Appeal from the District Court of the United States for the District of Connecticut.
Before MANTON, SWAN, and CHASE, Circuit Judges.
This litigation was first before this court on an appeal from an order relating to a bill of discovery. See 63 F.2d 778. Following that the case was tried to a jury in the District Court, where a verdict was returned in favor of the defendant and judgment entered thereon. The plaintiff's appeal to this court resulted in a reversal and remand for a new trial. See (C.C.A.) 72 F.2d 236. At the second trial, the plaintiff obtained a verdict for $956,300, upon which judgment for three times that amount, together with costs including an attorney's fee of $300,000, was entered. The present appeal is from this judgment.
The defendant, a Pennsylvania corporation, is the sole producer of virgin aluminum in the United States. Its business is the outgrowth of that of the Pittsburgh Reduction Company which began to manufacture aluminum at Pittsburgh, Pa., in 1888. Its predecessor and the defendant will hereinafter be treated as one and called the defendant. It acquired the rights under the United States patents to Charles M. Hall which issued in 1886 and disclosed a revolutionary process for extracting alumina (the oxide of aluminum) from the base ore bauxite by means of electrolysis and mainly because it controlled these patent rights succeeded in vastly increasing the production of aluminum at a small percentage of its former cost. Before the Hall patents expired in 1903, the defendant was firmly entrenched in the business of producing virgin aluminum in this country, and it has ever since successfully maintained its supremacy in that field. It strenuously insists that this, however, has been due solely to the momentum of its patent monopoly coupled with its business skill and financial resources which have been employed at all times without violation of the anti-trust laws.
There are producers of virgin aluminum in foreign countries who have branches in this country from whom domestic users who do not choose to deal with the defendant may buy. The only ones which need be mentioned are the British Aluminum Company, Limited; L'Aluminium Francais (French); Alumunium Industrie (Swiss); and a German company, Vereinigte Aluminum Werke Aktiengesellschaft. They will hereafter be referred to as the foreign producers.
Besides virgin aluminum, the defendant and the foreign producers also manufacturer aluminum alloys which have a higher tensile strength than the pure metal and have been given various trade names. One which is perhaps most commonly known is called "duralumin" and was first developed commercially in Germany under that name. The defendant's product of similar composition and quantity is known as 17S and was first made in 1916.
Though the defendant alone produces virgin aluminum in the United States, there is a large business, which it does not control, in the reduction of aluminum scrap that yields a product not as uniform in quality but in other respects the equal of the virgin metal. The defendant's virgin aluminum and its alloys are sold in ingot form to manufacturers of aluminum sheet, wire, tubing, electric cable, foil, powder, rods, forgings, extruded and structural shapes, and many other articles. No distinction will be made herein between the pure aluminum and the alloys, but both will be called "aluminum."
Besides selling to manufacturers, the defendant has domestic subsidiaries who manufacturer all kinds of aluminum products and who compete directly with independent manufacturers of such goods. Until 1928 it also had foreign subsidiaries and itself engaged in foreign business, but in that year a Canadian corporation, called "Aluminium, Limited," was organized to which were transferred all of the defendant's foreign holdings, except its Dutch Guiana bauxite mines and the Alcoa Power Company which owned a water power development in Canada, in return for all of Aluminium, Limited's, capital stock. This stock was at once distributed to the defendant's stockholders in the ratio of one share of Aluminium, Limited, to each holder of three shares of the defendant's stock. Since then changes in stock ownership have occurred, but a small group of stockholders common to both corporations have always owned more than half of the stock of each. Since the organization of Aluminium, Limited, the defendant has confined its business to the United States.
The plaintiff, a Massachusetts corporation, is a manufacturer in Springfield and Chicopee, Mass., whose business in part is the making of aluminum products from aluminum ingot. It was already well established in business when, in 1919, it entered this field. Its aluminum business led a precarious existence from the start and was never a profitable venture. On April 18th in that year, the plaintiff brought a suit similar to this against the defendant in the District Court for the District of Massachusetts which was pending, though never tried, when the present action was brought in Connecticut on July 24, 1931.
