The opinion of the court was delivered by: GURFEIN
GURFEIN, Cir. J. (sitting by designation):
This is an opinion after trial on the issues of liability alone. An earlier opinion on the motion for summary judgment by the defendants stated the history of the litigation between the parties and the claims in the present complaint. International Railways of Central America v. United Brands Co. and Compania Agricola de Guatemala, 358 F. Supp. 1363 (S.D.N.Y. 1973).
The summary judgment motion was denied, but partial summary judgment was granted dismissing the antitrust claims for acts committed before February 16, 1961; and dismissing the contract claims against United Brands ("UB"), formerly United Fruit Company ("UF"), for breaches committed after December 31, 1962 (contract expiration date) and before January 1, 1961. With respect to breaches of contract claimed against Compania Agricola de Guatemala ("CAG"), they were dismissed if committed after December 31, 1962 (contract expiration date) and before October 9, 1962.
The case was tried to the Court without a jury with the applicable statutory recovery period for alleged antitrust violations designated as only from February 16, 1961; and for alleged contract violations against UB between January 1, 1961 and December 31, 1962.
Detailed findings of fact are being filed herewith.
To restate the issues briefly:
International Railways of Central America ("IRCA"), the plaintiff, was dominated for many years by UF which was its controlling stockholder and which also controlled its Board of Directors.
UF is, and has been, for more than half a century, in the business of producing, buying and transporting bananas for the purpose of importing them into the United States, as well as other countries. CAG, a wholly-owned subsidiary of UF, owned and operated banana plantations in western Guatemala in an area around Tiquisate. IRCA was a railway in Central America which, among other things, carried bananas in Guatemala from the east coast to the seaboard Port of Barrios on the Atlantic Ocean for UF and from the west coast to Barrios for UF's wholly-owned subsidiary, CAG, as shippers.
As will appear, UF sold its stock in IRCA, save for 100 shares, in January, 1962.
The Guatemalan Government seized IRCA's assets in 1969 for alleged default on a Government loan. The corporate entity remained and is the present plaintiff.
The surviving antitrust claims in this litigation are:
First Claim : that UF's repressive tactics prevented other banana shippers from using IRCA's railroad facilities from February 16, 1961 to December 31, 1961, in violation of Sherman Act Section 1 (15 U.S.C. § 1).
Third Claim : that UF restricted its own banana shipments over IRCA from February 16, 1961 to 1964, and disposed of its Tiquisate banana plantations (on the west coast of Guatemala) in violation of Section 2 of the Sherman Act (15 U.S.C. § 2).
Sixth Claim : that acquisition of control of IRCA by UF was in violation of Section 7 of the Clayton Act (15 U.S.C. § 18).
Beginning in February, 1949, certain shareholders of IRCA had begun a derivative suit against UF in the New York Supreme Court charging that UF had breached its fiduciary duty to IRCA.
In 1956, the Supreme Court so held and awarded a judgment for over $4.5 million for the period before 1956, and ordered an increase in freight rates prospectively to the termination of the contracts. In March 1961 a supplemental judgment awarded IRCA close to $4 million more, representing the increased rates from January 1956 through December 1960, which had been accrued but not yet paid pending the outcome of the appeal. The New York Court of Appeals affirmed the judgment, 8 N.Y.2d 430, 209 N.Y.S.2d 289, 171 N.E.2d 443, in 1960, and finally denied rehearing on February 23, 1961, 9 N.Y.2d 758. The full amount of the judgment was then paid.
After collecting the $8.5 million from UF, IRCA retained some of the able attorneys who had succeeded in the first action to sue in the Federal Court claiming antitrust violations and breaches of contract. The action was begun on February 16, 1965 -- four years after the final order of the New York Court of Appeals.
In the meantime, the United States had started a civil antitrust suit against UF in 1956 which resulted in a consent decree in 1958.
UF moved to dismiss the present claims as barred because of the prohibition against the splitting of causes of action and on the ground that they were barred by the statute of limitations. On the antitrust claims this court (Ryan, Ch. J.) dismissed the complaint on the antitrust claims, finding that there had been a splitting of the causes of action because "the facts presented to the New York court in the Ripley case were substantially the same as those presented by this litigation." 254 F. Supp. 233, 237 (S.D.N.Y. 1966).
The Court of Appeals for the Second Circuit disagreed that there had been a splitting of the causes of action: "[since] the Ripley complaint did not and could not properly have asserted a claim under the federal antitrust laws the judgment cannot have adjudicated that UF violated them." 373 F.2d 408, 419 (2 Cir. 1967), cert. denied, 387 U.S. 921, 87 S. Ct. 2031, 18 L. Ed. 2d 975 (1967). The Court of Appeals affirmed the District Court's finding that the Statute of Limitations barred suits for antitrust violations committed before February 16, 1961, which is the law of the case.
