United States v. Ward Baking Company/Opinion of the Court

This appeal raises the question of whether and under what circumstances a District Court may properly enter a 'consent' judgment in a civil antitrust suit without the consent of the Government and without trial of certain disputed issues.

On July 21, 1961, the Government filed a civil complaint in the United States District Court for the Middle District of Florida. The complaint charged the five appellee bakery companies with violating § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1, by conspiring:

'(a) To allocate among themselves the business of supplying     bakery products (defined as bread and rolls) to the United      States Naval installations in the Jacksonville area; and

'(b) To submit noncompetitive, collusive, and rigged bids and     price quotations for supplying bakery products to United      States Naval installations in the Jacksonville area.'

The Government sought relief, including an adjudication that the companies had violated the Act, an injunction against allocating business or fixing prices in the supplying of bakery products to United States naval installations in the Jacksonville area, and 'such further, general, and different relief as the nature of the case may require and the Court may deem appropriate in the premises.'

On May 8, 1962, after an extensive period of settlement negotiations, the bakery companies filed with the court a proposed form of judgment which would have enjoined the companies from conspiring to:

'(a) Submit noncompetitive, collusive or rigged bids, or     quotations for supplying bakery products to United States      Naval installations in the Jacksonville area, or '(b) Allocate, divide or rotate the business of   supplying bakery products to United States Naval   installations in the Jacksonville area.' (Emphasis   added.)

The proposed judgment would also have required the companies to include sworn statements of noncollusion in each bid for bakery products submitted to any naval installations in the Jacksonville area for the following three years.

The District Court ordered the Government to show cause 'why the said proposed judgment * *  * should not be entered.' The Government replied, objecting 'to confining the scope of the injunction to bids for supplying bread and rolls to United States Naval Installations in the Jacksonville area' and 'to limiting the requirement *  *  * that bids be accompanied by sworn statements of non-collusion, to a three year period.'

The bakery companies then filed an amended motion for entry of consent judgment, containing two significant changes in their original proposal. Its scope was broadened to include all bakery products, not only bread and rolls, and to include all sales to the United States, not only to its naval installations in the Jacksonville area. Subsequently, at the hearing on the order to show cause, the companies agreed to increase, from three to five years, the period during which they were to submit sworn statements of noncollusion.

The Government opposed entry of the amended proposed consent judgment on the ground that it still omitted two necessary items of relief:

'(1) a general injunction against conspiring to fix the price     of bakery products to any third party other than the      Government, and (2) an injunction against urging or      suggesting to any seller of bakery products the quotation or      charging of any price or other terms or conditions of sale of      bakery products.' Despite these objections, the District Court entered the amended 'consent' judgment proposed by the companies. The judgment recited that it was entered 'without trial or adjudication of any of the issues of fact or law herein and before the taking of any testimony * *  * .' In his opinion accompanying the entry of judgment, the district judge said:

'The demand of the plaintiff as to the inclusion of the two     controversial provisions in its tendered judgment does not      have a reasonable basis under the circumstances here present. * *  * Based upon this court's knowledge of the facts involved      in Case No. 11677-Crim-J and this record, the proposed      judgment which the court is entering provides all the relief      to which the plaintiff would be entitled after the entry of a      decree pro confesso against each defendant and after a trial      on the allegations of this complaint. * *  * The mere fact      that a court has found a defendant has committed an act in      violation of a statute does not justify an injunction broadly      to obey the statute and thus subject the defendant to      contempt proceedings if he shall at any time in the future      commit some new violation unlike and unrelated to that with      which he was originally charged.'

The Government, pursuant to § 2 of the Expediting Act, 32 Stat. 823, as amended, 15 U.S.C. § 29, appealed directly to this Court from the entry of judgment. Probable jurisdiction was noted. 374 U.S. 803, 83 S.Ct. 1694, 10 L.Ed.2d 1029. We conclude that the additional relief sought by the Government had a reasonable basis under the circumstances and that, consequently, the District Court erred in entering the 'consent' judgment without the Government's actual consent.

This Court has recognized that a 'full exploration of facts is usually necessary in order (for the District Court) properly to draw (an antitrust) decree' so as 'to prevent future violations and eradicate existing evils.' Associated Press v. United States, 326 U.S. 1, 22, 65 S.Ct. 1416, 1425, 89 L.Ed. 2013. After a District Court has concluded that a conspiracy in restraint of trade exists, it:

'has the duty to compel action by the conspirators that will,     so far as practicable, cure the ill effects of the illegal      conduct, and assure the public freedom from its continuance. Such action is not limited to prohibition of the proven means     by which the evil was accomplished, but may range broadly      through practices connected with acts actually found to be      illegal. Acts entirely proper when viewed alone may be     prohibited. The conspirators should, so far as practicable,     be denied future benefits from their forbidden conduct. * *  *      (R) elief, to be effective, must go beyond the narrow limits      of the proven violation.' United States v. United States      Gypsum Co., 340 U.S. 76, 88-89, 90, 71 S.Ct. 160, 169-170, 95     L.Ed. 89.

