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, Nos. 118 and 119.--0oroBE$ TExY, 1910. others. I Appeals from the Circuit 118 va. The American Tobacco Company and The United States of America, Appellant, ~ ' Court of the United States The American Tobacco Company and i for the Southern District of 119 Others, Appellants. ~ . 'i New York. as. • The United States of America. J [May 29,1911.] ~ . Mr. Chief Justice WHrrs delivered the opinion of the Court. . . This suit was commencea on July 19, 1907, by the United States, to prevent the continuance bf alleged violations of the first and seoend sec- tions of the Anti-trust Act of July 2,1890. The defendants were twenty- nine individuals, named in the margin,* sixty-five American corporations, most of them created in the State of New Jersey, and two Engiish cor- porations. For convenience of statement we classify the corporate de- fendants, exclusive of the two foreign ones, which we shall hereafter sep- arately refer to, as o ows : e rican Tobacco Company, a New Jersey corporation, because of its dominant relation to the subject matter of the controversy as the primary defendant ; five other New Jersey cor- porations, (viz., American Snuff Company, American Cigar Company, American Stogie Company, MacA^i±~ws & Forbes Company, and Con- ley Foil Company), because of their relation to the controversy as the accessory, and the fifty-nine other.American..corporations as the sub= sidiary defendants. The ground of complaint against the American Tobacco Company rested not alone upon the nature and character of that corporation and the power which it exerted directly over the five accessory corporations *James B. Duke, Caleb C. Dula, Percival S. Hill, George Arents, Paul Brown, Robert B. Dula, George A. Helme, Robert D. Lewis, Thomas J. Dd'a- loney, Oliver H. Payne, Thomas F. Ryan, Robert K. Smith, Georg® W. Watq, , George G. Allen, John B. Cobb, William R. Harris, William H: McAIister, Anthoriy' N. Brady, 'Benjamin N. 'Dake, H. M. Hbnna, Herbert D. Bingsbnry, Pierre Lorillard, Rnfus L. Patterson, Frank H. Ray, Grant B. Schley, Charlea N. Strotz, Peter A. B. Widener, Welford C. Reed (now deceseed ), and William- son W. Faller. -

2 Ilnited States vs. dmericau Tobacco Co. d, aL and some of the subsidiary corporations by stock ownership in .uch corporations, but also upon the control which it exercised over the eubsidiary companies by virtue of stock held in said oompaniee by the acceesory companies by stock ownership in which the American Tobacco Company exerted its power of control. The accessory companies were impleaded either because of their nature and_character or because of the ~wer eze _. Qver. ..thiosg7h •stock--flwnership lry the American Tobacco Company and also because of the_pow.er-w.ltich they in turn exerted by stock ownership over the subfiidiary corporations, and finally the subsidiarLcorporations were impleaded either because of their nature or becaase of the control to which they were subjected in and bX_virtue of the stock ownership above stated. We append in the margin a state- ment showing-the-stoet-eea#rel exercised by the principal defendant, the American Tobacco Company, over the five accessory corporations and also the authority which it directly exercised over certain of thesub- sidiary aorporations, and a list showing the control exercised over the subsidiary corporations as a reault of the stock ownership in the accessory ora ions, ~f`iey being in turn controlled as we have said by the prin- cipal defendant, the American Tobacco Companp* • Eztent of control of American Tobacco Company over the accessory u,r- porations : American Snuff Gbmpany-of 120,000 shares of preferred stock owns 12,517 shares direetlyand 11,274 shares by reason of stock control of P. Lorillard Co., in all 23,764 shares; of 110,017 shares of common stock owns 41,214 directly and 34,594 by reason of stock control of P. Lorillard Co., in all 75,808 shares. dm.rican Cigar Company-of 100,000 shares of preferred stock owns 89,700 shares directly and 5,000 shares through control of American Snuff Co., in all 94,700 shares; of 100,000 shares of common stock owns directly 77,451 shares. American Stogie Cbmpany-of 108,790 shares of common stock controls 