UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
July 18, 1962
ATLANTIC CITY ELECTRIC COMPANY et al., Plaintiffs,
GENERAL ELECTRIC COMPANY et al., Defendants
The opinion of the court was delivered by: FEINBERG
Defendants in 418 antitrust treble-damage actions joined in three motions under Rule 12(j), Fed.R.Civ.P., 28 U.S.C.A. to strike certain allegations from the complaints. My opinion dated July 11, 1962,
dealt with the first of these and describes the background of the litigation. This opinion deals with the remaining motions directed to allegations relating to criminal and civil injunctive suits brought by the Government in Philadelphia against many of these defendants, and other allegedly prejudicial evidentiary matter.
The motions should be considered in the context of authority that not only makes clear that motions to strike on the grounds alleged here are not favored, but also raises grave doubt whether anything is gained by allowing the pleadings to be the battlefield in complex cases rather than moving such cases expeditiously through carefully supervised pretrial procedures.
In Nagler v. Admiral Corp., 248 F.2d 319 (2 Cir. 1957), a treble-damage suit, the Court of Appeals reversed a judgment dismissing a complaint as insufficient. Attack on the complaint in Nagler asserted that too little -- not, as here, too much -- was alleged. But the Court stressed that over-emphasis on the pleading process in these cases is unwise. Thus, the Court said (248 F.2d at 326-327):
'The sad truth is that these cases are likely to prove laborious in any event and that there is no real substitute for trial, although pre-trial conferences and orders may greatly speed the result. * * * The real solution -- so far as there is one short of trial -- would appear to be * * * continuing pre-trial conferences under the direction of a single judge who may thus avoid the duplicating efforts of various judges we have noted above.'
While it is true that the Court in Nagler referred to pleading of evidence as 'surely not required and * * * on the whole undesirable,' (Id. at 326) the author of the Court's opinion elsewhere stated:
'Occasionally there is a direction to prune off surplusage, a theoretically sound point of view, since these complaints, far from being models, are usually singularly verbose and full of unnecessary conclusions, cliches, and counts. Indeed, I fear the trend I am discussing in part because it promotes verbosity. But is there time in the Southern District for such pruning and perfectionism when the easier course is just to treat such excesses with silent disdain?' Clark, Special Pleading in the 'Big Case,' 21 F.R.D. 45, 51 (1957).
This pragmatic attitude is consistent with the general doctrine that has grown up around Rule 12(f). In discussing that doctrine, Professor Moore, after stating that motions to strike are not favored, adds:
'Matter will not be stricken from a pleading unless it is clear that it can have no possible bearing upon the subject matter of the litigation. If there is any doubt as to whether under any contingency the matter may raise an issue, the motion should be denied. Even if the allegations are redundant or immaterial, they need not be stricken if their presence in the pleading cannot prejudice the adverse party. * * * And where certain evidential facts, when read with the complaint as a whole, give a full understanding thereof, they need not be stricken. In suits involving multiple and complex issues greater latitude in pleading may be allowed since the impertinence may not be so clear.' 2 Moore, Federal Practice 2317-2319 (2 Ed.1961).
Thus, in Fleischer v. A.A.P., Inc., 180 F.Supp. 717, 721 (S.D.N.Y.1959), the Court observed:
'Before it may be determined that a portion of a complaint is immaterial it must clearly appear that the matter alleged can have no possible bearing on the issues of the trial * * *. Even if that determination is made, immaterial allegations, and likewise verbose, conclusory, or evidentiary allegations, need not be stricken unless their presence in the complaint prejudices the defendant.'
Cf. Buchholtz v. Renard, 188 F.Supp. 888, 894 (S.D.N.Y.1960); Gas Consumers Ass'n v. Philadelphia Gas Works Co., 12 F.R.D. 125, 127 (E.D.Pa.1951); Tivoli Realty, Inc. v. Paramount Pictures, Inc., 80 F.Supp 800 (D.Del.1948); Sinaiko Bros. Coal & Oil Co. v. Ethyl Gasoline Corp., 2 F.R.D. 305 (S.D.N.Y. 1942); see Boerstler v. American Medical Ass'n, 16 F.R.D. 437, 446 (N.D.Ill.1954).
