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UNITED STATES v. INGERSOLL-RAND CO.

April 11, 1963

UNITED STATES of America, Plaintiff,
v.
INGERSOLL-RAND COMPANY, Goodman Manufacturing Company, Lee-Norse Company and Galis Electric and Machine Company, Defendants



The opinion of the court was delivered by: ROSENBERG

INTRODUCTORY STATEMENT

Findings of fact, conclusions of law and this opinion are presented subsequent to and in support of the issuance of an order by this Court on the 6th day of March 1963, preliminarily restraining the defendants from consummating agreements contemplating specific corporate acquisitions in the underground coal mining machinery production as a line of commerce in the United States.

 On March 4, 1963, a second order was issued denying a proposed modification of the Court's original order. A supplemental opinion relating to the second order will follow.

 Ingersoll-Rand Company (Ingersoll-Rand) entered into three separate agreements, all dated January 16, 1963, with defendants, Goodman Manufacturing Company (Goodman), Lee-Norse Company (Lee-Norse) and Galis Electric and Machine Company (Galis).

 The agreement with Goodman provides that Ingersoll-Rand will acquire certain of the assets of the mining and rock crushing machinery and industrial manufacturing business of Goodman for the consideration of 8 million dollars. The agreement further states that from the date of closing the Goodman name will not be used in any related type business and the closing date was stipulated to be March 1, 1963, unless properly extended.

 The agreement with Lee-Norse provides that Ingersoll-Rand and Lee-Norse enter into a Plan and Agreement of Reorganization, wherein a wholly owned subsidiary of Ingersoll-Rand (to be known as the Goodman-Norse Company) will purchase all property of Lee-Norse in exchange for a quantity of Ingersoll-Rand voting stock. Within twelve months after closing, Lee-Norse will dissolve and distribute its remaining assets, comprising the Ingersoll-Rand voting stock, to its shareholders. Th closing date of this agreement is also listed as March 1, 1963, unless properly extended.

 The agreement with Galis provides that Ingersoll-Rand and Galis entered into a Plan of Reorganization pursuant to which Ingersoll-Rand will acquire all issued and outstanding shares of Galis stock in exchange for shares of common stock of Ingersoll-Rand, and that all officers and directors will resign. The closing date shall be March 1, 1963, unless properly extended.

 When the United States Government received on or about December 5, 1962, a published report of the impending merger, the Anti-Trust Division of the Department of Justice made contact with Ingersoll-Rand by letter dated December 6, 1962. It inquired about the proposed merger and received in response a letter from counsel for Ingersoll-Rand dated December 12th, advising the Government that Ingersoll-Rand would assemble and forward the necessary information. On January 16, 1963, Ingersoll-Rand did provide some information concerning the proposed acquisition, including information that March 1, 1963, was to be the closing date of the Lee-Norse contract.

 The Government then requested additional information and served upon the merging companies a Civil Investigative Demand returnable on February 25th. At this time, the Government also requested assurance from these companies that it would be advised in advance of any closing of a proposed acquisition, but the companies indicated their reluctance to become so bound. Thereupon, on February 14th, the United States, as plaintiff, filed its complaint and supporting affidavits charging that the defendants, Ingersoll-Rand, Goodman, Lee-Norse and Galis had entered into the various agreements for acquisition mergers which were in imminence of being consummated, and if consummated, would violate Section 7 *fn1" of the Act of Congress of October 15, 1914, c. 323, 38 Stat. 736, as amended by the Act of Congress of December 29, 1950, c. 1184, 64 Stat. 1125, 15 U.S.C.A. § 18, commonly known as the Clayton Act.

 For this hearing, each side presented memorandum briefs. In their brief, the defendants at page 7 stated: 'However, defendants will now show that even if notice had been given, no temporary order should have been issued.' Accordingly, the defendants were allowed such opportunity as they desired to 'show' that this statement could be supported, while the plaintiff was required to justify the issuance of the temporary restraining order. After a full day's hearing, I denied the motion to vacate the order and directed preparation by the parties for the preliminary hearing on the following Monday, February 25th.

