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“Whether or not a person or corporation who offers to sell to the Government, pursuant to public invitation to bid, material and equipment for use in the construction of the Panama Canal, and who is otherwise responsible and able to carry out his contract, may be deemed to be not a “ responsible bidder” because he is a party to an unlawful trust or monopoly, or otherwise carrying on his business in violation of the Sherman Antitrust Law.” And it was held that, under the statute and Executive order, a contract for the purchase of material and equipment for use in the construction of the Panama Canal could not be ignored simply because such bidder had been adjudicated to be a party to an unlawful trust or monopoly. (28 Op. 247.)
This opinion was rested upon the decision of the Supreme Court of the United States in Connolly v. Union Sewer Pipe Co. (184 U. S. 540, 550), wherein the defendant in error had brought suit to recover an amount due by notes for sewer pipe sold and delivered to plaintiff in error; and it was set up as a defense that the plaintiff was a member of an illegal combination among manufacturers of sewer and drainage pipes, formed for the purpose of enhancing prices, stifling competition, and restricting the freedom of commerce between the States and with foreign countries, contrary to the common law and the Sherman Antitrust Act. But it was held by the Supreme Court that such fact did not constitute a valid defense, because, though the company may have been a party to an illegal combination, yet the transaction in question did not grow out of such combination, and was not within itself unlawful, and hence was enforceable. That part of the opinion which bears directly upon the present question is as follows:
“ If the contract between the plaintiff corporation and the other named corporations, persons and companies, or the combination thereby formed, was illegal under the act of Congress, then all those, whether persons, corporations or associations, directly connected therewith, became subject to the penalties prescribed by Congress. But the act does not declare illegal or void any sale made by such com
bination, or by its agents, of property it acquired or which came into its possession for the purpose of being soldsuch property not being at the time in the course of transportation from one State to another or to a foreign country. The buyer could not refuse to comply with his contract of purchase upon the ground that the seller was an illegal combination which might be restrained or suppressed in the mode prescribed by the act of Congress; for Congress did not declare that a combination illegally formed under the act of 1890 should not, in the conduct of its business, become the owner of property which it might sell to whomsoever wished to buy it. So that there is no necessary legal connection here between the sale of pipe to the defendants by the plaintiff corporation and the alleged arrangement made by it with other corporations, companies and firms. The contracts under which the pipe in question was sold were, as already said, collateral to the arrangement for the combination referred to, and this is not an action to enforce the terms of such arrangement. That combination may have been illegal, and yet the sale to the defendants was valid.”
On June 14, 1910, a communication was received from your department in which you stated that the Vacuum Oil Co., one of the companies specified in the decree above named, had requested a suspension of the order of December 11, 1909, pending the ultimate decree of the Supreme Court; and you asked for an opinion as to whether or not an adjudication that a person or corporation is a party to an unlawful trust or monoply, from which judgment an appeal has been taken, is sufficient to exclude such person or corporation from competition in the sale of supplies to the Government; and in response thereto (28 Op. 384) it was held that such adjudication did not justify a rejection of a bid from such party; but, it was suggested that, inasmuch as an appeal had been taken from the judgment of the circuit court, it was not necessary “ to express an opinion upon what the status of the company would be if a final decree affirming the decree of the court below were rendered, and in defiance of such decree the company persisted in the transaction of business."
Unless there has been some material modification of the status of the parties defendant to that litigation by the decree entered by the Supreme Court, it is apparent that the foregoing opinions are conclusive of the question now presented. It is necessary, therefore, to examine the nature of the decree pronounced in the circuit court against the party in question, and the effect of the affirmance thereof, with certain modifications, by the Supreme Court.
