I. Background.
Plаintiffs, minority stockholders of General Motors Corporation, appeal from a judgment for defendants General Motors and E. I. du Pont de Nemours & Company entered in the United States District Court for the Southern District of New York after a trial without a jury before Charles M. Metzner, J.,
The present civil action for treble damages was brought pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15, alleging that du Pont had violated section 7 of the Clayton Act and sections 1 and 2 of the Sherman Act, and had breached its common law fiduciary duty. Specifically, plaintiffs claimed that subsequent to May 4, 1950,
2
du Pont utilized its stock control to insure its position as primary supplier to General Motors of a variety of products, thereby preventing actual and potential competition from other suppliers and enabling du Pont to
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sell General Motors its products at excessive prices. In September 1963, Judge Metzner issued an opinion dealing with the effect to be given to the Supreme Court judgment in the first
du Pont
case, explaining that a decision on that issue in advance of trial was necessary in order to define the scope of deposition-discovery procedures.
(a) that du Pont acquired 23% of the stock of General Motors;
(b) that automotive finishes and fabrics constitute a substantial “relevant market” within the meaning of the Clayton Act;
(c) that said acquisition of stock by du Pont was not solely for investment;
(d) that General Motors’ share of the “relevant market” for automotive finishes and fabrics was substantial;
(e) that du Pont supplied a substantial share of that market;
(f) that du Pont used its stock interest in General Motors to entrench itself as the primary supplier to General Motors of automotive finishes and fabrics and that du Pont controlled General Motors to that extent.
The judge dismissed plaintiffs’ claim for money damages under section 7 of the Clayton Act as a matter of law, but certified the order for immediate appeal. This court denied leave to appeal from that order on January 31, 1964, and the Supreme Court denied certiorari,
After extensive pre-trial and discovery proceedings, the claims relating to du Pont’s sales of automotive fabrics and finishes for passenger cars manufactured by General Motors came to trial in November 1966 solеly on the questions of liability of du Pont and injury to General Motors as distinguished from the quantum of damages. The trial continued until late January 1967; thereafter Judge Metzner filed his opinion, dismissing these causes of action. He found that du Pont had not used its stock ownership to control General Motors’ purchases of automotive finishes or fabrics or to insulate General Motors from competition in either line of commerce in violation of section 1 or 2 of the Sherman Act and that du Pont had not abused any fiduciary duty to General Motors. On March 29, 1968, final judgment was entered after a finding pursuant to Rulе 54(b) of the Federal Rules of Civil Procedure that more than one claim for relief had been presented and that there was no just reason for delay. This finding was upheld by this court in denying defendants' motion to dismiss plaintiffs’ appeal in July 1968.
On this appeal plaintiffs argue that numerous issues of law and fact were incorrectly decided by the court below. We do not have to reach most of these claims, however, for we find that the rulings in Judge Metzner’s Pretrial Opinion of September 18, 1963, and their application to the case at trial, were sufficiently erroneous to require remanding the action for further consideration. In particular, we hold that Judge Metzner erred in deciding that a violation of see *959 tion 7 of the Clayton Act cannot support a private cause of action for money damages, and that he improperly restricted the scope and weight of the government judgment in the first du Pont case as applied to the case at bar. Because of this disposition of the case, we need summarize only briefly the relevant facts set out at length in the du Pont opinion and in the opinion of the district court.
During the second decade of the century, du Pont acquired a number of manufacturing operations in automotive fabrics and paints. Considering other areas of further expansion, the corporation became interested in purchasing General Motors stock, both as a profitable investment and because General Motors constituted a large potential market for du Pont products. In 1917, du Pont decided to acquire $25,000,000 worth, or 23 per cent, of the outstanding common stock of General Motors. While the precise percentage of ownership varied for a number of years, it remained at 23 per cent from 1939 on. At least in the first few years аfter du Pont’s stock acquisition, the company made substantial and successful efforts to insure that the maximum share of General Motors’ purchases of automotive fabrics and finishes were from du Pont. As the Supreme Court found in the first
du Pont
case, these purchases constituted a substantial part of the total market. Thus, in 1946 and 1947, when General Motors purchased approximately one half of all such products, du Pont supplied 67 and 68 per cent, respectively, of General Motors’ requirements for finishes and 52.3 and 38.5 per cent of its fabric requirements.
In holding that du Pont’s stock purchase resulted in a viоlation of section 7 of the Clayton Act, the Supreme Court found that “immediately after the acquisition, du Pont’s influence growing out of it was brought to bear within General Motors to achieve primacy for du Pont as General Motors’ supplier of automotive fabrics and finishes,”
The conclusion upon this record is inescapable that such likelihood was proved as to this acquisition. The fire that was kindled in 1917 continues to smolder. It burned briskly to forge the ties that bind the General Motors market to du Pont, and if it has quieted down, it remains hot, and, from *960 past performance, is likely at any time to blaze and make the fusion complete.