 The preliminary hearing proceeded as scheduled in the following week, during which time the parties presented many witnesses and documents to support their respective contentions. The hearing closed on the following Friday, and within a day or two, the parties submitted briefs, requests for findings of fact and conclusions of law. After careful examination of the parties' briefs and considerable research, within the time allotted by law, I issued the preliminary injunction order to maintain the status quo until a permanent decision might be had after a final hearing. Immediately after issuance of the preliminary injunction, the defendants filed a motion for a modification of the preliminary order, and after hearing all the parties, that motion was denied.

 As already stated, the plaintiff contends that the acquiring by the defendant, Ingersoll-Rand, of the stock and assets of the other defendants, Goodman, Lee-Norse and Galis, would be an acquisition in a line of commerce in the United States, the effect of which may be to substantially lessen competition or to tend to create a monopoly, and that such is forbidden by Section 7 of the Clayton Act.

 The defendants contest the validity of the plaintiff's case by attempting to show:

 1. That the plaintiff did not support its case by proper evidence;

 2. That the plaintiff's statistics are erroneous or improperly compiled;

 3. That the action pursued by the Attorney General in this particular case is unjust;

 4. That if the defendants are eventually proven to be in violation of the Clayton Act, divestiture would be a less harmful procedure than the issuance of a preliminary injunction;

 5. That the plaintiff has shown no irreparable injury;

 6. That, conversely, the defendants are being irreparably injured by this action;

 7. That the defendants, Goodman and Lee-Norse are not competitive within the meaning of the Clayton Act;

 8. That the production of underground coal mining machinery and equipment is not a line of commerce within the meaning of the Clayton Act; and

 9. That the coal mining industry is in need of this merger.

 In proceeding with the hearing for a preliminary injunction, it was incumbent upon the Court to bear in mind the pertinent language of Section 7 of the Clayton Act and to consider leading court decisions interpreting this section. Both sides introduced substantial evidence from which a basic determination could be made of whether or not Section 7 was seriously threatened with violation by the defendants, and if such violation was imminent, to determine whether or not a temporary injunction should issue in order to preserve the status quo until a permanent hearing on the full merits could be had.

 Approximately 800 pages of testimony were compiled at the hearings and transcribed by two court reporters working day and night to make the record available on a day to day basis. All of the parties were given full opportunity and ample time in which to present all of the evidence they wished to submit, without hindrance or limitation. I was mindful of the fact that all parties should have such an opportunity. See Sims v. Greene, 3 Cir., 161 F.2d 87 (1947).

 The evidence of the parties consisted of both testamentary and documentary proof. Originally, both sides introduced affidavits which were later modified or varied by oral evidence. On the Friday evening of the fifth day of trial, the parties agreed that they had fully presented their respective cases, and that they did not wish to continue into the next week.

 Because of the abundance of testimony, it was necessary for me to sift and evaluate the evidence in the light of the provisions of the Clayton Act and leading judicial authority, including United States v. E. I. DuPont De Nemours & Co., 366 U.S. 316, 81 S. Ct. 1243, 6 L. Ed. 2d 318 (1960); United States v. Brown Shoe Co., Inc., 179 F.Supp. 721 (E.D.Mo.1959); affirmed 370 U.S. 294, 82 S. Ct. 1502, 8 L. Ed. 2d 501 (1962). Because of the extended amount of evidence produced, an effort is here made to translate the material evidence into findings of fact, numerous as they may be. Again, it has not been my intention to consider that evidence as finalizing the case, but only in such character as to guide me into making a preliminary determination. Because objections were made to portions of the evidence in this case, and because I stated that certain evidence would be received subject to admission or refusal of admission into evidence after consideration, a clarification is here made of what was and what was not accepted.

 In the preparation of its case, the plaintiff relied heavily upon its statistical data originally compiled in Exhibits GX100 through GX108. These were later modified by GX82, which is the Futoran affidavit showing the final government statistics as adjusted by information received by the plaintiff from the defendants pursuant to a stipulation agreed upon on February 21, 1963.

