332 F.2d 346

NEW JERSEY WOOD FINISHING COMPANY, Plaintiff-Appellee, v. MINNESOTA MINING AND MANUFACTURING COMPANY, Defendant-Appellant, and Essex Wire Corp., Defendant.

No. 14487.

United States Court of Appeals Third Circuit.

Argued Dec. 10, 1963.

Decided May 20, 1964.

*347Sidney P. Howell, Jr., New York City (Charles C. Trelease, Newark, N. J., Edwin E. McAmis, Regan, Goldfarb, Powell & Quinn, New York City, Thomas J. Lyons, St. Paul, Minn., of counsel, on the brief), for defendant-appellant.

Albert G. Besser, Newark, N. J. (Hannoch, Weisman, Myers, Stern & Besser, Newark, N. J., Ralph M. Lowenbach, Newark, N. J., on the brief), for plaintiff-appellee.

Before BIGGS, Chief Judge, and MCLAUGHLIN and HASTIE, Circuit Judges.

MCLAUGHLIN, Circuit Judge.

This is an interlocutory appeal under 28 U.S.C. § 1292(b) from a denial of a defense motion to dismiss based on the statute of limitations.

Plaintiff-appellee is the New Jersey Wood Finishing Company (N. J. Wood), *348a New Jersey corporation engaged in the manufacture of certain electrical insulation products. Defendant-appellant is the Minnesota Mining and Manufacturing Company (3M), a Delaware Corporation, doing business in New Jersey and likewise engaged in the electrical insulation field.

On June 24, 1960, the Federal Trade Commission (FTC) had issued a complaint against 3M, charging that 3M “has violated and is now violating the provisions of Section 7 of the Clayton Act (U.S.C. Title 15, Section 18) as amended, -» « */’ That FTC complaint substantially alleged the following:

For a number of years prior to 1953, 3M was a highly diversified company, manufacturing and selling a number of product lines and segments thereof. From 1952 to 1956, 3M began to acquire the operations of a number of manufacturers and various product groups, particularly in the electrical insulation field. During this period it also bought several distributor companies. In March 1956, 3M absorbed Prehler Companies, the second largest distributor (15% of sales) of electrical insulation products in the United States, and in August 1956, it absorbed Insulation and Wires, Inc. (IWI), the third largest such distributor (14% of sales). After obtaining these corporations, 3M became the largest such distributor, having around 29% of the total sales of electrical insulation produets sold and distributed by electrical instrument distributors in the United States.

By these acquisitions, 3M further became the second largest distributor of seven (7) of the electrical insulation products it manufactured and had 18% of the total sales of these products. In 1958 3M’s sales of these products through its acquired distributors, increased to about 21% of the total sales of said products, while the sale of those seven products by the largest electrical insulation distributor decreased to less than 21%.

By virtue of 3M’s acquisition of these distributor corporations, other manufacturers who had previously dealt with Prehler and IWI found this market closed to them. Similarly other distributors, who had been supplied with products by 3M and the other manufacturers 3M acquired, found this source of supply cut off.

The FTC complaint asserted that the effect of the acquisitions of Prehler and IWI, and of each of them, by 3M may be substantially to lessen competition or to tend to create a monopoly in the manufacture, distribution, and sale of electrical insulation products, individually and collectively in various sections of the country within the meaning of Section 7 of the Clayton Act as amended. The complaint thereafter specified these injurious effects.1

*349The FTC complaint concluded by charging that:

“The foregoing acquisitions, acts and practices of respondent, * * * constitute a violation of Section 7 of the Clayton Act as amended and approved December 29, 1950:
“WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this 24th day of June, A.D. 1960 issues its complaint against said respondent.”

Apparently before any testimony was taken, this FTC proceeding was terminated by consent order entered July 20, 1961, under which 3M was ordered inter alia to divest itself absolutely of all the assets of Insulation and Wires Division (IWI) of the Essex Wire Corporation and its related corporations.

On November 20, 1961, N. J. Wood filed its complaint in this action alleging that 3M had violated Section 1 and Section 2 of the Sherman Act (15 U.S.C. §§ 1, 2 (1958)) and Section 7 of the Clayton Act (15 U.S.C. § 18 (1958)) to its (N. J. Wood’s) injury, for which under Section 4 of the Clayton Act (15 U.S.C. § 15 (1958)) it was entitled to treble damages. N. J. Wood claimed that 3M had; acquired IWI in violation of these antitrust statutes and deprived it of a substantial national market for its products.