Six years after the Court of Appeals' decision, UF (now UB) moved for summary judgment as related above. On the antitrust claims it argued that IRCA had no standing to sue. In the opinion mentioned above, 358 F. Supp. 1363, this Court held, as indicated, that there were issues of fact to explore which prevented summary judgment for the defendant without a trial of the issues. The Court said:
"The gravamen of the present claim that survives the limitations defense is that UF then turned upon IRCA as reprisal for its insistence on the fulfillment of the Ripley judgment and aimed its antitrust violations at IRCA as a direct and prime target. It is said to have cut its banana production on the West Coast for the purpose of laying IRCA low, and to have restricted the use of its Tiquisate land for banana growing not only to thwart its potential competition but also for the avowed purpose of directly harming IRCA." 358 F. Supp. at 1372-73.
To understand this reference, a brief statement about Tiquisate is in order at this point. UF's subsidiary CAG operated banana plantations on the west coast of Guatemala in an area called Tiquisate from the 1920's to 1963 or 1964. All the bananas grown or purchased by CAG on the west coast were transported to Barrios via IRCA. The claim with respect to standing which was principally considered on the summary judgment motion, was that UF had deliberately abandoned Tiquisate in reprisal against the Ripley judgment and against IRCA's refusal to lower the freight rates provided therein.
While I based my opinion denying summary judgment primarily on the disputed issues of fact concerning the alleged abandonment of Tiquisate, I did not finally determine whether IRCA had standing on its other theories. UB had contended that since IRCA was not its competitor, its alleged antitrust violations were directed against others than IRCA, and that any harm to IRCA was merely of incidental effect.
On the trial, resourceful counsel for the plaintiff did not limit their antitrust claim to the Tiquisate abandonment and its consequences. Instead, they have sought to take full advantage of the decision of our Court of Appeals that they had not split their cause of action.
Accordingly, they have contended that UF was in a conspiracy with its subsidiary, CAG, to restrain trade for many years -- going back a half century -- and that some of this restraint continued into the period after February 16, 1961. They also contend that certain acts committed before February 16, 1961 had an effect after that date because the damages were allegedly not calculable at any time before the statute had run. The plaintiffs contend that such damages are recoverable despite the claimed bar of the statute under the doctrine of Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 28 L. Ed. 2d 77, 91 S. Ct. 795 (1971).
The defendant takes sharp issue on these claims, urging that conditions of alleged control and domination had so changed by 1961 that no carry-over of antitrust violation (if it ever existed) can be presumed and that the plaintiff has failed to prove such control and domination. It asserts further that Zenith, supra, has no bearing because, in any event, there were no pre-1961 damages that were incalculable at the time and have become calculable since. It contends also that the plaintiff has failed to show any causal connection between any pre-1961 act and an impact therefrom after February 16, 1961.
With the statutory limitation of February 16, 1961 in mind, let us review the changes that had occurred by that date in the relationship of UF to CAG to IRCA. I noted in the earlier opinion, 358 F. Supp. at 1367, that the New York Court of Appeals had affirmed the Referee's decision requiring UF to pay higher rates to IRCA for transportation of bananas, $130 per car, a rate equal to that charged its competitors in 1960; and that the United States had obtained a consent decree against UF in 1958, one section of which required UF to dispose of its IRCA stock not later than June 30, 1966. Judge Ryan had found, and our Court of Appeals did not disagree, that since 1959 IRCA had had several independent directors who had the requisite knowledge to bring suit against UF for antitrust violations.
By February 16, 1961 the control of IRCA by UF had been dissipated. While it still owned the IRCA stock which was not sold until January, 1962, it was required under the consent decree to divest itself of the IRCA stock by 1966. I find that the IRCA board was independent of UF by February 16, 1961. At the May, 1961 IRCA stockholders' meeting, UF did not vote its shares. The freight rates on banana transportation were governed by the Ripley judgment.
The consent decree, in Paragraph VI(A) (9), prohibited contracts between UF and IRCA requiring IRCA to discriminate against other shippers. Counsel for IRCA, UF and the Ripley plaintiffs independently studied the contracts and found no language requiring discrimination that should be abrogated.
We shall deal later with the claim that IRCA in fact was compelled to discriminate against Standard Fruit ("Standard"), UF's only competitor in Guatemala.
The conclusion of counsel that there were no clauses requiring IRCA to discriminate would have had to be wrong if "discrimination" actually continued, since, if the contracts themselves did not require it, there was no proof adduced that the IRCA board was subservient enough in the statutory recovery period to take orders from UF or CAG. On the contrary, since we know from Judge Ryan's finding that there had been at least three independent directors since 1959, one would expect to find any discriminatory act of the IRCA Board resulting from domination by UF to have met with their articulated dissent. The IRCA Board Minutes are in evidence (DX 552) but they show no instance of a split vote on rates or practices.
