ANTITRUST DIVISION MANUALCHAPTER IV |
LITIGATION The purpose of this Chapter is to outline some of the practices and procedures that the Antitrust Division has used in civil and criminal litigation. The Chapter is not intended as a litigation handbook; rather, it attempts to address selectively a number of practices that are part of any litigation effort. Trial staffs should make use of a variety of source materials including various trial handbooks; the Division's Civil Litigation Manual; the Handbook of the Attorney General's Advocacy Institute; and the suggestions and services that are described in detail in Chapter VI, Section B, "Guide to Conducting Antitrust Investigations." Because of the varied nature of matters most common in antitrust litigation, this Chapter presents certain issues in a detailed manner and others only as an outline of possible issues or questions. The civil litigation sections contain a brief description of the preparation and filing of the complaint; a detailed legal and practical analysis of the requirements and standards for obtaining preliminary relief; an outline of issues that may arise during civil discovery; a brief discussion of the trial of a civil case and suggested methods of expediting and streamlining litigation; and a detailed description of the manner of negotiating and entering consent decrees. The criminal litigation section includes a description of the preparation and filing of the indictment, an outline of pre-trial discovery and motion practice, a list of practical trial suggestions, and a description of the considerations in negotiating plea bargains and recommending sentences to the court in appropriate circumstances. The final section of the Chapter sets forth the procedures used in preparing or opposing an appeal in either a civil or criminal action. It is impossible to establish any one set of procedures for the conduct of the Division's pre-trial and trial efforts. Since each case poses problems that are unique to the particular facts of that case, this Chapter should be used only as a starting point from which ideas and strategies may be developed.
Since civil litigation begins with the filing of the complaint, the procedures are similar regardless of the type of violation alleged or whether the Division is seeking preliminary relief. The staff will have prepared a complaint for submission to the section, task force, or field office Chief and the appropriate Director of Enforcement as it submits other materials relating to the case. The section, task force, and field office files, as well as the Division's Work Product Document Bank, contain sample complaints for different violations in different circumstances. The FOIA Unit maintains files of all complaints and accompanying papers that are filed by the Division. These sample complaints provide the basic style and substance of the complaints filed by the Division and assist the staff in drafting a complaint based on particular facts. Generally, complaints filed more recently are better models. Staff should consider checking with the appropriate Special Assistant for the best examples. The staff should also consult the local rules and practices of the district where the complaint will be filed to determine the specific requirements of the district (e.g., size of paper and margins, form of caption, etc.). The local U.S. Attorney's Office should be informed of our intention to file a complaint in the district and should be consulted to ensure the correctness of the form. In preparing the complaint, staff should not overlook the significance of venue and interstate commerce allegations. In alleging venue, the staff should be alert to where the defendants transact business or are found. At least one of the defendants must meet this venue requirement. While often all of the defendants will meet the venue requirement, there are sometimes situations where one or more of the defendants do not, or may not, meet it. In such instances, the complaint should indicate that fact, and, in the prayer for relief, the complaint should ask that the court issue summons to the defendants not meeting the venue requirement to bring them within the court's jurisdiction for purposes of the litigation. The issuance of summons is provided for under Section 5 of the Sherman Act, 15 U.S.C. § 5, if the case arises under the Sherman Act, and under Section 15 of the Clayton Act, 15 U.S.C. § 25, if the case arises under the Clayton Act. In many cases, the defendants will stipulate venue. Second, interstate commerce should be alleged as clearly as possible consistent with the specific facts of the case. Whenever possible, the staff should allege such facts as are necessary for both the "affecting" and "in commerce" ("flow") tests. The complaint should also state a general allegation of interstate commerce. In addition to these two practical matters, the complaint should be a concise and persuasive statement of the allegations and the relief prayed for by the Division. The staff must notify the office of the appropriate Director and the appropriate Special Assistant of the tentative filing date as soon as it is known so they can send the draft press release to the Office of Public Affairs in advance. (Staff should not forward the press release directly to the Office of Public Affairs.) A copy of the papers being filed must be sent to the appropriate Director (typically by e-mail) before the case has been filed.(1) A signed copy should be delivered to the Director's office preferably immediately after signing (if at all possible, the day before it is filed). The staff must also notify the Director's office at least 24 hours before the complaint is in fact to be filed so the Office of Public Affairs may be advised to prepare for issuance of the press release. The complaint should be filed with the Clerk of the Court, together with whatever forms the Clerk requires under local procedures. The U.S. Attorney's Office should be consulted concerning the forms to be filed and the summons to be issued. A copy of the complaint, stamped by the Clerk of the Court at the time of filing, must be provided to the office of the appropriate Director immediately after the complaint is filed.
