UNITED STATES v. WISE

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Argument of Robert L. Wright

Chief Justice Earl Warren: Number 488, United States versus Raymond J. Wise.

Mr. Wright.

Mr. Robert L. Wright: Mr. Chief Justice, members of the Court.

This appeal is from the dismissal of a corporate officer from the Sherman Act indictment.

The dismissed defendant Wise is Vice President and Director of the defendant, National Dairy's Corporation.

He and his corporation were charged with conspiring with other persons to fix prices in violation of Section 1 of the Sherman Act.

Wise was the only individual defendant and was alleged to be actively engaged to manage with direction and control of national business.

He was charged with having to authorize order conduct that implicated his employer.

The Justice Department has been prosecuting corporate officers, who are responsible for corporate Sherman Act violations under the Sherman Act for 70 years.

But the District Court held in this case, this practice was stopped.

From now on, the court below says, "Such officers can only be prosecuted under the Clayton Act."

This holding rest primarily on a misconception as to what the Clayton Act was supposed to do, although that Act is described in its title as the supplement to the Sherman Act, the court held that Congress met instead to amend the Sherman Act.

In other words, what the Congress itself described, as an addition to existing to antitrust law liability was wrongly construed as replacing the existing liability.

The history of the relevant legislation in a detailed analysis of the applicable case law is fully set out in our briefs.

All that I'm going to try to show here is that the practical effect of the decision is exactly contrary to what Congress intended when it passed the Clayton Act in 1914 and amended the Sherman Act in 1955.

I propose to do this by first describing the pre-1914 practice in prosecuting corporate officers for Sherman Act violations.

I shall then discuss the continuance of the same practice for the next 40 years with the implied approval of Congress and finally show an explicit approval of those practice in 1955 when Congress increased the maximum Sherman Act fine from $5000 to $50,000.

Before 1914, 40 Sherman Act indictments have been returned against corporate officers or agents, 10 are which named only the individuals without making their corporations defendants.

The illegal conduct charge against these individuals have undertaken on behalf of their corporations but in no case was it essential to establish a violation by the corporation that already convicted the individual.

Although both were charged with the same Sherman Act offense, the liability of each was subsequently determined at trial.

Diverse in such indictments have been overruled on the ground to the corporate officer, who aids or abets this corporation in the commission of a misdemeanor, is just as guilty as this corporation.

That's a common law rule.

It was expressly applied to all federal crimes by the Aiders and Abettors Statute in 1909.

Violations of the Sherman Act are almost had been misdemeanors.

These 40 indictments are identified in appendix A of our main brief and I'll only describe one here to illustrate the three Clayton Act practice.

This was the 1912 indictment of 30 officers and agents of the National Cash Register Company for conspiring to monopolize the cash register business for that corporation.

In addition to its president, Patterson, and the principle sales officials, the indictment included 12 branch managers.

All were charged to interrupt the valid capacity and were convicted, 44 were sentenced to a year in jail of 1913.

These convictions were on appeal during the entire debate on the bill that became the Clayton Act.

And the Clayton Act debate leaves no doubt that the Congress unanimously favored continuance of Sherman Act prosecutions of that kind.

These debates showed --

Justice Potter Stewart: Was the corporation indicted in the National Cash Register case?

Mr. Robert L. Wright: The Corporation was not indicted, it's not a defendant.

Justice Potter Stewart: It's not --

Mr. Robert L. Wright: These debates show that both sides agreed that it was desirable to extend the criminal liability of corporate officers.

No one wanted to contract it.

No one advocated any repeal or restriction of their existing Sherman Act liability.

Section 14 was inserted in Clayton's Bill when that Bill's prohibitions against price discrimination, time clauses, stock acquisitions, and interlocking directorates for penal offenses.

That's the way it passed the House.

But the Senate made substantial changes at Section 14 lawsuits' original significance when the conference made the substantive provisions non-penal.

The final result was that Section 14 added nothing to the Clayton Act liability of the corporate officers.

It did add, however, to their Sherman Act liability.

But this add at Section 14 liability in contrast to the existing Sherman Act liability, was condition to file an antitrust law violation by the official's corporation.

It was, therefore, less effective remedy than the Sherman Act.

No officer could be convicted under Section 14 without a prior finding of a violation of Wise Corporation, no matter how flagrant the individual officers' old conduct might be.

This was understood by the Congress, and Judge Floyd charged the bill in the House and had to assure the House that Section 14 would not disturb the existing Sherman Act liability in order to get the conference bill passed.

If Section 14 had actually superseded the existing Sherman Act remedy, it would have repudiated instead of responded to President Wilson's request for greater antitrust penalties against the individuals responsible for corporate violations.

Wilson had told the Congress that the officers and directors of great business bodies, who were responsible for antitrust law violations, should themselves bear the stigma of these violations instead of their corporations.

This could only be done by preserving the existing Sherman Act liability of those officers.

A Sherman Act indictment would permit conviction of the officials without a finding of violation by their corporation, a Section 14 indictment would not.

The Department of Justice, therefore, continued to prosecute corporate officers acting in the representative capacity under the Sherman Act, frequently, without naming their corporation as the defendant as in the Cash Register case.

There were no prosecutions under Section 14, and the Congress was kept fully advised as this is nonuse of Section 14 and the continued exclusive use of the Sherman Act in prosecuting corporate officers.

An indictment --

Justice John M. Harlan: (Inaudible) Mr. Wright under Section 14 (Inaudible)?

Mr. Robert L. Wright: Very little, it was obvious that you -- that you cannot determine what can be reached until and unless you prosecute under Section 14.

There has been no prosecution --

Justice John M. Harlan: (Inaudible)

Mr. Robert L. Wright: I can conceive of instances that might be reached under 14 where the officers' connection with the offense was rather remote, but it's --

Justice John M. Harlan: (Inaudible)

Mr. Robert L. Wright: It's a matter of -- of question of fact how -- how close he is to the illegal conduct.

I don't think, however, that it's -- it's necessary to determine that here.

This is after all the Sherman Act indictment, and if I'm right in my contentions, 14 was supplementary legislation as the Clayton Act does.

It doesn't make any difference for the purpose of this indictment, what additional offense of 14 might cover.