These cases and modern notions of the pleading process in 'big' cases
express a useful approach: little is accomplished from attempting to prune complaints at this stage; they should be left intact unless matter is alleged whose materiality is highly unlikely. If such matter is alleged, then the Court may strike it, in its discretion, depending upon its assessment of other factors, including possible prejudice, elements of unfairness and threat of delay.
The Motion to Strike References to Prior Grand Jury and Government Proceedings
The allegations objected to are classifiable as: (1) references to pleas of guilty and the judgments entered thereon; (2) references to pleas of nolo contendere and the judgments entered thereon; (3) references to other incidents of the Government suits, such as the pendency of the civil injunctive proceedings, the indictments, the sentences and the Grand Jury proceedings. Defendants contend that these allegations are 'immaterial, impertinent and unfairly prejudicial to defendants.'
A. References to Pleas of Guilty and Judgments Thereon
Defendants have moved to strike all references to the pleas of guilty entered in the Philadelphia proceedings,
and the judgments of conviction on these pleas. Defendants, relying on the language of the statute, legislative history and judicial authority, argue that judgments on pleas of guilty are 'consent judgments' within the meaning of the proviso to Section 5(a) of the Clayton Act, 15 U.S.C.A. § 16(a) ('Section 5(a)'), which states:
'(a) A final judgment or decree heretofore or hereafter rendered in any civil or criminal proceeding brought by or on behalf of the United States under the antitrust laws to the effect that a defendant has violated said laws shall be prima facie evidence against such defendant in any action or proceeding brought by any other party against such defendant under said laws or by the United States under section 15a of this title, as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto: Provided, That this section shall not apply to consent judgments or decrees entered before any testimony has been taken or to judgments or decrees entered in actions under section 15a of this title.'
Diametrically opposing arguments can be made from the language of the Section. The first portion of Section 5(a) refers to a 'final judgment or decree * * * rendered in any civil or criminal proceeding * * *.' (Emphasis supplied). Defendants claim that the proviso they rely on thus clearly embraces 'consent judgments' in criminal proceedings. But Section 5 of the Clayton Act, as originally enacted in 1914,
also contained a proviso of obviously temporary application which followed the one on which defendants now rely. It read:
'Provided further, This section shall not apply to consent judgments or decrees rendered in criminal proceedings or suits in equity, now pending, in which the taking of testimony has been commenced but has not been concluded, provided such judgments or decrees are rendered before any further testimony is taken.' (Emphasis partially supplied).
Thus, Congress could make clear that an exception to Section 5 included criminal proceedings, and its failure to do so in the proviso which still remains arguably shows Congressional intent to exclude criminal proceedings from the scope of the proviso. But the legislative history of Section 5 is not persuasive that the omission of a reference to criminal proceedings in the first proviso was deliberate; see, e.g., 51 Cong.Rec. 15825 (1914) (remarks of Senator Reed); id. at 15938, 15939 (remarks of Senator Nelson).
The remainder of the legislative history is similarly inconclusive.
Illustratively, Representative Webb, a member of the Conference Committee that added the proviso to Section 5, stated that it meant that:
'If the Government brings a suit against a trust or monopoly and it surrenders, we eliminate the effect of the 'prima facie' judgment. If it fights and loses, then the 'prima facie' effect is given.' Id. at 16276.
On the other hand, however, when Senator Reed interpreted the proviso as applying to judgments entered on pleas of guilty as well as pleas of nolo, Senator Walsh replied that he 'would scarcely give that significance to the language,' id. at 15823, and added,
'I am not able to agree with (Senator Reed) that in the future the judgment entered upon a plea of guilty in a criminal action would not be available under the proposed statute.' Id. at 15824.
Nor is there compelling judicial authority for defendants' argument that judgment on a plea of guilty is a 'consent judgment.' They rely heavily on a statement in Twin Ports Oil Co. v. Pure Oil Co., 26 F.Supp. 366 (D.Minn.1939), aff'd 119 F.2d 747 (8 Cir.) cert. denied, 314 U.S. 644, 62 S. Ct. 84, 86 L. Ed. 516 (1941), in which references to a plea of nolo were stricken. The Court there reviewed the legislative history and stated that Congress 'unmistakably intended to include judgments entered on pleas of guilty and pleas of nolo contendere in pending criminal cases as consent judgments * * *.'