Once the complaint is filed with the Clerk of the Court, the complaint and summons should be issued to the defendants, pursuant to Rule 4 of the Federal Rules of Civil Procedure. As a courtesy, the staff should inform counsel of the filing, and provide counsel with a copy of the papers. Immediately upon filing the complaint, the staff must inform the appropriate Director's office of the filing, the Judge's name, and the case's civil number. This is usually done by telephoning from the courthouse. The Director's office will then notify the Office of Public Affairs that the press release may be issued. After the parties have been informed of the filing of the complaint and all local district procedures have been completed, staff should follow the local rules and practices and the Federal Rules in setting up whatever conferences are deemed necessary to expedite the matter. When appropriate, procedures for obtaining preliminary relief through a temporary restraining order or preliminary injunction should begin. Those procedures are described in detail in Section B of this Chapter. B. Obtaining Preliminary Relief: Temporary Restraining Orders and Preliminary Injunctions This section discusses the legal analysis and procedures that will assist a Division trial staff in determining whether to seek preliminary relief. The legal discussion is more extensive than that in any other section of this Chapter. Trial staffs are more likely to need a readily available source of case law and analysis in this area since preparation time is usually short and staff is confronted with numerous factual and legal considerations. While this analysis is not exhaustive, it raises the major legal issues that may arise in seeking preliminary relief, as well as the procedures that must be completed before a hearing is held. The purpose of preliminary relief is to "create or preserve a state of affairs such that [the court] will be able, upon conclusion of the full trial, to render a meaningful decision for either party." Developments in the Law -- Injunctions, 78 Harv. L. Rev. 994, 1056 (1965); see also Note, Preliminary Relief for the Government Under Section 7 of the Clayton Act, 79 Harv. L. Rev. 391 (1965). It should be sought by the Division whenever, in its absence, the relief obtainable following a trial on the merits may not be adequate to restore effective competition in the affected market or where an interim anticompetitive effect is likely, assuming the legal prerequisites are otherwise met. Preliminary relief is particularly appropriate in section 7 cases, but is also available in other types of cases, including actions brought under sections 1 and 2 of the Sherman Act. See 15 U.S.C. § 4; see also De Beers Consol. Mines, Ltd. v. United States, 325 U.S. 212, 219-20 (1945); United States v. American Column & Lumber Co., 263 F. 147 (W.D. Tenn. 1920), permanent decree aff'd, 257 U.S. 377 (1921) (violation of 15 U.S.C. § 1); Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc., 351 F. Supp. 462 (E.D. Pa. 1972) (violation of 15 U.S.C. § 2). A temporary restraining order ("TRO") is the most extreme form of preliminary injunctive relief. Its purpose is to prevent imminent and irreversible developments that may seriously compromise the applicant's right to relief on the merits until the court can hold a hearing on an application for preliminary injunction. A TRO may be issued with or without notice to, or appearance by, the adverse party (although efforts should be made to give notice and the court may require it in an antitrust action). It is strictly limited in duration, and issuance is generally non-appealable. A preliminary injunction ("P.I.") functions similarly to a TRO, pending a trial and ultimate disposition of the case, but it is designed to be a more measured response, based on a more complete record. The affected party must be given a full and fair opportunity to contest the requested relief. In most cases, an evidentiary hearing, often of substantial proportions, will be held. The order, if granted, may be of indefinite duration. It must be supported by detailed findings of fact and conclusions of law, and it is immediately appealable. In merger cases, rarely can a case be filed sufficiently far in advance of the transaction to permit an application for preliminary relief to be brought on as a regular motion. Moreover, it is unlikely that the necessary hearing can be completed and the issue decided by the date of the proposed transaction. Thus, in most cases, unless the defendants are willing to stipulate to interim relief (i.e., an agreement not to consummate a merger) until a P.I. hearing or full trial can be held, a TRO will be required to ensure that a decision will be timely made and that competition will not be irreversibly harmed. In addition, it may be useful to seek a TRO as a means of obtaining an expeditious hearing on the application for a preliminary injunction. See Fed. R. Civ. P. 65(b) (stating that when a TRO is granted without notice, the hearing on the motion for a preliminary injunction takes precedence over other matters). The issuance of temporary restraining orders and preliminary injunctions is governed by a variety of procedural and substantive rules.
