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UNITED STATES v. GENERAL DYNAMICS CORP.

July 28, 1965

United States, Plaintiff,
v.
General Dynamics Corp., Defendant


Cannella, District Judge.


The opinion of the court was delivered by: CANNELLA

Memorandum

CANNELLA, District Judge:

 Motion by the defendant, General Dynamics Corporation, made at the conclusion of the government's case, pursuant to Rule 41(b) of the Federal Rules of Civil Procedure, to dismiss the plaintiff's action "on the ground that upon the facts and the law the plaintiff has shown no right to relief" was denied in all respects by this court on April 9, 1965 for the reasons hereinafter set forth.

 THE CHARGE

 This is a civil anti-trust action brought by the United States alleging that the defendant has acted in violation of Section 1 of the Sherman Act, 26 Stat. 209 (1890), as amended, 15 U.S.C. § 1 (1958) and Section 7 of the Clayton Act, 38 Stat. 731 (1914), as amended, 15 U.S.C. § 18 (1958). Specifically, the plaintiff complains that the merger of the defendant with Liquid Carbonic Corporation on September 30, 1957 may have the effect of substantially lessening competition or tending to create a monopoly in the manufacture, distribution and sale of carbon dioxide, in violation of Section 7 of the Clayton Act. In addition, the government asserts that the effect of a special sales program, established and implemented by the defendant, is to restrain trade and commerce in violation of Section 1 of the Sherman Act.

 The government seeks divestiture by the defendant of its now Liquid Carbonic Division and injunctive relief prohibiting the defendant from further use of its special sales program or any other device designed to accomplish the same asserted proscribed aims.

 BACKGROUND

 General Dynamics Corporation was founded in 1952 and has grown in stature to a place among the leaders of American industry. It acquired Electric Boat Company, and its subsidiary Canadair Limited thus entering fields primarily concerned with the national defense. Electric Boat was a private producer of submarines and its subsidiary was involved in aircraft manufacture. This acquisition was effected on April 25, 1952. Thereafter followed a chain of acquisitions by the defendant bringing within their corporate entity such companies as Consolidated Vultee Aircraft Corporation (Convair) (1954), Stromberg-Carlson Company (1955), Liquid Carbonic Corporation (1957) and Material Service Corporation (1959). *fn1" In short, due to these acquisitions and an expanded volume of business conducted (primarily with the United States and Canadian Governments), General grew to the point where it now occupies a high echelon in this country's corporate hierarchy.

 In 1957, at the time of the merger, Liquid Carbonic Corporation maintained a position as the largest domestic producer of carbon dioxide. Despite its preeminent position in the industry, Liquid had failed to show any increase in sales volume in the period prior to the merger. From documents in evidence, discussed infra, the lack of further growth was apparently ascribed by Liquid to a deficiency in its sales force and their techniques.

 Therefore, the situation before this court, most particularly insofar as the § 7 charge is concerned, involves the consolidation of a diverse corporation of unquestioned size with a company of smaller absolute scope, but of substantial size and at the time, the leader in its field.

 DISCUSSION

 At the outset, the court will note the procedure that is to be used in presentation of this memorandum. This statement by the court is designed to indicate its reasons for the decision of April 9. At the writing of this memorandum, the court is aware that the defendant will present its case sometime during the ensuing summer. Thus for its benefit and also for that of the plaintiff-government's, the court will undertake the task of evaluating the evidence presented in light of the applicable law.

 The procedure the court will employ will necessarily differ from that which would be required of it were the motion to have been granted. Were the latter to have occurred, the court would be obliged to make findings of fact and conclusions of law. Rule 41(b), F.R.C.P.; see also Rule 52(a), F.R.C.P. Full findings will of course be made at the close of all the evidence. While the court's ruling on the defendant's motion must of necessity be substantiated here, the function of the court, at this point in the litigation, is to indicate its legal reasoning and to highlight the evidence which supports it. Thus no complete and detailed examination of the evidence is here contemplated.

 Before proceeding to consideration of the asserted violations, it would be well to consider the framework in which the motion to dismiss is considered. The motion made by the defendant in accordance with Rule 41(b) is the procedural equivalent of a motion for a directed verdict in a jury case. See 5 Moore's Federal Practice P41.13(4); 2B Barron & Holtzoff Federal Practice and Procedure § 919. Though designed to accomplish the same result, the standards for decision are significantly different. In a jury action, on a motion for a directed verdict, the court should consider the evidence in a light most favorable to the plaintiff and accord all favorable inferences. The motion may be granted only if the evidence is insufficient to establish relief for the plaintiff, as a matter of law. See O'Brien v. Westinghouse Electric Corp., 293 F.2d 1 (3d Cir. 1961). In an action tried to the court sitting without a jury, the court weighs the evidence and considers the law. But in this context, the motion may be granted even though the plaintiff has made out a prima facie case. Huber v. American President Lines, 240 F.2d 778 (2d Cir. 1957). The court must view the evidence with an unbiased eye, without any attendant favorable inferences. The evidence must be sifted and balanced and given such weight as the court deems fit. See Allred v. Sasser, 170 F.2d 233 (7th Cir. 1948). Against this background, the court will now proceed to consideration of the charges themselves.

 SECTION 7 OF THE CLAYTON ACT

 Although the allegation of a § 7 violation appears as the second offense in the government's complaint, *fn2" the court will treat this matter in the first instance. In view of the prayer for relief in relation to this charge, to wit, divestiture of the Liquid Carbonic Division of the defendant, the § 7 charge is of primary importance. For a violation of section 7 *fn3" to be established, the government must basically prove three elements contained in the statute. Two of the three elements have been agreed to by stipulation of the parties. *fn4" The parties have stipulated that "the manufacture, distribution and sale of carbon dioxide in the United States (excluding Alaska and Hawaii) is a 'line of commerce' in a 'section of the country', as those terms are used in Section 7 of the Clayton Act." Thus the function of the court is narrowed to a ...


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