73,072f shares through stock interest in American Snuff Company. The Ameri- can Stogie Company owns all of the stock-12,500-of the Union American Cigar Company=cigars and stogiee. llfacAndrev:s & Forbes Company-of 37,583 shares of preferred stock (no voting power) owns 7,500 shares; of 30,000 shares of common stock owns 21,129 shares directly and 983 shares through stock control of the R. J. Reynolds Co., in all 22,112 shares. The (bnley Foil Compa.ny-of 8,250 shares of stock, directly owns 4,950 shares. , T7u d,nurioatt Tobacco Company-by stock own.erahip.is the owper outTight of the following defendant cor-panies : .'8. Anargyros [The B. Anaagyros CJompanp owna ~all y)ie capital, stociC (10 shares) of.the London Cigarette Co.]; F. F. tldains-Tahatxo Co.;, i§lack- well's Durham Totiacco Co.; Crescent Cigar and Tobacco Co.; Day and Night Tobacco Co.; Luhrman & W ilbern Tobacco Co.; Nall & W illiams To- ~ w Co -b ~ v N y

TlnW States vs. American Tobacco Co. et a1. E The twof&eign eorporationa were impleaded either because of their nature and character and the operation and effect of contracts or agree- ments with the American Tobacco Company, or the power which it ex- erted over their affairs by stock ownership. As we shall have occasion hereafter in referring to matters beyond dis- pute to set forth the main facts relied upon by the United States as giving rise to the cause of action alleged against all of the defendants it suffices at this moment to say that the bill averred,the origin and riature of the American Tobacco Compauy and the origin and nature of all the other defendant corporations, whether accessory or subsidiary, and the connection of the individual defendants with such corporations. In effect the bill charged that the individual defendants and the defendant cor- porations were engagqd in a conspiracy in restraint of interstate and foreign trade in tobacco and the products of tobacco and constituted a combination in restraint of such trade in violation.o£.xhe_6zaLmFtion of the act, and Also were attemptigg~~nttito~i~, and_.$rer,e _actuaIly a , monQpolization of such trade in violation of the second section. In sup- port of these charges general averments were made in the bill as to the baocc Co.; Nashville Tobacco Works; R. A Patterson Tobacco Co.; Monopol Tobacco Works; Spalding & Merrick. The American Tobacco Co. also haa theEtNk4n+a s* 'rdicated in the follow- defendant corporations: British-American Tobacco Co.-owns 1,200,000 shares of 1,500,000 shares of pre- ferred stock and 2,280,012 shares of 3,720,021 shares of common stock. The Imperial Tobacco Co., &c.--owns 721,457 pounds sterling of 18,000,000 pounds sterling of stock. The John Bollman Co.-of 2,000 shares of stock owns 1,020 sliares. F. R. Penn Tobacco Co.-of 1,50.° shares of stock owns 1,002 shares (through Blackwell's Durham Tobacco Co. ) R. P. Richardson, Jr., & Co., Inc.-owns 600 out of 1,000 shares of stock and $120,000 of $200,000 issue of bonds. R. J. Reynolds Tobacco Co.-owns 50,000 out of 75,250 shares of stock. Pinkerton Tobacco Co.-owns 775 out of 1,000 shares of stock. Reynolds Tobacco Co. (of Bristol Tenn.)-owns 1,449 shares out of 2,500 shares. J. W. Carroll Tobacco Co.--owns 2,000 out of 3,000 shares. P. Lorillard Co-owns 15 813 oMt_of_20,OOD whn.wa nf prPfPrewd~d.4t.l .~he~ common stock (30,000 shnree),, hentueky Tobacco Product Co.-owns 14 of 1,900 shares preferred and owns directly 5,264, and, through the American Cigar Co., 355 out of 8,100 shares of common stock. [The Kentucky Tobacco Product Co. owns all the capital stock (100 shares) of the Kentucky Tobacco Extract Co.] Porto Rican-American Tobacco Co.-owns directly 6,578, and, through the American Cigar Co., 6,576 of 19,984 shares of stock. [The Porto Riean- =~;-,