Rule 65(b) of the Federal Rules of Civil Procedure permits TROs to be issued ex parte and without notice to the adverse party, but it places a variety of restrictions on such TROs, and it provides for a hearing, on motion by the adverse party, for dissolution or modification of such an order. The rule is silent as to the conditions applicable to TRO's issued with notice and appearance by the adverse party.
Rule 65(b) provides that a TRO may be granted "without written or oral notice" only in circumstances where the applicant "clearly" shows from "specific facts" that "immediate and irreparable injury" will occur before the adverse party can be heard in opposition, and where the applicant certifies in writing the efforts made to give notice and the reasons for proceeding without it. The Advisory Committee Notes to the 1966 amendment to Rule 65(b) state, however, that "informal notice, which may be communicated to the attorney rather than the adverse party, is to be preferred to no notice at all." The Rule does not specify what written or oral notice is sufficient to take the case out of the category of orders issued "without written or oral notice" and thus sufficient to relieve the applicant of making a Rule 65(b) showing. See 11A Charles Alan Wright et al. Federal Practice & Procedure: Civil 2d § 2952, at 273 (2d ed. 1995) ("Wright"), suggests that written notice pursuant to Fed. R. Civ. P. 5(b) should suffice. However, for safety, Division attorneys in applying for a TRO should follow the rules for TROs issued without notice regardless of whether actual notice has been given, while every effort should be made to follow the rule's preference for as much actual notice as possible. The staff should, of course, determine the local rules and practices of the district in which the application will be made.
Rule 65(b) requires a TRO granted without written or oral notice to be based on an "affidavit or ... verified complaint" "clearly" setting out "specific facts" showing (1) immediate and (2) irreparable damage "will result to the applicant before the adverse party or that party's attorney can be heard in opposition." In lieu of sworn affidavits and verifications, unsworn declarations under penalty of perjury may be utilized. See 28 U.S.C. § 1746. There is apparently no case law defining the standard for judging the quality and character of a declaration offered in support of a Rule 65(b) motion. See 11A Wright § 2952, at 275. It is reasonable to apply the applicable standards for affidavits supporting an application for preliminary injunction. See 11A Wright § 2952, at 276; see also infra note 2 (discussing affidavits for preliminary injunction). The declarations specified by Rule 65(b) should not be required to satisfy the more rigorous requirements of Rule 56(e), relating to summary judgments. See 11A Wright § 2952, at 275-76). Of course, declarations that rely more heavily on personal knowledge than on information and belief are likely to be accorded greater weight by the court.
