The opinion of the court was delivered by: DUSEN
This case is before the court on Keasbey and Mattison Company's (hereinafter sometimes called 'defendant') Motion for Summary Judgment under Rule 56 (Document 9).
The present Civil Action, which was filed on July 25, 1962 (Document 1), was brought by the United States Government against three companies: Keasbey and Mattison Company (hereinafter sometimes referred to as 'K & M'), Johns-Manville Corporation, and Certain-teed Products Corporation (hereinafter referred to as 'Certain-teed'). The Complaint was brought under § 4 of the Sherman Antitrust Act and alleges a conspiracy in violation of §§ 1 and 2 of the Sherman Act. More specifically, the Complaint alleges that defendants combined and conspired in unreasonable restraint of, and to monopolize, interstate and foreign trade and commerce and that defendants have attempted to monopolize the aforesaid interstate and foreign trade and commerce in asbestos-cement pipe and couplings. Injunctive relief is sought to restrain a continuation of the alleged offenses.
K & M is a Pennsylvania corporation which, from the year 1936 until June 1, 1962, was engaged in the business of manufacturing, selling and distributing numerous products, including asbestos-cement pipe and couplings (par. 2, Document 33). All of the common stock of K & M is owned by Turner & Newall, Limited, of Manchester, England (hereinafter referred to as 'T & N'), through a wholly-owned Canadian subsidiary of T & N (par. 1, Document 33). On or about April 16, 1962, Certain-teed agreed to buy from defendant K & M, pursuant to written agreements, K & M's asbestos-cement pipe and coupling business, including plants, equipment, accounts, records, certain trade-names and patent rights, and other assets employed in connection with the manufacture, sale and distribution of asbestos-cement pipe and couplings (par. 5, Document 37). Also included in the sale was the right to use the K & M name for a period of one year after the closing date in connection with the pipe assets purchased under the agreement (par. 1(g) of Exhibit A attached to Document 10).
In a contract between T & N and Certain-teed, entered into at the same time as the above K & M and Certain-teed contract, it was provided that T & N would not enter into the business of manufacturing or selling asbestos-cement pipe in the United States for a period of five years, except as a supplier of asbestos fibers (par. 4(a) of Exhibit B attached to Document 10).
T & N also agreed with Certain-teed to exchange information as to the methods of manufacturing cement pipe and such exchange shall be effected without payment by either party for the information itself. This is limited by a stipulation that if either party becomes possessed of a 'basic development' in the manufacture of asbestos-cement pipe, it need be communicated to the other party only on the possessor's terms. Also, Certain-teed is to purchase, for a period of ten years, from T & N the total quantity of asbestos fibers which Certain-teed requires for the purpose of manufacturing operations itself. This is limited to a 75,000 ton obligation. This is further limited by clauses stating that, if purchase or delivery of the fibers is prohibited by reasons beyond the control of the parties, the defaulting party is excused. The price is to be agreed upon from time to time, and if Certain-teed can buy from another supplier the same quantity and quality at a lower price, it may do so if T & N does not meet the price (par. 4(b) of Exhibit B attached to Document 10).
Certain-teed also agrees that so long as T & N is a holder of not less than either 10% Or 250,000 shares of the issued common stock of Certain-teed, it will submit to its stockholders, for election to its Board of Directors, two persons nominated by T & N as nominees of the management.
The sale of K & M assets to Certainteed was in exchange for $ 580,000 shares of the latter's stock, which, together with those shares previously owned by T & N, constituted approximately 20% Of the issued and outstanding common stock of Certain-teed (Document 36, par. 3). Certain-teed in this transaction, in addition to physical assets, also acquired some of K & M's key personnel and office space in order to continue the operation of the business (par. 5, Document 37).
The sale or liquidation of K & M was discussed as early as 1959 by the Board of Directors of T & N (par. 4(a), Document 33). The discussions of sale were prompted by T & N's concern over the difficulties of absentee management. In time sequence, the above discussions follows a 1958 Grand Jury inquiry in which several officials from K & M were called to testify (see p. 71, Document 35, and footnote 12 below).
'3. Said sale was not made as a result of the criminal indictment of K & M on June 1, 1962 for alleged violations of the Sherman Antitrust Act; nor was it the design or intent of Turner & Newall or K & M to sell its pipe business, liquidate, and dissolve, to avoid prosecution or litigation in connection with the said indictment or any other litigation related to the said business.
'4. As is set forth in more detail in the subparagraphs below, the negotiations and contractual arrangements for the sale of the asbestos-cement pipe business were undertaken and consummated long before either the criminal litigation or the present civil equity action. The decision to sell the pipe business was dictated by valid and bona fide business reasons. * * *' (Affidavit of Ralph M. Bateman, Document 33)
On May 4, 1962, the stockholders of K & M approved and ratified a resolution of the Board of Directors of K & M providing for a plan of liquidation of the company within a 12-month period (par. 4 of affidavit attached to Document 9). Settlement to carry out the agreement of April 1962 was held June 1, 1962, and this settlement date was designated well in advance of said date, without any knowledge of the criminal indictment that was handed down on the same day (par. 4(e), Document 33).
On June 1, 1962, the defendants were indicted in a companion criminal case for purported violations of the Sherman Act. The indictment was based on substantially the same conduct alleged in this suit, although the indictment did not include Certain-teed, a defendant in the instant action. After trial to a jury, the defendants were acquitted.
Defendant K & M filed its Motion for Summary Judgment on September 14, 1962 (Document 9), and on December 19, 1962, and June 3, 1963, entered into stipulations with the plaintiff for a stay of further proceedings on its Motion until the criminal proceedings were disposed of or until such time as either party reordered the ...