Opinion
No. 14952-Y-Cr.
November 15, 1941.
Tom C. Clark, Sp. Asst. to Atty. Gen., and A. Andrew Hauk and Robert J. Rubin, Sp. Attys., both of Los Angeles, Cal., for the United States.
Mitchell, Johnson Ludwick and Byron C. Hanna, all of Los Angeles, Cal., for defendants Certified Grocers of California, Ltd., Caler Grocery Company, Ltd., Clayton Whiteman, Sam Seelig, Morris Weisstein, Miller Allen, Henry J. Carty, T.I. Lingo, Isador Saul, and T.A. Von der Ahe.
Fred Horowitz, of Los Angeles, Cal., and Riccardi, Webster Donahue and Wilton W. Webster, all of Pasadena, Cal., for defendants Colonial Wholesale Grocery Co., Ltd., State Wholesale Grocery Company, Market Basket, and W.L. Wright.
Sarau Thompson and H.L. Thompson, all of Riverside, Cal., for defendants Alfred M. Lewis, Inc., and Paul A. Lewis.
J. Wesley Cupp, Otto Christensen, D.G. Montgomery, Beilensen Berger, and Eugene Sax, all of Los Angeles, Cal., for defendants Food and Grocery Bureau of Southern California, Inc., Southern California Retail Grocers Association, Spartan Grocers, Ltd., United Jewish Retail Grocers of California, S.M. White, E.G. de Statute, Myer Pransky, Clarence M. Plumridge, Harry R. Zenor, George Hagmann, Jr., and Ben Roth.
Williamson, Hoge Judson, Harold Judson, and Emil Steck, Jr., all of Los Angeles, Cal., for defendants Smart Final Co., Ltd., and A.W. Lutz.
Lawler Felix Hall and Max Felix, all of Los Angeles, Cal., for defendants Haas, Baruch Company, Karl Triest, and Ralph R. Brubaker.
Proceeding by the United States of America against the Food and Grocery Bureau of Southern California, Incorporated, and others, for alleged violation of the Sherman Anti-Trust Act § 1, 15 U.S.C.A. § 1. On demurrers to the indictment and motion for bill of particulars.
Demurrers overruled, and motions, except as to the particulars granted, denied.
The defendants are charged with a combination and conspiracy in restraint of trade or commerce in violation of Section 1 of the Act of July 2, 1890, commonly known as the "Sherman Anti-Trust Act", 15 U.S.C.A. § 1. Thirty defendants interposed demurrers in five separate pleadings. Each demurrer was joined in by two or more defendants. Two defendants joined in filing a pleading entitled: "Notice of Motion to Dismiss Indictment", which is here treated as a demurrer.
The principal ground urged in all of the demurrers is that the indictment does not adequately allege a "restraint of trade or commerce".
The indictment is in two counts. The first count charges generally, in Paragraph 19 thereof, that all the defendants, both wholesalers and retailers, "have entered into and engaged in an unlawful combination and conspiracy to raise, fix, maintain and stabilize the wholesale price of foods, groceries and allied products shipped into Southern California Territory from various States of the United States other than the State of California * * *" Count Two, in Paragraph 31, contains the same language except that it charges "an unlawful combination and conspiracy to raise, fix, maintain and stabilize the retail prices of foods, groceries and allied products." The two counts further contain substantially the same language particularizing these general charges. Thus, Paragraph 20 describes the organization of the defendant "Bureau", its purposes, activities, and its meetings at which prices and mark-ups were compared, fixed and agreed upon. Paragraph 21 details the plan to finance the activities of the "Bureau" by adding an arbitrary amount to the price of canned milk. In Paragraphs 22 and 23, there are alleged the efforts of the defendants to procure amendments to the California "Unfair Practices Act" and the utilization of that statute to enforce the high, arbitrary and artificial prices fixed and agreed upon by them.
Following allegations of facts supporting jurisdiction and venue, Paragraph 29 alleges that: "The purpose, intent, necessary tendency and effect of said combination and conspiracy and each of the acts of the defendants hereinbefore described were and have been unreasonably to raise, fix, maintain, and stabilize the wholesale prices of foods, groceries and allied products shipped into the Southern California Territory from various States of the United States other than the State of California; to eliminate competition among wholesalers engaged in the wholesale distribution of foods, groceries and allied products in the Southern California Territory; to restrain and obstruct the free and normal flow of the trade and commerce hereinbefore described; and to impose undue, direct, oppressive and unreasonable burdens thereon."