Justice John M. Harlan: (Inaudible)

Mr. Robert L. Wright: Well, there's no --

Justice John M. Harlan: (Inaudible)

Mr. Robert L. Wright: There's no dispute here about the fact that 14 overlaps.

We don't say we couldn't have prosecuted Wise under 14.

We simply say that we didn't' have to be the -- the view of the court below.

The argument is here that 14, instead of providing a supplemental additional remedy, actually was a substitute remedy for the existing Sherman Act liability.

Justice John M. Harlan: (Inaudible) initially the question what Congress could have in particular.

Mr. Robert L. Wright: Precisely.

Justice John M. Harlan: (Inaudible)

Mr. Robert L. Wright: Well, this is what they said they did.

Justice John M. Harlan: The purpose of putting in Section 14 --

Mr. Robert L. Wright: Well, Section --

Justice John M. Harlan: (Inaudible)

Mr. Robert L. Wright: Section 14 initially as I just pointed out was in the bill as a supplement to the Clayton Act liability that was being established for the first time by this -- the time clause and the similar price discrimination provisions.

Then, as -- when the Senate changed the bill and it went to conference, these provisions -- Clayton Act provisions to which it have the initial application, were made non-penal.

The result was, that when it -- the bill came out of conference, Section 14 had only a -- a Sherman Act liability and that is why it was important.

In the final debates for representative Floyd to give the assurances that are quoted in appendix B of our main brief there that the existing Sherman Act liability was not being disturbed.

Now, that -- the legislation itself was identified by Congress as supplementary.

And what I show it here is that's the way it has to be construed to make sense out of it.

An indictment somewhere to the Cash Register indictment was the turn in 1960, against 16 officers of nine companies who had been engaged in fixing the price support and submit.

None of those companies was a defendant.

The more of that indictment was overruled and the majority of the defendants pleaded guilty.

Two defendants who elected to stay in trial were convicted and their conviction was affirmed by the Ninth Circuit Court of Appeals.

There was no determination of the antitrust liability to their companies.

If their Sherman Act liability had in fact been superseded by Section 14, these officials were improperly convicted.

And if Congress had contended Section 14 to be the only statute under which officers acting for their corporations could be prosecuted, it seems likely that Congress would have hold of the Justice Department's continued use of the Sherman Act for this purpose, just as so the Congress found out about.

But Congress has never objected to that practice, although it's been repeatedly brought to Congress's attention --

Justice Potter Stewart: The Ninth Circuit case was another case in which the corporation was not indicted, is that correct?

Mr. Robert L. Wright: Right sir.

Justice Potter Stewart: And of course 14 is applicable, I should assume only if our way on the corporation is indicted and found guilty, is that correct?

Mr. Robert L. Wright: No, I don't think that there has to be criminal of -- the -- the corporation doesn't have to be indicted and found guilty but there must --

Justice Potter Stewart: (Voice Overlap)

Mr. Robert L. Wright: -- be at least an allegation.

Yes, there must be a fine --

Justice Potter Stewart: By the corporation.

Mr. Robert L. Wright: -- in corporate violations.

Justice Potter Stewart: By the corporations.

Mr. Robert L. Wright: Yes.

Yes, by the corporations.

Justice Potter Stewart: As I remember the theory of the National Cash Register case which as you remember was a very famous case out -- in part of the country and state.

Mr. Robert L. Wright: Yes.

Justice Potter Stewart: The theory was there that these individuals were guilty of using the corporation to further their own personal conspiracy, wasn't that -- wasn't that the theory of forfeiting that case?

Mr. Robert L. Wright: Now that's what the defendant said.

I think it's rather difficult for me to visualize these 12 branch managers as people who were manipulating the -- the corporation for their own benefit.

I think quite clearly that at least as far as they were concerned, whatever they did was being done, they will represent capacity for the Cash Register Company and not to further any purpose of their own, except this -- I suppose any corporate officer who is doing something that he thinks is going to be profitable for the company or help the company is at the same furthering result personal interest in that respect that --

Justice Potter Stewart: Didn't the United States Government in that case, in the indictment, -- in -- in the prosecution of those people take that position contrary in (Voice Overlap) --

Mr. Robert L. Wright: It certainly did, the indictment -- the indictment charges them specifically in representative capacity and that's what the eviden -- the evidence was.

No question at all about the Cash Register defendants, having been indicted and convicted on the basis of what they were doing for the National -- National Cash Register Corporation.

Chief Justice Earl Warren: Is there any indication why the corporation was not charged?

Mr. Robert L. Wright: Well, I should suppose that that may have been feeling somewhere to that -- that President Wilson expressed.

They felt that to these violations are -- were of such flagrant character that it would -- perhaps be unjust to the stockholders to visit the penalty on the corporation, it would be preferable to visit it on the individuals.

By the -- by the time Congress increased the maximum --

Chief Justice Earl Warren: You mean by that the more flagrant the violation, the less responsible the corporation should be --

Mr. Robert L. Wright: Well --

Chief Justice Earl Warren: -- even though they're acting in a representative capacity?

Mr. Robert L. Wright: Well, I suppose we have to take some account of the -- the feelings of jurors.

If you -- if you prosecute under Section 14, you go to the jury under periphery instruction that says, "Unless you find that the corporation is guilty of a violation, you don't even reach the liability of corporate officers."

Now, it might be that in certain circumstances, the judge or jury would feel that the corporate officer had -- while everything he had done had been for the benefit of the corporation, had engaged in conduct of such a nature on the corporation's behalf that he should be penalized for it and the corporation should not.

This is the kind of -- of fair apply judgment that juries are making everyday.

They don't necessarily convict everyone that might properly be convicted.

And this is really what wanted to state here on this appeal is the question of whether you're going to make it harder or easier to convict to corporate official -- officials.

There isn't any question at all to what drive us from it -- passed the Clayton Act they thought it was making it easier.

Justice John M. Harlan: (Inaudible)

Justice Potter Stewart: No prosecutions under the -- under Section 14?

Mr. Robert L. Wright: There was one indictment which was dismissed, that was subsequent to 1955, that was in 1956.

No one has actually got a trial under 14.

Justice Potter Stewart: So Congress' intent was certainly not realized, was it in fact?

