United States v. W. T. Grant Company/Opinion of the Court

by Tom C. Clark

United States Supreme Court

345 U.S. 629

United States  v.  W. T. Grant Company

 Argued: and Submitted April 9, 1953. --- Decided: May 25, 1953

For the first time since the enactment of the Clayton Act in 1914 the Court is called upon to consider § 8's prohibitions against interlocking corporate directorates. ^[1] The Government appeals from judgments dismissing civil actions brought against Hancock and three pairs of corporations which he served as a director, W. T. Grant Co. and S. H. Kress & Co., Sears Roebuck & Co. and Bond Stores, Inc., and Kroger Co. and Jewel Tea Co., Inc. Alleging that the size and competitive relationship of each set of companies brought the interlocks within the reach of § 8, the complaints asked the court to order the particular interlocks terminated and to enjoin future violations of § 8 by the individual and corporate defendants. Soon after the complaints were filed, Hancock resigned from the boards of Kress, Kroger and Bond. Disclosing the resignations by affidavit, all of the defendants then moved to dismiss the actions as moot. Treated as motions for summary judgment, ^[2] they were granted by the District Judge. His concluded that there is not 'the slightest threat that the defendants will attempt any future activity in violation of § 8 (if they have violated it already) * * *.' 112 F.Supp. 336, 338. The Government brought this direct appeal under § 2 of the Expediting Act, 32 Stat. 823, as amended, 62 Stat. 989, 15 U.S.C.(Supp. V) § 29, 15 U.S.C.A. § 29, contending that the cases were not rendered moot by Hancock's resignations and that it was an abuse of discretion for the trial court to refuse any injunctive relief.

Appellees suggest, without arguing the point in extenso, that the judgment should be affirmed because § 11 of the Clayton Act vests exclusive § 8 enforcement powers in the Federal Trade Commission. ^[3] Section 11 does authorize the Commission to enforce § 8. But any inference that administrative jurisdiction was intended to be exclusive falls before the plain words of § 15: 'The several district courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this Act * * *.' 15 U.S.C. § 25, 15 U.S.C.A. § 25. And the cases have spoken of Congress' design to provide a scheme of dual enforcement for the Clayton Act. United States Alkali Export Ass'n v. United States, 1945, 325 U.S. 196, 208, 65 S.Ct. 1120, 1127, 89 L.Ed. 1554; Standard Oil Co. of California and Standard Stations v. United States, 1949, 337 U.S. 293, 310, note 13, 69 S.Ct. 1051, 1060, 93 L.Ed. 1371. Appellees' failure to press the point denotes its merits. The District Court properly entertained the suits.

Both sides agree to the abstract proposition that voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot. United States v. Trans-Missouri Freight Ass'n, 1897, 166 U.S. 290, 17 S.Ct. 540, 41 L.Ed. 1007; Walling v. Helmerich & Payne, Inc., 1944, 323 U.S. 37, 65 S.Ct. 11, 89 L.Ed. 29; Hecht Co. v. Bowles, 1944, 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754. A controversy may remain to be settled in such circumstances, United States v. Aluminum Co. of America, 2 Cir., 1945, 148 F.2d 416, 448, e.g., a dispute over the legality of the challenged practices. Walling v. Helmerich & Payne, Inc., supra; Local 74 United Brotherhood of Carpenters, etc., v. National Labor Relations Board, 1951, 341 U.S. 707, 715, 71 S.Ct. 966, 970, 95 L.Ed. 1309. The defendant is free to return to his old ways. ^[4] This, together with a public interest in having the legality of the practices settled, militates against a mootness conclusion. United States v. Trans-Missouri Freight Ass'n, supra, 166 U.S. at pages 309, 310, 17 S.Ct. 546, 547. For to say that the case has become moot means that the defendant is entitled to a dismissal as a matter of right, National Labor Relations Board v. General Motors Corp., 2 Cir., 1950, 179 F.2d 221. The courts have rightly refused to grant defendants such a powerful weapon against public law enforcement. ^[5]

The case may nevertheless be moot if the defendant can demonstrate that 'there is no reasonable expectation that the wrong will be repeated.' ^[6] The burden is a heavy one. Here the defendants told the court that the interlocks no longer existed and disclaimed any intention to revive them. Such a profession does not suffice to make a case moot although it is one of the factors to be considered in determining the appropriateness of granting an injunction against the now-discontinued acts.

Along with its power to hear the case, the court's power to grant injunctive relief survives discontinuance of the illegal conduct. Hecht Co. v. Bowles, supra; Goshen Mfg. Co. v. Hubert A. Myers Mfg. Co., 1916, 242 U.S. 202, 37 S.Ct. 105, 61 L.Ed. 248. The purpose of an injunction is to prevent future violations, Swift & Co. v. United States, 1928, 276 U.S. 311, 326, 48 S.Ct. 311, 314, 72 L.Ed. 587 and, of course, it can be utilized even without a showing of past wrongs. But the moving party must satisfy the court that relief is needed. The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive. The chancellor's decision is based on all the circumstances; his discretion is necessarily broad and a strong showing of abuse must be made to reverse it. To be considered are the bona fides of the expressed intent to comply, the effectiveness of the discontinuance and, in some cases, the character of the past violations.