3M moved to strike N. J. Wood’s complaint because the cause of action accrued more than four years before the-commencement of the suit and was therefore barred by the statute of limitations. N. J. Wood opposed the motion, arguing-that the statute was tolled under 5(b) of the Clayton Act by virtue of the FTC' proceeding against 3M.

On March 19, 1963, an amended complaint was filed by direction of the court. Its gravamen is the same ,as are the-controlling legal questions.

On the motion, the trial judge held, that the proceeding by the FTC to enforce Section 7 of the Clayton Act was. a “civil or criminal proceeding * * * instituted by the United States” within, the meaning of Section 5 of the Clayton Act (15 U.S.C. § 16 (1958)) ;2 that the-statute of limitations was therefore tolled and plaintiff’s filing of the complaint-in this cause against 3M was timely-New Jersey Wood Finishing Company *350v. Minnesota Mining & Manufacturing Company, 216 F.Supp. 507 (D.C.N.J. 1963).

N. J. Wood’s claim arises in the first instance under Section 4 of the Clayton Act, which provides that “persons” injured by violations “of the antitrust laws” shall be entitled to threefold damages. 15 U.S.C. § 15 (1958) “Antitrust laws” as that term is employed in Section 4 has a restricted meaning. Notwithstanding other antitrust acts prior or subsequent to the Clayton Act, private parties can recover under Section 4, only where their injury has resulted from acts in violation of the specific antitrust laws, itemized in Section 1 of the Act.3 15 U.S.C. § 12 (1958) ; Nashville Milk Co. v. Carnation Co., 355 U.S. 373, 78 S.Ct. 352, 2 L.Ed.2d 340 (1958). The Sherman and Clayton Acts upon violations of which N. J. Wood’s complaint is based, are “antitrust laws” within the meaning of Section 4. Other acts are not, including for our purposes, the Federal Trade Commission Act. See Samson Crane Co. v. Union National Sales, 87 F.Supp. 218 (D.C.Mass.1949).

In its scheme for the enforcement of these “antitrust laws”, Congress envisaged both public and private actions. United States v. Borden Co., 347 U.S. 514, 519, 74 S.Ct. 703, 98 L.Ed. 903 (1954) ; United States v. Cooper Corp., 312 U.S. 600, 608, 610, 61 S.Ct. 741, 85 L.Ed. 1071 (1941); United States v. Bendix Home Appliances, 10 F.R.D. 73, 77 (S.D.N.Y. 1949) ; see 2 Toulmin’s Antitrust Laws, Section 16.6 P. 91 (1949); MacIntyre, The Role of the Private Litigant in Antitrust Enforcement, 7 Antitrust Bulletin, P. 113, et seq. (1962). Through Section 4, the business public became an ally of government and the private antitrust suit, a substantial weapon of national antitrust policy. Cinnamon v. Abner A. Wolf, Inc., 215 F.Supp. 833, 834 (E.D.Mich.1963), citing Report of the Attorney General’s National Committee, to Study the Antitrust Laws, P. 378 (1955). Congress had hoped that these private antitrust suits would supplement government actions and perhaps in some cases make them unnecessary.4

This broad plan of private and public actions is further detailed. The Sherman Act5 contemplates civil (Section *3514) and criminal (Section 3) actions by the Justice Department, and treble damage suits by private parties (Section 7). 15 U.S.C. §§ 3, 4, 15 note (1958); but cf. Federal Trade Commission v. Cement Institute, 333 U.S. 683, 68 S.Ct. 793, 92 L.Ed. 1010 (1948). Under the Clayton Act,6 private actions may be in the form of suits for injunctive relief (Section 16) or for treble damages (Section 4). 15 U.S.C. §§ 26, 15 (1958) ; public actions, in the form of suits principally by the FTC and the Justice Department under Section 11 for violations of Sections 2, 3, 7 and 8 of that act. 15 U.S.C. § 21 (1958).

To be distinguished is the role of the FTC under the FTC Act.