Mr. Robert L. Wright: Oh I --

Justice Potter Stewart: But you said -- you just told us it was the intent of Congress in an act in Section 14 to make easy -- easier.

Mr. Robert L. Wright: To supply an additional alternative remedy.

Justice Potter Stewart: And one never utilized by the Government except in that one, I submit a case.

Mr. Robert L. Wright: Not utilized.

No.

By the time Congress, they got around with increasing the maximum Sherman Act fine from $5000 to $50,000 in 1955, more than a hundred corporate officers acting in the representative capacity had been indicted under the Sherman Act of a large number that's been convicted.

None had been charged under Section 14.

No court suggested that Section 14, it superseded the Sherman Act and the statutes --

Justice William J. Brennan: Excuse me Mr. Wright, is what you just said to Mr. Justice Stewart, affect this that Congress wanted to make it easier to prosecute corporate officers in adopting Section 14, but in fact that made the Government's job more difficult?

Mr. Robert L. Wright: Well, perhaps it's easier as the (Inaudible).

They didn't make the -- the Government's job wasn't made anymore difficult but -- because the existing Sherman Act probably that was -- was preserved.

Justice William J. Brennan: I know -- I know but the point --

Mr. Robert L. Wright: They didn't touch the Sherman Act, only they did is --

Justice William J. Brennan: But the point, as I understand it, is your position that Section 14 requires at least an allegation in the finding of those corporate violations before there can be a conviction of the corporate officers.

Mr. Robert L. Wright: That's what it says on its phase.

Justice William J. Brennan: And that that's not true under the Sherman Act.

Mr. Robert L. Wright: That's correct.

Justice William J. Brennan: Therefore, in that sense, the prosecution of the 14 isn't more difficult for the Government, isn't it?

Mr. Robert L. Wright: Yes, and that's what it is.

What it does is hold out the premise of a lesser standard of proof being required to connect the corporate officer.

But in exchange, you must -- the liability's condition and the corporation's guilt.

But viewed as -- viewed as a supplemental additional remedy, this represented no -- no interference, no lessening of existing liability.

It did -- it did represent a broad mean in the sense that you had this new additional remedy of proceeding against the corporate officer.

Justice William J. Brennan: And yet the Government -- and yet the Government had no occasion as I understand it, to resort to it.

Mr. Robert L. Wright: That is correct.

Justice William J. Brennan: Why is that?

Mr. Robert L. Wright: Well, I think if you -- if you look at the factual considerations involved, you can see why.

There isn't anybody that you can really reach under the standards of 14 who is tremendously important, 14 what's -- what 14 would do, would be to sweep in perhaps minor officials or officials with a remote connection with the Act.

The problem in convicting the corporate officers is always to persuade the court of jury to convict any.

In practice, we do of course always try to limit the individuals.

We select those or the grand jury selects those who it regards as having primary responsibility for the offense as a practical manner.

I think convictions under Section 14 trying to -- trying to get at somebody under 14 really wasn't -- didn't have any primary responsibility, just wouldn't be a very useful thing to do in terms of Sherman Act enforcement, we've never done it.

Justice Hugo L. Black: I presume you would still have to prove they were guilty beyond a reasonable doubt.

Mr. Robert L. Wright: Yes indeed.

Justice Hugo L. Black: The question raised is to how far Congress could create any rebuttal of presumption.

Mr. Robert L. Wright: That's quite correct Your Honor.

As I said, those things could only relegate determine in a Section 14 prosecution.

Clearly, I think that they aren't presented here, where the indictment is of the Sherman Act.

As I pointed out, in '55, when the penalty was -- was raised, there could no use at all of 14, Congress knew this, and it knew that the only -- only prosecutions of officers had been under the Sherman Act.

Now, when Congress first considered raising the antitrust law maximum fines in 1950, it was told by the Justice Department that no increase in -- no increase in the Section 14 fine was needed because this Section was unused.

Congress accordingly limited the increase to the Sherman Act and all of the bills subsequently introduced for this purpose including the one that became law on the spring of 1955.

Chief Justice Earl Warren: Is that part of your -- of the legislative history in your brief?

Mr. Robert L. Wright: Yes.

Chief Justice Earl Warren: That the Department of Justice told them, it was not necessary because it was not used?

Mr. Robert L. Wright: Yes.

That's explicitly pointed out both for me in the original brief and the reply brief.

It was also told -- Congress has also told 1950 by the Justice Department that the proposed increase from $5000 to $50,000 was especially needed to deter corporate officers.

No one suggested that corporate officers ought to be exempted from it.

Now, the entire House debate on the 1955 Amendment took place on March 29th and takes up less than seven pages of the congressional record.

The debate opened with the statement by representative Rogers at Colorado that the purpose of the increase was to give the court's discretion to make the punishment fit the crime for which the individual and I emphasize individual or the corporation, may have been convicted.

Congress went so and then inserted in the debate a tabulation of all convictions of imprisonment under the antitrust laws, down to February 15, 1955.

And that tabulation makes clear that the individuals under discussion included corporate officers acting in the representative capacity.

Among the convicted individuals are listed to seven corporate officers in the Trenton Potteries case, all convicted for directing the price fixing activities of their corporation, who received jail sentences of from six to 10 months in 1923.

And again, as in the 1914 Clayton Act debate, the only opposition to this Amendment was based on applying that the little legislations didn't make it fairly severe enough.

Now, when Congress, in 1955, deliberately declined to amend the unused Clayton Act provision and shows instead to amend the Sherman Act, that Amendment ought to be construed in accordance with that statute, the Sherman Act's prior actual used.

So construed, the Sherman Act covered Wise's allege defense beyond any doubt and the dismissal of his indictment was plain error.

I would like if I might to reserve the rest of my time for rebuttal.

Chief Justice Earl Warren: You may -- you may, certainly.

Mr. Chadwell.

Argument of John T. Chadwell

Mr. John T. Chadwell: Mr. Chief Justice, may it please the Court.

The indictment in this case against Mr. Wise, the Government does not deny and admits, is precisely in the language of Section 14 of the Clayton Act, reads right on it word per word.

Now that Act, Section 14, imposes criminal liability upon corporate officers, directors, or agents.

In other words, it includes everyone who could possibly act for a corporation.