American Tobacco Co. owns 190 of the 380 shares of preferred and 300 of the 450 shares of common stock of Ind. Co. of Porto Rico; also owns 2,150 of the 5,000 shares of capital stock of the Porto Rico Leaf Tobacco Co.] i The American Tobacco Company is also interested, as indicated, in the fol- .erdngful purpose and intent with which acts were committed which it was alleged brought about the alleged wrongful result. The prayer of the bill was as folloAs: Wherefore petitioner prays : " 1. That the contracts, combinations, and conspiracies in restraint of trade and commerce among the States and with foreign nations, together with the attempts to monopolize and the monopolies of the same hereinbe- fore described be declared illegal and in violation of the act of Congress passed July 2, 1890, and subsequent acts, and that they be prevented and restrained by proper orders of the court. `° 2. That the agreements, contracts, combinations, and conspiracies en- tered into by the defendants on or about September 27, 1902, and there- after, and evidenced among things by the two written agreements of that date, Exhibits 1 and 2 hereto, be de:,lared illegal, and that injunctions issue restraining and prohibing defendants from doing'anything in pursuance lowing defendants, supply or machinery companies: Golden Belt Manufacturing Co. (cotton bags)-owns 6,521 of 7,000 shares. _ 63i A ri T C B i i h 3 b M l C d b o me can enge o. (woo en ozes)- s - owns , o acco Box r t lk' of 6,000 shares of atock. ) [The Mengel Company owns all of the capital stock of the Columbia Box Com- pany and of the Tyler Box Company, respectively 1,500 and 250 eharea] of ns majorit to u cha s lies)-o l -( d S C A t y p r w am upp y o. agency se upp ma er ;,,a F 9 stock and controls large part of remainder through subsidiary companies. i Thomas Cusack Co.-(bill posting)-owns 1,000 out of 1,500 ehares. Manhattan Briar Pipe Co.--owns all of stock, 3,500 shares. International Cigar Machinery Co.-of 100,000 shares owns 33,637 shares di- rectly and 29,902 shares through Am. Cigar Co.-in a1163,539 shares. The American Tobacco Company is also interested in the following com- not named as defendants: panies , American Machine & Foundry Co.-owns 510 shares directly and remainder y (490) through Am. Cigar Co. 4 N J Mhi C 510h ditldid (490) ewerseyacneo.-owns saresrecy an remaner through Am. Cigar Co. Standard Tobacco Stemmer Co.-of 17,300 shares owns 16,895 shares. C.arson Vending Machine Co.-of 500 shares owns 250 shares. The American Snuff Company in addition to stock, &c., interests in the American Tobacco Co., American Cigar Company, and the Amsterdam Supply Company, has stock interests in the following defendants: _ FI. Bolander-owns all of stock, 1,350 shares; e-

. __. : .. . ... . . __ rlrtited b'datee vs. American Tobacco G'o. et al. 5 4 of or in furtherance of the same within the jurisdiction of the United States. " 3. That the Imperial Tobacco Company, it officers, agents, and serv- aqts be enjoined from Qngaging in interstate or foreign trade and com- merce within the jurisdiction of the United States until it shall cease to observe or act in pursuance of said agreements, contracts, combinations, and conspiracies entered into by it and other defendants on or about Sep- tember 27, 1902, and thereafter, and evidenced among other things by the contracts of that date, Exhibits 1 and 2 hereto. "4. That the British-American Tobacco Company be adjudged an un- lawful instrumentality created solely for carrying into effect the objects and purposes of said contract, combination, and conspiracy entered into on or about September 27, 1902, and thereafter, and that it be enjoined from engaging in interstate or foreign trade and commerce within the jurisdiction of the United States. De Voe Snuff Co.-owns all of stock, 500 shares. [The De Voe Snuff Co. owns all the capital stock, 400 shares of Skinner & Co., snuff.] Standard Snuff Co.-owns all of stock, 2,816 shares. The American Cigar Co. in addition to stock interests in the Amsterdam Supply Co., American Stogie Co., Porto Rican American Tobacco Co., Sen- tuckyTobacco Product Co. and International Cigar Machinery Co., has the stock interest indicated in the following defendants: R. D. Burnett Cigar Co.--owns 77 out of 150 shares ; M. Blaskower Co.-owns 1,875 rut of 2,500 shares pref. and 1,875 out of 2,500 shares of common. Cuban Land & Leaf Tobacco Co.---owns all of stock, 1,000 shares. [The Cuban Land, &c., Co. owns 1,320 of the 1,890 shares of stock of the Vuelta Abajo S. S. Co. ] Cliff Weil Cigar Co.-owns 255 out of 500 shares. Dusel, Goodloe & Co.-owns 510 out of 750 shares. Federal Cigar Real Estate Co.-owns all stock, 6,000 shares. J. J. Goodrum Tobacco Co.