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MINNESOTA MINING & MANUFACTURING CO. v. NEW JERSEY WOOD FINISHING CO.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT.
Argued April 29, 1965.
Decided May 24, 1965.
Respondent filed this private antitrust suit in 1961, alleging violations of 7 of the Clayton Act and 1 and 2 of the Sherman Act, arising out of petitioner's acquisition in 1956 of the assets of Insulation and Wires, Inc., which had been the primary distributor of electric insulation materials manufactured by respondent. Petitioner claimed that the action was barred by the four-year limitation provision of 4B of the Clayton Act, but respondent asserted that the bar of the statute was tolled under 5 (b) by a proceeding timely filed in 1960 against petitioner pursuant to 7 of the Clayton Act by the Federal Trade Commission (FTC). That proceeding resulted in a consent order under which petitioner was directed to divest itself of the acquired assets. Section 5 (a) of the Clayton Act makes a final judgment or decree in any civil or criminal proceeding brought by or on behalf of the United States prima facie evidence in later private suits as to all matters respecting which that judgment or decree would be an estoppel as between the parties. Section 5 (b) provides that a civil or criminal proceeding instituted by the United States to prevent, restrain or punish violations of the antitrust laws tolls the statute of limitations during the pendency thereof and for one year thereafter for private actions arising under those laws and based on any matter complained of in the government suit. The District Court held that the statute had been tolled by 5 (b) and that the suit was timely filed, and the Court of Appeals affirmed. Held:
Sidney P. Howell, Jr., argued the cause for petitioner. With him on the briefs were Charles C. Trelease and Edwin E. McAmis.
Albert G. Besser argued the cause and filed a brief for respondent.
Lewis C. Green and Gustav B. Margraf filed a brief for Reynolds Metals Co., as amicus curiae, urging reversal.
Briefs of amici curiae, urging affirmance, were filed by Solicitor General Cox, Assistant Attorney General Orrick, Frank Goodman, Robert B. Hummel and Irwin A. Seibel for the United States, and by Alex Akerman, Jr., Thomas A. Ziebarth and Robert E. Staed for Highland Supply Corp.
MR. JUSTICE CLARK delivered the opinion of the Court.
This private treble-damage antitrust action was brought by the New Jersey Wood Finishing Company against Minnesota Mining and Manufacturing Company and the [381 U.S. 311, 313] Essex Wire Corporation. 1 Respondent's original complaint was filed on November 20, 1961. 2 It alleged violations of 7 of the Clayton Act, 3 a conspiracy to restrain commerce in electrical insulation products in violation of 1 of the Sherman Act and an attempt to monopolize the same as prohibited by 2. 4 The substance of the complaint concerned the acquisition in 1956 of all the assets of Insulation and Wires, Inc., a subsidiary of Essex, by Minnesota Mining and an alleged conspiracy to restrain trade in electrical insulation products. The latter claimed that the suit was barred by the four-year limitation provision of the Clayton Act. 5 However, New Jersey Wood asserted that the bar of the statute had been tolled by a proceeding filed in 1960 against Minnesota Mining by the Federal Trade Commission under 7 of the Clayton Act. That action resulted in a consent order under which Minnesota Mining was directed to divest itself of the assets acquired. Section 5 (b) of the Clayton Act 6 provides [381 U.S. 311, 314] that a "civil or criminal proceeding . . . instituted by the United States to prevent, restrain, or punish violations of any of the antitrust laws" suspends the running of the statute of limitations during the pendency thereof and for one year thereafter with respect to private actions arising under those laws and based on any matter complained of in the government suit. The questions here are whether proceedings by the Federal Trade Commission toll the running of the 4B statute of limitations to the same extent as do judicial proceedings and, if they do, whether the claim of New Jersey Wood is based on "any matter complained of" in the Commission action. The District Court denied Minnesota Mining's motion to dismiss, holding that the four-year statute had been tolled by 5 (b) and that this suit was timely filed. 216 F. Supp. 507. The Court of Appeals affirmed. 332 F.2d 346. We granted certiorari because of a conflict between circuits 7 and the importance of the question in the administration of the Clayton Act. 379 U.S. 877 .