The Federal Trade Commission was established under the Federal Trade Commission Act (Act of September 26, 1914, c. 311, 38 Stat. 717) and invested with both adjudicatory and investigatory functions. Under Section 5 (of the FTC Act) the FTC was empowered to order the discontinuance of “unfair methods of competition” and later “unfair * * practices” which were declared “unlawful” by the Act. See the extensive legislative history in Judge Denison’s partial dissent in L. B. Silver Co. v. Federal Trade Commission, 289 F. 985, 992-998 (6 Cir. 1923); Federal Trade Commission v. Klesner, 280 U.S. 19, 50 S.Ct. 1, 74 L.Ed. 138 (1929); Federal Trade Commission v. Raladam Co., 283 U.S. 643, 647, 51 S.Ct. 587, 75 L.Ed. 1324 (1931). Purposefully left broad and generally undefined (as to what constituted an “unfair method of competition” or an “unfair practice”), Section 5 proceeded on the idea of an administrative body of experts (the FTC) which, given a flexible standard of judgment, would discover and prevent the use of such practice before it worked a Sherman violation. See Federal Trade Commission v. Motion Picture Advertising Service Co., 344 U.S. 392, 394, 73 S.Ct. 361, 97 L.Ed. 426 (1953) ; Federal Trade Commission v. Raladam Co., 283 U.S. 643, 648, 51 S.Ct. 587, 75 L.Ed. 1324 (1931); see Beer, Federal Trade Law and Practice (1942) P. 76-77. The Sherman Act was to serve as a guide for the Commission, as a “declaration of policy”, to be considered in determining what constituted an unfair method of competition. Federal Trade Commission v. Beech Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307 (1922); Standard Oil Co. v. Federal Trade Commission, 282 F. 81, 86-87 (3 Cir. 1922) affirmed 261 U.S. 463, 43 S.Ct. 450, 67 L.Ed. 746 (1923).

Within this area of “unfair methods of competition”, the FTC Act and the Clayton Act overlap. At the time of the enactment of the Clayton Act, it was believed that its specific prohibitions particularly Section 2 and Section 3 (15 U.S.C. §§ 13, 14 (1958)) would be cov*352ered by Section 5 of the FTC Act. However, Congress, by declaring these practices unlawful specifically in the Clayton Act, took away from the Commission its informed judgment respecting them.7 These “unfair methods of competition (later amended to include “unfair * * * practices”), whether prohibited specifically under the Clayton Act, or generally under the FTC Act, were to be restrained according to a congressional design. While Section 5 of the FTC Act was to be enforced by the FTC, Section 11 of the Clayton Act provided a scheme of dual enforcement of Sections 2, 3, 7 and 8 of that act, by the FTC and the Justice Department; and while the underlying substantive violation of Section 5 (FTC Act) did not give rise to a private right of action (the FTC Act was not an antitrust law within the meaning of Clayton Section 4), a violation of Sections 2, 3, 7 and 8 did, no matter by which agency, if either of them, they were enforced. In short, the FTC Act bolstered the Clayton and Sherman Acts both by restraining evils, which might also constitute violations of those acts, and by reaching areas not covered by their proscriptions. These three acts are “interlaced” remedially as well as substantively evincing a Congressional desire for a “cumulative remedy” for the threats and dangers to trade and competition. See Federal Trade Commission v. Cement Institute, 333 U.S. 683, 694-695, 68 S.Ct. 793, 92 L.Ed. 1010 (1948) ; United States v. Borden Company, 347 U.S. 514, 518, 74 S.Ct. 703, 98 L.Ed. 903 (1954). 51 Cong.Rec. 16274-16275 (1914). The question here presented concerns in part the “cumulative remedy” Congress provided for the violation of Section 7 of the Clayton Act. In the case at bar, both the FTC (under Section 11) and N. J. Wood (under Section 4) had brought actions based on the violation of Section 7. N. J. Wood claims that, by virtue of the FTC proceeding, it is entitled to the benefits of Section 5 of the Clayton Act. Section 5 is auxiliary to Section 4 and provides for the tolling of the statute of limitations in favor of potential private suitors during the pendency of certain government antitrust suits. 3M, however, contends that the FTC proceeding is not a proceeding instituted by the United States within the meaning of Section 5.