The nature of trade and commerce involved is particularized in Paragraphs 17 and 18. In the first of these it is alleged that more than 70 per cent of all food products sold at wholesale and retail and used and consumed in Southern California is produced in and shipped from other States; that 85 per cent of such food products is sold and distributed by the defendants. It is then averred that a "substantial amount of the products so sold and distributed is shipped directly and delivered in drop shipments from various States of the United States other than the State of California to the defendant retailers and to retail grocers purchasing from the defendant wholesalers for resale to the consuming public". Further, that a substantial amount of canned milk sold and customarily distributed by wholesalers in Southern California is produced in and shipped from various other States.
Paragraph 18 reads: "Foods, groceries and allied products are marketed in the Southern California Territory by means of a continuous flow of shipments from various States of the United States other than the State of California through wholesale and retail grocers to the consuming public. Thus, wholesale and retail grocers are the conduit through which foods, groceries and allied products produced in and shipped from various States of the United States other than the State of California, are sold and distributed to the consuming public in the Southern California Territory. When the wholesale and retail prices of foods, groceries and allied products in the Southern California Territory are artificially and arbitrarily raised, fixed, maintained and stabilized, competition among wholesalers and among retailers is eliminated, thereby substantially and directly affecting the quantity of said foods, groceries and allied products shipped into the Southern California Territory from States of the United States other than the State of California, and resulting in the unreasonable restraint of the free flow of interstate commerce in said foods, groceries and allied products."
On the Demurrer:
A thorough study of the indictment, in the light of the latest decisions on the subject, leads me to the conclusion that it charges with sufficient certainty a conspiracy, the object of which is "to restrain or control the supply entering and moving in interstate commerce or the price of it in interstate markets," and which the Supreme Court, ever since the second Coronado case (Coronado Coal Co. v. United Mine Workers, 1925, 268 U.S. 295, 310, 45 S.Ct. 551, 69 L.Ed. 963), has held to be a direct violation of the Anti-Trust Act. And see: United States v. Trenton Potteries Co., 1926, 273 U.S. 392, 397, 398, 47 S.Ct. 377, 71 L.Ed. 700, 50 A.L.R. 989; Ethyl Gasoline Corporation v. United States, 1940, 309 U.S. 436, 458, 459, 60 S.Ct. 618, 84 L.Ed. 852; United States v. Socony-Vacuum Oil Co., 1940, 310 U.S. 150, 212-218, 60 S.Ct. 811, 84 L.Ed. 1129.
And there are adequate allegations in the indictment to show that, despite the apparent local character of the activities of the defendants, the direct aim, purpose and effect of their acts is the kind of restraint of interstate commerce which these cases denounce. See my opinion in United States v. Heating, Piping Air Conditioning Contractors Ass'n, D.C. 1940, 33 F. Supp. 978.
The demurrers to the indictments are therefore overruled.
On the Motions for Bills of Particulars:
The plaintiff, United States of America, is ordered to furnish to the defendants the following particulars concerning the matters embraced within Counts One and Two of the indictment:
I. As to Paragraph 17, Page 8 of the indictment:
(1) State whether it is claimed that said drop shipments alleged in Lines 23-27, Page 8, constitute interstate commerce.
(2) State whether it is claimed that the retailers were engaged in interstate commerce by reason of receipt of such drop shipments through the wholesalers.
(3) Amplify the allegation in Paragraph 17, Line 23, that a substantial amount of the product so sold and distributed, is shipped directly and delivered in drop shipments from various States of the United States other than the State of California to the defendant retailers by specifying what amount of products sold and distributed is so received and what amount of canned milk so sold and distributed in Southern California Territory is shipped from other States of the United States.
II. As to Paragraph 18, Pages 8 and 9 of the indictment:
(1) State whether the Government in support of its application of the "conduit" theory, intends to rely, in addition to the continuous flow of shipments set forth in said paragraph, upon any facts showing that the price of commodities originating out of the State, other than those covered by drop shipments, was fixed in advance by the defendants.
It is further ordered that, except as hereinabove allowed, the motions of the various defendants for Bills of Particulars are, and each of them is, denied.