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January 22, 1944

PULLMAN CO. et al.

The opinion of the court was delivered by: MARIS; GOODRICH

Before BIGGS, MARIS, and GOODRICH, Circuit Judges.

By MARIS and GOODRICH, Circuit Judges.

At the request of the court, the government and the defendants have each submitted a form of proposed judgment. Objections of each to the form submitted by the other have also been proffered, together with briefs setting forth the respective points of view. These have been fully considered.

 The determination of the terms of the judgment which will accomplish that which is necessary in the public interest and which will not deal unfairly with the defendants has been a matter of some difficulty.The major subject of dispute between the parties and the point which has most troubled the Court is the extent to which the present tri-party relation among Pullman Company, Pullman, Inc., and Pullman Standard shall be affected. The government argues that Pullman, Inc., should be directed to dispose of all interest in Pullman Standard; in other words, present owners of the combined Pullman enterprises are to dispose of the manufacturing business and to stay in the sleeping car business. Defendants argue, in turn, that freedom of the market will be accomplished by provisions much milder than this. Their point is that elimination of the exclusive dealing features as between Pullman and the railroads and the establishment of an open market in the purchase of sleeping cars, by terms of the judgment, will accomplish all that the findings and the opinion of this court require.

 Our conclusion is that the public interest requires the complete separation in ownership and direction of the business of manufacturing and the business of operating sleeping cars. We think the public will not get the competitive conditions to which it is entitled if the Pullman Company and the manufacturing organization from whom it has bought all its cars for many years (with slight exceptions immaterial here) remain locked in common ownership and direction. In so concluding we do not for a moment attribute to the parties before us lack of good faith in the acceptance of the court's judgment. We do think, however, that if we had adopted the defendants' suggestion we would have left in existence a condition which has been the source of much of the trouble and invite the probability of its repetition. There must, therefore, be what counsel for the defendants aptly characterizes as a divorcement.

 We are equally clear, however, that the public interest does not require that the court make the choice for Pullman, Inc., as to which one of its present two businesses it shall continue to own and operate. Separation is not an end in itself; it is a means to provide an open market. Counsel for the government have not given us, in their able brief, convincing arguments why the public interest requires a disposition of the manufacturing business instead of the service business. They have stressed with some force that the retention of the service business would be better for the interests of the shareholders of Publlman, Inc. With regard to that point, the court thinks that the problem what is for the best interests of the owners can well be settled by the owners themselves, whose money is invested in the enterprise. The object to be accomplished by the court's judgment is remedial, not punitive. Separation is a necessary element in the remedy. but there is no reason, in protection of the public interest, why the separation needs to be made more difficult than necessary for the defendants nor against their judgment of what is in their best interests.

 The defendants should have a reasonable time, say three months, to explore the possibilities and provide a plan for the separation. They should have an additional period, perhaps a year, to effect it. If they cannot accomplish it by that time, the court will have to order it done by such means as its ingenuity may devise. But defendants should have opportunity to try it themselves first.

 With regard to the other points in the judgment, there is only one matter which we think requires comment. Since a separation is to be effected and since the Pullman Company and Pullman Standard will not only be separate entities in law but owned separately in fact, we see no reason why Pullman's future purchases of cars need be subjected to rules of competitive bidding.

 The other provisions of the judgment may, we think, be worked out between the parties. The draft submitted by the government may be taken, except for the points above discussed, as a basis. If the parties are unable in the light of this opinion to agree upon the form of the judgment the Court will, upon being advised of their inability, settle the form.

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