And it says, whenever, is the word whenever, anyone of these corporate officers, directors or agents shall have authorized order or done, authorized order or done any act constituting in whole or in part, in whole or in part, a corporate violation, the officer shall be punished by a fine not exceeding $5000.

Now, Congress in that Act in 1914 encompassed every possible act by every possible corporate agent that could be done to effectuate a corporate violation in a whole or in part.

It would have been impossible for Congress to have passed the law which more completely encompassed the field of representative action on the part of a corporate employee or officer than they did when they adopted Section 14.

Now, in spite of the fact that this statute clearly covers what Mr. Wise is alleged to have done, in spite of the fact that it comes precisely within Section 14, in spite of the fact that that statute provides for the maximum fine of $5000.

The bold proposition of the Government in this case is that the Department of Justices has the complete unreviewable discretion to decide and choose to prosecute this man under another statute, the Sherman Act, which makes no reference in terms whatsoever to any representative act by anybody which in nowhere and no place refers to any corporate officer, director or employee, and in spite of the fact that that statute contains a maximum fine of $50,000.

It is the position of the Government as annunciated by Mr. Wright today and over and over again in their brief, that they have this choice, it's not a judicial choice, it's up to them to decided whether they're going to prosecute in spite of the circumstances I have outlined under a statute that could cause a maximum of $5000 in fines or a maximum of $50,000 in fines.

Now, the -- the question in this case is whether or not under those circumstances, the Government is required to prosecute under Section 14.

Now, the lower court held that the Government is so required to prosecute and four District Courts in different districts have sense agreed with the lower court in that respect.

Now, the Government's argument, if Your Honors please, the Government's argument comes down to this, "We have been using Section 1 to prosecute corporate officers and directors for 70 years.

No court ever held that we couldn't do it.

It's now pretty late for a defendant to come into court when he's prosecuted under Section 1 and say, we -- I should have been prosecuted under Section 14 which carries a lesser fine.

And I say to this Court that the reason obviously, that this question was never raised before, is because until the difference in fines appeared at 1955, it was a completely academic question.

What difference did it make to when a defendant indicted under Section 1 whether in a corporate -- whether in a representative capacity or not, whether he should have been indicted under Section 14?

The clients are very practical when they're in litigation, they're considering expense and time and everything else, why should they spend time and money litigating over whether Section 1 or Section 14 applied when there's no question that one did and when the fine was precisely the same in either event?

Now, that's why it wasn't raised before.

We have in this case, if Your Honors please, we have the situation that confronted this Court exactly in the Nashville Milk case.

In that case, it had been assumed for a number of years since Section of 3 of the Robinson-Patman Act was adopted, it had been assumed that treble damage suits could be filed on the basis of Section 3.

It had been assumed indeed by this Court in the Bruce's Juices case and Moore against Mead that a treble damage suits would lie under Section 3.

The question as to whether or not Section 3 came within the antitrust laws so as to make it possible to sue -- to sue for treble damages was not raised directly on those cases.

It was raised for the first time in the Nashville case and in the Nashville case, this Court held that you couldn't prosecute a treble damage suit under Section 3 because Section 3 wasn't a part of the antitrust laws.

And I say that the argument which the Government makes, trying to lift themselves by their own bootstraps in this thing saying, "That because we've made this mistake for 70 years, you can't challenge us now," makes no sense when the fines were different all this time.

Now, if the Court please --

Chief Justice Earl Warren: I understood and to say also that Congress took this view of it and that Congress --

Mr. John T. Chadwell: Yes, Your Honor.

That contention is raised and I say to the -- to the Court and I -- and we've argued this and briefed it thoroughly, that Congress said, "No such thing," that Congress did not have the view that at anytime, that it was proper to prosecute corporate officers acting in a representative capacity under Section 1.

As a matter of fact, the -- the legislative history shows that from 1890, when the Sherman Act was passed, until 1914 when the Clayton Act was passed, there were 51, 51 different bills introduced in the Congress for the purpose of supplementing or amending the Sherman Act to cover corporate -- or representative liability by corporate officers.

One of them passed the House in 1900 and in the report of the judiciary committee to the House in support of that bill, the statement was made that the reason it was passed was because corporate officers or representatives, acting in a representative capacity, were not covered by the Sherman Act as it was -- as it then existed.

There was no question about it, if Your Honors please, on the basis of the corporate history here.

I -- I strongly assert to the Court, there was no question that Congress never did a thing by virtue of these bills, these steady stream of bills over a period of 24 years.

They never did think that individual liability of persons acting in a corporate capacity was subject to the Sherman Act.

As -- as a -- I'm sorry.

Chief Justice Earl Warren: We'll recess now Mr. --

Mr. John T. Chadwell: Yes, sir.

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Argument of John T. Chadwell

Chief Justice Earl Warren: Mr. Chadwell you may continue your argument.

Mr. John T. Chadwell: Mr. Chief Justice and may it please the Court.

I should like to continue a brief response to Your Honor's question if I may at the outset.

The Government's argument as to what Congress knew and didn't knew -- didn't know in 1955 when the fine in -- maximum fine with respect to Section 1 was increased to $50,000 and there was no increase in the fine in Section 14 is simply not borne out their contention.

Their simply not borne out by the record, by the reports or by the debates.

In our brief, we have summarized them and so as the Government, each as might be expected pointing out some different things but this underlying fact, I submit to the Court, is quite obvious from those debates and reports.

That is, that what Congress was concerned about was the inadequacy of the maximum fine of $5000 under the Sherman Act in view of the existence of large corporations and with large assets today.

That was the burden of the argument.

That was the point that was made.

And I submit to the Court that you can look at those debates from beginning to end in vain for a single statement anywhere that corporate officers were under Section 1 of the Sherman Act, and therefore, it was unnecessary to raise the fines to them.

There was a reference by Attorney General Berkson in 1950, five years before the -- before the fines were raised in 1955, there was a reference by him as to the importance of Section 1 and expressing indifference as to whether the fines were raised under Section 14.

But he did not say why.

The reason behind the statement was not stated.

Individuals are mentioned from time to time in the debates, but obviously, individuals are mentioned in connection with -- with acts done by them in their individual capacity, not acts done by them in a representative capacity.