New Jersey Wood is engaged in the manufacture of electrical insulation materials, some of which it sells to independent distributors who, in turn, sell to wire and [381 U.S. 311, 315] cable manufacturers and fabricators. Minnesota Mining is a diversified company, with one of its divisions producing electrical insulation materials. Essex is a substantial consumer of electrical insulation material. It owned Insulation Wires which distributes that type of material.
In August 1956 Minnesota Mining bought all the assets of Insulation Wires and in 1960 the Federal Trade Commission filed a proceeding against it under 7 of the Clayton Act which resulted in a consent order directing the divestiture by Minnesota Mining of the assets so acquired. This order was dated August 24, 1961. The Commission charged that prior to 1953 Minnesota Mining was the leading manufacturer of electrical insulation tape; that through five transactions in the years 1952 through 1956 it had also brought under its control substantial shares of other major electrical product lines; and that its subsequent acquisition of two of the three largest distributors of these products might have the effect of actually or potentially lessening competition and tending to create a monopoly in various aspects of that commerce. One of the two distributors so acquired was Insulation Wires.
Thereafter, within a year, this suit was filed. We need not detail the allegations of the complaint. It is sufficient to say that the gist of it was that prior to August 1956 Insulation Wires was the primary distributor of New Jersey Wood products throughout the United States; that in August 1956 Minnesota Mining acquired all of the assets of Insulation Wires and during the next month notified New Jersey Wood that beginning in January 1957 Insulation Wires would no longer distribute its products. The complaint also charged Minnesota Mining and Essex with conspiring to restrain trade and commerce in the manufacture, sale and distribution of electrical insulation products beginning with the acquisition of Insulation [381 U.S. 311, 316] Wires and continuing until the filing of this suit. There were numerous overt acts alleged as being in furtherance of the conspiracy, the first of which was that acquisition.
At the outset it is necessary to examine 5 (a) of the Clayton Act 8 and its relationship to 5 (b). The former makes a final judgment or decree in any civil or criminal proceeding brought by or on behalf of the United States prima facie evidence in subsequent private suits "as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto." Several distinctions between these sections are apparent and suggest that they are not wholly interdependent. First, the words "final judgment or decree" are used in 5 (a) and are of crucial significance in its application. However, 5 (b) tolls the statute of limitations set out in 4B from the time suit is instituted by the United States regardless of whether a final judgment or decree is ultimately entered. Its applicability in no way turns on the success of the Government in prosecuting its case. Moreover, under 5 (a) the judgment or decree may be used only as to matters respecting which it would operate as an estoppel between the parties. No such limitation appears [381 U.S. 311, 317] in the tolling provision. It applies to every private right of action based in whole or in part on "any matter" complained of in the government suit.
When we turn from the express language of these two statutory provisions to the congressional policies underlying them, it becomes even more apparent that the applicability of 5 (a) to Federal Trade Commission actions should not control the question whether such proceedings toll the statute of limitations. We have discussed these policies at greater length below. At this juncture it is sufficient to say that in framing 5 (a) Congress focused on the narrow issue of the use by private parties of judgments or decrees as prima facie evidence. This was recognized in Emich Motors Corp. v. General Motors Corp., 340 U.S. 558 (1951), where we stated that the purpose of 5 (a) was "to minimize the burdens of litigation for injured private suitors by making available to them all matters previously established by the Government in antitrust actions" and to permit them "as large an advantage as the estoppel doctrine would afford had the Government brought suit." Id., at 568. As we shall show, however, its purpose in adopting 5 (b) was not so limited, for it was not then dealing with the delicate area in which a judgment secured in an action between two parties may be used by a third. Whatever ambiguities may exist in the legislative history of these provisions as to other questions, it is plain that in 5 (b) Congress meant to assist private litigants in utilizing any benefits they might cull from government antitrust actions. See S. Rep. No. 619, 84th Cong., 1st Sess., 6. The distinction was emphasized in Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (1962), where the court, after noting the analysis of 5 (a) set out in Emich Motors Corp., supra, stated that:
Section 5, later 5 (a) and 5 (b), was passed in response to the plea of President Wilson. In a speech to the Congress on January 20, 1914, he urged that a law be enacted which would permit victims of antitrust violations to have "redress upon the facts and judgments proved and entered in suits by the Government" and that "the statute of limitations . . . be suffered to run against such litigants only from the date of the conclusion of the Government's action." 51 Cong. Rec. 1964. The broad aim of this enactment was to use "private self-interest as a means of enforcement" of the antitrust laws. Bruce's Juices, Inc. v. American Can Co., 330 U.S. 743, 751 [381 U.S. 311, 319] (1947). The "entire provision [was] intended to help persons of small means who are injured in their property or business by combinations or corporations violating the antitrust laws." H. R. Rep. No. 627, 63d Cong., 2d Sess., 14. See S. Rep. No. 619, supra, at 6.
