Hanover Shoe, Inc. v. United Shoe Machinery Corp./Dissent Stewart

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Stewart

United States Supreme Court

392 U.S. 481

HANOVER SHOE, INC.  v.  UNITED SHOE MACHINERY CORP.

 Argued: March 5, 1968. --- Decided: June 17, 1968


Mr. Justice STEWART, dissenting.

Hanover sued United under the Clayton Act for damages allegedly flowing from United's practice of offering its machines for lease but not for sale. Hanover did not attempt to prove as an original matter that this practice violated the antitrust laws. Instead, it relied exclusively upon § 5(a) of the Clayton Act, 38 Stat. 731, as amended, which provides:

'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 * * * as to all matters respecting which said judgment or decree would be an estoppel as between the parties thereto * * *.' 15 U.S.C. § 16(a).

Hanover recovered an award of treble damages solely upon the theory that the 1953 judgment and decree in United States v. United Shoe Machinery Corp., 110 F.Supp. 295, aff'd per curiam, 347 U.S. 521, 74 S.Ct. 699, had established the unlawfulness of United's practice of making its machines available by lease only. So it follows, as the Court says, '(i)f the 1953 judgment is not prima facie evidence of the illegality of the practice from which Hanover's asserted injury arose, then Hanover, having offered no other convincing evidence of illegality, should not have recovered at all.' Ante, at 484.

I think that the 1953 judgment did not have the broad effect the Court attributes to it today. On the contrary, that judgment, it seems evident to me, held unlawful only particular kinds of leases with particular provisions, not United's general practice of leasing only. [1]

The only precedent cited by the Court for its expansive application of § 5(a) is Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 71 S.Ct. 408. That case dealt with the estoppel effect of a general jury verdict in a criminal case. We deal here with a civil case which was tried to a federal judge, who rendered a thoroughly considered opinion and carefully precise decree.

One section of the decree, § 2, broadly set out what the court found United's antitrust violations to be:

'Defendant violated § 2 of the Sherman Act, 15 U.S.C.A. § 2, by monopolizing the shoe machinery trade and commerce among the several States. Defendant violated the same section of the law by monopolizing that part of the interstate trade and commerce in tacks, nails, eyelets, grommets, and hooks, which is concerned with supplying the demand for those products by shoe factories within the United States. * * *' 110 F.Supp., at 352.

Another section of the decree, § 4, clearly specified the unlawful means by which these antitrust violations had been accomplished, and United's general leasing practice was not one of those means:

'All leases made by defendant which include either a ten-year term, or a full capacity clause, or deferred payment charges, and all leases under which during the life of the leases defendant has rendered repair and other service without making them subject to separate, segregated charges, are declared to have been means whereby defendant monopolized the shoe machinery market.' Ibid.

In addition to these two sections setting forth the violations found, the decree contained some 20 remedial sections. Section 3 enjoined the violations found in § 2. Section 6 prohibited the particular types of leases found to be unlawful in § 4. Another section of the decree, § 5, went further and provided that in the future United's machines must be offered for sale as well as for lease. But it is a commonplace that 'relief, to be effective, must go beyond the narrow limits of the proven violation,' United States v. United States Gypsum Co., 340 U.S. 76, 90, 71 S.Ct. 160, 170, 95 L.Ed. 89; United States v. Loew's Inc., 371 U.S. 38, 53, 83 S.Ct. 97, 106, 9 L.Ed.2d 11; United States v. Bausch & Lomb Co., 321 U.S. 707, 724, 64 S.Ct. 805, 814, 88 L.Ed. 1024.

I can find nothing in Judge Wyzanski's written opinion in the 1953 case to suggest that he found United's lease-only practice, as such, to be a violation of the antitrust laws or illegal in any way. [2] To the contrary, that opinion repeatedly emphasized the anticompetitive effects of the particular types of leases held illegal, and carefully explained that the purpose of requiring that customers in the future be given an option to purchase was to create an eventual second-hand market in United's machines and to make the machines available to United's competitors, so that they might study and copy them. 110 F.Supp., at 349-350. The opinion specifically stated that the reason for ordering United to offer its machines for sale was not to widen the choices available to customers. [3]

The Court today adds as an Appendix to its opinion-like a deus ex machina-Judge Wyzanski's findings of fact. But it is irrelevant with respect to § 5(a) that the 1953 findings describe United's lease-only practice, when neither the decree nor the opinion held that practice to be unlawful.

The real key to why the Court has gone astray in this case is to be found, I think, in the concluding sentence of Part I of the Court's opinion. For there the Court reveals that it is really not trying to determine what Judge Wyzanski decided in 1953, but is determining instead how this Court would decide the issues if the 1953 case were before it as an original matter today. [4]

In my view the 1953 United Shoe decision does not establish United's liability to Hanover. I do not reach, therefore, the other questions dealt with in the Court's opinion.

I would reverse the judgment of the Court of Appeals.

Notes[edit]

^1  I am not alone in this view. See Cole v. Hughes Tool Co., 10 Cir., 215 F.2d 924, 932-933; Laitram Corp. v. King Crab, Inc., D.C., 244 F.Supp. 9, 18. See also n. 2, infra.

^2  Neither, apparently, could Judge Wyzanski. After the trial court in this action filed its opinion holding that the 1953 decree had condemned United's lease-only practice, United applied to Judge Wyzanski for a construction of his decree. While denying the application upon grounds of comity, Judge Wyzanski indicated a willingness to construe his decree if officially requested by the trial judge in the present case, Judge Sheridan. During the course of the hearing before Judge Wyzanski, he made his own views clear to government counsel:

'New that you are here, are you not aware from being here on previous occasions that the government never contended, and I never ruled, as Judge Sheridan supposes the matter was decided?'

^3  110 F.Supp., at 349-350. The language quoted by the Court, ante, at 486, n. 3, is not a statement of why the District Court in 1953 ordered United to offer its machines for sale, but rather part of the court's answer to United's argument that it would be unfair to make United sell while its competitors continued only to lease. 110 F.Supp., at 350.

^4  'When the applicable standard for determining monopolization under § 2 is applied to these facts, it must be concluded that the District Court and the Court of Appeals did not err in holding that United's practice of leasing and refusing to sell its major machines was determined to be illegal monopolization in the Government's case.' (Emphasis added.)

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).