The opinion of the court was delivered by: SIRICA
Rather than reviewing in detail the allegations of the complaints filed in these cases, it is sufficient to say that they arise out of the electrical equipment indictments returned in 1960 in the United States District Court for the Eastern District of Pennsylvania.
In general, plaintiffs, who are public corporations, city and state governments, complain of continuing agreements among the defendants to fix prices, submit collusive bids and price quotations and allocate sales among themselves on various items such as distribution transformers, circuit breakers, meters, etc.
In support of claims which in one case go as far back as 1948, and, in order to avoid the restrictive effects of the four-year limitation period of Section 4B of the Clayton Act, plaintiffs allege that defendants fraudulently concealed their violations; i.e., they employed deceptive schemes designed to conceal their damaging practices. In order to point with greater specificity to the charges made by plaintiffs, a paragraph of the complaint filed by the City of Piqua, Ohio, in Civil Action No. 2829-62, which is similar to allegations made by other plaintiffs, is here reproduced:
'12. The defendants and other participants in the aforesaid conspiracy have used various devices and practices to conceal the existence of the aforesaid conspiracy. These included secret meetings of officers and employees of the participants in hotels and other places throughout the country, often under cover of trade association and other ostensibly innocent conferences; placing telephone calls from public pay telephones or to and from private residential telephones of company representatives rather than using company office telephones; correspondence by means of plain envelopes without return address or other identifying marking, addressed to the residence of company representatives, rather than their offices; and the concealment and destruction of documents and records relating to the conspiracy. By means of these and other acts defendants and other participants in the conspiracy fraudulently concealed the existence of the combination and conspiracy; and plaintiff had no knowledge thereof and could not by the exercise of reasonable diligence have obtained knowledge of the existence of the conspiracy until the institution of the federal government proceedings described in paragraph 13 of this complaint.'
The sufficiency of the above and other allegations is not contested at this time by defendants' motion, but instead, defendants attack plaintiffs reliance on the so-called doctrine of fraudulent concealment to toll the four-year limitation period of Section 4B. The attack has many avenues of approach, but basically it centers around their contention that no doctrine of fraudulent concealment exists, as such, in the federal judicial system.
Prior to a consideration of the several points raised in the argument made by defendants, it is felt that a brief summary of the overriding consideration aimed at in the resolution of this difficult problem would serve a useful purpose. Therefore, with the following introduction, the Court will attempt to answer the arguments of defendants and state its reasons for adopting the conclusion that the four-year period of limitation of Section 4B is tolled by the fraudulent concealment of antitrust violations.
The Supreme Court, in Glus v. Brooklyn E. Dist. Terminal, 359 U.S. 231, 232, 79 S. Ct. 760, 761, 762, 3 L. Ed. 2d 770 (1959), has quoted the well-known maxim that 'no man may take advantage of his own wrong.' In the present situation it appears difficult to reach the conclusion that Congress was unmindful of this maxim when it considered and deliberated the amendment to the Clayton Act, proposed in 1955, establishing a uniform period of limitation in antitrust litigation. Since it is obvious that Congress in enacting antitrust legislation during the past seventy-odd years had as one of its main purposes a desire to make it economically unattractive to create monopolies, it would appear to be unreasonable to argue that in passing a statute of limitation in this area, Congress would permit violators to gain substantial immunity by merely devising elaborate schemes which avoid detection.
In considering this same problem, the United States Court of Appeals for the Eighth Circuit in its recent decision in Kansas City v. Federal Pac. Elec. Co., 310 F.2d 271, 284 (1962), has said:
'We are not persuaded to believe that Congress meant to proscribe and outlaw conspiracies and combinations in restraint of trade, only to reverse itself by enacting a statute of limitations that would reward successful conspirators. When the antitrust laws are violated, the wrongdoers who are successful in cloaking their unlawful activities with secrecy through cunning, deceptive and clandestine practices should not, when their machinations are discovered, be permitted to use the shield of the statute of limitations to bar redress by those whom they have victimized.'
In support of their motion and in contrast to the view expressed above, defendants argue that no federal doctrine of fraudulent concealment existed prior to the enactment of Section 4B in 1955, or exists at this time, and thus could not have been in the mind of Congress during its deliberations. However, the decisions in Bailey v. Glover, 88 U.S. (21 Wall.) 342, 22 L. Ed. 636 (1874) and Holmberg v. Armbrecht, 327 U.S. 392, 66 S. Ct. 582, 90 L. Ed. 743 (1946), would appear to refute this position.
In Bailey v. Glover, supra, an assignee of a bankrupt brought suit to set aside certain fraudulent real estate conveyances from the bankrupt to defendants. Faced with a two-year statute of limitation, plaintiff argued that the clandestine nature of the fraud tolled the statute. Agreeing with this position, the Supreme Court considered it equally applicable in law and in equity. In concluding that the tolling of the statute in the situation presented to it was a 'sound and philosophical view of the principles of the Statute of Limitation' the Court stated:
'They were enacted to prevent frauds; to prevent parties from asserting rights after the lapse of time had destroyed or impaired the evidence which would show that such rights never existed, or had been satisfied, transferred or extinguished, if they ever did exist. To hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the Statute of Limitations to protect it, is to make the law which was designed to prevent fraud, the means by which it is made successful and secure.' 88 U.S. (21 Wall.) 342, 349 (1874).
Defendants attempt to distinguish Bailey v. Glover, supra, by contending that the principle evolved in that case has application only where fraud is the gist of the action. Although this restrictive analysis might have merit in a consideration of the Bailey case by itself, the distinction would appear to weaken in light of the Holmberg v. Armbrecht, supra, decision.
In Holmberg, the Supreme Court considered a statute of limitation problem arising out of a suit in equity to enforce the liability imposed by the Federal Farm Loan Act on shareholders of a bank that had failed. The plaintiffs' action was filed after the state statute of limitations had run because, as plaintiffs contended, defendant had concealed his ownership of a portion of the bank stock by taking title under another name. Clearly, then, fraud was not the gist of the action. The fraud which had been perpetrated was done to conceal the liability which fell upon shareholders.
In arriving at its decision, the Court initially rejected the application of the state statute of limitations saying that the case before it concerned 'not only a federally-created right but a federal right for which the sole remedy is in equity.' Holmberg v. Armbrecht, 327 U.S. 392, 395, 66 S. Ct. 582, 584, 90 L. Ed. 743 (1946). Then, applying the doctrine of laches, the Court cited Bailey and quoted language from it, to the effect that the bar ofa statute of limitation will not begin to run until the fraud is discovered. The Court then concluded by saying:
'This equitable doctrine is read into every federal statute of limitation. If the Federal Farm Loan Act had an explicit statute of limitation for bringing suit under § 16, the time would not have begun to run until after petitioners had discovered, or had failed in reasonable diligence to discover, the alleged deception by Bache which is the basis of this suit. (Citing cases). It would be too incongruous to confine a federal right within the bare terms of a State statute of limitation unrelieved by the settled federal equitable doctrine as to fraud, when even a federal statute in the same terms ...