 Preliminarily, the plaintiff presented 49 exhibits by way of an affidavit prepared by John M. O'Donnell, Esquire, which generally consisted of an exchange of correspondence between the plaintiff and defendants. Through this correspondence, the plaintiff received some information as to the relative size and standing of the defendant corporations in the coal mining industry. In this way, too, the plaintiff received the following significant documents: copies of the acquisition contracts; *fn2" the Goodman Manufacturing Company Annual Report to the Stockholders; *fn3" the Ingersoll-Rand Annual Report to the Stockholders; *fn4" and the Security Exchange Commission Registration Statement of Lee-Norse. *fn5"

 Pursuant to that stipulation as entered into by the parties on February 21st, the defendants provided the plaintiff with other pertinent documents which formed the basis of the plaintiff's statistical analysis. These included the Ingersoll-Rand-Wearly Report: *fn6" The Ingersoll-Rand-Ford, Bacon & Davis Report and Supplement; *fn7" and certain responses to interrogatories and questions advanced by the Government to the various defendants. *fn8" The information supplied in these documents was considered in relation to all of the evidence in the case as a whole in making a determination to issue a preliminary injunction.

 Besides the information furnished by the defendants to the plaintiff, the defendants admitted during the course of the hearing, that they conceded the accuracy of the figures listed in the Government's Exhibits GX106, 107 and 108. These documents reflected statistics compiled by the United States Bureau of Census and the Business and Defense Service Administration, United States Commerce Department and the Bureau of Mines, Department of Interior. Accordingly, I considered and gave weight to such accuracy as the figures reflected from these sources, as taken in relation to the evidence as a whole.

 I disregarded certain affidavits of the parties because of the purpose for which they were offered, such as the plaintiff's Hugo C. Nyquist affidavit *fn9" and the J.D.A. Morrow affidavit, *fn10" and the defendants' William L. Wearly affidavit. *fn11"

 AFFIDAVITS

 The defendants contend that the plaintiff has failed to establish its case because it chose to rely upon the affidavit of Joseph Futoran whom they did not cross-examine. The defendants maintain that this expert, utilized by the plaintiff, and who prepared the statistics upon which the plaintiff relied, was available in court during the hearing and that he should have been placed upon the stand by the plaintiff, and have been subjected to cross-examination by the defendants.

 The defendants deny the competency of these prepared documents to sustain a preliminary injunction since counteraffidavits were presented. They cite in support of their argument the following cases: Warner Brothers Pictures, Inc., v. Gittone, 3 Cir., 110 F.2d 292 (1940): and Murray Hill Restaurant, Inc., v. Thirteen Twenty One Locust, 3 Cir., 98 F.2d 578 (1938).

 The defendants' objection here is without merit because:

 a. the cases cited by the defendants are not applicable;

 b. during the course of the hearing, the defendants did in fact have the opportunity to cross-examine the witness;

 c. the defendants' affidavits dealt with different matter than that of the Futoran exhibits;

 d. the evidence, as a whole, presented by the plaintiff is sufficiently well-founded to sustain the preliminary injunction; and

 e. defendants are inconsistent in this argument.

 An examination of the cases relied upon by the defendants shows that they are distinguishable from the instant case because in the cited cases, the supporting evidence consisted solely of bare affidavits without any oral testimony. It was held that while the granting of a preliminary injunction is discretionary, where affidavits furnish the only evidence, a preliminary injunction should not be granted unless there is a clear case. It will be noted that a preliminary injunction may be issued upon mere affidavits in a 'clear case'. In Warner Brothers Pictures, Inc., supra, the Court stated 110 F.2d at page 293:

 'The evidence was conflicting and the trial judge, in order to enable him to resolve these conflicts, should have been afforded the opportunity of testing the credibility of the witnesses by having the benefit of their cross-examination and, if possible, their presence in court. In the absence of such opportunity the affidavits of each side were entitled to equal weight.'

