The opinion of the court was delivered by: FRANKEL
In this action for treble damages and injunctive relief under the Clayton and Sherman Acts, one defendant, Westinghouse Electric Corporation, moves to strike from the complaint allegations relating to a criminal antitrust judgment upon a plea of nolo contendere entered against this defendant on April 3, 1964. The allegations in question, reversing the order of their presentation in the complaint, are:
(1) That plaintiffs propose to rely upon the criminal judgment in this action "[pursuant] to the provisions of [section 5(a) of the Clayton Act,] 15 U.S.C. Section 16" (complaint, par. 16); and (2) that defendants other than the movant have conspired to withhold supplies from plaintiffs "in retaliation for plaintiffs' cooperation with the Department of Justice" in the prosecution leading to the nolo plea and judgment of April 3, 1964 (id., par. 15(f)).
For reasons outlined below, the motion is granted as to paragraph 16 of the complaint (item (1), supra) and denied as to paragraph 15(f) (item (2), supra).
At least in the aspect we find it appropriate to treat first, decision of the motion turns on the application to relatively uncommon circumstances of the Clayton Act's section 5(a), 15 U.S.C. § 16(a), which says:
"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."
The criminal judgment pleaded in the disputed portions of plaintiff's complaint was based upon an indictment filed December 5, 1961, against Westinghouse, the other corporate defendants herein, and eight individuals. One of the corporate defendants was convicted after pleading not guilty; three pleaded guilty; as to one, the indictment was dismissed. Westinghouse, after initially pleading not guilty, but before trial, moved to substitute a plea of nolo contendere. The motion was denied by Judge Cashin, and the indictment proceeded to trial against Westinghouse on November 26, 1963. On December 5, the case went to the jury, which proved unable to reach a verdict. Discharging the jury, Judge Cashin ordered a new trial.
On March 16, 1964, before commencement of the new trial, Judge Cashin accepted Westinghouse's plea of nolo contendere. On April 3, judgment was entered imposing a fine of $15,000. In an opinion explaining his acceptance of the nolo plea, United States v. Engelhard-Hanovia, Inc., 252 F. Supp. 605, 1964 Trade Cas. (CCH) P71,052 (S.D.N.Y. 1964), Judge Cashin observed that Westinghouse was a comparatively minor figure in the conspiracy there charged. He also treated as a primary consideration the anticipated problem, which has now arisen, of private antitrust litigation. Making clear his premise that allowing Westinghouse to plead nolo contendere would preclude use of the judgment by private plaintiffs, he concluded that the circumstances justified this measure of leniency. He wrote (id., 252 F. Supp. at 607):
"By pleading nolo contendere, . . . Westinghouse takes as settled the question of its responsibility for the acts done as charged in the indictment. A plea of nolo contendere is essentially tantamount to a plea of guilty for the purposes of this case. In a case of this kind the only significant difference between the two pleas is that a plea of guilty or a verdict of guilty would constitute prima facie evidence against the defendant in a private treble damage action under the antitrust laws, . . . whereas a plea of nolo contendere has been held to be excepted from the prima facie effect of the statute. . . .
"After having considered the relevant and pertinent facts which were submitted during the trial of this case, I am satisfied that, in the exercise of my discretion, the application should be granted. Even from the allegations of the indictment, the participation of Westinghouse in this conspiracy was of much shorter duration and significantly less than that of the other defendants. . . . Moreover, as regards the defendant Westinghouse, the refusal of a nolo contendere plea does not appear to be required in order to protect treble damage claimants or to serve the public interest."
There has been no suggestion that Judge Cashin's views in the criminal proceeding are, in any strict sense of the lawyer's word, "binding" upon the plaintiffs here. To be sure, it is difficult to ignore the fact that the careful study and long hesitation preceding allowance of the nolo plea were exercises in futility if the criminal judgment is now available to plaintiffs. It is, similarly, an appealing circumstance that avoidance of this consequence was a (if not the) primary consideration on which Westinghouse entered such a plea rather than putting the Government to its proof a second time. But these are not "equities" against the present plaintiffs, which were not parties to the criminal proceeding. Rather, the premises underlying the plea and judgment have weight in the sense of being obviously pertinent precedent. For that reason and, more importantly, because it appears to resolve correctly the close question presented, we follow Judge Cashin's lead.
It seems settled by now that a judgment entered on a plea of nolo contendere "before any testimony" is within the proviso to section 5(a) and is therefore unavailable to a plaintiff in a subsequent civil action. E.g., City of Burbank v. General Electric Company, 329 F.2d 825 (9th Cir. 1964); Commonwealth Edison Co. v. Allis-Chalmers Mfg. Co., 323 F.2d 412 (7th Cir. 1963), cert. denied, 376 U.S. 939, 11 L. Ed. 2d 659, 84 S. Ct. 794 (1964); Atlantic City Electric Co. v. General Electric Co., 207 F. Supp. 620, 628-29 (S.D.N.Y. 1962), affirmed on other grounds, 312 F.2d 236 (2d Cir. 1962), cert. denied, 373 U.S. 909, 10 L. Ed. 2d 411, 83 S. Ct. 1298 (1963).
Plaintiffs point out, however, that testimony had certainly been taken under the indictment against Westinghouse. The fact that the jury disagreed, requiring the ordering of a new trial, could not obliterate what had happened. It remained impossible, plaintiffs say, for the defendant to have ...