The opinion of the court was delivered by: BECHTLE
On October 29, 1976, Continental Group, Inc. ("Continental"), American Bag & Paper Corporation ("American"), Chase Bag Company ("Chase"), Harley Corporation ("Harley"), St. Regis Paper Company ("St. Regis"), James K. Cooper ("Cooper"), David Mawicke ("Mawicke"), Peter J. Weggeman ("Weggeman"), Stanley A. Schottland ("Schottland"), Harrison B. Rue ("Rue"), William H. Versfelt ("Versfelt") and Edward W. Weikum ("Weikum") were charged in a one-count indictment with having engaged, together with several unindicted coconspirators,
in a continuing combination and conspiracy in unreasonable restraint of interstate trade and commerce, in violation of Section 1 of the Act of Congress of July 2, 1890, As amended, 15 U.S.C. § 1 ("Sherman Act"). The indictment charged that the combination and conspiracy consisted of a continuing agreement, understanding and concert of action among the defendants and coconspirators, the substantial terms of which were to raise, fix, maintain and stabilize the prices and the terms and conditions for the sale of consumer bags. Consumer bags were defined in the indictment as follows:
Consumer bags are used for packaging a variety of products including, among others, pet foods, cookies, tea, coffee, kitty litter, chemicals, and agricultural products. Consumer bags also include air-sickness bags.
The conspiracy and combination with which the defendants were charged was alleged in the indictment to have begun as early as 1950 and to have continued until the date of the return of the indictment on October 29, 1976.
Pleas of Nolo contendere were entered by Harley on December 10, 1976, and by Schottland and American on June 1, 1977. The trial of the remaining defendants commenced September 30, 1977, before this Court and a jury. At the close of the Government's case, the motions of Mawicke and Versfelt for a judgment of acquittal, pursuant to Fed.R.Crim.P. 29(a), were granted by the Court. At the close of the entire case, the jury on November 23, 1977, returned a verdict of guilty as to Continental, Chase, Cooper and Rue, and a verdict of not guilty as to St. Regis, Weggeman and Weikum.
The total proceedings in this case, including five days of Voir dire, the jury's deliberations and the return of the jury's verdict, lasted 43 days from September 26 to November 23, 1977. From the date the indictment was returned and until the jury rendered its verdict, approximately 140 written motions were filed with the Court by the defendants. During the course of the trial, in which 4 Government counsel, 21 defense counsel and numerous assistants and paralegals participated, 14 witnesses were called by the Government and a total of 30 witnesses were called by the defense. The combined total of demonstrative exhibits (charts, graphs, documents) introduced at trial numbered in excess of 5,000. Subsequent to the jury's verdict, the four convicted defendants filed post-trial motions with the Court which totaled in excess of 300 pages.
Presently before the Court are the motions of defendants Continental, Chase, Cooper and Rue for judgment of acquittal or, in the alternative, for a new trial or for an arrest of judgment, pursuant to Fed.R.Crim.P. 29(c), 33 and 34, respectively. For the reasons stated below, each of these motions will be denied.
A brief summary of the evidence, construed in a light most favorable to the Government, will facilitate an understanding of this Opinion.
Beginning in 1950 or 1951, representatives of the major consumer bag manufacturers in the United States attended meetings at which they discussed the prices to be charged for consumer bags. At these early meetings, the competitors represented included the Benjamin C. Betner Company ("Betner"), the Thomas M. Royal Company ("Royal"), Union Bag and Paper Company ("Union Bag"), American, Arkell and Smith ("Arkell") and Oneida Packaging Products, Inc. ("Oneida"). In 1953, Continental acquired Betner and, in 1967, Chase acquired Arkell. Harley entered the consumer bag industry in the early 1960's, and St. Regis entered the consumer bag portion of the paper industry in 1965. Subsequent to their respective entries into the consumer bag industry, representatives of Continental, Chase, Harley, American and St. Regis regularly attended meetings of competitors. Thus, by 1967, and continuing until the return of the indictment, the core of the group of manufacturers of consumer bags whose representatives regularly attended meetings of competitors consisted of Continental, Chase, American, Harley and St. Regis.