This statement was not necessary to the holding since no judgment based on a plea of guilty was before the court.
Moreover, other courts have found the legislative history to be less conclusive.
In United States v. Standard Ultramarine & Color Co., 137 F.Supp. 167 (S.D.N.Y.1955), Judge Weinfeld, denying defendants' motion to withdraw pleas of guilty and enter pleas of nolo, discussed the statutory scheme (137 F.Supp. at 173-174):
'The use of the nolo plea came into extended use in antitrust suits partly because of the uncertainty that a guilty plea would in fact gain for the defendant the benefit of the exception under § 5; it of course also served to eliminate other hazards and possible consequences to a defendant. Its use for 'practical purposes' to avoid the issues inherent in a guilty plea does not necessarily reflect congressional purpose to extend the exemption provision of § 5 to defendants in criminal antitrust suits. In any event, the short answer to the defendants' contention is that Rule 11 of the Federal Rules of Criminal Procedure vests the Court with discretion to accept or reject the tendered plea. Had Congress intended to grant a defendant an absolute right to avert the effects of the prima facie case in a criminal prosecution, as in an equity suit, it could readily have granted him, under Rule 11, the right to plead nolo contendere -- just as a defendant has the right to confess judgment in answer to a Government civil antitrust suit without the consent of the Court.'
This statement is clearly based on the premise that a plea of guilty, which the Court has no power to reject, does not 'avert the effects of the prima facie case' under Section 5(a).
Plainly, opposing policy considerations are involved. Defendants would allow a defendant in a criminal prosecution to avoid the prima facie effect of an adverse judgment by his unilateral 'consent' to it. Otherwise, say defendants, the Congressional purpose of encouraging capitulations in Government prosecutions is defeated. However, plaintiffs reply, that purpose can amply be served by allowing pleas of nolo, which have no prima facie effect under Section 5(a).
Plaintiffs observe that Section 5(a) and its proviso give expression to two policies -- encouraging capitulations in Government prosecutions and easing the burden of treble-damage litigants who sue defendants previously found to have violated the antitrust laws.
Accepting defendants' position, say plaintiffs, tips the balance between these two policies wholly in favor of encouraging surrender, leaving private litigants not much better off than they were before Section 5 was enacted.
Plaintiffs point out that defendants would also, in effect, erase the well established distinction between pleas of nolo and guilty, Hudson v. United States, 272 U.S. 451, 47 S. Ct. 127, 71 L. Ed. 347 (1926).
This argument has weight, in view of the consistent practice for many years of counsel and the courts of distinguishing between the two pleas,
and Congress' reenactment in 1955 of the substance of Section 5 in Section 5(a) after the practice had been recognized for decades.
Plaintiffs also argue that the pleas of guilty are admissible under common law rules of evidence.
Similarly, they claim as to the judgments that New York courts admit prior judgments of conviction in later civil actions as prima facie evidence of the material facts charged in the criminal prosecution, and that under Rule 43(a), Fed.R.Civ.P., the same rule should be applied to these cases in this Court.
Defendants deny the accuracy of this statement of New York law and claim that use of common law rules of evidence would vitiate Section 5(a).
These arguments raise two substantial questions: whether the proviso of Section 5(a) is construed to include judgments on pleas of guilty,
and the admissibility of guilty pleas and judgments under common law rules. Deciding the question of statutory construction would not dispose of the latter issue unless, as defendants contend, Section 5 altogether displaced common law rules. But the legislative history
and judicial authority
do not support this position.
Certainly, therefore, it cannot be said that it is highly unlikely that the pleas and judgments are material. Defendants urge that the question of admissibility, although normally appropriately left to the trial judge, should be decided now. But the question of admissibility under common law rules cannot be determined in the abstract. Whether, to what extent, and against whom the pleas of guilty and the judgments entered on them are admissible and, if so, of what they are probative, are questions best left to the discretion of the trial judge on the basis of his necessarily more complete appraisal of the facts. Reluctance to make premature rulings on admissibility of evidence in complex antitrust cases is not novel. See South Side Drive-In Co. v. Warner Bros. Distributing Corp., 30 F.R.D 32 (E.D.Pa.1962); Alamo Theatre Co. v. Loew's Inc., 143 F.Supp. 419, 420-421 (N.D.Ill.1956); Wolfe v. National Lead Co., 15 F.R.D. 61 (N.D.Cal.1953); Minneapolis Gasoline & Fuel Co. v. Ethyl Gasoline Corp., 2 F.R.D. 307 (S.D.N.Y.1941).