The facts relied on by the Government to show an abuse of discretion in this case are these: Hancock's three interlocking directorates viewed as three distinct violations, his failure to terminate them until after suit was filed despite five years of administrative attempts to persuade him of their illegality, his express refusal to concede that the interlocks in question were illegal under the statute and his failure to promise not to commit similar violations in the future.

Were we sitting as a trial court, this showing might be persuasive. But the Government must demonstrate that there was no reasonable basis for the District Judge's decision. ^[7] In this we think it fails. An individual proclivity to violate the statute need not be inferred from the fact that three violations were charged, particularly since it is only recently that the Government has attempted systematic enforcement of § 8. ^[8] The District Court was not dealing with a defendant who follows one adjudicated violation with others. The only material before the District Judge on the supposed five years of administrative persuasion could easily support an inference that during that time the defendant and the Department of Justice were each trying to determine the legality of his directorships. The Government's remedy under the statute was plain. Postponement of suit indicates doubt on the prosecutor's part as much as intransigence on the defendant's. How much contrition should be expected of a defendant is hard for us to say. This surely is a question better addressed to the discretion of the trial court. The same can be said of the limited disclaimer of future intent.

Assuming with the Government that the corporations were properly joined as defendants, ^[9] the conclusion that there was no abuse of discretion in refusing injunctive relief against Hancock applies a fortiori in their case. None of the corporations appeared to have engaged in more than one alleged violation. And affidavits filed with the motions to dismiss indicated that these defendants were ignorant of the Government's interest in the interlocks until the suits were filed. Indeed the emphasis on this branch of the case is placed on the refusal of relief against Hancock. The failure to point to circumstances compelling further relief against the corporations speaks for itself.

Essentially, the Government's claim is that it was deprived of a trial on the relief issue. But at no time was objection raised to the procedure by which the case was handled. Of course summary judgment procedure could not have been employed were there a 'genuine issue as to any material fact'. Fed.Rules Civ.Proc. 56. However, after the defendants had moved to dismiss, the Government elected not to file any countervailing affidavits or amend its complaint and stated on oral argument that the truth of the defendants' affidavits was not questioned. To frame a factual dispute, that left the complaint, the only relevant paragraph of which reads: '16. The defendants have threatened to continue and will continue the aforesaid violation of Section 8 of the Clayton Act unless the relief prayed for herein is granted.' (Emphasis added.) 'The aforesaid violation(s),' the specific interlocks, had been voluntarily terminated and intention to resume them had been negatived under oath. As to the prayer that the defendants be enjoined from any future violations of § 8, the complaint alleged no threatened violations other than those specifically charged. In these circumstances, the District Judge could decide that there was no significant threat of future violation and that there was no factual dispute about the existence of such a threat.

We conclude that, although the actions were not moot, no abuse of discretion has been demonstrated in the trial court's refusal to award injunctive relief. Moreover, the court stated its dismissals 'would not be a bar to a new suit in case possible violations arise in the future.' The judgments are affirmed.

Affirmed.

Mr. Justice DOUGLAS, with whom Mr. Justice BLACK concurs, dissenting.

Notes

1. Sec. 8.
2. Fed.Rules Civ.Proc. 12(b)(6), 56, 28 U.S.C.A.
3. '§ 11. Authority to enforce compliance with sections two, three, seven, and eight of this Act by the persons respectively subject thereto is hereby vested * * * in the Federal Trade Commission where applicable to all other character of commerce to be exercised as follows:
4. Cf. United States v. Hamburg-Amerikanische Packet-Fahrt-Actien Gesellschaft, 1916, 239 U.S. 466, 36 S.Ct. 212, 60 L.Ed. 387.
5. 'When defendants are shown to have settled into a continuing practice or entered into a conspiracy violative of antitrust laws, courts will not assume that it has been abandoned without clear proof. * * * It is the duty of the courts to beware of efforts to defeat injunctive relief by protestations of repentance and reform, especially when abandonment seems timed to anticipate suit, and there is probability of resumption.' United States v. Oregon State Medical Society, 1952, 343 U.S. 326, 333, 72 S.Ct. 690, 695, 96 L.Ed. 978.
6. United States v. Aluminum Co. of America, supra, 148 F.2d at page 448.
7. Cf. United States v. United States Gypsum Co., 1950, 340 U.S. 76, 89, 71 S.Ct. 160, 169, 95 L.Ed. 89, on review of particular anti-trust decree provisions.
8. See Kramer, Interlocking Directorships and the Clayton Act After 35 Years, 59 Yale L.J. 1266.
9. We should not be understood as deciding whether corporations can violate § 8 or, for other reasons, be enjoined under the statute.