The first of these meetings about which there was detailed testimony at trial was held at the Arkell headquarters in New York in 1960 or 1961. This meeting was attended by price analysts from Continental, Arkell and the Bemis Bag Company ("Bemis"), who had been instructed by their respective superiors to devise a new list-price format for consumer bags which would be used by Continental, Arkell, American, Bemis and Oneida to price orders from customers for consumer bags (N.T. 9-182 to 9-189, 12-44 to 12-49). The consumer bag list-price format created at this meeting was a looseleaf binder which contained lists and/or tables of all the possible variable components or factors ("factors") involved in the manufacture of a consumer bag, such as type or plies of paper, printing process or manufacturing charges, and a corresponding price for each factor. Consumer bags are generally manufactured according to customer specifications and, thus, the factors involved in the construction of a particular consumer bag vary according to the particular specifications. Therefore, the price format devised at this meeting not only provided manufacturers with corresponding prices for most of the factors specified by a customer, but also allowed any manufacturer constructing consumer bags according to a particular set of customer specifications to arrive at the identical total price simply by adding the prices for the factors involved in that particular bag.
Continental, Arkell and American each adopted and employed the list-price format devised at the Arkell headquarters meeting (N.T. 9-188 to 9-189, 12-44 to 12-49), as did Chase, Harley and St. Regis subsequent to their respective entries into the consumer bag industry; and all continued to employ the list-price format throughout the period of the indictment. After the implementation of the list-price format, manufacturers entering the consumer bag industry, and existing manufacturers who did not adopt and follow the format, would be invited to attend a meeting of representatives of consumer bag manufacturers. At these meetings, representatives from Continental, American, and later Harley, would advise these competitors that they were selling below the "market price," that they could make a profit without deviating from the list price and that "the other" manufacturers wanted them to price consumer bags from the list-price book and not deviate from it (N.T. 3-9 to 3-19, 3-120 to 3-126).
Approximately twice a year during the period covered by the indictment, general or across-the-board increases, wherein each factor contained in the price book would be increased by a certain percentage, were implemented. And from time to time, selective or single-factor increases, whereby the price for only one component or factor, such as paper, would be increased, were also implemented. The general procedure for implementing these general or selective price increases was for Continental to announce the previously agreed upon price increase in the Wall Street Journal and then to distribute revised price sheets to Chase, St. Regis, American, Harley and other competitors pricing from the list-price format (N.T. 6-106 to 6-122, 7-102 to 7-108, 14-59 to 14-63, 14-75).
The amount and effective date of the implementation of the general or selective price increases were agreed to by representatives of Continental, Chase, American, Harley and St. Regis at the regular meetings of the representatives of these competitors. During the period from the early 1960's to May, 1971, these meetings of the representatives of the major competitors in the consumer bag industry were held at various country clubs around the country. At these meetings, the representatives discussed various problems of the industry and also discussed and agreed to the prices and the terms and conditions for the sale of consumer bags. For example, in 1962, representatives from Arkell and Continental met at the home of Eugene Pavitt ("Pavitt"), Executive Vice-President of American, to persuade Pavitt to agree to a proposed increase in the cost of heat-sealed consumer bags (N.T. 7-188 to 7-192, 12-79 to 12-92). And in the summer or fall of 1969, Cooper and George Landon ("Landon") of Continental, and Frederick Kiendl ("Kiendl") and Eugene Alexander ("Alexander") of Chase met with representatives of St. Regis, American and Harley at the Philmont Country Club near Philadelphia to discuss a 3% General price increase which had been announced by Continental prior to the meeting. In addition to comments about the adequacy of the proposed increase, the representatives at that meeting discussed the fact that price increase announcements were not usually made without the others knowing about the increases first (N.T. 8-159 to 8-162, 7-200 to 7-211). Again, at a meeting held January 16, 1970, at Hilton Head Island, South Carolina, the amount and effective date of a general price increase were proposed, discussed and agreed to by Landon of Continental, Alexander of Chase and representatives from St. Regis, American and Harley (N.T. 3-59, 3-84, 8-166). Finally, at a meeting held at the Tamarack Country Club in Greenwich, Connecticut, on September 29, 1970, which was attended by Cooper and Landon of Continental, Alexander and Kiendl of Chase and representatives from St. Regis, Harley and American, Pavitt proposed that a factor for rotogravure printing charges be included in the price book (N.T. 7-238, 8-171 to 8-172, 8-180). At this meeting, a 3% General price increase on certain types of bags was also discussed (N.T. 8-172 to 8-174), and in addition, Landon suggested that representatives from American revise the air-sickness bag list price (N.T. 8-176 to 8-179).