-owns 477 out of 600 shares. Havana-American Co.-owns all stock, 2,500 shares. Havana Tobacco Co.-owns 700 shares out of 47,038 preferred, 166,800 out of 297,912 common stock, an-i ; 2,' :0,000 of $7,500,000 bonds. Jordan Gibson & Baum Co., Inc.-owns all preferred and common stock, 250 shares each. Louisiana Tobacco Co. Limited-owns 375 out of 500 shares. The J. B. Moos Company-owns all of stock, 2,000 shares. J. & B. Mooa-owns all of common stock, 1,000 shares. Porto Rican Leaf Tobacco Co.-owns 2,500 out of 5,000 shares. The Smokers' Paradise Corporation-owns all of common stock (250 shares) and 349 of 500 shares preferred. Havana 7bbacco Co. has a stock interest in the following corporations: H. de Cabanis y Carbajal-all of stock, 15,000 shares. Hy. Clay and Bock & Co., Lira.-owns 9,749 out of 16,950 shares preferred and 14,687 out of 15,990 shares common.

"5. That the court adjudge The American Tobacco Company, the American Snuff Company, The American Cigar Company, the American Btog'~e Company, the MacAndrews & Forbes Company, and the Conley Foil Company is each a combination in restraint of interstate and foreign trade and oommerce ; and that each has attempted and is attemping to mono~olize, is in combination and conspiracy with other persons and cor- porations to monopolize, and has monopolized part of the trade and com- merce among the several States and with foreign nations ; and order and decree that each one of them be restrained from engaging in interstate or foreign commerce, or, if the court should be of opinion that the public interests will be better subserved thereby, that receivers be appointed to take possession of all the property,, assets, business, and affairs of said de- fendants and wind up the same, and otherwise take such course in regard thereto as will bring about conditions in trade and commerce among the States and with foreign nations in harmony with law. [The Hy. Clay, &c., Co. is owner of 16,667 shares of the ordinary capital etock 'of the Havana Cigar & Tobacco Factories, Limited ; and also owns 64 shares of the 1,890 shares of the capital stock of the Vuelta Abajo S. S. Co.] Cuban Tobacco Co.-owns all of stock, 50 shares. gavana Commercial Co.-owns 55,562 out of 60,000 shares - preferred and 124,718 out of 125,000 shares common. [The Havana Commercial Co. owns all of the capital stock-100 shares--of the M. Valle y Co.-cigars.] Havana Cigar & Tobacco Factories, Lim.-owns 6,774 out of 25,000 shares ordinary stock. J. S. Murias y Co.-owns all of stock-7,500 shares. Blackuvdd'e Durham Tobacco Co.-in addition to a stock interest in the Amster- dam Supply Co., has the stock interest, indicated, in the following de- fendant corporation : F. P. Penn Tobacco Co.-owns 1,002 out of 1,503 shares. Scotten-Dillon Co.--owns $10,000 out of $500,000 of stock. Wells-Whitehead Tobacco Co.-owns all of stock, 1,500 shares. (bnley Foil Company-ownu all of the capital stock (3,000 shares) of the John- son Tin Foil and Mccal Co. P,I_.orillard Gbmpany-has a stock interest in the American Snuff Company and the Amsterdam Supply Co. R. J. R~ye po1dR Tobacco Co.-in addition to a stock interest in the Amsterdam Supply Company and the MacAndrews & Forbes Company, owns one-third of the 5,000 shares of stock of the Lipfert Scales Co. The Britiah-dmerican Tobacco Gb.-in addition to a small interest in the Amster- dam Supply Company, has the following stock interest in certain defend- ants ; David Dunlop-plug--owns 3,000 of 4,500 shares. W. S. Mathews & Sons-amoking-owns 3,637 out of 5,000 shares of stock. T. C. Williams Company-plug-owns all of stock, 4,000 shares. 1P k ~ w to -A -.1 r.~ «.-