It may be, as Minnesota Mining contends, that when it was enacted the tolling provision was a logical backstop for the prima facie evidence clause of 5 (a). But even though 5 (b) complements 5 (a) in this respect by permitting a litigant to await the outcome of government proceedings and use any judgment or decree rendered therein - a benefit which often is of limited practical value 9 - it is certainly not restricted to that effect. As we have pointed out, the textual distinctions as well as the policy basis of 5 (b) indicate that it was to serve a more comprehensive function in the congressional scheme of things. The Government's initial action may aid the private litigant in a number of other ways. The pleadings, transcripts of testimony, exhibits and documents are available to him in most instances. In fact, the rules of the Commission so provide. 16 CFR 1.132 (e). See generally 16 CFR 1.131 et seq. Moreover, difficult questions of law may be tested and definitively resolved before the private litigant enters the fray. The greater resources and expertise of the Commission and its staff render the private suitor a tremendous benefit aside from any value he may derive from a judgment or decree. Indeed, so useful is this service that government proceedings are recognized as a major source of evidence for private parties. See Bicks, The Department of Justice and Private Treble Damage Actions, 4 Antitrust Bull. 5 (1959); Loevinger, Handling a Plaintiff's Antitrust Damage Suit, 4 Antitrust Bull. 29 (1959). [381 U.S. 311, 320]
Admittedly, there is little in the legislative history to suggest that Congress consciously intended to include Commission actions within the sweep of the tolling provision. But neither is there any substantial evidence that it consciously intended to exclude them. The fact of the matter is that the record of the 1914 legislative proceedings reveals an almost complete absence of any discussion on the tolling problem. It seems that Congress simply did not consider the extent of its coverage in the course of its deliberations.
It is in light of this legislative silence that we must determine whether 4B is tolled by Commission proceedings. In resolving this question we must necessarily rely on the one element of congressional intention which is plain on the record - the clearly expressed desire that private parties be permitted the benefits of prior government actions. Implicit in such an objective is the necessity that the tolling provision include Commission proceedings. Otherwise the benefits flowing from a major segment of the Government's enforcement effort would, in many cases, be denied to private parties. In this connection, and of crucial significance, is the fact that the potential advantages available to such litigants because of 5 (b) reach far beyond the specific and limited benefits accruing to them under 5 (a). Furthermore, the 5 (b) advantages flow as naturally from Commission proceedings as they do from Justice Department actions. Yet petitioner contends that 4B must be tolled in the latter but not in the former. Such a grudging interpretation of the interrelationship of 5 (b) and 4B, however, would collide head-on with Congress' basic policy objectives. Acceptance of petitioner's position would make enjoyment of these intended benefits turn on the arbitrary allocation of enforcement responsibility between the Department and the Commission, and we must therefore reject it. [381 U.S. 311, 321]
It is true that the precise language of 5 (b) does not clearly encompass Commission proceedings. But it is not the literal wording of such a provision that is controlling where, as here, Congress has evidenced neither acceptance nor rejection of either interpretation, yet one effects a clearly expressed congressional purpose while the other defeats it. We stated the pivotal question for determination in such an event only this Term in Burnett v. New York Central R. Co., 380 U.S. 424, 427 (1965): "[W]hether congressional purpose is effectuated by tolling the statute of limitations in given circumstances." In order to determine that intent, we must examine "the purposes and policies underlying the limitation provision, the Act itself, and the remedial scheme developed for the enforcement of the rights given by the Act." Ibid. Guided by these criteria, we think it clear that congressional policy sustaining 5 (b) would be effectively served only by tolling the statute of limitations in cases such as this, and we deem that policy controlling. This analysis is not a novel one. Mr. Justice Holmes, sitting on circuit, noted in Johnson v. United States, 163 F. 30, 32:
Minnesota Mining further contends that even though 5 (b) tolls Commission proceedings, the suit here, insofar as it asserts Sherman Act claims, is not based in part on any matter complained of in the Commission's proceeding. We cannot agree.