Under Rule 65(b), a temporary restraining order issued without notice is effective only for the period set by its terms, not to exceed 10 days. However, within the period set by the order, it can be extended for "a like period" (i.e., 10 days) upon a showing of good cause. The rule also provides that a TRO can also be extended if "the party against whom the order is directed consents." The literal language of the rule permits extensions by consent without regard to the 20-day limit; however, local authority should be consulted on this point, and any extension may not be indefinite, consistent with the order's purpose as "temporary" relief until a hearing can be held. See, e.g., Fernandez-Roque v. Smith, 671 F.2d 426, 429-30 (11th Cir. 1982); Connell v. Dulien Steel Prods., Inc., 240 F.2d 414, 417 (5th Cir. 1957); 11A Wright § 2953, at 283-84. The courts apply the same rule on duration to ex parte TROs as to those issued with informal notice.(2) Restraining orders ordinarily should be drafted to specify their duration. If the order does not state how long it will remain in effect, it automatically expires after 10 days, unless extended. See Granny Goose Foods, Inc., 415 U.S. at 443-444; 7 James Wm. Moore, Moore's Federal Practice ¶ 65.07, at 65-134 (2d ed. 1996) ("Moore"). The cases offer little guidance as to the grounds for extending a TRO. See 11A Wright § 2953, at 279. It is clear, however, that the proponent of an extension must move for renewal before the original order expires. See id.; 7 Moore ¶ 65.07, at 65-135. There is little law as to what constitutes good cause for extension. It should be sufficient that more time is required to complete the hearing, see United States v. United Mineworkers of America, 330 U.S. 258, 301 (1947); Maine v. Fri, 483 F.2d 439, 441 (1st Cir. 1973), or more time is required for submission of additional evidence on the application for preliminary injunction, see Weyenberg v. Town of Menasha, 409 F. Supp. 26, 27-28 (E.D. Wis. 1975), or for the court to prepare its decision, see Steinberg v. American Bantam Car Co., 76 F. Supp. 426, 433 (W.D. Pa. 1948), appeal dismissed as moot, 173 F.2d 179 (3d Cir. 1949), at least as long as the grounds for originally granting the order continue to exist. See 11A Wright § 2953, at 279; 7 Moore ¶ 65.07, at 65-136. If the parties clearly intend it, a hearing to modify or dissolve a TRO can be converted to a preliminary injunction hearing. See Granny Goose Foods, Inc., 415 U.S. at 441.
According to Rule 65(b), every temporary restraining order granted without notice "shall be indorsed with the date and hour of issuance; shall be filed forthwith in the clerk's office and entered of record; shall define the injury and state why it is irreparable and why the order was granted without notice." TROs issued with informal notice and appearance should make comparable recitations. In addition, Rule 65(d) states that every restraining order (and injunction) "shall set forth the reasons for its issuance; shall be specific in its terms; [and] shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained." See infra Section B.3 (summarizing what should be included in a proposed TRO drafted by the Division). Local rules and practice should also be consulted as they may affect the form of the order.
Issuance or denial of a TRO is generally not appealable. See, e.g., Connell v. Dulien Steel Prods., Inc., 240 F.2d at 418. However, when a temporary restraining order is continued beyond the 10 or 20 days permitted by Rule 65(b) (or far beyond this period with the consent of the parties), some courts will treat the TRO as a preliminary injunction for purposes of appealability. The TRO may then, however, be held inadequate, because it fails to satisfy the requirements for preliminary injunctions, such as inclusion of findings of fact. See, e.g., Sampson v. Murray, 415 U.S. 61, 86 (1974); In re Arthur Treacher's Franchise Litigation, 689 F.2d 1150, 1153-55 (3d Cir. 1982); Telex Corp. v. IBM, 464 F.2d 1025, 1025 (8th Cir. 1972); National Mediation Bd. v. Air Line Pilots Ass'n., 323 F.2d 305, 305-06 (D.C. Cir. 1963); Pan American World Airways, Inc. v. Flight Engineers' Int'l Ass'n, 306 F.2d 840, 843 (2d Cir. 1962); 11A Wright § 2953, at 280-83.