As to the Standard Oil Co. of Indiana, it was adjudged and decreed by the circuit court, in effect, that it had entered into and become a party to a combination or conspiracy in restraint of trade and commerce in petroleum and its products among the several States and in the Territories and with foreign nations, such as is declared illegal by the act of Congress approved July 2, 1890, entitled “An act to protect trade and commerce against unlawful restraints and monopolies;” and by means of this combination the several defendants had combined and conspired to monopolize, and had monopolized, and were continuing to monopolize, a substantial part of the commerce among the States, in the Territories, and with foreign countries; that the capital stock of the Standard Oil Co. of Indiana was $1,000,000, of which the Standard Oil Co. of New Jersey owned $999,000, by which means the former company was controlled by the latter; that the various companies mentioned were engaged in shipping petroleum and its products into the States and Territories of the United States, the District of Columbia, and foreign nations; and the subsidiary companies, of which the Standard Oil Co. of Indiana was one, were controlled by the Standard Oil Co. of New Jersey; that the stock of the Standard Oil Co. of Indiana was acquired and held by the Standard Oil Co. of New Jersey by virtue of the illegal combination; and the court enjoined the Standard Oil Co. of New Jersey, or anyone acting for it, from voting any of the stock of the Standard Oil Co. of Indiana, and from exercising or attempting to exercise any control, direction, supervision, or influence over the acts of the same by virtue of its holding of said stock; and the Standard Oil Co. of Indiana and its officers, agents, and employees were enjoined from declaring or
paying any dividends to the Standard Oil Co. of New Jersey on account of its stock held by such company, and from permitting said company to vote any of its stock or to direct its policy or to exercise any control whatsoever over its corporate acts; but it was not prohibited from distributing ratably to the shareholders of the Standard Oil Co. of New Jersey the shares of its stock to which they yere equitably entitled. The Standard Oil Co. of Indiana and its officers, etc., were further enjoined from continuing or carrying into further effect the combination adjudged illegal, and from entering into or forming any like combination or conspiracy the effect of which would be to restrain commerce in petroleum or its products among the States and in the Territories of the United States and with foreign countries; or to prolong the unlawful monopoly of such commerce, either by written evidence or stock interest, through any competitive party to the illegal combination, by causing the conveyance of its property and business to such party, by placing its control in a trustee or group of trustees, by causing its stock to be held by others than its equitable owners, or any similar device, or by making any kind of contract with either or any of the parties defendant relative to its control or management, or the price or terms of purchase, or the sale, or rates of transportation of petroleum or the products thereof, in interstate commerce.
By the seventh section of the decree it was ordered that the defendants named in section 2 (of which the Standard Oil Co. of Indiana was one) be enjoined and prohibited, until the discontinuance of the operation of the illegal combination, from engaging or continuing in commerce among the States, or in the Territories of the United States; and by the ninth section it was directed that the decree should take effect 30 days after it was entered, in case of no appeal being taken therefrom; but in case of an appeal that it should take effect 30 days after the final judgment of the Supreme Court.
This decree was in all things affirmed by the Supreme Court, except the last provision was modified by extending the time in which it should go into effect to six months,
and the injunction against engaging in interstate commerce, directed by section 7 of the decree of the court below, was held to have been improvidently granted.
It is apparent that the legal status of the Standard Oil Co. of Indiana has been changed in no respect by the pronouncement of the decree by the Supreme Court. There is no adjudication that the Standard Oil Co. of Indiana is not a lawfully incorporated body. On the contrary, there is a distinct recognition that its existence is lawful and that its illegal act consists in the combination which was effected by the ownership of its stock by the Standard Oil Co. of New Jersey; and, further, the Supreme Court has expressly refused to enjoin its engaging in interstate commerce for a period of six months, and has extended the period of probation as to it and all other defendants for a like period, to permit them to dissolve the unlawful com bination by the proper adjustment of the stock relationship, the method of doing which is suggested in the opinion of the court.
Under the opinion rendered April 19, 1910, and the decision of the Supreme Court of the United States in the case of Connolly v. Sewer Pipe Company (184 U. S. 540), there is no question that contracts entered into by this company are perfectly valid and enforceable. If this company and the Standard Oil Co. of New Jersey, after the expiration of six months, should, through its officers and directors, refuse to obey the mandate of the court and dissolve their relationship in accordance with its terms, the circuit court might thereafter enjoin its further engaging in interstate commerce, and possibly might place it in the hands of a receiver, and direct that its business be wound up; but, in such case, the interests of the United States would be amply protected by the act of April 10, 1878, chapter 58 (20 Stat. 36), as amended by the act of March 3, 1883, chapter 120 (22 Stat. 487), wherein it is provided :
“ That the Secretary of War is hereby authorized to prescribe rules and regulations to be observed in the preparation and submission and opening of bids for contracts under the War Department
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