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UNITED STATES v. PULLMAN CO.

December 18, 1945

UNITED STATES
v.
PULLMAN CO. et al.



The opinion of the court was delivered by: GOODRICH

This case now comes to the Court upon an application for approval of a contract of sale. On March 22, 1945 the Court made an order permitting Pullman, Inc. to cause the Pullman Company to offer to 'treat with the railroads or any other persons for the sale of the Sleeping Car Business and the properties connected therewith now owned by The Pullman Company.' Pullman, Inc. was also authorized to treat for the sale of the stock of the Pullman Company. Pursuant to this authority Pullman, Inc., on May 12, 1945 made an offer of sale to the railroads. This offer was not, at the time, accepted. During the period between the date of that offer and the present, four propositions have been submitted to Pullman, Inc. for the disposal of the stock of the sleeping car company. The first is from Otis and Co.; the second is from Glore, Forgan and Co.; the third is from the Standard Steel Spring Company and the fourth from a group of railroads. The railroad group subsequently modified their proposition so as to constitute it an unqualified acceptance of Pullman, Inc.'s original offer to sell and the latter now comes to the Court asking for an order approving the sale.

The individual offerors, a number of the railroads, a number of unions representing employees of the Pullman Company and the States of California and Colorado have with the Court's permission intervened. *fn1" The testimony presented by the various offerors was heard by the Court on November 5 and 6 and that presentation was followed on December 10, 11 and 12 by argument on the part of counsel for all parties who desired to be heard

 Because the considerations presented to the Court in argument upon the question of approval of Pullman's sale of its sleeping car business to the railroads have covered a wide field, it seems well to reorient ourselves to the questions now before us in this case.

 The original proceeding was a suit in equity brought by the United States against Pullman, Inc., its associated companies and some individuals connected therewith. It charged Pullman with monopolistic practices which violated the Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note. The Court after a long series of hearings found that the defendants had violated the Sherman Act. Since all aspects of this part of the case were fully discussed in the original opinion that discussion need not be repeated here.

 Relief against continuation of the monopolistic practices was discussed in the original opinion. 50 F.Supp. 123. Separation of Pullman Standard, which manufactures sleeping cars and other rolling stock, from the Pullman Company, which owns and operates the sleeping cars, was ordered. 53 F.Supp. 908. This separation was not an end in itself, but merely a means of policing to insure compliance with the decree. We left it to Pullman, Inc. to decide which end of its business it chose to retain and which to dispose of. Its choice was to dispose of the sleeping car business which is represented by the Pullman Company. Whether sold or retained by Pullman, Inc. the future conduct of the sleeping car business by the Pullman Company is, by terms of the judgment, subject to all the limitations imposed on it by the Court.

 The sale now offered to us for approval is the final step in the proceeding to break the Pullman monopoly. It should not be thought of as the end product of the lawsuit. It is but a buy-product. The main objects were accomplished in the elaborate judgment entered May 8, 1944, which followed the Court's opinion and findings of fact and conclusions of law. 55 F.Supp. 985.

 We say all this because the argument has covered such a wide range that it might almost be thought that we had here a new proceeding in which the Court is being asked to determine the best way to conduct the sleeping car business for the benefit of the country at large. We do not think this very formidable undertaking is imposed upon us. We take it that the judgment of a court under the Sherman law is not to substitute the judicial judgment for that of the proprietors of the country's business enterprises. We think it is the court's task to strike at monopolistic practices when it finds them to exist and then leave it to competitive business, freed from monopoly, to take advantage of the freedom to profit itself and incidentally benefit the public.

 So here, we think it is our responsibility to see that the disposal of its sleeping car business by the Pullman interests is done in a way which carries out the judgment of this Court. Pullman's choice of a customer has been the railroad group. Other prospective customers have described and extolled their offers both to the seller and to the Court. We think the variety of choice presented is a credit both to the ingenuity of those who thought up the various plans and to the lawyers who have presented them to the Court. Our conclusion is that the sale to the railroads should be approved.

 In so concluding we want it to be perfectly clear that the restrictions imposed by the judgment upon the Pullman Company are still to be effective. Especially do we emphasize at this point the provisions of paragraph 26 of our judgment prohibiting exclusive dealing contracts. In the judgment, paragraph 10, we reserved the question of the extent to which persons acquiring the business or properties are to be bound by the provisions of the judgment. We now say that the terms are to apply to Pullman under the new ownership. That of course is clear from the terms of the judgment. They also are to be applied to any person or company to whom the railroads may later transfer the business, as contemplated by the provisions of their plan and a provision of our order will so state. We pass then, to a discussion of the reasons which have led us to the conclusion stated.

 One railroad furnishing sleeping cars to the passengers on its lines is certainly not a situation which anyone could see as a possible source of Sherman Act violation. That was granted, we think, in all the arguments made to us. In this case, however, railroads doing something more than 90% of the passenger carrying business of the country have joined together in the proposal to buy the stock of the Pullman Company. It does not follow that because one man can do a thing alone he can join with others in so doing. Does not this joining together of the railroads to own a sleeping car company simply substitute a railroad monopoly for the original Pullman monopoly? It has been asserted with great earnestness that it does by those other than the railroad group who seek to obtain the Pullman Company. That poses a relevant issue; the only one, we think, now before us. We think the answer is that it does not for the following reasons:

 I. Part of the Pullman monopoly was its sale of cars manufactured by one of its companies (Pullman Standard) to the Pullman Company, which owned and operated the sleeping cars. No other car manufacturer could get into the market. On the occasions when he got an order for sleeping cars from the railroads who were interested in new developments, that purchase created difficulties with the road's sleeping car service because of the obstacles to such experiments put in its way by Pullman. This is described in the original opinion and need not be enlarged upon here. That phase of the monopoly is now gone. It is struck down by the provisions of the judgment and those provisions are reinforced by the order directing separation of the manufacture and servicing businesses from one ownership. The Government, in objecting to the proposed sale to the railroads, suggests that the habit pattern of railroads purchasing from Pullman Standard would be likely to be continued if the railroads owned Pullman.

 This is a point of great force if established. It is not the kind of proposition that can be proved by mathematical demonstration either way. It can be replied that the habit pattern which was established only amounted to the purchase of sleeping cars by the Pullman Company from its manufacturing associate in the Pullman family, Pullman Standard, and it can be pointed out that even back in those days the railroads tried to break away by purchase of cars elsewhere and got into difficulty with Pullman when they did.

 All the above is true. Yet it is also true that there have been interlocking directorates between Pullman, Inc. and the railroads. We talked about those in our original opinion. It is only in the last few weeks that some of these common directors have dropped out of Pullman, Inc. and we are not advised that all of them have done so even yet. We think there is very great danger to the public interest if the railroads by interlocking directorates, or whatever means there may be, continue the kind of tie-up which we found to exist and ...


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