appeals.
[
Footnote 2/1]
I am not lone in this view.
See Cole v. Hughes Tool
Co., 215 F.2d 924, 932-933;
Laitram Corp. v. King Crab,
Inc., 244 F. Supp.
9, 18.
See also 392
U.S. 481fn2/2|>n. 2,
infra.
[
Footnote 2/2]
Neither, apparently, could Judge Wyzanski. After the trial court
in this action filed its opinion holding that the 1953 decree had
condemned United's lease-only practice, United applied to Judge
Wyzanski for a construction of his decree. While denying the
application upon grounds of comity, Judge Wyzanski indicated a
willingness to construe his decree if officially requested by the
trial judge in the present case, Judge Sheridan. During the course
of the hearing before Judge Wyzanski, he made his own views clear
to government counsel:
"Now that you are here, are you not aware from being here on
previous occasions that the government never contended, and I never
ruled, as Judge Sheridan supposes the matter was decided?"
[
Footnote 2/3]
110 F. Supp. at 349-350. The language quoted by the Court,
ante at
392 U. S. 486,
n. 3, is not a statement of why the District Court in 1953 ordered
United to offer its machines for sale, but, rather, part of the
court's answer to United's argument that it would be unfair to make
United sell while its competitors continued only to lease. 110 F.
Supp. at 350.
[
Footnote 2/4]
"When the
applicable standard for determining
monopolization under § 2
is applied to these facts, it
must be concluded that the District Court and the Court of Appeals
did not err in holding that United's practice of leasing and
refusing to sell its major machines was determined to be illegal
monopolization in the Government's case."
(Emphasis added.)