Now, in Hartford-Empire this Court has recognized that where an individual performs acts strictly in a representative capacity on behalf of their corporations.

Court recognized that they could be indicted under Section 14.

Also, the Court held in Hartford-Empire that where that was the case, an injunction should not run against the individuals personally, but only against the corporations and their officers, directors, and employees in general.

That was expressly held in Hartford-Empire, that recognition of the very real difference that exist between charging individual defendants with engaging in conspiracies on their own behalf, as the words were in Hartford-Empire, and where they perform acts strictly in a representative capacity on behalf of their corporation.

And I say to the Court, in connection with Mr. Justice Brennan's question of -- of Mr. Wright, that it's obvious and it always has been obvious in -- in -- in the history of the Sherman Act, that where any individual is indicted in a representative capacity, strictly for performing an act on behalf of this corporation which results in a corporate violation.

That obviously, he is not guilty unless the corporation is guilty, he couldn't be, he never has been, and the same thing is true under Section 14.

Now did I -- I perhaps have misunderstood Mr. Wright's statement, but I understood him to say at one time, that under Section 14, the corporation must be found guilty before an individual can be indicted.

I may be wrong about that, but the fact is that that is not necessary.

It's merely necessary that the act done by the individual should result in the corporation being in violation of the act, not that there is an -- that is -- it's necessary to be any finding of a violation by the corporation or a finding of guilt in the early stages of the Section 14 history.

There was a provision requiring of finding of guilt on behalf of the corporation, but that is out in the -- and has been out ever since Section 14 has been in effect.

I --

Justice Potter Stewart: As Section 14 is written, the jury would at least had to be instructed assuming there were jury that until they could not find the individuals guilty and -- and -- and until or unless they found a violation by the corporation --

Mr. John T. Chadwell: Well, that's true.

Justice Potter Stewart: -- won't you agree?

Mr. John T. Chadwell: But it would -- would -- Oh yes indeed sir --

Justice Potter Stewart: Whether or not the corporation or even a defendant would have (Voice Overlap) --

Mr. John T. Chadwell: Oh yes.

No -- no question about that.

I -- my point is though Your Honor, that if a man is indicted strictly in his representative capacity -- strictly in his representative capacity under the Sherman Act, he could not be guilty of violating the Sherman Act in his individual capacity.

He could only be guilty of violating it in his corporate capacity or his representative capacity and he -- the fact that he violated the act in his representative capacity would mean that the corporation violated the act that does -- the -- the result is precisely the same.

I state to the Court that I've argued this very point in three different District Courts, this is the fourth time I've argued here in the United States Supreme Court.

I have yet -- I have yet to hear a counsel for the Government to give any reason, any sensible reason why Congress adopted Section 14.

They say there was some provision in Section -- in the Sherman Act already, there were some individual liability in the Sherman Act already, and this perhaps was to reach people who were may be just a little bit guilty, and wouldn't have been guilty under the Sherman Act, but now they're guilty under the Section 14.

I say that Congress under Section 14 could not have used more inclusive and complete language to -- to reach every violator in his representative capacity whether he was big or little, whether he violated it just a little bit or agree to you when they use the words that they did use which I reviewed in the outset of my remark in which I will not repeat.

Justice Potter Stewart: Mr. Chadwell.

Mr. John T. Chadwell: Yes.

Justice Potter Stewart: Perhaps you told us the history so I didn't get it.

Mr. John T. Chadwell: Yes.

Justice Potter Stewart: Without going into great detail, the Sherman Act was on the books, what, from 1890 to 1914 --

Mr. John T. Chadwell: Yes sir.

Justice Potter Stewart: -- 24 years --

Mr. John T. Chadwell: Yes.

Justice Potter Stewart: -- before the Clayton Act was enacted.

During that period, did anybody -- did any officer indicted for acts done in a representative capacity ever raised this question?

Mr. John T. Chadwell: Not as such.

Now, I -- I want to explain that exactly as -- as I understand the fact's worth.

In the first place, of great many of the cases upon which the Government relies, Winslow, Patterson, to which reference was made in Mr. Wright's argument, Swift and -- and others, it is clear that the individuals were indicted in their individual capacity for individual conspiracies on their own account.

Indeed, in the Winslow case in the Supreme Court of the United States, the Solicitor General argued that Section 1 of the Sherman Act reaches individuals where they act in their own capacity and use the corporation as a mere guise or façade for their individual activities.

Now, that was the argument made, and that explanation can be made of the great majority of the cases that the Government cites, the pre-1914 cases.

Now, there -- there was an argument in a number of cases since 1914 to the effect that an indictment was duplicitous -- was duplicitous because the corporations were indicted and the individuals were indicted under Section 1 who were indicted in the same count.

And the argument was, not that they couldn't be indicted under Section 1, but that they couldn't be indicted in the same count of Section -- as the corporation because they would have had -- had been indicted under Section 14 in the -- and of -- and the corporations under Section 1.

The court never did pass on that question directly.

There has not a single case, I submit to the Court, in which a lower court has held or the Supreme Court has held, directly what's involved here that the individuals can only be indicted and -- and prosecuted and -- and -- and convicted under Section 14 where they act in the representative capacity.

Not a single one.

We have reviewed each one of these cases which the Government has cited in their brief.

It would take too long to review them here but I think I can dispose of them in -- in one of two general categories.

One is, they were indicted in their individual capacities and as in Patterson and others, operated under individual capacities, and the other was where the court held as they did in General Motors, and as they did in -- in one or two other cases, Atlantic Commission, that you couldn't tell from the phase of the indictment whether the individuals were indicted in their corporate capacity or not.

And therefore, the question could not be raised on the phase of the indictment.

Now, I want to make a reference, if Your Honors please, to the Barrett case.

I believe that the statement made by His Honor, Mr. Justice Black, in the dissenting opinion written in the Barrett case is precisely opposite here and the majority did not find it necessary to reach the point.

And if that in that case which our Court will recall was an income tax evasion case.

The Government took the position that the individual, though there was a difference in the penalties, could be indicted either under a general act against defrauding the Government out of income taxes or specific act against filing false returns.