New Jersey Wood's Sherman Act claims rest on an alleged conspiracy to restrain and attempt to monopolize trade and commerce in the manufacture, sale and distribution of electrical insulation products. The purposes of the conspiracy were alleged to be: (1) to control Insulation Wires; (2) to prevent it from distributing New Jersey Wood products; (3) to insure that Insulation Wires' supplies were purchased from a Minnesota Mining subsidiary; (4) to effect tie-in sales of electrical insulation products with other Minnesota Mining products; and (5) to have Essex deal only with Insulation Wires in purchasing electrical insulation products to the exclusion of competitive distributors handling New Jersey Wood products. The effect of the conspiracy was alleged to be the complete disruption of the pattern of manufacture, sale and distribution that New Jersey Wood had enjoyed with Insulation Wires and denial to it of access to substantial national markets for electrical insulation products.
Certainly the allegations are based "in part" on the Commission action. It charged that the Insulation Wires acquisition, along with that of another distributor, placed [381 U.S. 311, 323] in the hands of Minnesota Mining, a manufacturer, two of the three largest distributors in the business; that following the acquisitions these distributors discontinued distribution of the products of a number of manufacturers who had used them prior to their acquisition by Minnesota Mining; and that the effect of such action by Minnesota Mining was "the actual or potential lessening of competition" in the manufacture, sale and distribution of insulation products and the foreclosure of other manufacturers from a substantial share of the markets for said products. It appears to us that both suits set up substantially the same claims. It is true that the Commission's Clayton Act proceeding required proof only of a potential anticompetitive effect while the Sherman Act carries the more onerous burden of proof of an actual restraint. The Commission complaint, however, did allege an "actual" as well as a "potential" lessening of competition, i. e., manufacturers "have been foreclosed from a substantial share of the markets." Moreover, the monopolization count was phrased in terms of an "attempt to monopolize," which may be illegal though not successful. See United States v. Columbia Steel Co., 334 U.S. 495, 525 , 531-532 (1948).
Minnesota Mining's claim seems to be that the crucial difference between the Commission and the New Jersey Wood proceedings is that the former alleges conduct that may substantially lessen competition while the latter asserts activity that has actually done so. We think that this is a distinction without a difference and does not deprive New Jersey Wood of the tolling effect of 5 (b). That clause provides for tolling as long as the private claim is based "in part on any matter complained of" in the government proceedings. The fact that New Jersey Wood claims that the same conduct has a greater anti-competitive effect does not make the conduct challenged any less a matter complained of in the government action. [381 U.S. 311, 324] It merely requires it to meet a greater burden of proof as to the effect of the conspiracy before a Sherman Act claim can be sustained.
[ Footnote 2 ] During the pendency of the case in the District Court respondent filed an amended complaint. However, respondent's theories of recovery and the controlling legal questions are common to both pleadings.
[ Footnote 3 ] 38 Stat. 731, as amended, 15 U.S.C. 18 (1964 ed.).
[ Footnote 4 ] 26 Stat. 209, as amended, 15 U.S.C. 1, 2 (1964 ed.).
[ Footnote 5 ] Section 4B of the Clayton Act, 69 Stat. 283, 15 U.S.C. 15b (1964 ed.), provides that:
[ Footnote 6 ] Section 5 (b), 38 Stat. 731, as amended, 15 U.S.C. 16 (b) (1964 ed.), provides:
[ Footnote 7 ] See Highland Supply Corp. v. Reynolds Metals Co., 327 F.2d 725 (C. A. 8th Cir. 1964).