Because of this appraisal of probable materiality, it is unnecessary to examine defendants' contentions as to prejudice.
Accordingly, defendants' motion to strike from the complaints allegations of the guilty pleas and the judgments thereon is denied.
B. References to Pleas of Nolo and Judgments Thereon
Defendants contend that allegations referring to the pleas of nolo in Philadelphia and judgments entered thereon should be stricken. Defendants' position is that judgments after pleas of nolo are 'consent judgments' within the meaning of Section 5(a), that legislative history demonstrates that Congress intended this construction, and that there is overwhelming support in the cases for the interpretation urged. The point is at least tacitly
conceded by all plaintiffs who generally opposed these motions, with but four exceptions.
The few plaintiffs who would preserve the allegations have not cited a single case in which a court refused to strike from a complaint references to nolo pleas or judgments thereon when asked to do so.
However, the courts have consistently held that the proviso of Section 5 applies to judgments entered after pleas of nolo
and for that reason have struck from complaints references to judgments entered after such pleas. Alden-Rochelle v. American Society of Composers, Authors and Publishers, 3 F.R.D. 157 (S.D.N.Y.1942); Barnsdall Refining Corp. v. Birnamwood Oil Co., 32 F.Supp. 308 (E.D.Wis.1940); Twin Ports Oil Co. v. Pure Oil Co., 26 F.Supp. 366 (D.Minn.1939), aff'd 119 F.2d 747 (8 Cir.), cert. denied, 314 U.S. 644, 62 S. Ct. 84, 86 L. Ed. 516 (1941); see Pfotzer v. Aqua Systems, Inc., 162 F.2d 779, 784 (2 Cir. 1947). In comparable suits against some of these defendants, references to the same nolo pleas and judgments thereon were stricken. N. W. Electric Power Cooperative, Inc. v. General Electric Co., 30 F.R.D. 557 (W.D.Mo.1961); City of Philadelphia v. Westinghouse Electric Corp. (E.D.Pa.1961) (see 1961 Trade Cas. P70,143).
It is true that the possibility of prejudice to defendants from these allegations may not be great.
However, in view of the overwhelming authority on the point, defendants' motion is granted in this respect.
C. Other References to Prior Government Proceedings
Defendants' second motion is otherwise denied, except as to the sentences imposed and certain references to the indictments. Plaintiffs argue that they have only alleged concise background allegations of the prior proceedings that are both helpful and permissible.
however, they have not specifically attempted to justify averments of the sentences on the ground of their materiality. The materiality of such allegations is highly unlikely and they are stricken.
With regard to references to the Philadelphia indictments, they contain the charges to which most defendants pleaded and are, therefore, inextricably linked with the issues of the admissibility of pleas of guilty and judgments thereon. References to those pleas and judgments are not stricken
and if these pleas or judgments are later held to be admissible, the judge determining those questions will necessarily determine the purposes for which they may be admitted. However, as to any complaint against defendants who all pleaded nolo, or were not indicted, references to the indictments will be stricken.
Allegations of the pending civil injunctive proceedings will not be stricken because they are material to the issue of whether the four-year limitation period of the Clayton Act
is tolled by Section 5(b).
It is of little consequence, in the circumstances of these cases, that some plaintiffs have alleged more than that the running of the statute was suspended by an action instituted by the United States which commenced on a certain date and is still pending, see Alden-Rochelle, Inc. v. American Society of Composers, Authors and Publishers, 3 F.R.D. 157 (S.D.N.Y.1942), or that plaintiffs have anticipated a defense, see Avon Pub. Co. v. American News Co., 122 F.Supp. 660, 662 (S.D.N.Y.1954).
The Motion to Strike Other Allegedly Prejudicial Evidentiary Matter
Defendants' third motion is to strike '(1) allegations that defendants conspired with respect to purchasers other than plaintiffs; (2) allegations of the effects of the conspiracy upon others than plaintiffs; (3) allegations of meetings, participants, discussions and decisions of the conspiracy; (4) alleged conclusions of law with respect to the effect of the prior judgments in the criminal actions; and (5) allegations of specific procedures used by defendants to avoid detection.'