As we indicated above, specifically granted in Section 11 of the Clayton Act, (15 U.S.C. § 21 (1958)), was the jurisdiction of the FTC to enforce compliance with Sections 2, 3, 7 and 8 of the Act, (15 U.S.C. §§ 13, 14, 18, 19 (1958)) to be shared concurrently with the Justice Department. (See footnote 12 infra). United States v. W. T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 97 L.Ed. 1303 (1953); Standard Oil Co. of Calif. v. United States, 337 U.S. 293, 310, 69 S.Ct. 1051, 93 L.Ed. 1371 (Note 13) (1949); United States Alkali Export Association, Inc. v. United States, 325 U.S. 196, 65 S.Ct. 1120, 89 L.Ed. 1554 (1945). In the latter opinion, 325 U.S. at pp. 206-209, 65 S.Ct. 1120, 89 L.Ed. 1554 Chief Justice Stone described the enforcement of these provisions as one of “efficient cooperation” between the “two agencies”. This relationship was further cemented in 1950 when Congress amended Section 11, giving the Attorney General the right to intervene in an FTC Clayton Act proceeding. Act of December 29, 1950, c. 1184, 64 Stat. 1125; House Report No. 1191, August 4, 1949, 81st Cong. 1st Session; S. Report No. 1775, June 2, 1950, 81st Cong. 2d Session, U.S.Code Congressional Service, p. 4293. See also Final Report of Attorney General’s Na*353tional Committee to study Antitrust Laws, G.P.O. March 1955 at P. 375, et seq. We believe that when Congress vested authority in the FTC to enforce the Clayton Act provisions, it designated the FTC as a “representative of the United States” having “authority to represent its interest in a final adjudication” of an alleged Clayton antitrust violation. Sunshine Anthracite Coal Co. v. Atkins, 310 U.S. 381, 60 S.Ct. 907, 84 L.Ed. 1263 (1940); United States v. Willard Tablet Co., 141 F.2d 141, 152 A.L.R. 1194 (7 Cir. 1944) ; United States v. R. C. A., 358 U.S. 334, 79 S.Ct. 457, 3 L.Ed.2d 354 (1959). In the latter case, the Supreme Court held that because the Federal Communications Commission (FCC) had not the power and authority to decide the antitrust issue there presented, the United States would not be estopped by any determination made therein. Underwritten in that decision is the thought that if the FCC had the power and authority to decide those antitrust issues, FCC would have been regarded in that instance as a representative of the United States.8 R. C. A. case, supra, 358 U.S. p. 352, 79 S.Ct. 457, 3 L.Ed.2d 354. This clearly negates the proposition offered by 3M in this appeal, that suits by the United States and proceedings by the FTC must be regarded as distinct, because “agency determinations do not bar antitrust suits”. The cases cited by 3M9 deal fundamentally with questions of primary jurisdiction over matters having antitrust implications. They hold merely that agency determinations in proceedings brought in regulation of other laws (e. g., Interstate Commerce Act, Natural Gas Act) without authority to adjudicate antitrust issues will not bar antitrust suits by the United States. Cf. Pan American World Airways v. United States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963). In the FTC proceeding at issue, where the Commission under Section 11 was directly given such authority to enforce the Clayton Act, such action must be regarded as one on behalf of the United States, the interests of which are now further protected by Attorney General’s right of intervention.

Any argument that an FTC proceeding is not a suit by the United States must meet the reality that whether the Commission functions under the Clayton or the FTC Act, it does so in the public interest and as an administrative arm of the Government. See 16 C.F.R. Section 1.21 Rules of Practice of the Federal Trade Commission; Federal Trade Commission v. Cement Institute, 333 U.S. 683, 692-693, 68 S.Ct. 793, 92 L.Ed. 1010 (1948) ; Federal Trade Commission v. Gratz, 253 U.S. 421, 432, 435, 40 S.Ct. 572, 64 L.Ed. 993 (1920), Justice Brandeis dissenting but not as to the functioning of the Commission; certainly an FTC proceeding under Section 11 of the Clayton Act should not be rendered an anomaly in the Congressional plan for “antitrust law” enforcement. This plan definitely contemplates private and public actions, with some of these public actions, being brought by the FTC under Section 11. As Judge Augelli succinctly phrased it below:

“It certainly would seem not to have been the Congressional intent to have plaintiff’s rights turn on the fortuitous circumstance of which agency initiated the action. To permit a plaintiff to take advantage of facts *354uncovered as a result of a Department of Justice proceeding, but not as a result of a Federal Trade Commission proceeding brought under the same statute, does not seem logical.” New Jersey Wood Finishing Co. v. Minnesota Mining and Manufacturing Co., 216 F.Supp. 507, 510 (D.C.N.J.1963).

The sole reason for Section 5 of the Clayton Act was to stimulate private antitrust suits (see footnote 4) and aid such private suitors. As it appears that the FTC is the primary enforcing agency of Section 7 of the Clayton Act (see United States v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963)),10 to hold that such a proceeding was not within Section 5 (b) would thwart in part the Congressional scheme for the enforcement of Section 7. We think it must follow that a Section 4 private right is preserved by a Government action to enforce Section 7, whether that action is brought by the Justice Department or the FTC; that it is not a question whether it is a judicial or an administrative proceeding but rather whether it is a proceeding on behalf of the United States to enforce the “antitrust laws”.