Rule 65(a)(1) states that "[n]o preliminary injunction shall be issued without notice to the adverse party." Notice is not defined by Rule 65(a), but Rule 6(d) generally requires a motion to be served, along with notice of the hearing, "not later than 5 days before the time specified for the hearing." See 11A Wright § 2949, at 213. Since Rule 6(d) allows the time limit to be changed by court order, a shortened time can be requested. Local rules should also be consulted for time limits, including required notice for motions. As to content adequate to provide sufficient notice, a copy of the motion for preliminary injunction and specification of the time and place of hearing should be adequate. See 11A Wright § 2949, at 214. Although in many courts(3) a preliminary injunction can be based solely on affidavits and documents,(4) this is often done only where neither party requests an evidentiary hearing or there is no controversy as to the material facts. In most antitrust cases, an evidentiary hearing will be held, but live testimony will usually be supplemented with declarations, deposition transcripts, and documents. See, e.g., FTC v. Coca-Cola Co., 641 F. Supp. 1128, 1129-30 (D.D.C. 1986), vacated, 829 F.2d 191 (D.C. Cir. 1987). Preliminary injunction hearings in antitrust cases tend to be moderately lengthy, averaging about one week of trial time. In most respects, they resemble a scaled-down plenary trial. As provided in Rule 65(a)(2), the court may order that the trial on the merits be consolidated with the hearing on the application for preliminary injunction, and therefore, the staff must be prepared to explain its position on whether such consolidation is appropriate. Even if there is no consolidation, Rule 65(a)(2) provides that all evidence received upon application for a preliminary injunction that would be admissible at trial automatically becomes part of the record and need not be repeated at trial; however, it may be reintroduced if there is adequate reason to do so. See 7 Moore ¶ 65.04[5]; 11A Wright § 2950, at 234. Consolidation of a trial on the merits with a preliminary injunction hearing is an abuse of discretion if it deprives a party of its right fully and fairly to present its case on the merits. See 7 Moore ¶ 65.04[4]; 11A Wright § 2950, at 236-40; see, e.g., Paris v. HUD, 713 F.2d 1341, 1345-46 (7th Cir. 1983).
A preliminary injunction, unlike a TRO, can be of indefinite duration. It ordinarily will remain in effect until completion of a trial on the merits, although the court retains plenary power to dissolve or modify it as circumstances warrant. See 7 Moore ¶ 65.05, at 65-128. Rule 65(d) requires that the injunction or restraining order "shall set forth the reasons for its issuance; shall be specific in terms; [and] shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained." See City of Mishawaka v. American Elec. Power Co., 616 F.2d 976, 991 (7th Cir. 1980) (holding mere incorporation of language of the Sherman Act insufficient to describe in reasonable detail action sought to be restrained), cert. denied, 449 U.S. 1096 (1981).(5) In addition, Rule 52(a) requires statement of "the findings of fact and conclusions of law which constitute the grounds of [the court's] action" in granting or denying interlocutory injunctions.
Preliminary injunctions are appealable under 28 U.S.C. § 1292(a)(1) ("interlocutory orders of the district courts . . . granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions"). Both the district court and the court of appeals are authorized either to grant or to stay a preliminary injunction pending appeal. See Fed. R. Civ. P. 62(c); Fed. R. App. P. 8(a). Such orders are frequently granted, and appeals of the grant or denial of a preliminary injunction may be heard on an expedited basis. The articulated scope of review on appeal is narrow. Most courts state that they will reverse only for clear abuse of discretion, see, e.g., Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32 (1975); American Med. Ass'n v. Weinberger, 522 F.2d 921, 924 (7th Cir. 1975); SCM Corp. v. Xerox Corp., 507 F.2d 358, 360 (2d Cir. 1974), or an error of law, see, e.g., Selchow & Righter Co. v. McGraw-Hill Book Co., 580 F.2d 25, 27 (2d Cir. 1978)); Jones v. Snead, 431 F.2d 1115, 1116 (8th Cir. 1970). Findings of fact are reviewed for clear error. See 11A Wright § 2962, at 443 & n.62. The appellate court "ordinarily will not delve any further into the merits of the controversy than is necessary to decide the specific issues being appealed." 11A Wright § 2962, at 435.