And, though the majority held that the point was not before them on the procedural aspect of the matter in the descending opinion there, the statement is made to which the majority did not disagree that the basic principle that a -- a defendant is entitled to a fair notice as to the conduct charged to be illegal and the punishment to be administered, would be administered, is flouted if either statute can be chosen by the Attorney General at his unregulated whim as to which one should form the basis for the indictment.

And the further statement was made that no such intent should be attributed to Congress in the absence of clear command.

And I submit to the Court that there's no such clear command here as I shall demonstrate, and as I wish to mention in connection with the corporate history of -- of the Sherman Act.

I have mentioned the fact, if your -- if the Court please, that under the Sherman Act, the -- there were, after the adoption of the Sherman Act, have great many bills introduced in Congress to take care of this subject of corporate representation which it was thought and was not covered by the act as it then -- as it then existed and still exist.

And as a matter of fact, all of those bills, 51 of them were introduced through the years, pointed that out.

The committee report in 1900 to the House of Representatives, contained the expressed provision that the reason for the bill, which would have amended Section 8, defining person.

The reason for it is that the action of a corporate official as an agent, also an attorney, does not subject them to the penalties under the law today.

That's expressly stated in the House Report at that time.

Now, it -- it appears that the Government is arguing here that the aider and abettor doctrine ought to apply.

That argument is laid to rest, I submit to the Court, but on -- on two bases and the first one I want to refer very briefly is the Dotterweich case.

In the Dotterweich case, there was an indictment under the Food and Drug Act.

The Food and Drug Act contained a definition of person as being an individual partnership association or corporation.

Now, it was held both in the majority opinion and in the minority opinion, in that case, that that language did not reach corporate representatives acting in their corporate capacity and their representative capacity, both the majority and the minority agreed on that.

There was a disagreement as to whether the aid -- the general aider and abettor statute as -- as applied.

The majority holding that it did.

The minority holding that it should not apply.

Now then, the question is, does the aider and abettor statute apply here to bring it under the Sherman Act?

Is there any basis upon which it can be contended here that the aider and abettor statute should apply?

I say to the Court that the legislative history of Section 14 shows beyond any question that Congress not only preempted every single aspect of this subject of corporate representation in the very words of Section 14.

But that the legislative history shows that they meant to do so and they specifically rejected the aider and abettor doctrine.

As a matter of fact, the opposition to Section 14, in Congress in -- in 1914, took two general theories.

The first was that the general aider and abettor statute applied now anyway so you don't need that -- don't need the Act.

The second was, an amendment offered by Representative Volstead, which would have applied directly to the Sherman -- to the antitrust laws, the gen -- or the -- a Sherman, an aider and abettor doctrine.

That was the Volstead Act, the Volstead Bill.

The Volstead Bill incorporating that aider and abettor theory was voted down by the House on the very day that the House voted Section 14 as it is now on the book, the very day.

An aider and abettor bill as a substitute for Section 14 was introduced in the Senate and discussed and it was not passed.

Congress could not have more specifically declared its intention that this Section 14 was to be the complete and thorough coverage that it is, and that the aider and abettor doctrine did not apply to it and should not apply to antitrust violations in the future.

And as a matter of fact in Dotterweich, there had been a -- an authorized, ordered or done bill introduced with respect to the Food and Drug Act which was voted down.

And the majority held that that left the aider and abettor doctrine in effect.

A conclusion which was the subject of the dissent as I have mentioned.

Now, I want to point this out also, if Your Honors please, that the -- the definite -- the very words of the Sherman Act are that the defendants that -- that -- that a party who shall make a contract, who shall engage in a conspiracy, a person who shall monopolize or attempt to monopolize under Sections 1 and 2.

A person who shall do those things is guilty of violating the Sherman Act.

Now, only an -- only a principal can make a contract, an agent doesn't make a contract except on behalf of the principal.

An agent doesn't monopolize, it's the principal that monopolizes.

So that Congress came along in Section 8 and they defined what they mean of a person.

And Congress defined what's meant by a person in this passion, it shall include corporations and associations.

Nowhere in the definition, is there any reference to corporate representatives, to officers, directors or agents.

Nowhere is there any such reference in the definition of person and as a matter of fact, as I said, every effort to -- to supply that deficiency failed until 1914 when it was supplied by Section 14 of the Clayton Act as an entirely separate and supplemental act.

Now we don't argue that Section 14 amends the Sherman Act or repeals the Sherman Act, I say that it supplements the Sherman Act.

And it furnishes a -- a liability, a representative liability which did not exist prior to the enactment of Section 14 in 1914.

This, I would say to the Court, was recognized not only by reason of a congressional action on Section 14 and their turndown of the Volstead aider and abettor Act, it was recognized by President Wilson, who addressed Congress in person and who said, we quote from his address in our -- in our brief, who said, "In urging Congress to adopt the Clayton Act, and with specific reference to what subsequently became Section 14, one that the -- the law should make corporate representatives individually responsible” and he said, "One of the main objects of our legislation should be to divest such persons of their corporate cloak."

Justice Hugo L. Black: Would it bother you if I ask you question on --

Mr. John T. Chadwell: Yes sir Your Honor.

Justice Hugo L. Black: Tell me if I'm -- I'm --

Mr. John T. Chadwell: Yes sir.

Justice Hugo L. Black: -- understanding of your view.

Mr. John T. Chadwell: Yes, Your Honor.

Justice Hugo L. Black: Suppose there was no Section 14, who could be prosecuted here?

Mr. John T. Chadwell: I think that any corporation obviously, or any principal whether he'd be an individual, as in the Winslow case, acting on his own behalf, or whether if the partnership or association or corporation, any one of them acting on their own behalf could be the fact that he was an individual, as a matter of fact, would in no way exempting -- exempt --

Justice Hugo L. Black: Suppose he was an individual, who was an officer of the company, is it your view that he could not be prosecuted under 1?

Mr. John T. Chadwell: No sir.

I say if an individual who's an officer of the company, acts on his own behalf and not in a representative capacity, if that is clear then he could be --

Justice Hugo L. Black: How could he do that?

Mr. John T. Chadwell: But -- excuse me Your Honor.

Justice Hugo L. Black: How could he do that?

Mr. John T. Chadwell: Well --

Justice Hugo L. Black: That's what I am --

Mr. John T. Chadwell: Yes sir.