It is also asserted that an action by the FTC is not a “proceeding in equity”, as-Section 5 originally provided.11 Certainly, when the Justice Department seeks an injunction against a defendant for violation of the Clayton Act, its purpose is to prevent irreparable injury to the public weal by the traditional equitable remedy. Section 15 of the Clayton Act, 15 U.S.C. § 25 (1958) ; United States v. Borden Co., 347 U.S. 514, 518, 74 S.Ct. 703, 98 L.Ed. 903 (1954). The effect of the FTC proceeding is essentially the same, by virtue of the 1959 amendment to Section 11, hereinafter referred to as the Finality Act of 1959.12 Act of July *35523, 1959, Pub-L 86-107, Section 1, 73 Stat. 243. Formerly the FTC had to seek the enforcement of its order — after its determination of a Clayton Act violation, and a subsequent violation of the order (See Federal Trade Commission v. Ruberoid Co., 343 U.S. 470, 72 S.Ct. 800, 96 L.Ed. 1081 (1952)) — by a petition to the Court of Appeals; but now enforcement decrees by the Circuit Court of Appeals are unnecessary and the orders become final and self-executing by the expiration of defendant’s time to seek review.

The legislative history of the FTC Act and the Clayton Act indicates that the FTC cease and desist order originally was to be more in the nature of “notice” of violation than an injunctive measure. The bare order had “no effect in itself, unless made operative by the Circuit Court of Appeals, * * Proper v. John Bene and Sons, Inc., 295 F. 729, 731 (E.D.N.Y.1923). The FTC functioned as- an investigatory body which would judge and note violations of the Acts. In formulating its findings and order, it presented itself in a manner analogous to a Master in Equity to the Court of Appeals [See address of William H. Taft, of October 20, 1914, reported in New York Times, October 21,1914, P. 5] which sat not as an Appellate Court but as a court of equity enforcing, modifying or setting aside the orders of the FTC. C. E. Niehoff & Co. v. Federal Trade Commission, 241 F.2d 37,42 (7 Cir. 1957); Federal Trade Commission v. Fairyfoot Products Co., 94 F.2d 844 (7 Cir. 1938); Butterick v. Federal Trade Commission, 4 F.2d 910 (2 Cir. 1925); L. B. Silver v. Federal Trade Commission, 292 F. 752, 753 (6 Cir. 1923). See e. g. 51 Cong.Rec.14927, 14768-70, 14251-52, 16281 (1914), H. Rep.No. 1142, 63 Cong. 2d Sess. p. 19; *356Henderson, Federal Trade Commission (1924) pp. 77-78. In addition to examining the prospective application of the order, restraining the violation of the Act, the Court of Appeals had to determine the legality of the order, whether the facts properly found by the FTC constituted a violation of the Act. See Federal Trade Commission v. Henry Broch and Co., 368 U.S. 360, 364, 82 S. Ct. 431, 7 L.Ed.2d 353 (1962); Federal Trade Commission v. Ruberoid Co., 343 U.S. 470, 473-474, 72 S.Ct. 800, 96 L.Ed. 1081 (1952); Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, 612, 66 S.Ct. 758, 90 L.Ed. 888 (1946); Federal Trade Commission v. Fairyfoot Products Co., 94 F.2d 844 (7 Cir. 1938); See Beer, supra p. 420. By virtue of the Finality Act, if judicial review is not sought, the cease and desist order becomes final, and an adjudication that a violation of the Clayton Act has been committed. That act brought to Clayton Act-FTC orders the same binding effect that had been given FTC orders under the FTC Act. See Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 54, 68 S.Ct. 822, 92 L.Ed. 1196 (1948); United States v. Willard Tablet Co., 141 F.2d 141, 143 (7 Cir. 1944); George H. Lee Co. v. Federal Trade Commission, 113 F.2d 583 (8 Cir. 1940); United States v. Piuma, 40 F. Supp. 119 (S.D.Calif.1941); affirmed 126 F.2d 601 (9 Cir. 1942) ; See 152 ALR Anno. 1198 (1944).

The “proceeding in equity” therefore was not the Commission proceeding but the proceeding before the Court of Appeals from which a judgment or decree would issue determining and restraining a violation of the Act. With development of “final orders” in FTC proceedings, whether the order becomes final by expiration of time in which to seek review or by a judgment or decree from a Court of Appeals, the proceeding resulting in such final order or decree, is a “proceeding in equity” and a “civil proceeding” within the meaning of Section 5, and an adjudication of a violation of the Clayton Act.