11 United 6tatta .a American Tobacco G'o. eE al. 7 4 "6. That the holding of ®tock by one of the defendant corporations in another under the circumstances shown be declared illegal, and that each of them be enjoined from continuing to hold or own such shares in another and from exercising any right in connection therewith. "7. That defendants, each and all, be enjoined from continuing to carry out the purposes of the above-described contracts, combinations, conspira- cies, and attempts to monopolize by the means herein described, or by an}• other, and be required to desist and withdraw from all connection with the same. "8. That each of the defendants be enjoined from purchasing leaf tobacco or from selling and distributing its manufactured output as a part of interstate and foreign trade and commerce in conjunction or combina- tion with any other defendant, and from taking part or being interested in any agreement or combination intended to destroy competition among , them in reference to such purchases or sales. "9. That petitioner have such other, further, and general relief as may be proper." As to the answers, it suffices to say that all the individual and corpo- rate defendants other than the foreign corporations denied the charges of wrongdoing and illegal combination and the corporate defendants in par- ticular in addition averred their right under State charters by virtue of which they existed to own and possess the property which they held and further averred that they were engaged in manufacturing and that any combination amongst them related only to that subject, and there- fore was not within the Anti-trust Act. The two foreign corporations as- serted the validity of their corporate organization and of the assailed agreements, and denied any participation in the alleged wrongful com- bination. After the taking of much testimony before a special examiner, the case was heard before a court consisting of four judges, constituted under the expediting act of February 11, 1903. In deciding the case in favor of the government each of the four judges delivered an opinion. (164 Fed. 700). A final decree was entered on December 15, 1908. The petition was dismissed as to the English corporations, three of the sub- sidiary corporations, the United Cigar Stores Company and all the indi- vidual defendants. It was decreed that the defendants other than those against whom the~etition,.wss-dismissed, .had theretofore entered.intQJand were L7~arties_to binations in restraint of trade, etc., an vielatien of the ,._ ___ _i _ Anti-trust Act and said defendants and each of them, their officers, agents, etc., were restrained and enjoined "from directly or indirectly doing any act or thing whatsoever in furtherance of the objects and pur- poses of said combinations ,and from continuing as pasties thereto.°" jt. specifically found that each of the, defendants, "The American Tobaccpo Company, American Snuff Company, American Cigar Company, Ameri- can Stogie Company, and MacAndrews & Forbes Company constitutes I -0 .r. ~ -,~ ~ IMMMW v rv

and is itself a combination in violation of the said Act of Congress." The corporations thus named, their officers, etc., were next restrained and enjoined "from further directly or indirectlv enMing in interstate or foreign trade and commeroe~n__leaf_ tobacco or the products manufac- tured therefrom or articles necessary or useful in connection therewith. But ' of said last-named defendants can hereafter affirmatively show the restorstion of reasonably corn~titive eeaditiens, such defendant may apply to this court for a modification, suspension or dissolution of the in- junction herein granted against it." The decree then enumerated the various corporations which it was found held or claimed to own some or all of the capital stock of other eorporations and particularly specified such other corporations, and then made the following restraining pro- visions : "Wherefore each and all of defendants, The American Tobacco Com- pany, The American Bnuff Company, The American Cigar Company, P. Lorillard Company, R. J. Reynolde Tobacco Company, Blackwell's Dur- ham Tobacco Company and Conley Foil Company, their officers, directors, agents, servants and employes are hereby restrained and enjoined from i h i b l b f h h y conveyance or ot erw Be, t aoqu ~nng e.p ant<or us nesa~ any enc cor~oa~ion wherein any one of them now holds or ; and each and hlI _ofeaid de-feniiant`corpora ions so o ding stock in other corpora- tions as above apeci8ed, their officers, directors, agents, servants and employes, are further enjoined from voting or attempting to vote said kh k i f h ld f " h i i i ng o stoc at any meet t e stoc o ers o e corporat t on ssu ng the same and from exercising or attempting to exercise any control, direction, supervision or influence whatsoever