In some -- I don't think it's very -- I don't think it's very likely that he could do it.

But in some of the cases, that was true in the General Motors case, it was true in the Atlantic Commission case, the reference was made to the fact that a mere description of a defendant, in an indictment, as an officer of General Motors Corporation for example, is not in itself an allegation that he acted in a representative capacity.

He could so describe, have been acting individual was the -- was the statement made by the Court in that case.

I say that reasoning however, in the General Motors case, cannot apply here because the lower court has construed this indictment to be limited to acts done in a representative capacity and indeed, the Government does not contest that, and indeed, admitted it to be so in the bill of particulars which --

Justice Hugo L. Black: Suppose they can be prosecuted under both.

Suppose it is authorized and they prosecute under both and you're wrong about that.

I'm interested in what your argument is then.

Mr. John T. Chadwell: Well I -- I don't think they can be prosecuted under both.

Now if they are prosecuted under both, I think that a motion to strike would lie, with respect to the account containing the Section 1 charge.

Justice Hugo L. Black: Just because you think Section 1 would not include them.

Mr. John T. Chadwell: Yes sir, that's what I --

Justice Hugo L. Black: Suppose, it does include them and it -- and the Act is really on that phase, authorized the Attorney General to choose which one he will prosecute on this whether it's one providing for $50,000 fine or $5000 fine.

What's your argument there?

Mr. John T. Chadwell: Are you asking me -- just so I may understand Your Honor.

Are you asking me of whether Congress could vest this discretion on the Attorney General?

Justice Hugo L. Black: I'm asking you what -- what -- if we construe at this -- if it's construed as meaning that -- that an officer can be prosecuted under either number 1 or 14, yet one of them provides for a $5000 fine, one provides it for $50,000, what is the -- if -- if the defendant has any judicial remedy there or any remedy of any kind against being subjected to that kind of decision by the Attorney General, what is your remedy?

Mr. John T. Chadwell: I think the remedy is the one that we availed ourselves here moving to dismiss.

Because I -- I say that if we don't move to dismiss that the outset, we get ourselves into the problem that -- that was -- that confronted the defendant in the -- in the Barrett case where you might not be able to raise it properly at the trial.

And I say this furthermore, it is very possible that in some of these cases, an individual so indicted in his representative capacity might wish to tender a nolo plea, that's done quite frequently as Your Honor recognizes.

I think when he does so, and Judge Watkins recognized this in his opinion in the -- in the Milk Distributors case in Baltimore.

When he does so, he is entitled to know whether the maximum fine is $5000 or $50,000 and that I think it would be a serious prejudice to him unless he does know, and that is the reason I think that a motion to dismiss is the proper remedy, and the one we have availed ourselves here.

Justice Hugo L. Black: I understood you to say that the indictment was charged -- charged him with an offense in the exact language of Section 14.

Mr. John T. Chadwell: Authorized -- yes sir.

Authorized your order and the court construed that to mean that he was limited that -- that the indictment is limited to charging him in his representative capacity.

Justice Hugo L. Black: Well if the -- if it did do that that showed on its face that it was under 14, would the Court have a right to assume that he could fine him $50,000 instead of $5000?

Mr. John T. Chadwell: Well, I'd -- I -- I would not like to take that chance.

I think that -- I think that you're getting in then to -- to the question raised by -- perhaps by Section 7 (c) of the rules.

I say there --

Justice Hugo L. Black: Getting into the question that you discussed a few minutes ago thereon.

Mr. John T. Chadwell: Yes sir.

Yes sir.

I think that the way to raise this is the way we did raise it because the indictment does not state a cause of action if it purports to be under Section 1 and here --

Justice Hugo L. Black: Who would want -- should be against the law on there, what is your remedy then if any?

With reference to you being charged in the language of the statute which fixes a penalty of $5000 and it's insisted that -- by the Government that you should really charge him with -- you should really consider that he can be fined $50,000, although the statute whose language is used to provide for only $5000.

Mr. John T. Chadwell: Well, I suppose at the end of the trial, you could move -- you could move to limit the fine if there was some attempt to charge more than that or to -- to fine more than that I presume.

But I say that in a -- in an indictment of this kind, you've got both the corporation and the individual indicted in one count thus the Section 1 obviously under the Sherman Act of course as to the corporation.

And the individual I see under Section 14 which makes the count bad to start with as being duplicitous under the very -- under the very provisions of Section 8.

I just want to make this additional statement that Senator Culberson, who is in charge of this bill, chairman of the judiciary committee of dissent, made a statement in his argument -- in his argument to the Senate precisely upon the argument we're making now, that the Sherman Act as it then existed, did not cover corporate executives acting in a -- a representative capacity and therefore this Section 14 was needed.

I thank the Court.

Justice Hugo L. Black: What do you do with (Inaudible)

Mr. John T. Chadwell: Well in -- in Trenton Potteries, the -- there was of course a Section 1 in -- indictment but this Court nor any court passed on the question which is before the Court now that there was no decision, if Your Honor please, at that time that Section 14 was the proper remedy for a corp -- for a corporate officer acting only in his representative capacity, it was not raised.

Justice Hugo L. Black: It wasn't raised?

Mr. John T. Chadwell: It was not raised sir, and the reason was --

Justice Hugo L. Black: Then why -- why (Inaudible)

Mr. John T. Chadwell: Yes sir there were a number of them but the question was not raised there, and the reason that it was not raised I -- I submit to the Court was the reason I stated the outset, namely that it made no difference in the fine and there were -- would have been raising as they thought an academic matter.

I thank the Court.

Chief Justice Earl Warren: Mr. Wright.

Argument of Robert L. Wright

Mr. Robert L. Wright: May it please the Court.

I would like to say first that it's not to my experience the technical defects of an indictment with regard to as an academic matter by defense counsel.

I have traditionally -- all that's been raised that every opportunity and I suggest to you that it is not an explanation at all of the failure to raise before -- that the fines were the same.

The reason that it wasn't raised is because people who are closer to the event never supposed that 14 could be put to this kind of defensive views.

Now, I may have misled Mr. Justice Stewart when I referred simply two cases which did not involve corporate defendants in illustrating the pre-1914 and post 1914 practice.