[ Footnote 8 ] Section 5 (a), 38 Stat. 731, as amended, 15 U.S.C. 16 (a) (1964 ed.), provides:
[ Footnote 9 ] See Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537 (1954).
MR. JUSTICE BLACK, dissenting.
Section 4B of the Clayton Act bars a private antitrust damage suit unless brought within four years after the cause of action arises. 1 Section 5 (b) of the Act, as amended, 15 U.S.C. 16 (b) (1964 ed.), however, suspends the running of this limitation period "[w]henever any civil or criminal proceeding is instituted by the United States to prevent, restrain, or punish violations of any of the antitrust laws . . . ." I am unable to agree with the Court's holding that a purely administrative proceeding initiated by the Federal Trade Commission and decided by that same regulatory agency is the kind of "civil or criminal proceeding . . . instituted by the United States . . ." which tolls the statute of limitations under 5 (b). The Court itself concedes that even as amended "the precise language of 5 (b) does not clearly encompass Commission proceedings" and that "there is little in the legislative history to suggest that Congress consciously intended to include Commission actions within the sweep of the tolling provision." And the Solicitor General, while urging as amicus curiae the result the Court reaches today, candidly admits that this "result is difficult and perhaps impossible to justify in terms of conventional analysis of the text and legislative history . . . ." It is [381 U.S. 311, 325] because I think both the language of the statute and the legislative history persuasively, if not conclusively, show that Congress did not intend the construction the Court gives 5 (b) today, that I am unable to agree with its decision.
The whole of 5, now divided into subdivisions (a) and (b), was passed in response to President Wilson's 1914 plea to Congress to enact a law designed to make it easier for antitrust victims to collect damages through private lawsuits since preparing an antitrust case against a major corporate defendant was a larger task than most injured persons could undertake. To accomplish that single purpose he recommended to Congress, as the Court notes, two things - that these victims be permitted to seek "redress upon the facts and judgments proved and entered in suits by the Government" and also that "the statute of limitations . . . be suffered to run against such litigants only from the date of the conclusion of the Government's action." 51 Cong. Rec. 1964. Congress accepted the President's recommendation and passed 5, a single section in two paragraphs, making "a final judgment or decree . . . rendered in any criminal prosecution or in any suit or proceeding in equity brought by or on behalf of the United States . . . prima facie evidence" against a civil antitrust defendant and tolling the statute of limitations during the pendency of "any suit or proceeding in equity or criminal prosecution . . . instituted by the United States . . . ." This language of 5 as it passed the Congress in 1914 clearly did not refer to administrative proceedings but to antitrust suits or criminal prosecutions instituted by the Government in civil or criminal courts. Moreover, the purpose and effect of the two parts of this provision were obviously complementary, permitting the injured party to utilize a final judgment obtained by the Government and also providing a means whereby the injured party could await the result of the government action [381 U.S. 311, 326] confident that his suit would not be barred by the statute of limitations. In the words of one of the committee reports, the "entire provision is intended to help persons of small means who are injured in their property or business by combinations or corporations violating the antitrust laws." H. R. Rep. No. 627, 63d Cong., 2d Sess., 14. (Emphasis supplied.) See S. Rep. No. 698, 63d Cong., 2d Sess., 45. Therefore, both the language and the complementary nature of the two paragraphs of 5 ought to show beyond any doubt that the whole section as passed was intended to apply to the same kind of proceeding in the same kind of tribunal - that is a proceeding brought in a civil or criminal court, the only tribunal which in common understanding has power to render the kind of "final judgment or decree" mentioned in 5 (a). 2 Furthermore, since the two paragraphs of 5 when offered and when passed were regarded as an entity because of their identical language and purpose, it is not surprising that the Senators and Congressmen addressing themselves to 5 did not specifically direct their remarks to the tolling provision as distinct from the effect to be given a court judgment or decree. Those discussing the measure naturally treated the "suit or proceeding in equity" or "criminal prosecution" set out in both paragraphs in identical terms as referring to the same kind of proceeding in the same kind of tribunal, namely a court. It is true that the language was changed in 1955 from "suit or proceeding in equity" and "criminal [381 U.S. 311, 327] prosecution" to "civil or criminal proceeding," the present language, but the legislative history of the 1955 amendment affirmatively shows that there was no intention to affect in any way the kind of court proceedings necessary to suspend the statute of limitations. Thus, I am unable to go along with the Court in construing the tolling provision of 5 (b) as though it applies to both court and Trade Commission proceedings while treating 5 (a) as though it may apply to court proceedings only. Such a holding would, in my judgment, run counter to the whole legislative history of the 1914 Act.
