Nelson v. United States/Opinion of the Court

by Joseph McKenna

United States Supreme Court

201 U.S. 92

Nelson  v.  United States

 Argued: January 5, 8, 1906. --- Decided: March 12, 1906

Plaintiffs in error urge three main contentions, which we will consider in their order.

I. That the evidence, documentary and oral, which the witnesses were required to produce, was not shown to be material to plaintiff's case.

1. There are three answers to this contention. (1) The evidence is clearly material. The charge of the bill is that the defendant manufacturing corporations entered into a conspiracy and combination in violation of the act of July 2, 1890, to suppress competition between themselves, and that they accomplished this purpose by organizing the General Paper Company, and gave it certain controlling powers over the output of the mills and the prices and distribution of their products.

Before the application to the court for the orders under review there were certain facts established. It was established that in the fall of 1899 and the spring of 1900 there were preliminary meetings of the parties to ultimately form the paper company, and that it was subsequently formed by those representing the manufacturing companies, who subscribed for the stock. In July, 1900, the corporations, as represented in the paper company, fourteen in all, entered into contracts with it, making it their exclusive selling agent; that each constituent manufacturing company was represented by one of its principal officers upon the board of directors of the paper company, and the number of directors have been increased as other corporations have made the paper company their selling agent. A table of the constituent companies was given and the times the companies became members of the paper company. And it was established that there was an executive committee, comprised substantially of the same persons who constituted the board of directors, and that the paper company had books and records containing the minutes of the meetings of stockholders, directors, and the executive committee, and that the treasurers and sales agents had presented reports to the stockholders, directors, and executive committee. It was stipulated that all the subscriptions to stock of the paper company were for the benefit of some paper manufacturing company, and in its name, that it was the beneficial owner thereof, and that the dividends declared thereon were its property; that said stock was from time to time allotted to such corporations as made contracts with the paper company, making it their exclusive selling agent, upon the basis of estimated relative productions of paper. A list of the individuals to whom stock was issued, the names of the corporations represented by them, and the days of the issuances of the stock, were given.

The questions were framed to prove the combination charged in the bill and the powers and operation of the General Paper Company and the relations of the other companies to it. What the answers will show we do not know, nor what the books and documents will disclose. The organization of the paper company had a purpose, and whether it was a legal or illegal instrument for competing companies to use we do not have now to determine. By the admissions of the answers the paper company entered into contracts with those companies, became their selling agent, and was entitled to a certain percentage of the sales. Presumably it exercised its powers, made sales and received profits. In all that it did, the manufacturing corporations were interested; they owned its stock, were entitled to its dividends. This we may admit, for argument sake, not prejudging in any way, may be consistent with continued competition between the companies, but it may be otherwise. At any rate, the manner in which the paper company executed its functions may be links in the evidence adduced by the United States, and this is enough to establish the materiality of the evidence.

It must not be overlooked that not only an inspection of the books was refused, but questions directed to ascertain the contents of the books were objected to, not answered. We have given one illustration; we will give another. Counsel for defendant corporations stated at the examination: 'That for the purpose of any questions the government counsel see fit to ask, it may be assumed that all the books, papers, and documents' described in the subpoena 'are present here in court, and we decline to submit them to the inspection of the government counsel.' The following then took place:

Q. State whether those books show the amounts, kinds, or grades of paper manufactured by the defendant Northwest Paper Company and sold by or through the defendant General Paper Company, as the exclusive sales agent of the defendant Northwest Paper Company since the 8th day of April, 1902, or since about the 1st of May, 1902 if that is the date the business commenced.

Same objections by defendants, and the witness given the same advice.

Q. You decline to answer?

A. I decline on advice of attorney.

Q. Do the books also show where the said paper so manufactured was sold and into what states and territories it was shipped since the 8th day of April, 1902, or the 1st day of May, 1902?

Mr. Flanders: I wish to make the same objections, and I give the witness the same advice.

A. Same answer.

And counsel for the United States, not only as to the matters expressed in the foregoing questions, but as to other matters which the bill charged against the companies and which had been inquired about, said that he desired to use the books and offer them in evidence to show such matters. An inspection of the books was refused, and all evidence of their contents withheld.

Necessarily the books contained the information. The paper company was the selling agent of the Northwest Paper Company and must have kept an account of its sales and into what states the paper of the company was shipped and sold. Such accounts are material and relevant to complainant's case. They may or may not, in connection with other evidence, sustain the charge of the United States, but they are elements in the proof, having tendency enough to sustain the charge to be considered material.