Actually, during both periods, corporations with their officers were being prosecuted under Sherman Act and other indictments.

Of course, we disagree that this point was never raised in the early days.

In our brief, we say that the -- the -- in the first Patterson case back in 1893, defendant's claim that they couldn't be prosecuted in a representative capacity demurrer and it was rejected.

Now, I want to --

Justice Hugo L. Black: (Inaudible)

Mr. Robert L. Wright: Yes sir.

All corporate officers who have been prosecuted, it have been prosecuted under the Sherman Act only.

Justice Hugo L. Black: Do you think it was raised there?

Is that it?

Mr. Robert L. Wright: I beg your pardon?

Justice Hugo L. Black: Is this problem was not raised?

Mr. Robert L. Wright: No it was not.

Justice Hugo L. Black: Do you think any one can be prosecuted under 14 and should not be prosecuted under 1?

Mr. Robert L. Wright: Yes, let me -- let me try this illustration and I suppose that if you had some corporate officer who let us say, authorized a -- or merely authorize his subordinate to go out and increase his share of the market, telling him he didn't care how it's done.

And under those circumstances if the support to use methods which violated the act to -- to get that bigger share, we might reach the authorizing officer under Section 14, whereas of course, we couldn't reach --

Justice Hugo L. Black: You couldn't reach him under 1?

Mr. Robert L. Wright: We could reach him under 1 if we had knowledge, I think we have a heavier burden with respect to showing knowledge of the illegal conduct under -- under the Sherman Act and we would have under 14.

Justice Hugo L. Black: But you mean that under 14 you can convict the man for violating the Sherman Act without proving that he knew what he was doing was the part from the violation of that Act?

Mr. Robert L. Wright: I would think that that might raise constitutional questions.

I would think we would have to at least show some kind of -- of knowledge perhaps that a violation might occur, but I suppose the Congress I think really probably wasn't able to do what it tried to do.

It was clearly trying to extend this liability.

I think the situations of that kind, whether or not it can be done, I have the greatest doubt of myself.

I think the -- the department has been wise to confine its -- its prosecuted efforts to the Sherman Act because all sorts are very difficult questions would and do arise if -- if we should attempt to make use of 14 instead of the Sherman Act.

Justice Hugo L. Black: I've been unable to get from your argument and from the other argument, yes.

Why these do not allow conviction in the same facts to prove it these two --

Mr. Robert L. Wright: I think in many cases Mr. Justice they would, that is that -- the conduct and questions would be covered by both the Sherman Act and by Section 14, however insofar as we are concerned, I think these are clearly alternative remedies that is --

Justice Hugo L. Black: It's your position that the Attorney General has a right to select the 1 if he wants to -- that gives the right to the biggest fine.

Mr. Robert L. Wright: I think that we're entitled to -- to proceed as we have been under the Sherman Act because we do have a more severe standard of proof there with respect to the degree to which the individual is implicated in the violation, I think co -- Congress clearly intended that where the officer is so implicated, he should be subject to the $50,000 fine without any question.

14 does, I think, describe a lesser offense which has never -- the limits have never been fully tested because the statute hasn't been used to that.

I might add that none of us, I think, at this point, really know how to prosecute a corporation under the Sherman Act simultaneously with the officers under Section 14.

Justice Hugo L. Black: But you do it under number 1, do you not?

Mr. Robert L. Wright: We do it under 1, yes.

When we charged him with the same offense and under the same statute but I suggest to you that this would be a hybrid procedure to --

Justice Hugo L. Black: Something like the tax cases that we had?

Mr. Robert L. Wright: I --

Justice Hugo L. Black: -- could be gotten by a felony under 1 Act and misdemeanor under the other?

Mr. Robert L. Wright: Well, these are both -- these are both -- these -- misdemeanors with the practical problem that would arise.

I think you can see are enormous if that is assuming and this is the economical way to do it, we always wish to prosecute the corporate officers with the corporation rather than serial.

Justice Hugo L. Black: Which one is this one under?

Mr. Robert L. Wright: Under the Sherman Act, this is --

Justice Hugo L. Black: Under number 1 only.

Mr. Robert L. Wright: This is the way we've always proceeded, I say if -- if now we should adopt a new procedure under which we try to indict the -- and try the corporation under the Sherman Act.Simultaneously, with a trial of the officers under Section 14, you would have, in my judgment, a procedural monstrosity that would raise all sorts of problems as to admission of evidence, instruction of the jury, just mere pleading that haven't yet been encountered and I would expect that -- that if we switch to that procedure, our corporate officials would have a five or six moratorium and a year of moratorium as far as any danger of conviction is concerned until those procedural questions were ironed out.

Justice Hugo L. Black: Your point is, it has to be -- exactly has to be under full bags, the corporation under 1?

Mr. Robert L. Wright: Yes.

Justice Hugo L. Black: The officers under 14.

Mr. Robert L. Wright: This so far as I know is an absolutely unheard of -- form of -- a procedure to prosecute under two statutes on their evidence which involves all of the defendants in the same time.

Justice Hugo L. Black: I do not see yet from your argument that's why you have something to charge case under number 1, and if that's the case, where do the argument come in?

Mr. Robert L. Wright: We had charged that one, I might -- I would like to read what the -- the indictment says a little more than -- than he read.What we have charged to Wise with is -- is this, "That he has been actively engaged in the management direction that control of the affairs, policy, and acts of national and hasn't authorized or ordered to be done somewhere all of the acts relies in the count of this indictment to have been done by national."

The ordering to authorize a language is merely a description of course of how any corporate official manages and controls the conduct of a corporation, that's the only way he can do it.

Justice Hugo L. Black: That's the description is it not of your -- your allegation that he violated the act?

Mr. Robert L. Wright: Yes, the Sherman Act.

Justice Hugo L. Black: By taking -- for taking part in agreement --

Mr. Robert L. Wright: Yes.

Justice Hugo L. Black: -- to violate the act.

Mr. Robert L. Wright: Yes.

Justice Hugo L. Black: And would the fact that you have charged this that's -- that it happens to be a language that could be used and then charge under 14, affect the validity of your indictment here?

Mr. Robert L. Wright: Not at all.

Chief Justice Earl Warren: Very well.