over the acts and doings of such cor- h f poration. And it is urther ordered and decreed that each and every of the defendant corporations "the stock of which is held by any other defend- ant corporation as hereinbefore shown, their officers, directors, servants and agents, be and they are hereby respectively and collectively re- strained and enjoined from permitting the stock so held to be voted by any other defendant holding or claiming to own the same or by its attor- neys or agents at any corporate election for directors or officers and from permitting or suffering any other defendant corporation claiming to own or hold stock therein, or its officers or agents, to exercise any control whatsoever over its corporate actg." Judgment for costs was given in -favor of the petitioner and against the defendants as to whom the petition had not been dismissed, ex- cept the R. P. Richardson, Jr., & Company, a corporation which had consented to the decree. The decree also contained a provision that the defendants or any of them should not be prevented "from the institution, prosecution or defense of any suit, action or proceeding t,o- prevent or re= etrain the infringement of a trade-mark used 'ih- interstate commetce or. otherwise assert or defend 'a claim to, any'property t)r Fights." In the event of a taking of an appeal to this court,,the decree provided that the .,«

injunction which it directed "shall be auspended during the pendency of xach appeal." The United States appealed, as did also the various defendants against whom the decree was entered. For the Government it iR contended : 1. That the petition should not have been dismissed as to the individual defendants. 2. That it should not have been dismissed as to the two for- eign corporations-the Imperial Tobacco Company and the British- American Tobacco Company and the domestic corporations controlled by the latter, and that, on the contrary, the decree should have commanded the observance of the Anti-trust Act by the foreign corporations so far as their dealings in the United States were concerned, and should have restrained those companies from doing any act in the United States in ~ violation of the Anti-trust Act, whether or not the right to do said acts .ras asserted to have arisen pursuant to the contracts made outside of or within the United States. 3. The petition should not have been dismissed as to the United Cigar Stores Company. 4. The final decree should have adjudged defendants parties to unlawful contracts and conspiracies. 5. The final decree should have adjudged that defendants were attempting to monopolize and had monopolized parts of commerce. More particularly, it is urged, it should have adjudged that the Ameriean Tobacco Com- pany, American Snuff Company, American Cigar Company, American Stogie Company, MacAndrews & Forbes Company, the Conley Foil Com- pany and the British-American Tobacco Company were severally attempt- ing to monopolize and had monopolized parts of commerce, and that appro- priate remedies should have been applied. 6. The decree was not suf- ficiently specific, since it should have described with more particularity the methods which the defendants had followed in forming and carrying out their unlawful purpose, and should have prohibited the resort to sim- ilar methods. 7. The decree should have specified the shares in corpora- tions disclosed by the evidence , c._ owned by the parties to the conspir- acy, and should have enjoined those parties from exercising any control over the corporations in which such stock was held, and the latter, if made defendant, from permitting such control, and should have also en- joined the collecting of any dividends upon the stock. 8. The decree improperly provided that nothing therein should prevent defendants from • prosecuting or defending suits ; also improperly suspended the injunction pending appeal. The defendants, by their assignments of error, complain because the petition was not dismissed as -to all, and more specifically, (a) because they were •adjudged parties to a combination in restraint of interstate and foreign commeree; and enjoined aceoidingIf ;(b) because certain defendant corporations holding shares in others were enjoined from voting