On May 27, 1971, a meeting was held at the Darien Country Club in Connecticut which was attended by Cooper and Landon of Continental, Alexander, Kiendl and James Wells ("Wells") of Chase and representatives of St. Regis, American and Harley. Shortly after the meeting began, Robert Searle ("Searle") of St. Regis announced to the group that he had consulted with legal counsel, that in his opinion the meetings had gotten completely out of hand, because they were discussing prices and other issues they had no business discussing, and that representatives from St. Regis would no longer attend the meetings unless they were held under the auspices of an organized trade association (N.T. 3-87, 3-91 to 3-93, 7-243, 8-191 to 8-194, 10-148 to 10-153). Schottland and Harley both objected to the group joining a trade association, because they feared that confidential price information would be disclosed to "outside" competitors, and suggested that the group form its own trade association. Those present finally agreed that the group would join the Paper Sack Shipping Manufacturers' Association ("PSSMA"), but that prices would only be discussed at private, informal meetings attended by representatives of the involved competitors (N.T. 10-152 to 10-153). Continental, American and Chase joined the PSSMA shortly thereafter; Harley and St. Regis were already members (N.T. 3-91).
The first PSSMA meeting attended by representatives from Continental, Chase, American, St. Regis and Harley was held October 6 to 9, 1971, in Scottsdale, Arizona. The general procedure followed at the post-PSSMA gatherings of representatives was for the group to attend the formal sessions of the PSSMA, at which legal counsel was present, and also to attend prearranged, informal sessions at which legal counsel was not present and which were attended primarily by representatives of Continental, Chase, American, Harley and St. Regis; although occasionally representatives from Bemis or Union Camp would also attend. These informal meetings were usually held in a representative's suite or a private dining or meeting area. At these meetings, the group continued to propose, discuss and agree upon price increases or changes in the terms and conditions for the sale of consumer bags. For example, at an informal meeting held during the PSSMA convention in New Orleans, Louisiana, in April of 1974, Robert A. Harley ("Robert Harley"), Chairman of the Board of Harley, asked the group of representatives in attendance to consider adding a factor for pallet and finishing charges to the price list. Robert Harley testified that he felt that the representatives who were present, who included Cooper of Continental, Kiendl and Rue of Chase and representatives from St. Regis, Harley and American, did not support the proposal at the time but that all of the competitors except American did later add a factor for pallet charges to the price list (N.T. 3-153 to 3-157, 10-205 to 10-207, 18-84 to 18-90). And at an informal meeting held during the PSSMA convention in Williamsburg, Virginia, from September 22 to 25, 1974, which was attended by Cooper of Continental, Rue and Kiendl of Chase and representatives from St. Regis, American and Harley, Cooper proposed, and Rue discussed, the implementation by the members of the group of the "LIFO" method of accounting (N.T. 11-43 to 11-47, 15-67 to 15-69).