It would be a rare case where all the facts necessary for a trial court to decide whether a disputed item of relief was warranted could be determined without an 'opportunity to know the record.' Id., 340 U.S. at 89, 71 S.Ct. at 169, 95 L.Ed. 89. This is not such a case.

The dispute here concerned whether the injunction should include prohibitions against (1) price fixing in sales to parties other than the United States Government, and (2) 'urging or suggesting to any seller of bakery products the quotation or charging of any price or other terms or conditions of sale of bakery products.'

The conspiracy alleged in the complaint was a particularly flagrant one. The complaint charged specifically that:

'Representatives of the defendants held meetings and     conferred by telephone for the purpose of allocating among the defendants the business of supplying bakery      products to United States Naval installations in the      Jacksonville area. The business was allocated in such a     manner as to provide each defendant with the business for a      designated quarterly period of the year. When invitations to     bid were received from the Naval installations in the      Jacksonville area, said representatives would again meet and      confer and the representatives of the defendant designated      for the particular period would declare the prices which that      defendant intended to bid. The others would agree to bid     higher prices and thus protect the bid of the designated low      bidder.'

As this Court has said: 'Acts in disregard of law call for repression by sterner measures than where the steps could reasonably have been thought permissible.' 340 U.S., at 89-90, 71 S.Ct. at 169-170, 95 L.Ed. 89. The acts here alleged could not, under any theory, have been thought permissible. 'It is a salutary principle that when one has been found to have committed acts in violation of a law he may be restrained from committing other related unlawful acts ' National Labor Relations Board v. Express Pub. Co., 312 U.S. 426, 436, 61 S.Ct. 693, 699, 85 L.Ed. 930.

The allegedly illegal acts were surrounded by 'circumstances,' United States v. United States Gypsum Co., supra, 340 U.S. at 89, 71 S.Ct. at 169, 95 L.Ed. 89, which did not preclude the possibility that the relief sought by the Government would be warranted. In fact, the circumstances tended to support the view that the practices which the Government sought to enjoin were 'connected' with and 'related' to practices which the companies may in the past have followed. The Government informed the District Court that 'on June 27, 1962, a federal grand jury in Philadelphia indicted the defendant Ward Baking Company on a charge of conspiring with five other baking companies to fix the prices of 'economy' bread sold in the Philadelphia-Trenton area.' The record before the District Court showed, moreover, that four of the defendants had previously pleaded nolo contendere to charges of conspiring to fix prices on sales to nongovernment accounts, such as 'grocery stores, supermarkets, restaurants, hotels and similar large purchasers.' Thus, the surrounding circumstances suggest the possibility of a conspiracy reaching beyond the Jacksonville area, beyond bread and rolls, and, most significantly, beyond sales to the Government.

Against this background, it cannot reasonably be assumed that the Government could not, at the trial, have introduced evidence justifying, in whole or in part, the relief sought. This is not to say, of course, that the District Court could not correctly have concluded, after trial and an 'opportunity to know the record and to appraise the need for prohibitions or affirmative actions,' United States v. United States Gypsum Co., supra, 340 U.S. at 89, 71 S.Ct. at 169, 95 L.Ed. 89, that the requested relief was not warranted. Under the circumstances of this case, however, it could not so conclude without a trial.

Since we conclude that there was a bona fide disagreement concerning substantive items of relief which could be resolved only by trial, we need not, and do not, reach appellees' contention that, where there is agreement on every substantive item of relief, insistence by the Government upon an adjudication of guilt as a condition to giving its consent to a judgment would conflict with the congressional policy embodied in § 5 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. § 16. Compare, United States v. Brunswick-Balke-Collender Co., D.C., 203 F.Supp. 657. We decide only that where the Government seeks an item of relief to which evidence adduced at trial may show that it is entitled, the District Court may not enter a 'consent' judgment without the actual consent of the Government. There is nothing in the language or legislative history of § 5 of the Clayton Act indicating that Congress intended to give a defendant the privilege of rejecting the bona fide demands of the Government and at the same time avoiding an adjudication on the merits of the complaint. The companies argued before the District Court that they should not be 'foreclosed from a right to go to trial if (the District Court decides) to enter the Government's Decree.' Nor should the Government be foreclosed from that same right where, as here, the District Court decides, over the Government's objection, to enter the companies' proposed decree.

Accordingly, the judgment is vacated and the case is remanded for trial.

It is so ordered.

Judgment vacated and case remanded.