Id.
at 607,
II. Treble damages under section 7 of the Clayton Act.
Section 4 of the Clayton Act, 15 U.S.C. § 15, states:
Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor * * * and shall recover thrеefold the damages by him sustained * * *.
The Supreme Court’s first
du Pont
decision established that du Pont’s acquisition of General Motors’ stock was a type forbidden under section 7. In his 1963 pre-trial opinion, however,
No case has been found discussing the question whether damages can be recovered for a violation of section 7 of the Clayton Act, and no case has been found where damages have been awarded for such a violation.
After distinguishing two eases he concluded :
The test of a section 7 violation is whether “there is a reasonable probability that the acquisition is likely to result in the condemned restraints.” United States v. E. I. du Pont dе Nemours & Co., supra,353 U.S. at 607 , 77 S.Ct. [872] at 884,1 L.Ed.2d 1057 . Plaintiffs cannot be damaged by a potential restraint of trade or monopolization. There can be no claim for money damages for a violation of section 7.
Other district courts have subsequently reached the same conclusion, see, e. g., Highland Supply Corp. v. Reynolds Metals Co.,
We agree with those authorities cited above that indicate that a violation of section 7 of the Clayton Act does furnish a basis for a claim for money dam
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ages under the broad language of section 4 of the Act. To begin with, section 1 of the Act, 15 U.S.C. § 12, defines “antitrust laws” as including “this Act,” and it seems clear to us that section 7 of the Clayton Act is an antitrust law within the meaning of section 4 of the same Act. This proposition is not the truly disputed one in the above-cited cases or even in this one. The trial judge did not hold that section 7 is not an antitrust law, nor do defendants so contend. The basis of the pre-trial ruling was that a section 7 violation can cause no damage because it establishes only that harm was threatened, not that it occurred. But if the threat ripens into reality we do not see why there can never be a private cause of action for damages. If section 7 is designed to prevent acquisitions that “may” or “tend to” cause specified harm, such an acquisition may either itself directly bring about the harm or make possible acts that do. We do not say that a section 7 violation must, or even probably will, have that result ; but that it may and that plaintiffs should have a chance to prove injury “by reason of” the violation are persuasive propositions. The Supreme Court seems to have recognized as much in the first
du Pont
decision,
Its [the Clayton Act’s] aim was primarily to arrest apprehended consequences of intercorporate relationships before those relationships could work their evil, which may be at or any time after the acquisition, depending upon thе circumstances of the particular case.
Damages have been allowed to private litigants under sections 2 and 3 of the Clayton Act, 15 U.S.C. §§ 13, 14, which are also aimed at anticipated injury and proscribe certain activities when “the effect * * * may be * ' * * to lessen competition or tend to create a monopoly.” See Stein,
supra,
56 Calif.L.Rev. at 979 & nn. 47-50. Finally, if we had any real doubts on this issue, we would resolve them in favor of a broad, rather than a narrow, construction of section 4, because “Congress has expressed its belief that private antitrust litigation is one of the surest weаpons for effective enforcement of the antitrust laws.” Minnesota Mining & Manufacturing Co. v. New Jersey Wood Finishing Co.,
Of course, plaintiffs cannot rest on a showing of a violation of section 7; they must, as in private actions under other sections of the antitrust laws, prove that they have been injured by the violation. However, the Supreme Court’s finding that du Pont’s stock ownership in General Motors constituted a “potential” restraint of trade or monopolization hardly precludes a showing that a given party was in fact injured by the prohibited acquisition, or that the section 7 violation proximately caused damage which might not in itself constitute a cause of action under the Sherman Act. Cf. the examples given in J. Scott & E. Rockefeller, Antitrust and Trade Regulation Today: 1967, at 342 (1967). Appellees argue that even assuming that a cause of action for damages lies under section 7, appellants suffered no prejudice from the district court’s ruling as they specifically failed to prove any injury at trial. However, in view of the fundamental nature of the error here, we think that the district court should be given the opportunity to reconsider the evidence before it in the light of our holding that injury from a section 7 violation, as distinct from thе alleged Sherman Act claims, is ground for treble damages. The advisability of such a re-examination is further supported by the eviden-tiary effect which the Supreme Court’s finding of a section 7 violation may have on the plaintiffs’ claims, a subject discussed below.
III. Effect of the first du Pont judgment.
In his September 18, 1963 opinion, Judge Metzner ruled that since the judg *962 ment in the first Supreme Court du Pont case covered a different time period than the case at bar, the “ultimate facts” determined in that judgment could not be used against the defendants under section 5(a) of the Clayton Act, 15 U.S.C. § 16(a):
A final judgment or decree * * 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 estop-pel as between the parties thereto.
He concluded that “plaintiffs may introduce in evidence the decree in the government suit, for historical purposes and background material * * *. Plaintiffs, however, will have to submit other proof of the existence of the facts on which they base their claims.”
