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UNITED STATES v. NATIONAL WHOLESALE DRUGGISTS' ASS

July 19, 1945

UNITED STATES
v.
NATIONAL WHOLESALE DRUGGISTS' ASS'N et al.



The opinion of the court was delivered by: MEANEY

The indictment charges the National Wholesale Druggists' Association, 23 wholesale drug corporations alleged to be members of the National Wholesale Druggists' Association, and 29 individuals, with conspiracy in restraint of trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.A. § 1.

The charges as set forth in the indictment are that these defendants have been engaged from in or about 1932 to the date of its return, February 6, 1942, in a continuing conspiracy 'to raise, fix and maintain the wholesaler's margin of profit on drug products by (a) raising, fixing, stabilizing, and maintaining the wholesale selling prices of said drug products and by (b) fixing and maintaining the wholesale purchasing prices of said drug products at levels demanded by the said defendants and other members' of the association. The theory of the indictment is of a continuing conspiracy, charging the defendants with having 'regularly and continuously entered into those agreements and done those things which they conspired to do.'

 McKesson & Robbins, Incorporated, one of the 23 wholesalers named as defendants, has filed a plea in abatement, the legal sufficiency of which the government attacks by demurrer. The defendant has joined with its plea, a motion to quash and for leave to inspect the grand jury minutes. To these pleadings the government has filed its motion to strike.

 The motion to quash and the plea in abatement, as to defendant McKesson & Robbins, and for an inspection of the minutes of the Grand Jury which returned said indictment, are based upon the following allegations:

 (1) From December 8, 1938 to July 1, 1941 the business, assets and property of the company were in custodia legis. The company filed a voluntary petition in the United States District Court for reorganization, which petition was duly approved on December 8, 1938 and that as a result thereof the company became powerless and without capacity to operate as a corporation except under the control of said Court. During the period, December 8, 1938 to July 1, 1941, a trustee duly appointed by the Court had title to the assets, property and franchises of the company and operated its business to the exclusion of the company and its officers, directors, employees and agents and that the company did not, nor did its directors, officers, employees or agents in its behalf, in fact, perform or purport to perform any act with respect to the operation of its business or the management or control of said property. On July 1, 1941, pursuant to Court order, the said trustee transferred title to the company of all its assets, properties and franchises, and relinquished to the company the operation and management thereof.

 (2) On information and belief, no evidence whatever was submitted to the Grand Jury which returned the indictment, that during the period from December 8, 1938 to July 1, 1941, the business, assets and property of the company were in custodia legis and the company had, during said period, no capacity or power to engage in, and did not engage or purport to engage in the combination or conspiracy alleged in the indictment.

 (3) On information and belief, there was no evidence whatever before the Grand Jury which tended to prove or proved that after July 1, 1941 the company engaged in the combination or conspiracy as alleged in the indictment.

 The motion to quash and the plea in abatement challenge the indictment upon the ground that no evidence to support it was given before the Grand Jury and, primarily, that there was no evidence to show a re-entry or rejoinder in the alleged conspiracy after July 1, 1941 when the control of defendant, McKesson & Robbins, Inc., by the trustee was terminated.

 There is no dispute between the parties that for the period from December 8, 1938 to July 1, 1941, defendant was in the custody and control of the District Court for Southern New York whose trustee was in exclusive possession and management. During such period there was no legal capacity in the defendant to engage in the conspiracy. The position taken by the defendant is that the filing of the petition constituted an effective withdrawal from the conspiracy and that the government has failed to produce any evidence to show an effective re-entry or rejoinder in such conspiracy subsequent to July 1, 1941.

 The undisputed facts show that commencing on July 1, 1941 McKesson & Robbins was again in full possession and control of its assets and business. It appears further, without dispute, that six of the individual defendants named in the indictment were officers and agents of the corporation from 1932 to December 8, 1938 at which time they became agents of the trustee and acted as such until the trusteeship terminated on July 1, 1941. On the latter date, when the defendant corporation resumed its business, these same individuals were reinstated in their former positions.

 It also appears that the purchase and sale of drug products at prices in accord with the schedules established under the conspiracy were continued throughout the entire period during which the trustee was in control as well as during the period following the termination thereof. Throughout the entire period the officers and agents remained the same; albeit under the control of the court for the duration of the trusteeship. These were the identical persons who had been officers of the defendant corporation prior to December 8, 1938 and who were re-instated on July 1, 1941.

 For the purposes of this motion it must be conceded that the conspiracy and the purchases and sales pursuant thereto, prior to the appointment of the trustee, were illegal. The matter is then resolved down to the question of whether, upon the resumption of legal control of the business and assets of the defendant corporation by the same officers and agents who had previously participated in and had been members of the conspiracy and having full knowledge thereof, the continued practice by such officers and agents of strict compliance with the prices established and maintained under the conspiracy constituted a re-entry into the conspiracy by the defendant corporation.

 It is the conclusion of the Court that upon the facts, this question must be answered in the affirmative.

 The contention of the defendant is that the acts of McKesson & Robbins in buying and selling drugs under the terms and at the prices fixed and maintained under and pursuant to the stabilization plans theretofore adopted, without more, fall short of establishing an effective re-entry or re-joining in ...


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