With regard to items (1) and (2), even in cases striking other material from complaints,
this Court at the same time has nonetheless permitted allegations that a conspiracy to violate the antitrust laws intended to injury and affected persons other than a particular plaintiff involved in a suit. Austin Theatre, Inc. v. Warner Bros. Pictures, Inc., 1957 Trade Cas. P68,808 (S.D.N.Y.); Maple Drive-In Theatre Corp. v. Radio-Keith-Orpheum Corp., 17 F.R.D. 226 (S.D.N.Y.1955). Denial of this portion of defendants' motion reflects no tolerance for the intrusion of 'peripheral' issues. Separation of significant from side issues can best be done in the pretrial stage without pausing now to amend the complaints. Nor will defendants be threatened by unlimited discovery; what I have already said in this opinion about the function of the pretrial judge is a sufficient answer here.
In any event, it does not appear that the materiality of the allegations referred to is highly unlikely. Accordingly, as to these items, defendants' motion is denied.
With regard to item (3), it is clear that the materiality of these allegations is not highly unlikely. As to them, defendants' motion is denied.
As to item (4), two allegations singled out by defendants deserve particular attention; i.e., that defendants were guilty of the charges set forth in the indictment and that defendants, by their pleas, have admitted such guilt.
Of course, the question of what defendants admitted when they pleaded guilty is a question to be determined ultimately by the trial judge and is highly material.
But, when similar allegations are made with regard to defendants who pleaded nolo in Philadelphia or who were not indicted, there appears to be an element of unfairness in use of a term that has a specific criminal connotation. Accordingly, this portion of the motion is granted as to these defendants and otherwise denied.
With regard to item (5), the materiality of such allegations is evident. In my decision dated July 11, 1962, defendants' motion to strike all allegations relating to fraudulent concealment was denied. Rule 9(b), Fed.R.Civ.P., requires that 'In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.' The rule is applied to allegations of fraudulent concealment of a conspiracy to violate the antitrust laws. Suckow Borax Mines Consolidated, Inc. v. Borax Consolidated, Ltd., 185 F.2d 196, 209 (9 Cir. 1950), cert. denied, 340 U.S. 943, 71 S. Ct. 506, 95 L. Ed. 680 (1951). See Moviecolor Ltd. v. Eastman Kodak Co., 288 F.2d 80, 88 (2 Cir.), cert. denied, 368 U.S. 821, 82 S. Ct. 39, 7 L. Ed. 2d 26 (1961). Accordingly, as to this item, defendants' motion is denied.
To recapitulate, the following are stricken from the complaints:
(a) references to pleas of nolo and judgments entered on pleas of nolo; a complaint shall be regarded as containing instead of such stricken references statements of when the criminal action was begun and terminated, if no such averments appear in the complaint;
(b) references to sentences imposed;
(c) references to the indictments in any complaint naming only defendants who pleaded nolo or who were not indicted. If any such defendant is named as a defendant in a complaint naming one or more other defendants who pleaded guilty, references to the indictment shall be deemed to apply only to the defendant or defendants who pleaded guilty;
(d) allegations that defendants were guilty of the charges set forth in indictments or, by their pleas, admitted such guilt, insofar as they refer to any defendant who did not plead guilty. If any such defendant is named as a defendant in a complaint naming one or more other defendants who pleaded guilty, the allegations shall be deemed to refer only to the defendant or defendants who pleaded guilty.
Any complaint affected by this ruling shall be deemed amended; all allegations to be stricken shall be deemed excised and, where required, paragraphs shall be deemed renumbered. No amended complaints should be filed or served under any circumstances without prior permission of this Court. Wherever possible, amended complaints will be avoided; the changes in pleadings required by this opinion should be accomplished by the parties without the intervention of the Court.
With regard to any defendants who have previously answered any complaint from which allegations are stricken, the averments of such answers with respect to any stricken allegations shall be deemed not to have been made and such defendants shall not be required to file amended answers.
The rulings contained in this opinion are not intended in any way to be rulings on questions of evidence.
Settle order on notice.