The Federal Rules do not prescribe a standard for granting or denying a preliminary injunction, and accordingly historic equitable considerations are applied. Wright describes the most important factors in the decision, see 11A Wright § 2948, at 131-33 (collecting cases):
See also, e.g., Doran v. Salem Inn, Inc., 422 U.S. at 931.
(i) Most commonly, courts have articulated the plaintiff's burden as demonstrating a reasonable probability of success on the merits. While courts have used a variety of means of framing this concept, courts agree that the plaintiff is required to present a prima facie case but need not demonstrate the certainty of winning at trial. See generally 11A Wright § 2948.3, at 184-88; see also, e.g., United States v. Nippon Sanso, 1991-1 Trade Cas. (CCH) ¶ 69,377 (E.D. Pa. 1991) (section 7 case; reasonable probability test); United States v. Country Lake Foods, Inc., 754 F. Supp. 669, 673 (D. Minn. 1990) (government failed to show probability of success in section 7 case); United States v. Ivaco, Inc., 704 F. Supp. 1409, 1420 (W.D. Mich. 1989) (government had established "prima facie" section 7 case); United States v. Calmar, Inc., 612 F. Supp. 1298, 1300 (D.N.J. 1985) (requiring "reasonable likelihood" of success in showing section 7 violation). In most non-antitrust cases, the likelihood of success is balanced with the comparative injury to the parties. Where the balance of hardships tips decisively toward the plaintiff, the plaintiff need not make as strong a showing of likelihood of success to obtain a preliminary injunction. Wright describes this balancing as a "sliding scale." 11A Wright § 2948.3, at 195; see also, e.g., Duct-O-Wire Co. v. U.S. Crane, Inc., 31 F.3d 506, 509 (7th Cir. 1994). As Judge Frank's often-quoted opinion in Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1953) (footnote omitted) states:
While this "fair ground for litigation" standard has been applied in a variety of types of private antitrust suits, the Second Circuit has refused to apply the standard in government section 7 suits, on the ground that, once the government shows a reasonable probability that section 7 is violated, irreparable harm is presumed; in light of this presumption, the government should be required to do more than raise a "fair ground for litigation." United States v. Siemens Corp., 621 F.2d 499, 505-06 (2d Cir. 1980). But see United States v. Gillette Co., 828 F. Supp. 78, 86 (D.D.C. 1993) (holding that in section 7 case, since showing of irreparable injury was strong, the government had to make a lesser showing of likelihood of success); United States v. Brown Shoe Co., 1956 Trade Cas. (CCH) ¶ 68,244, at 71,114-15 (E.D. Mo. 1956) (applying Hamilton Watch test). Cases in the particular circuit should be consulted to determine what standard of likelihood of success is being applied in that circuit in government section 7 cases. (ii) Confusion can result concerning the proper showing of likelihood of success necessary for a preliminary injunction in section 7 cases, because section 7 of the Clayton Act involves a prediction about the effect that mergers or acquisitions "may" have on competition. Similarly, granting a preliminary injunction involves a prediction as to the plaintiff's chances of success. Thus, the government, to obtain a preliminary injunction, needs only to show a reasonable probability that it will be able to show that competition "may be" substantially lessened. Courts, however, may incorrectly require the government to show a substantial likelihood that competition will be lessened by the proposed transaction before it can be preliminarily enjoined. See, e.g., United States v. Gimbel Bros., Inc., 202 F. Supp. 779, 780 (E.D. Wis. 1962). This improperly imposes on the government the immediate burden of proving its right to final relief. See Comment, "Preliminary Preliminary" Relief Against Anticompetitive Mergers, 82 Yale L.J. 155, 157 (1972). The standard should be whether the government is able to demonstrate a reasonable probability of a substantial lessening of competition. See