The vital effect of these changes is overlooked by appellant in its strong reliance upon the 1923 decision in Proper v. John Bene and Sons, Inc., 295 F. 729 (E.D.N.Y.1923). That opinion held that a FTC proceeding under the FTC Act is not a “proceeding in equity * * * instituted by the United States” to restrain violations of the “antitrust laws” within Section 5 of Clayton Act. In Px*oper, the plaintiff brought a private antitrust suit for treble damages fox-violations of the Clayton, Sherman and FTC Acts. A proceeding had been brought against the defendant by the FTC under the FTC Act and the plaintiff sought to have the bare FTC order, unenforced by the courts, admitted as prima facie evidence under Section 5.

The court denied it for several reasons : that the proceeding before the Commission was not a “proceeding in equity”; that the FTC order was not a “final judgment or decree”; that the proceeding by the FTC to enforce Section 5 of the FTC Act was not a suit under the antitrust laws as that term is used in Section 5 of the Clayton Act. There are no findings in Proper contrary to our conception of the law as it stood in 1923. The Court in Proper dealt with a 1923 FTC proceeding under the FTC Act. We have before us a proceeding under the Clayton Act brought by an expanded 1960 FTC.

With that thoroughly in mind, the 1945 decision of Brunswick-Balke Collender Co. v. American Bowling and Billiard Corp., 150 F.2d 69 (2 Cir. 1945) cited by Judge Augelli below, becomes fax-more reflective of the problem presented by this appeal. There the Court held that an FTC proceeding brought for violations of Section 3 of the Clayton Act was a “final judgment or decree” rendered in a “suit or proceeding in equity brought by or on behalf of the United States” within Section 5 of the Act. In so deciding, the Court had mistaken the scope of the Act of March 21, 1938, c. 49, 52 Stat. 111, 15 U.S.C. § 45 (1958). That statute did not amend Section 11 of the Clayton Act but only Section 5 of *357the FTC Act, and on rehearing the Court reversed itself, concluding that because the order was not “final”, it was inadmissible as prima facie evidence under Clayton Section 5, citing Proper v. John Bene & Sons, Inc., supra. It is obvious that if the order had been final, as it is today, (by virtue of the Finality Act), the Court would have regarded the “final order” admissible under Section 5. See Fifth & Walnut v. Loew’s Inc., 176 F.2d 587, 593 (footnote 9) (2 Cir. 1949).

3M has argued that Section 5(b) (the tolling provision) is dependent upon Section 5(a) (the prima facie evidence provision), and that the two subsections must be construed as a unit. One theory advanced is that the express statement in Section 5(a): That this section shall not apply to “consent judgments or decrees” should be brought down to Section 5(b) and interpreted so as to prevent the tolling of the statute of limitations where the civil or criminal proceeding is terminated by a consent order. Apart from the legislative history which negates such construction 51 Cong.Rec. 15825-15826; 16046-47; 16276 (1914), it would seem that if the proviso were to apply to both paragraphs, there would be no reason to insert it after the first. As the district court further pointed out: “The proviso is grammatically a part of the single sentence which comprises section 5(a), separated only by a colon.” See Flora v. United States, 362 U.S. 145, 150, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960). More important is the substantive application of the consent judgment proviso. While the proviso deals with the termination of the government suit, the tolling provision operates during its “pendency”. Section 5(a) permits the use of government judgments and decrees as prima facie evidence, only as to matters actually decided in the government suit. Emich Motors Corp. v. General Motors, 340 U.S. 558, 71 S.Ct. 408, 95 L.Ed. 534 (1951). 5(b) tolls the statute of limitations as to “matters complained of” whether or not they are actually decided. Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10 Cir. 1962). To construe this section as appellant desires, would be to force every private antitrust claimant caught between the running of the statute and the possible consent termination of the government proceeding, to start suit without the benefits of the government action. See Twin Ports Oil Co. v. Pure Oil Co., 26 F.Supp. 366, 372-376 (D.C. Minn.1939), affirmed on other grounds, 119 F.2d 747 (8 Cir. 1941) ; Twentieth Century-Fox Film Corp. v. Brookside Theatre Corp., 194 F.2d 846 (8 Cir. 1952).