Among the factual matters to explore on the antitrust phase of the case are, therefore, (A) whether UF caused IRCA to discriminate against UF's competitors or potential competitors to the detriment of IRCA and (B) whether Tiquisate's termination (and its operation in the statutory period) were for the purpose of suppressing competition in the import of bananas into the United States and to harm IRCA in reprisal for Ripley ; or whether, as the defendant contends, the termination as well as the operation of Tiquisate were dictated by legitimate business considerations.
A. Alleged discrimination against other shippers and potential shippers
The gravamen of the Ripley complaint was that UF had breached its fiduciary duty to IRCA by insisting upon a large differential in the freight rate for banana shipments on the line haul from the west coast to Puerto Barrios between that which was charged to UF and that which was charged to competitors, to the great advantage of UF and to the detriment of IRCA.
In this case, the plaintiff is not claiming any discrimination in the rates paid on the line haul after February 16, 1961 (P. Answering Memo "PAM" p. 111).
There is good reason for this concession.
The line haul rates were fixed for the period from 1956 to the end of the contract by the Ripley court and complied with by the defendant. I have previously found the termination date of the contract involved to have been January 1, 1963.
The claim, in this respect, reduces itself to claims (1) that alleged discrimination in rates before February 16, 1961 had injurious effects after 1961 and are compensable; (2) that certain other discriminatory charges, other than the line haul freight rate itself, continued as discriminatory action after February 16, 1961. These alleged discriminations are: (1) dock charges; (2) total banana transportation costs; (3) import line haul rates; (4) wharfage on imports; (5) diesel oil freight rates; (6) practices at the pier; (7) allocation of banana cars. These very claims were essentially before the Ripley court on claims of unfairness. That court did not require any of the practices involved to be changed or compensated for.
With respect to these claims of discrimination in favor of UF against its competition, I find the following facts:
Both before and after 1961 CAG paid no wharfage charges to IRCA (which owned the wharf). CAG loaded and unloaded its ships at Barrios with its own labor. Standard, its competitor, was required to pay IRCA for the loading and unloading operations a wharfage fee of $3 per ton and a fee computed from the cost of IRCA's loading crews (Tr. 73; 313). The plaintiff failed to call any of Standard's personnel as a witness.
The plaintiff has failed to prove that it did not cost CAG as much to load and unload as the charge paid by Standard to IRCA for handling these operations. There is also no proof that Standard was arbitrarily denied, at the behest of CAG, the right to use its own labor in the process. There is evidence that Standard discussed this matter with IRCA in 1957. On July 2, 1957 the IRCA Board adopted a resolution to advise Standard that IRCA would agree to eliminate wharfage and switching charges if satisfactory arrangements could be made with Standard's labor to take over the unloading. Nothing came of the suggestion for reasons not in evidence.
On March 15, 1961, by which time I find that the IRCA Board was independent of the defendant, the board was informed that Standard wanted a cancellation of the wharfage charge on export banana traffic. Again there is no evidence that anything further was done about it before Standard left Guatemala entirely as the result of a hurricane "blowdown" of its west coast plantations in November, 1961. Nor is there any evidence that UF had anything to do with the decision, whatever it may have been. I find that there is no evidence of discrimination on the wharfage charge. I find further that it was essentially a loading and unloading charge rather than a separate charge for the use of the pier apart from its connection with the loading and unloading services performed by IRCA.
2. Total banana transportation costs
Standard was in business in Guatemala after February 16, 1961, but only until November of that year. During that period, as we have seen, UF was required under the Ripley judgment to pay the public tariff rates, which it did. Though the freight rate paid by both shippers was the same, the plaintiff contends that there was, nonetheless, a differential in favor of UF over Standard, because UF's so-called "banana loading expense" at Barrios for 1961 was $34.04 per car (DX 536) while Standard was paying IRCA $36 per car wharfage "plus at least $10 for loading aboard ship" (Tr. 424). Standard also had unspecified expense in running its own conveyors at Barrios (Tr. 157-60).
On the other hand, I find that IRCA rendered "spotting services" to Standard -- spotting its empty banana cars at locations on its banana farm (Tr. 1339-40) while CAG spotted its own cars at its own expense and turned their cars over to IRCA only at the junction at Rio Bravo. CAG operated its own 90 mile railway which it maintained and operated with its own locomotives and crews (Tr. 1338-39). Moreover, the line haul for Standard was 70 miles more each way than for CAG. I find that the differential claimed by plaintiff is not supported by adequate proof in view of the fact that IRCA rendered greater services to ...