The gist of its complaint it: (1) That the defendant has monopolized interstate trade in virgin aluminum by unlawfully combining and agreeing with the foreign producers that they will all charge substantially the same prices for virgin aluminum in this country; (2) that it so combined and agreed with Aluminium, Limited, that Aluminium, Limited, would not compete with it in the United States by selling virgin aluminum here; (3) that it did itself, and with its domestic subsidiaries, monopolize and restrain interstate trade in virgin aluminum; and (4) that it did, or attempted to, in concert with its domestic subsidiaries, monopolize interstate trade in substantial part by keeping the price of virgin aluminum high and the price of products manufactured from it low so that it was impossible for the defendant to compete with it in the manufacture of aluminum products, in that the cost of defendant's raw material plus the cost of manufacture and sale exceeded the price at which its product could be sold in competition with similar products so manufactured and sold by the defendant. In this connection the domestic subsidiaries of the defendant and the defendant will be herein treated as one.
The assignments of error are needlessly numerous. They cover no less than ninety pages in the record. None of them question the sufficiency of the evidence to take the issues to the jury. The occurrences which prejudiced the defendant, so it claims, have to do with the conduct of the trial wherein it is said that the trial judge abused his discretion; ruled erroneously in excluding and in admitting certain evidence; and made errors both of omission and commission in the charge.
The evidence that the defendant had violated the anti-trust laws as charged by the defendant was largely circumstantial. The only direct evidence of any such unlawful agreement is found in the testimony of Haskell, the plaintiff's president, who testified to a conversation he had with A. V. Davis, the president of the defendant, in which he said Davis told him that the defendant and the foreign producers had an agreement fixing the price at which they would all sell aluminum in the United States, which price the plaintiff must pay to obtain its raw material. Davis denied any such conversation, and other evidence than his own testimony tended strongly to discredit Haskell. The issue of credibility thus raised has been squarely presented to the jury in the first trial of this cause in a charge which made the verdict turn on its determination as to the verity of that evidence, and the jury then found not in accordance with Haskell's testimony but in favor of the defendant. In our reversing opinion [72 F.2d 236, 240] we held that the issues could not be confined so closely, saying in part: "Appellant's claim for damages is based upon the claim that the appellee had a monopoly. It was obliged to prove injury by the monopoly. It first attempted to show there was in fact a monopoly, and, for this purpose, evidence was admissible to show the conduct of persons in control and agreements and acts done preceding the vesting of power. Such evidence could be considered, although the acts occurred prior to the injury. To exclude this evidence was error. Nor should the appellant have been restricted to the introduction of evidence relating to transactions with domestic corporations. Relations with foreign corporations were admissible also for another reason. A monopoly within the United States created by contract or agreement with foreign corporations is unlawful. * * * The contracts entered into by the appellee and the appellee's subsidiaries with foreign corporations and the purchase of stock in these foreign corporations were admissible for the purpose of showing a tacit understanding not to compete. * * * The evidence of uniformity of prices in the United States which the appellee and the foreign producers charged over the period from 1919 to 1931, inclusive, under the circumstances, as the evidence disclosed, might well support a finding by the jury of an agreement between the appellee and the foreign producers. This issue should have been submitted to the jury irrespective of belief or disbelief of Haskell's testimony. Conspiracies are seldom capable of proof by direct testimony and may be inferred from the things actually done and from the circumstances. * * * The evidence presented by the appellant should have been submitted. * * * Moreover, the relationship of Aluminium, Limited, with the appellee and the holdings of Aluminium, Limited, in the foreign corporations, were items not to be disregarded."
At the instant trial one Babson, the vice president and general manager of the plaintiff, was produced as a witness for the plaintiff. During his examination by plaintiff's counsel he testified to making a trip abroad in 1929, during which he visited Switzerland and talked with officials of the Swiss company at Neuhausen. After saying that he talked with a Mr. Kaufman, who was then director of sales for the Swiss company and that he asked Kaufman to quote him a price for aluminum, the question, "What did he say?" was asked. To this counsel for the defendant objected on the ground that it was hearsay. The attorneys for both parties immediately began to discuss its admissibility with the court in the presence of the jury, in the course of which the court said there was evidence already in the case tending to show that the foreign companies and the defendant had agreed on a schedule of prices. To this statement defendant's attorney objected as not being correct, whereupon the trial was stopped while Haskell's testimony was looked into to determine whether there was evidence as indicated. A portion of it to that effect was found and then read to the court. After the reading plaintiff's counsel said: "But, if your Honor please, we do not base our claim with respect to the evidence upon any such narrow and specific ground as that, and I must say with all due respect --" He was then interrupted by the judge, who said: "It would be admissible on that ground, sir." To which counsel replied: "It would, indeed, but we do not claim it on that ground alone, and I say, with all due respect that if your Honor had said that there was not evidence already in the case showing that the Aluminum Company and the foreign companies had agreed on a schedule of prices, I would have been compelled to take an exception to it because the opinion of the United States District Court of Appeals on this very question, dealing with this evidence which has already gone in, is as follows --" At this point defendant's attorney objected to reading from our opinion. When told to let plaintiff's attorney finish and that his objection would be treated as seasonable, he informed the court that: "I was going to call it to your attention that this is a statement of a court not on this record, and I submit it is not admissible before a jury. It is not a statement of any proposition of law. It is a statement which purports to be a narrative drawn not from the evidence before this jury, and that is my objection to its being read. I submit that it should not be read." Upon being assured by plaintiff's counsel that what he proposed to read "* * * is not a question of fact but of law, and the law of this case, * * *" the portion of our former opinion which has been above quoted was read to the court before the jury. Defendant's attorney then renewed his objection, saying: "I renew my objection and save my exception to this having been read, specifically because it is a statement that is entirely, so far as this case is concerned, hearsay of the testimony in another case, and in a case that your Honor cautioned the jury that they should abstain from discussing or learning anything about, and is a statement based not upon the evidence that is before this jury. Those are the grounds of my exception." Then the following took place:
"The Court: But it seems to me that we have already got evidence on every one of those questions in the case now.