 Regardless of the above cases, in the instant case, I relied upon much more than the information furnished by the original affidavits submitted by the parties. Through the witnesses presented by both the plaintiff and the defendants, I did have the opportunity to test credibility of witnesses and weigh the probative value of the exhibits in accordance with the applicable rules of evidence.

 Moreover, the contention of the defendants as to Joseph Futoran cannot stand because this witness was present in the courtroom throughout the entire proceedings, as they say and the testimony shows, and the plaintiff repeatedly offered Futoran without limitation for cross-examination of his prepared evidentiary documents.

 The Futoran exhibits were not bare affidavits. Although the plaintiff had originally submitted a weaker edition of documents in the form of affidavits at the first hearing to vacate the temporary injunction, the documents presented subsequently at the preliminary hearing as exhibits were differently constituted. These latter were much more virile and informative, as substantiated and logical statistics.

 The Futoran prepared documents here under attack are Exhibits GX100-108, inclusive and GX82. Exhibits GX100-105, inclusive, are re-statements by Futoran of the figures contained in Exhibits GX106-108, inclusive, plus such other documents and financial statements given by the defendants to the plaintiff. Exhibit GX82 is a re-statement of Futoran prepared Exhibits GX100-105, inclusive, as modified by additional documents which were furnished by the defendants during the course of this trial.

 The Futoran affidavits presented at the first Thursday's hearing were based upon reports of underground face coal mining machinery and equipment manufacturers to the Bureau of Census and the Business Service and Defense Administration. Plaintiff's Exhibits GX100-105 and GX82 were based upon these which the defendants admitted in court were accurate, plus the defendants' own reports as offered to the plaintiff during the course of the trial.

 Does the plaintiff's case then lack substance because it is based upon these and because Futoran was not physically placed on the stand so that the defendants could cross-examine him?

 From the record as a whole, it does not appear that the defendants question the statistics of their source, but rather Futoran's calculations. From the record as a whole, the defendants cannot complain that they did not have the right to cross-examine Futoran on these statistical exhibits, because the defendants chose not to cross-examine him.

 As for example, at page 120 of the transcript, this was said:

 'Mr. Melchior: * * * Now, I will very gladly make available Mr. Futoran for interrogation on it during the hearing if the court wishes.

 'The Court: In order to make the determination on a preliminary injunction, whether I issue it or don't issue it, I must make findings of fact, and I am not going to make findings of fact upon mere affidavits. I want something in the record.'

 At page 462 of the transcript, it is noted that the defendants desired that the plaintiff place the witness physically and formally on the stand before they would agree to cross-examine him. There are other places in the record which indicate that Futoran was available to the defendants for cross-examination.

 At no time did the defendants indicate that they wished to have Futoran on the stand for cross-examination. It was obvious that they did not desire it. However, in spite of the fact that the defendants chose not to cross-examine him, I have examined each of the Futoran exhibits and found no difficulty in tracing the calculations to the federal reports and to the figures as submitted by the defendants. I find as a fact that Futoran neither colored nor varied the figures, but rather that he aided in making them more discernable for the pertinent purposes of this case.

 'Subsequent to the adoption of the 1950 amendments, both the Federal Trade Commission and the courts have, in the light of Congress' expressed intent, recognized the relevance and importance of economic data that places any given merger under consideration within an industry framework almost inevitably unique in every case.'

 The Futoran exhibits were not considered alone, but in relation to all of the evidence of the case as a whole. These exhibits thus are not dead affidavits relating to unverified averments or assertions. They are factual and factually based and entitled to much weight.

 While it is not really meaningful here, nevertheless, it should be stated that the defendants in their affidavits did not counter the Futoran documents so as to set up any question of fact. But it is meaningful that the defendants chose to contradict the Futoran affidavits by presenting their own economic expert as a witness, Mr. Jesse Friedman.