The final judgment entered March 1, 1962 in said Government suit may be introduced in evidence on the trial of this action for historical purposes and as background material. The judgment in the said Government suit speaks as of June 30, 1949. The present plaintiffs may only recover damages for acts occurring after May 4, 1950.
In his final opinion in December 1967,
Although Judge Metzner seemed to imply that “the Court’s language about entrenchment” was entitled to some evi-dentiary weight, and one of the “ultimate facts” found in its November 1963 order was that “du Pont used its stock interest in General Motors to entrench itself as the primary supplier to General Motors,” we interpret the net effect of the above comments to be that the judgment in the government case was given little or no substantive legal effect on the issues at trial. Since we think that that judgment was entitled to substantially greater impact than a limited use as “historical perspective” or “background material,” we find it necessary to remand the case for Judge Metzner’s further consideration in light of the principles we will set forth hereinafter.
Considerable controversy has arisen under section 5(a) of the Clayton Act over the proper evidentiary use to be made of government antitrust judgments covering violations prior in time to those alleged as a basis for damages in a subsequent treble-damagе action.' See generally Shores, Treble Damage Antitrust Suits: Admissibility of Prior Judgments Under Section 5 of the Clayton Act, 54 Iowa L.Rev. 434, 446-49 (1968); Timberlake. The Use of Government Judgments or Decrees in Subsequent Treble Damage Actions Under the Antitrust Laws, 36 N.Y.U.L.Rev. 991, 998-1002 (1961). Thus, some decisions have taken the strict view that a government judgment may not be introduced as evidence at all unless it covers the same, or part of the same, period as that in question in the private action. See International Shoe Machine Corp. v. United
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Shoe Machinery Corp.,
Certainly there are circumstances here suggesting that it is both appropriate and desirable to give substantial evidentiary weight to the judgment entered in
du Pont I.
The case is being tried to a judge rather than to a jury, thus minimizing the nagging problem of undue prejudice referred to in many of
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the cases. See, e. g., Buckhead Theatre Co. v. Atlanta Enterprises, Inc.,
We are not, however, limited to the decree in determining the extent of estoppel resulting from the judgment in the Government’s case. If by reference to the findings, opinion, and decreе it is determined that an issue was actually adjudicated in an antitrust suit brought by the Government, the private plaintiff can treat the outcome of the Government’s case as prima facie evidence on that issue.
Moreover, the Court specifically noted that it would be proper in determining the effect of the judgment in a government case to look to earlier opinions both “with respect to violation and * * with respect to remedy.”
Id.
It is significant, therefore, that in its second
du Pont
decision,
We held thаt du Pont’s acquisition of the 23 percent of General Motors stock had led to the insulation from, free competition of most of the General Motors market in automobile finishes and fabrics * * *. [Emphasis added.]
We do not agree entirely with the lower court’s statement that “[t]he thrust of the [first
du
Pont] opinion was directed to show the probability of public injury based on events quite far removed from the time period with which we are concerned herein.”
It is important to distinguish this case from the more usual situation in which plaintiffs seek to apply to a subsequent period a government judgment condemning activities prohibited under the antitrust laws, where it is not unreasonable to assume that defendants ceased those activities after the prohibition. Here the very acquisition and position of potential control which was found violative of the Clayton Act as of 1949 continued through 1961. We need not dispute the statement of the district court that, in the ordinary antitrust case, there is no “presumption of continuance of unlawful conduct,”
Accordingly, while we make no attempt to formulate a general rule on the effect to be given to government judgments relating to earlier time periods, we hold that under the circumstances of this particular litigation, the judgment in the Government’s suit was entitled to greater evidentiary weight than was accorded it by the court below. We are aware that the judgment is only prima facie evidence at best and that plaintiffs have the burden of showing not only antitrust law violation but injury as well. However, it must be remembered that if the latter fact is established to the satisfaction of the trier, “the standard of proof as to the quantum of damages is less severe,” as appellee du Pont concedes.
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See, e. g., Bigelow v. RKO Radio Pictures, Inc.,
Accordingly, we remand for further proceedings consistent with this opinion. In view of this disposition of the appeal, we find it unnecessary to rule or express any views on appellants’ additional arguments that the trial judge erroneously held that du Pont had not violated the Sherman Act 5 or breached any fiduciary duty to General Motors.
Notes
. An amended consolidated complaint was filed in November 1959.
. This was apparently the earliest date at which any plaintiff owned General Motors stock.
. In the
Alamo Theatre
case, the court deferred determination of the question of admissibility until trial, noting that the “mere fact of plaintiff’s entry into the motion picture field subsequent to a conspiracy found to exist in 1945 is not alone sufficient for the court to rule as a matter of law that the Paramount decree has no relevance to the instant suit.”
. Brief for Appellee du Pont at 37 n. 36.
. Appellants do not press on appeal the lower court’s finding as to § 1 of the Sherman Act but have relied primarily on an alleged violation of § 2.