2. The claim of immateriality of the testimony cannot avail plaintiffs against the orders of the circuit court. The procedure before an examiner and his power are explained in Blease v. Garlington, 92 U.S. 1, 23 L. ed. 521. It is there said: 'The examiner, before whom the witnesses are orally examined, is required to note exceptions, but he cannot decide upon their validity. He must take down all the examination in writing, and send it to the court, with the objections noted. So, too, when depositions are taken according to the acts of Congress, or otherwise, under the rules; exceptions to the testimony may be noted by the officer taking the deposition, but he is not permitted to decide upon them; and when the testimony, as reduced to writing by the examiner, or the deposition, is filed in court, further exceptions may be there taken. Thus, both the exceptions and the testimony objected to are all before the court below, and come here upon the appeal as part of the record and proceedings there.'

And an application to a court to compel the delivery of testimony in aid of the examination does not change the rule. The testimony is taken to be submitted to the court where the suit is pending, and all questions upon the evidence, its materiality and sufficiency, are to be determined by it, and after it by an appellate court. Even if the trial court permit the examination of witnesses orally in open court upon the hearing in cases in equity, as further said in Blease v. Garlington, the testimony must be taken 'down or its substance stated in writing and made part of the record, or it will be entirely disregarded here on an appeal. So, too, if testimony is objected to and ruled out, it must still be sent here with the record, subject to the objection, or the ruling will not be considered by us.' Blease v. Garlington has been applied at circuit in a number of cases. ^[1]

3. These writs of error are not prosecuted by the parties in the original suit, but by witnesses, to review a judgment of contempt against them for disobeying orders to testify. Being witnesses merely, it is not open to them to make objections to the testimony. The tendency or effect of the testimony on the issues between the parties is no concern of theirs. The basis of their privilege is different from that the entirely personal, as we shall presently see.

II. That the documentary evidence called for was not shown to be in the possession or under the control of the witnesses. This contention is untenable. The ground of it is that the possession of the witnesses was not personal, but was that of the respective corporations of which they were officers. Granting this to be so, and that the witnesses could have set up whatever privileges the corporations had, nevertheless they had the custody (actual possession) of the books, and were summoned from necessity, as representing the corporations. It is hardly necessary to observe that the witnesses had all the possession human beings could have had or can have, and if the objection is to prevail, the books of a corporation can be withdrawn from the reach of compulsory process.

It is as useless as attempting to demonstrate that twice two make four, to say that a corporation can have possession of nothing except by the human beings who are its officers, and it is to them-not the intangible being they represent and act for- that the law directs its process of subpoena and must procure its evidence.

III. That the evidence, documentary and oral, required to be produced, was in the nature of incriminating evidence, which the witnesses and the defendants are privileged from furnishing to the plaintiff under the provisions of the Federal Constitution and the well-recognized principles of equity procedure.

This contention asserts rights personal to the plaintiffs and rights of the corporation defendants in the suit. The basis of both rights is the protection of the 4th and 5th Amendments to the Constitution of the United States.

The argument submitted is substantially the same as that made by appellants in Hale v. Henkel and McAlister v. Henkel [[[201 U.S. 43]], 90, 50 L. ed. --, 26 Sup.Ct.Rep. 370, 385]. It is insisted that the immunity ^[2] given by the act of February 25, 1903, is not as broad as the penalties and forfeitures to which the plaintiffs in error or the corporations of which they are officers will be subjected. If the immunity, it is urged, protects from the penalties of the antitrust act of 1890, it does not protect, nor has Congress the power to protect, from the penalties of the Minnesota laws, which make criminal a combination and conspiracy in restraint of trade, and subject to forfeiture the charters of corporations who become parties to such combination and conspiracy. Minn. Stat. 1894, §§ 6955, 6956, 6962.

The extent of the immunity and its application to corporations was considered in Hale v. Henkel and McAlister v. Henkel, and decided adversely to the contention of plaintiffs in error.

Judgment affirmed.

Notes

1. Thomson-Houston Electric Co. v. Jeffrey Mfg. Co. 83 Fed. 614; Maxim-Nordenfelt Guns & Ammunition Co. v. Colt's Patent Firearms Mfg. Co. 103 Fed. 39; Parisian Comb Co. v. Eschwege, 92 Fed. 721; Fayerweather v. Ritch, 89 Fed. 529; Appleton v. Ecaubert, 45 Fed. 281; Edison Electric Light Co. v. United States Electric Lighting Co. 45 Fed. 55, 59; Johnson Steel Street-Rail Co. v. North Branch Steel Co. 48 Fed. 196; Adee v. J. L. Mott Iron Works, 46 Fed. 39; Lloyd v. Pennie, 50 Fed. 4; Brown v. Worster, 113 Fed. 20; MacWilliam v. Connecticut Web Co. 119 Fed. 509; Whitehead & H. Co. v. O'Callahan. 130 Fed. 243.
2. Provided, that no person shall be prosecuted or be subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he may testify or produce evidence, documentary or otherwise. in any proceeding, suit, or prosecution under said acts: Provided further, that no person so testifying shall be exempt from prosecution or punishment for perjury committed in so testifying.' Act February, 25, 1903, 32 Stat. at L. 904, chap. 755, U.S.C.omp. Stat. Supp. 1905, p. 602.