 This witness testified that he had examined the plaintiff's exhibits and found them improperly based. He, himself, then prepared a statistical report which was offered in evidence as defendants' Exhibit No. 'Y', which he said more nearly represented the true facts of the case. The witness, however, admitted that his source of information was for other than underground coal mining machinery and equipment, and he then concluded that the plaintiff's statistics also included other than coal mining machinery and equipment.

 Thus, the defendants through this witness presented a question of fact for my determination. After examining the defendants' expert witness on the stand and scrutinizing defendants' Exhibit No. 'Y' and defendants' Exhibit No. 'Z', which he maintained was the Government's report that gave support to his statistical Exhibit No. 'Y', and all of this in relation to the evidence as a whole, this witness and Exhibit No. 'Y' convinced me that he and his Exhibit No. 'Y' were entitled to little weight, if any, and particularly as against the basic, revealing and persuasive evidence of the plaintiff. I, therefore, resolved the question of fact in favor of the plaintiff that its statistical evidence was sufficiently substantial as relating to the subject of underground coal mining machinery and equipment.

 The defendants' attack upon the plaintiff's case was also based upon the affidavits of Hugo C. Nyquist and J.D.A. Morrow *fn12" I have already stated that these were disregarded in arriving at a determination.

 As appears, infra, *fn13" under the heading 'Irreparable Injury', the defendants have strongly urged through their affidavits Nos. A, B, and C, that irreparable injury will result to the defendants if the preliminary injunction should issue. Further, *fn14" under the heading 'The Coal Industry', through affidavits Nos. E and W, and numerous letters from coal producers the defendants sought to convince the Court that the coal mining industry would benefit from the proposed merger. These were introduced in evidence for the purpose of convincing me against the issuance of a preliminary injunction. These affidavits and letters were fully considered by me. This is merely noted here to show that the defendants are inconsistent when they, themselves, rely upon affidavits and letters to prove certain phases of their case while at the same time, they attack the plaintiff's exhibits which have superior evidentiary value.

 JUSTIFICATION FOR PROCEDURE

 The defendants in their brief at page 3 argue, 'There is no justification for applying to merger cases a unique set of standards not applicable to any other anti-trust violations.'

 Section 15 of the Clayton Act *fn15" includes within its provisions the following:

 '* * * and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited.'

 No one may deny that this is a mandate expressed by Congress in concise and indubitable words. Mr. Chief Justice Warren in the Brown Shoe case, supra, states, 'We cannot avoid the mandate of Congress that tendencies toward concentration in industry are to be curbed in their incipiency * * *'. And just as Mr. Justice Clark in a separate concurring opinion adds 370 U.S. at page 355, 82 S. Ct. at pages 1541-1542, 8 L. Ed. 2d 501, 'To me § 7 is definite and clear.', so it may be said of § 15 .

 Since, then, the present action relates to a violation of § 7 of the Clayton Act, what are its requirements of the Attorney General and United States Attorney? *fn16" The gist of § 7 is a prohibition of any acquisition by a corporation, in whole or in part, of the stock, share of capital, assets or proxy rights of other corporations, which may substantially lessen competition or tend to create a monopoly; and the gist of § 15 is an order upon United States Attorneys under the direction of the Attorney General 'to institute proceedings in equity to prevent and restrain such violations' of the prohibition contained in § 7.

 The United States Attorneys and the Attorney General simply performed their duty in this case when they instituted this action. But if there be any doubt whatsoever about ulterior motivation to guide the United States Attorney and the Attorney General, reference to the history of the uncontrolled growth and development of corporate monopolies through acquisitions and mergers and of the apprehension of Congress and Presidents responsible for the welfare of the country lend significance to the seriousness of the Congressional language contained in § 7 and § 15. While in the Brown Shoe Co. case, supra, the Supreme Court considered mainly the finality and appealability phases of the Clayton Act in relation to that case, its recital of legislative history commencing 370 U.S. at page 311, 82 S. Ct. at page 1516, 8 L. Ed. 2d 501, revealingly delineates the various guide-lights ...


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