I am setting out as an Appendix some of the legislative history of the original Act and of the 1955 amendment, which points out specifically something which does not surprise me at all: that while Congress was ready to make the final judgment of a court prima facie evidence against a defendant, it was at the same time entirely unwilling to give such effect to administrative hearings and orders and was also unwilling to toll the statute of limitations during the pendency of such proceedings. It is true that many administrative agencies now conduct hearings, make findings, and issue orders in a way more or less comparable to courts. I doubt, however, that the time has even yet come when Congress would be willing to compel judges and juries to treat administrative orders as prima facie proof of a violation of law, either civil or criminal, or to treat those proceedings as though they were conducted in a court of law with all the protections there afforded litigants.
I would reverse this judgment.
Senator Walsh, the spokesman for the Judiciary Committee, led the fight for the House version of 5 and defended it on the ground that the defendant "has had an opportunity to try out before a court, with all the forms of the law, every question involved in the lawsuit. . . ." 51 Cong. Rec. 13851. (Emphasis added.) And Senator Walsh later added that "Here the party has had his day in court. He has tried every issue, and it is simply a question, now that he has had it tried, whether he may insist upon a second trial." 51 Cong. Rec. 13857. (Emphasis added.) Opponents of the "conclusive evidence" proposal of the House bill never challenged the premise, implicit in the remarks of Senator Walsh and others, that only judgments rendered in judicial proceedings were contemplated by 5. Not once did any member of Congress suggest that under the House version, administrative findings based upon evidence which would not be admissible in a court should be conclusive of the defendant's liability in a later treble-damage action.
Senator Walsh, in arguing that his proposal would not violate the Constitution, again emphasized that 5 did not apply to administrative orders, but only to judgments or decrees of the courts:
When the bill left the conference committee and went back to the House, the managers were called on to defend the changes against charges that elimination of the criminal penalties had emasculated the bill. Chairman Webb of the House Judiciary Committee attempted to describe the proposed enforcement procedures in the strongest possible light. After reading the provision vesting enforcement responsibility in the Trade Commission, he stated:
The House initially passed the Act with four substantive sections, each having a criminal penalty attached. All of the criminal penalties were removed in the Senate or in conference. Senator Reed of Missouri, leading the opposition to the bill, charged repeatedly that the Clayton Act had been stripped of all force and effectiveness:
[ Footnote 1 ] Section 4B of the Clayton Act, 69 Stat. 283, 15 U.S.C. 15b (1964 ed.), provides that:
[ Footnote 2 ] And of course, it is not at all clear that this is a suit "instituted by the United States." The Department of Justice brings suits and criminal prosecutions in the name of the United States, while an independent regulatory agency sues and is sued in its own name. And the United States does not initiate the proceedings before an administrative agency. Here for example the Federal Trade Commission filed the proceeding against petitioner. However, because of the view I take of the other language in the section, I find it unnecessary to decide this question.
MR. JUSTICE GOLDBERG, dissenting.
With all deference, I dissent. I agree with the Court, ante, at 321, that, as we recently stated in Burnett v. New York Central R. Co., 380 U.S. 424, 427 , the pivotal question for determination is "whether congressional purpose is effectuated by tolling the statute of limitations in given circumstances." I cannot agree, however, that the Court has correctly applied that test in this case. As my Brother BLACK has so well demonstrated in his dissenting opinion, both the language and legislative history of the statutes before us clearly show that Congress did not intend that the statute of limitations applicable to private antitrust actions be tolled by the institution of a Federal Trade Commission administrative proceeding. Cf. United States v. Welden, 377 U.S. 95 . It frustrates rather than effectuates congressional purpose to fail to honor the express intent of Congress in this given circumstance. [381 U.S. 311, 336]