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UNITED STATES v. PAPERCRAFT CORP.

January 19, 1977

UNITED STATES OF AMERICA, Plaintiff,
v.
PAPERCRAFT CORPORATION, A Pennsylvania Corporation, Defendant



The opinion of the court was delivered by: SNYDER

This matter is before the Court on remand from the United States Court of Appeals for the Third Circuit, United States v. Papercraft Corporation, 540 F.2d 131 (3rd Cir. 1976), for reassessment of civil penalties under Section 11(l) of the Clayton Act, 15 U.S.C. § 21(l). We granted summary judgment on the violation of the Federal Trade Commission Order to the Defendant to divest itself of C.P.S. Industries, Inc., 393 F. Supp. 408 (W.D.Pa. 1975), and we assessed penalties of $3,817,500.

 On appeal, the Third Circuit required the application of the penalty provisions of the Clayton Act *fn1" and not of the Federal Trade Commission Act *fn2" as used by this Court, and thus ordered that the penalty be reassessed. The Circuit added "certain suggestions which the district court will be free to accept or reject at its discretion." 540 F.2d at 140. These suggestions involved considerations that there were peculiar circumstances which might, upon reflection, lead the district court to apply less than the maximum daily penalty of $5,000 as it had in applying less than the maximum daily penalty of $10,000, and further, that the district court might be disposed to impose different daily penalties for those violations of the FTC's Divestiture Order before the Commission clearly indicated that it would seek civil penalties. Argument of counsel was heard and briefs considered.

 We do not propose to again analyze the facts; these were detailed in our prior opinions. We do, however, need to discuss the principal contentions of the Defendant:

 
1. That this Court should reconsider "the good or bad faith of the defendants, the injury to the public, and the defendants' ability to pay." (See Judge Friendly's Opinion in United States v. J. B. Williams Co., 498 F.2d 414, 438-39 (2d Cir. 1974);
 
2. That this Court should apply a far different penalty to the period before the notice by the Federal Trade Commission of its intent to seek penalties;
 
3. The amount of any fine imposed in other cases to date has been under $500,000 and this Court should consider this as precedent in making a final determination of a fine to be imposed here;
 
4. That now, the fine's purpose of forcing compliance has been fulfilled since divestiture is complete, and since C.P.S. was sold for a price less than that which could have been received had it been divested earlier, Papercraft has been disgorged of its illegally obtained profits. *fn3"

 These contentions will be discussed seriatim.

 I.

 This Court, in its Opinion of May 9, 1975, 393 F. Supp. 415, held that the background for the penalty in the case sub judice was the finding by this Court that the asking price for C.P.S. was so unreasonable as to discourage inquiries. Papercraft considered substantial offers as "frivolous" and demonstrated a failure to realistically approach the subject of divestiture. It was apparent to the Court that Papercraft did not exercise that good faith which the Divestiture Order required, and proceeded with attempts to sell C.P.S. as though no order existed.

 
"In considering Papercraft's financial ability to pay, and the harm caused by the delay, the degree of bad faith, and the benefits received by Papercraft, we do not think that the penalty assessed should be the maximum." 393 F. Supp. at 427.

 No persuasive reasoning causes us to change our basic approach except, of course, the maximum of the statutory penalty under the Clayton Act changes ...


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