The defendant 3M also suggests that proceedings which cannot yield judgments and decrees applicable as prima facie evidence under Section 5(a) cannot toll the statute of limitations under Section 5(b). The legislative history is sparse on the interrelationship between the two sections. The only clear Congressional commentary on this point occurred in the debates on the House Clayton bill, (51 Cong.Rec. 9165, 9488-90 (1914)), which had no provision for the enforcement of its sections by the FTC;. [See H.Rep.No. 627, 63 Cong. 2d Sess. (1914)] ; so that the question whether FTC proceedings to enforce the Clayton provisions tolled the statute of limitations was not squarely met by the 1914 legislators. The House debates support 3M’s view solely to the extent that the tolling provision was to enable the private claimant to reap the benefits of the government action, i. e., the use of a government judgment and decree as prima facie evidence. Union Carbide & Carbon Corp. v. Nisely, 300 F.2d 561 (10 Cir. 1962). But see 51 Cong.Rec. 16003 (1914). In addition to the decisions noted infra (see footnote 14, infra), other courts have regarded the two subsections as related and dependent. See Sun Theatre v. R. K. O. Radio Pictures, 213 F.2d 284, 289-293 (7 Cir. 1951); Momand v. Universal Film Exchange, 43 F.Supp. 996, 1012 (D.C.Mass.1942), affirmed 172 F.2d 37 (1 Cir. 1948). However, we see no reason why final FTC orders enforcing the Clayton Act should not be admitted as prima facie evidence under Section 5(a). Brunswick-Balke Collender *358Co. v. American Bowling and Billiard Corp., 150 F.2d 69 (2 Cir. 1945). But cf. United States v. United Shoe Machinery Corp., 89 F.Supp. 349, 356 (D.C. Mass.1950). (Final disposition of case 110 F.Supp. 295 (D.C.Mass.1953), affirmed per curiam 346 U.S. 894, 74 S.Ct. 223, 98 L.Ed. 396 (1953)). While our 1914 legislators would not have accepted a bare FTC order of that period as admissible, the finality given such order through a decree emanating from the Court of Appeals would have resulted in its being considered a “final judgment or decree”, within Section 5(a). Today of course, under the Finality Act, the orders of the FTC become final adjudications of antitrust violations by expiration of the time in which review can be 'sought.

The.operation of Section 5(a) has been explained to some extent by Emich Motors Corp. v. General Motors, 340 U.S. 558, 71 S.Ct. 408, 95 L.Ed. 534 (1951). Judgments and decrees in government suits are only prima facie evidence of antitrust violations. The defendant still has his “day in Court” on that issue. See Harrison v. Paramount Pictures, 115 F.Supp. 312 (E.D.Pa.1953), affirmed 211 F.2d 405 (3 Cir. 1954). He is entitled to offer rebuttal evidence to break down the force and effect of that prima facie evidence. 51 Cong.Rec. 13856-13858 (1914); see the authorities collected in Richfield Oil Corp. v. Karseal Corp., 271 F.2d 709, 716-727 (9 Cir. 1959) . See also 65 Harv.L.Rev. 1400 (1952). 3M argues that FTC orders cannot be admitted because of the more liberal evidentiary rules of the administrative agency. This plus the broader administrative process might place the FTC proceeding on a somewhat unequal footing with a similar judicial proceeding brought by the Department of Justice. See United States v. Morton Salt Co., 338 U.S. 632, 641-643, 70 S.Ct. 357, 94 L.Ed. 401 (1950); Hunt Foods & Industries. Inc. v. Federal Trade Commission, 286 F.2d 803 (5 Cir. 1961). But see United States v. Household Goods Movers Investigation, 184 F.Supp. 689 (D.C.D.C. 1960) . The differences are at most peripheral and any attack along those lines would go to the weight of the prima facie evidence, not to its propriety. The use of administrative orders as prima facie evidence in private suits is not new to our law. Under the Interstate Commerce Act, 49 U.S.C. § 16(13) (1958) a reparation order of the ICC is admissible as prima facie evidence in an action for damages by a shipper against a defendant railroad, found by the ICC to have exacted unreasonable rates.13 Meeker *359& Co., v. Lehigh Valley R. R., 236 U.S. 412, 430, 35 S.Ct. 328, 59 L.Ed. 644 (1915); Pennsylvania R. Co. v. Weber, 257 U.S. 85, 42 S.Ct. 18, 66 L.Ed. 141 (1921); Western Maryland Ry. v. Penn. Veneer Co., 92 F.2d 146 (3 Cir. 1937). While we are satisfied that final orders in FTC Clayton Act proceedings are admissible under Section 5(a) as prima facie evidence, in the case at bar, N. J. Wood will not get the benefit of Section 5(a) because the FTC proceeding involved ended in a consent order, apparently before any testimony was taken. We have reached this question solely because there was some evidence in the legislative history of the section that the two subsections are to be construed together, as other courts have subsequently held. However, the decision of the court below that the two subsections should not be regarded as interdependent does have substantial support.

