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Hamilton Watch Co. v. Benrus Watch Co.

June 30, 1953


Author: Frank

Before SWAN, Chief Judge, and CLARK and FRANK, Circuit Judges.

The complaint of Hamilton Watch Company alleges that, in violation of Section 7 of the Clayton Act, 15 U.S.C.A., Section 18,*fn1 the defendant, Benrus Watch Company, Inc., has bought a large block of shares of the common (voting) stock of Hamilton, a competitor, for the purpose of obtaining control of Hamilton, and that, should Benrus succeed in achieving such control, it would control so considerably larger a percentage than it has previously of the interstate industry in which both companies are competitively engaged as to substantially lessen competition in a "line of commerce." The complaint prayed, inter alia, that Benrus be required to divest itself of all its Hamilton shares and be restrained from acquiring additional Hamilton shares; and that, pending final disposition of the suit, a preliminary injunction issue enjoining Benrus from voting its Hamilton shares. Plaintiff moved for a preliminary injunction. It filed affidavits, and defendant filed counter-affidavits. Plaintiff, then, at a hearing on the motion before the district judge, introduced oral testimony through two of its officers who appeared as witnesses; defendant called no witnesses. The trial judge, having filed findings of fact and legal conclusions, entered an order enjoining defendant, pending a trial and a final order, from voting such Hamilton stock, provided defendant gave bond in the sum of $10,000. Defendant has appealed from this order.

FRANK, Circuit Judge: The trial judge's opinion, findings of fact and conclusions of law are reported in F.Supp. . As the facts are there fully set forth, we do not repeat them in detail.

1. Defendant argues that it appears unmistakably that defendant did not violate Section 7 of the Clayton Act. Were that true, we would now know that plaintiff could have no final relief, and that therefore the granting of the preliminary injunction was an obvious error; indeed, we might direct dismissal of the complaint. But we think that the present record sufficiently discloses that the court, after a trial, may be required to conclude that Benrus was not innocent of a Section 7 violation. To justify a temporary injunction it is not necessary that the plaintiff's right to a final decision, after a trial, be absolutely certain, wholly without doubt; if the other elements are present (i.e., the balance of hardships tips decidedly toward plaintiff), it will ordinarily be enough that the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation.*fn2

As here the trial judge's findings derived from evidence presented at a preliminary hearing, that may perhaps be altered after a full-dress one. Yet, although we recognize them as necessarily tentative, they have such support in the oral testimony that we cannot possibly declare them "clearly erroneous"; we must therefore accept them on this appeal. Nor, on the basis of those findings, can we hold that the judge erred in temporarily holding, in effect, as follows: (a) The acquisition of control of Hamilton by Benrus very probably would substantially lessen competition in "a line of commerce" within the meaning of Section 7. (b) The purchases by Benrus of Hamilton shares were not made "solely for investment but for the primary purpose of obtaining such control; had this purpose not been frustrated by action of Hamilton's management, Benrus would successfully have carried it out. (c) Those purchases therefore violated Section 7. (d) Purchases thus unlawfully made do not cease to be unlawful - so as to preclude an order of divestment - because the purpose is balked.*fn3

Although we now indulge in no ultimate conclusion, we believe the amendment of Section 7 in 1950 certainly casts doubt on decisions - including International Shoe Co. v. F.T.C., 280 U.S. 291, and United States v. Columbia Steel Co., 334 U.S. 495 - interpreting that section as it stood previously.*fn4 The Senate Committee Report stated that the intent of the amendment was "to cope with monopolistic tendencies in their incipiency and well before they have attained such effects as would justify a Sherman Act proceeding."*fn5 Interference at an early stage, if possible, seems the paramount aim.

The judge's legal conclusions, like his fact-findings, are subject to change after a full hearing and the opportunity for more mature deliberation. For a preliminary injunction - as indicated by the numerous more or less synonymous adjectives used to label it - is, by its very nature, interlocutory, tentative, provisional, ad interim, impermanent, mutable, not fixed or final or conclusive, characterized by its for-the-time-beingness. It serves as an equitable policing measure to prevent the parties from harming one another during the litigation; to keep the parties, while the suit goes on, as far as possible in the respective positions they occupied when the suit began.

For the foregoing reasons, we cannot hold that the judge should have dismissed the complaint on the merits.

2. There remains the question whether the judge - assuming, as he did, for the time being, that the complaint was not without merit - went outside the bounds of his discretion in ordering a preliminary injunction. We read Section 16 of the Clayton Act, 15 U.S.C. Section 26,*fn6 as declaratory of the usual rule relative to the exercise of such discretion: The judge must consider whether irreparable harm is likely to result to plaintiff if pendente lite (i.e., "immediately")*fn7 the injunction is denied, and against this harm he must balance the harm to defendant likely to result if the relief is granted. The "hardship plaintiff will suffer * * * may make interlocutory relief imperative where the same showing at a final hearing would not outweigh the hardship the defendant would suffer from a permanent injunction. Thus in view of the character and extent of the emergency presented, of the provisional and temporary character of the relief sought, of the probable period of its duration, and of the court's tentative opinion on the substantive issues involved, the factor of relative hardship is measured, on an application for interlocutory injunction, with a different yardstick from that used at final hearing."*fn8 Here no substantial harm from the injunction to defendant is perceptible; but the hardship to plaintiff, were there no injunction, would be very considerable.*fn9 We agree with the trial judge that the private harm to plaintiff required as a condition of granting injunctive relief under Section 16 need not be at all the same as the public harm condemned by Section 7. In the light of the evidence before the judge and his findings not unreasonably derived therefrom, we hold that he surely did not "abuse" his discretion.*fn10


SWAN, Chief Judge: I concur in ...

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