During this post-PSSMA period, three problems of concern to the entire group of representatives developed which, in addition to the prices and the terms and conditions for the sale of consumer bags, were discussed at these meetings. First, Schottland, who became President and Chief Executive Officer of American in 1969, decided that American was going to undertake a more competitive position in the market place by quoting prices based upon an independent cost analysis and by adopting new marketing methods, such as discounting on long-term contracts (N.T. 8-91). After making this decision, Schottland would apparently advise representatives of American's competitors that he would follow the agreed upon price increases but would then delay in implementing those increases with his larger customers. Representatives of American's competitors were angered by Schottland's conduct, and confrontations between Schottland and representatives of these competitors began to occur. For example, at an informal dinner meeting at Antoine's Restaurant held during the April 3 to 5, 1974, PSSMA convention in New Orleans, which was attended by Cooper of Continental, Rue and Kiendl of Chase and representatives from St. Regis, American and Harley, Kiendl and Rue made derogatory comments to Schottland about Schottland's "dragging his feet" on price increase announcements and about Schottland's pattern of agreeing to implement price increases and then delaying (N.T. 3-162, 15-36 to 15-37). And again, at an informal dinner meeting held at Henrici's Restaurant during the June 26 to 28, 1974, PSSMA convention in Chicago, which was attended by Cooper of Continental, Rue of Chase and representatives of St. Regis, American and Harley, an argument developed between Rue and Schottland about Schottland's "dragging his feet" on price increases and giving "price protection" to his larger accounts (N.T. 3-191 to 3-195, 14-101 to 14-106, 11-21 to 11-36, 15-51 to 15-53, 15-88 to 15-89). In response to Rue's comments, Schottland advised Rue that he was going to run his own company. Then, turning to Robert Harley, Schottland said that he was also tired of receiving threatening phone calls (N.T. 3-192). Schottland was also accused by Kiendl of Chase, during an informal dinner meeting held during the January 8 to 10, 1975, PSSMA convention at Marcos Island, Florida, which was attended by Cooper and other representatives of Continental, Kiendl of Chase, and representatives of American, Harley and St. Regis, of "dragging his feet" on price increases (N.T. 11-56 to 11-58, 15-69 to 15-71).
Finally, prior to the PSSMA convention in Hamilton, Bermuda, held September 28 to October 1, 1975, Cooper called Robert Harley to tell him that Schottland was again "dragging his feet" on price increases and that he wanted Harley to join him at a meeting with Schottland "to see if (they) couldn't get (Schottland) to refrain from doing this" (N.T. 3-200 to 3-204). Robert Harley told Cooper during that phone call that he was considering not following the price increase unless Schottland did (N.T. 3-204). At the Bermuda meeting, Cooper invited Schottland to a breakfast meeting, which was also attended by Robert Harley and representatives from American. At that meeting, Cooper advised Schottland that a general price increase had been proposed and that "the others" had agreed to go along with the increase, but that they wanted to know what Schottland proposed to do (N.T. 3-204 to 3-207, 11-63 to 11-65, 14-152 to 14-159). Schottland said that he "would go along" with the price increase and Robert Harley said that, since Schottland had agreed, he, too, would go along with the price increase. Id.
The second problem which developed was that, in the late 1960's or early 1970's, Rose Loughrey ("Loughrey"), a price analyst with Continental, became dissatisfied with her employment at Continental, because she felt she was the victim of sex discrimination and also because she was disturbed by the "collusion" among the competitors. In the course of discussing these problems with Landon and her other superiors at Continental, Loughrey threatened to inform someone at the United States Department of Justice about the continuing price-fixing meetings and agreements among the representatives of the competing manufacturers. On at least three occasions, at informal meetings held during the PSSMA conventions in Atlanta, Georgia, in April, 1973; Hamilton, Bermuda, in late September, 1975; and, the City Line Marriott in Philadelphia in October, 1975, either Landon or Cooper of Continental briefed a group consisting variously of Rue and Kiendl of Chase and representatives from St. Regis, Harley and American, on the current status of the "Rose Loughrey situation" (N.T. 3-127 to 3-133, 8-27 to 8-33, 11-60 to 11-62, 14-154, 14-161 to 14-163).