The above mentioned intention in 1914 does not seem as plain in 1955 when Congress amended Section 5 and divided Section 5 into subsections (a) and (b). Act of July 7, 1955, c. 283, Section 2, 69 Stat. 283. The committee reports on the 1955 amendment to Section 5, plainly intimated a broader reason for tolling the statute of limitations. By 1955, the Supreme Court had pointed to the limited practical value of the prima facie evidence to a private suitor. See Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954) ; Partmar Corp. v. Paramount Pictures Theatres Corp., 347 U.S. 89, 102-103, 74 S.Ct. 414, 98 L.Ed. 532 (1954). The real importance of government proceedings that accrues today to private suitors is the availability to them of the government’s case against the defendant. Section 5(b) enables “a plaintiff to take advantage of facts uncovered” as a result of the government proceedings. New Jersey Wood Finishing Co. v. Minnesota Mining & Manufacturing Co., 216 F.Supp. 507 at p. 510 (D.C.N.J.1963). In the Senate Report on the 1955 amendment to Section 5(b) the Committee wrote:

“Although the statute is tolled during the pendency of the proceedings brought by the United States, the plaintiff in a treble-damage action may find himself hard pressed to reap the benefits of the Government suit if, upon its conclusion, he has but a short time remaining to study the Government’s case, estimate his own damages, assess the strength and validity of his suit, and prepare and file his complaint”. Senate Report No. 619, June 21, 1955, U.S. Code Cong. & Ad.News, 84 Cong. 1st Sess. P. 2332.

Whether or not this shift in congressional intent was there fully outlined, it seems to us that FTC orders and FTC proceedings presently enjoy the efficacy of court proceedings for purposes of Section 5, and that in this appeal the FTC proceeding against 3M to restrain a violation of Clayton Section 7, tolled the statute of limitations and that N. J. Wood’s complaint was timely.

Three recent decisions14 on the issue before us all relied on the old Proper case, supra, and summarily rejected the Brunswick Balke-Collender opinion. In so doing, those courts clearly overlooked the affirmative statutory distinction between FTC proceedings under the FTC Act and under the Clayton Act and that distinction’s vital effect upon Section 4 and Section 5 of the Clayton Act; otherwise they could not have reasonably adopted the obsolete Proper rule. To do so at this stage is to consider the present question in a vacuum and simply forget all about the present governing statutory formula for the enforcement of the Clay*360ton Act and the increased powers that have come to the FTC.

It is also clear that the status of the Brunswick-Balke opinion of Judge Frank was fundamentally misunderstood. The sound legal principle there pronounced that final FTC orders in Clayton Act proceedings are admissible within Section 5(a), was not reversed. It was simply not usable because, as was discovered, there was no Finality Act at the time, dealing with FTC-Clayton Act orders. When Congress passed the Finality Act in 1959, it simply vitalized the principle of Brunswick-Balke as to Section 5(a). We are satisfied that this principle is good law and good common sense and that its logical extension is applicable to the Section 5(b) question here involved.

Finally, 3M claims that even if the FTC proceeding tolled the statute of limitations, it preserved only the Clayton counts and the Sherman counts are barred. The statutory language of Section 5(b) tolls the statute as to “any matter complained of” in the Government suit. One of the overt acts upon which N. J. Wood’s conspiracy count was based was the acquisition of IWI by 3M.15 While “contract or conspiracy” was not at issue before the FTC, the acqusition of IWI was. N. J. Wood’s complaint alleges that this act of acquisition was in furtherance of a conspiracy to restrain competition and to monopolize trade. There was a “substantial identity of subject matter.” Union Carbide and Carbon Corporation v. Nisley, 300 F.2d 561, 570 (10 Cir. 1962). We, therefore hold that the acquisition of IWI was a “matter complained of” within Section 5(b) and that the statute of limitations was tolled as to the Sherman as well as the Clayton counts. Union Carbide, supra; Steiner v. 20th Century-Fox Film Corporation, 232 F.2d 190, 196 (9 Cir. 1956).

The judgment of the District Court will be affirmed.

New Jersey Wood Finishing Co. v. Minnesota Mining & Manufacturing Co.
332 F.2d 346

Case Details

Name
New Jersey Wood Finishing Co. v. Minnesota Mining & Manufacturing Co.
Decision Date
May 20, 1964
Citations

332 F.2d 346

Jurisdiction
United States

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