"Plaintiff's Attorney: Every one of them; every one of them.
"Defendant's Attorney: Whether we have any evidence on this subject, if your Honor please, does not make it any less the fact that the statements read to the jury were not based on this evidence in this case, and it is merely bringing in a hearsay report of what was in another case, reading a part of the opinion about what was the situation apart from this Haskell testimony, and I submit that it brings before the jury things which are not before the jury by the evidence in this case, and is doing the very thing with your Honor's sanction, that you directed the jury to avoid doing -- finding out anything about what had occurred in that other case.
"The Court: No, I do not agree with you at all on that theory. The opinion that counsel has read states the law of this case. That opinion is directions to me as to what to do on this trial. They are my orders.
"The Foreman: Let us put it the other way around. In your charge wouldn't you have given about the same thing as this anyway?
The Court: Yes, but more in detail.
"The Foreman: The point is that we would have heard it at some time, whether now or later.
"Defendant's Attorney: Well --
"The Court: It is a new practice to me to have objections -- I will withdraw the word "objections' -- I have always been accustomed to have counsel raise questions of law and you have raised your objections here. The Foreman has a right to ask me what the law is. When we recessed I had not thought of this theory that you have just read from the opinion of the Court of Appeals, but I was proceeding on the very elementary and well-established rule that when evidence in a case tends to show a combination or a conspiracy, then the declaration of any of the conspirators in pursuance of the conspiracy are admissible, and it is an exception to the hearsay rule. If you are willing to proceed on that theory, all right. Have I stated it correctly?
"Plaintiff's Attorney: Yes, sir, and upon this further ground that is stated here, that all of this evidence together establishes that, if credited.
"The Court: I will admit it on theories." This exception should be considered in connection with another exception taken to the reading from our former opinion a few days later during the cross-examination of one MacDowell, the first witness called by the defendant after the plaintiff rested. This witness had testified that he had spent many years in Japan as a salesman for the defendant and was familiar with the aluminum situation and prices in Japan when he was there; that he was sales manager of Aluminium, Limited, which sold aluminum in Japan; and that following the Japanese market was a part of his business with which he was familiar. He was then asked: "What was the price of aluminum in Japan in 1930?" At this point the following took place in the presence of the jury.
"Defendant's Attorney: This I object to, if your Honor please.
"The Court: Do you propose to show that the prices were uniform?
"Plaintiff's Attorney: No; I propose to show that Japan was a free market. Until they had this agreement with the Swiss company there really was some competition in Japan, that aluminum was selling at about 14 cents, which would indicate what its price would be in an open and free market.
"The Court: Did the Circuit Court say anything about this, admitting evidence of prices? I don't recall that they did.
"Plaintiff's Attorney: Well, if you Honor please, I do not think it did specifically, but of course it did in a legal sense when it dealt with what would be the price in a competitive market, and naturally, there having been only one producer in the United States, there could not be any competition between two producers here, so that we have to seek for the best that we can to show what it was if taken in the free exercise of competitive forces, and that would take us to Japan.
"Defendant's Attorney: There was nothing whatever in the opinion of the Circuit Court of Appeals bearing on this subject, either expressly or by any reasonable inference from what they did say.
"The Court: Not by indirection?
"Defendant's Attorney: Not by indirection, in any way.
"The Court: Well, I have read that several times. I read it last evening again. It is quite a long opinion. I have had a brief on it. You ...