The final problem was St. Regis' announcement that they were no longer going to follow the Continental list price but were going to formulate their own list price, particularly for the purpose of pricing pet food bags. At private, informal meetings held during the PSSMA conventions in New Orleans in April, 1974, and Chicago in June, 1974, attended by Cooper of Continental, Rue and Kiendl of Chase and representatives from St. Regis, American, Harley and Bemis, St. Regis' proposal was discussed (N.T. 10-208 to 10-209, 14-104 to 14-106, 15-55 to 15-60). At a prior meeting held during the Pebble Beach PSSMA meeting in October, 1973, Landon of Continental had announced to the group that Continental was the "price leader" and would publish the price book and other factor information (N.T. 10-201, 15-24). At the June, 1974, PSSMA meeting in Chicago, in response to St. Regis' announcement that it was going to issue a new pet food price list, Cooper of Continental responded, "Go ahead do it be my guest" (N.T. 10-209). Most of the group, however, responded favorably to St. Regis' proposal, and Robert Harley advised St. Regis that he would follow their list when they published it (N.T. 10-209, 14-104 to 14-106, 15-55 to 15-60). St. Regis issued their new price list December 30, 1974; and all of the other major competitors, including Continental and Chase, followed St. Regis' format and adopted it as the industry list (N.T. 7-76 to 7-77, 9-139 to 9-211, 10-211, 14-27 to 14-28, 14-55 to 14-57). However, by the time of the next price increase, Continental had again established itself as the price leader and issued new price lists which, Inter alia, reflected St. Regis' format.
In addition to discussions and agreements about the prices and the terms and conditions for the sale of consumer bags among representatives of Continental, Chase, St. Regis, Harley and American, at meetings held from 1950 through October of 1976, representatives from all of these companies also discussed and agreed upon the prices and the terms and conditions for the sale of consumer bags over the telephone. These calls, alternately referred to as "monitoring" or "verifying" calls, were made for the purpose of either obtaining a list price "multiplying factor" for a component not included on the list or to ensure that Continental and its competitors were quoting identical prices to their customers for bags with similar specifications (N.T. 3-64, 4-86, 4-103, 6-167, 12-141 to 12-147, 15-94 to 15-115). For example, Loughrey testified that, from approximately 1961 to 1970, when Continental received a request for a price on a particular bag, Continental representatives would call all of the competitors who made that particular type of bag, E. g., heat-sealed, to ask if they had received a similar inquiry and, if so, what price they were going to quote to the customer (N.T. 12-40 to 12-43). Loughrey also testified that she was advised by her superiors at Continental to accept "verification" calls from particular representatives at American, Arkell, St. Regis, Harley and Bemis, and that she was introduced individually to these representatives by telephone (N.T. 12-96 to 12-112). Loughrey also testified that she was authorized to receive "verification" calls from representatives at Chase after Chase acquired Arkell (Id.). Cooper and other Continental representatives engaged in these "verification" calls with representatives of Harley (N.T. 2-213, 3-61 to 3-62, 3-68 to 3-74, 4-43 to 4-78, 4-82 to 4-95, 4-147, 12-98), American (N.T. 4-78 to 4-138, 8-197, 9-190 to 9-196, 12-98, 15-81 to 15-86, 15-91 to 15-115), Chase (N.T. 12-97 to 12-104, 12-107 to 12-109), St. Regis (N.T. 12-106 to 12-107), and other competitors through at least 1975 (N.T. 4-43, 4-75 to 4-96, 15-101 to 15-109). Rue and other representatives from Chase engaged in these "verification" calls with representatives from Harley (N.T. 3-71 to 3-74, 4-62, 4-104 to 4-106), St. Regis (N.T. 15-103 to 15-104), American (N.T. 15-87 to 15-88, 15-104 to 15-105) and Continental (N.T. 12-97 to 12-104, 12-107 to 12-109), through at least late 1975 (N.T. 4-104 to 4-106, 15-104 to 15-112). There was testimony at trial that, after a competitor's price was "verified," that price would be met but never undercut (N.T. 4-86, 4-103, 10-138 to 10-139, 12-123).
As various representative's "contacts" changed, these changes would be made known to the group as a whole or through personal, individual introductions. For example, at the meeting at Hilton Head Island held January 16, 1970, attended by Cooper and Landon of Continental, Alexander, Wells and Kiendl of Chase and representatives from St. Regis, American, Equitable Bag Company and Harley, Landon advised the group that Harris Weaver ("Weaver"), rather than Loughrey, was the person to call at Continental to "verify" prices (N.T. 3-61). And at several PSSMA meetings beginning with the Palm Beach, Florida, meeting held January 9 to 11, 1974, Cooper introduced Mawicke and/or Weggeman to representatives of Harley and American ...