Pargas, Inc. v. Empire Gas Corp., 423 F. Supp. 199, 222-223 (D. Md.) (requiring "a substantial probability of establishing that the effect of [the transaction] 'may be' substantially to lessen competition"), aff'd, 546 F.2d 25 (4th Cir. 1976). To meet its burden of showing probability of success on the merits in section 7 cases, the government must, of course, put on evidence concerning geographic and product markets. Because of time and discovery constraints, the government's additional arguments concerning likely adverse effects on competition often concentrate heavily on structural evidence of probable anticompetitive effect (the magnitude and change in Herfindahls and other factors discussed in the Horizontal Merger Guidelines) and any other evidence obtainable within the time period addressing the harm to consumers the merger is likely to cause. Under the case law, "[s]tatistics reflecting the shares of the market controlled by the industry leaders and the parties to the merger are, of course, the primary index of market power." Brown Shoe Co. v. United States, 370 U.S. 294, 322 n.38 (1962); see also United States v. General Dynamics Corp., 415 U.S. 486, 498 (1974); United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 363 (1963). The government is entitled to rely on such evidence to make a prima facie case of probable anticompetitive effect and hence illegality, see Philadelphia Nat'l Bank, 374 U.S. at 363, but the defendants are entitled to attempt a rebuttal by showing "that the market-share statistics gave an inaccurate account of the acquisitions' probable effects on competition." United States v. Citizens & Southern Nat'l Bank, 422 U.S. 86, 120 (1975); see also General Dynamics Corp., 415 U.S. at 497-504; United States v. Consolidated Foods Corp., 455 F. Supp. 108, 134-35 (E.D. Pa. 1978); United States v. Amax, Inc., 402 F. Supp. 956, 970 n.53 (D. Conn. 1975). As a result, courts routinely make findings concerning structural factors affecting competition, such as entry conditions, when preliminary relief is sought. See, e.g., FTC v. Coca-Cola Co., 641 F. Supp. 1128, 1135 & n.18 (D.D.C. 1986), vacated, 829 F.2d 191 (D.C. Cir. 1987); United States v. Calmar, Inc., 612 F. Supp. 1298, 1305-07 (D.N.J. 1985). The staff should be prepared to offer evidence on relevant structural issues in its direct case at a preliminary injunction hearing.
Historically, equity could intervene only when there was no adequate remedy at law--for example, when the alleged injury could not later be repaired by an award of damages. A showing of irreparable harm in the absence of injunctive relief demonstrated that no adequate legal remedy was available, and that equity should intervene to prevent the impending injury. See 11A Wright § 2944. Irreparable harm in modern practice is one of the factors to be weighed by the court in considering whether to grant preliminary relief. Although courts have applied the traditional equity standards of irreparable injury to private actions brought under section 7 of the Clayton Act, they have recognized that a different test is appropriate where the government seeks preliminary relief under the Act. Courts have held that where the government shows a probability of success on the merits, it need not make a separate showing of irreparable injury. See United States v. Siemens Corp., 621 F.2d at 506; United States v. Ingersoll-Rand Co., 320 F.2d 509, 524 (3d Cir. 1963); United States v. Ivaco, Inc., 704 F. Supp. 1409, 1429 (W.D. Mich. 1989); United States v. Culbro Corp., 436 F. Supp. 746, 750 (S.D.N.Y. 1977); United States v. Atlantic Richfield Co., 297 F. Supp. 1061, 1074 n.21 (S.D.N.Y. 1969), aff'd mem. sub nom. Bartlett v. United States, 401 U.S. 986 (1971); United States v. Wilson Sporting Goods Co., 288 F. Supp. 543, 567 (N.D. Ill. 1968); United States v. Pennzoil, 252 F. Supp. 962, 986 (W.D. Pa. 1965); United States v. Chrysler Corp., 232 F. Supp. 651, 657 (D.N.J. 1964); United States v. Crocker-Anglo Nat'l Bank, 223 F. Supp. 849, 850 (N.D. Cal. 1963); United States v. Brown Shoe Co., 1956 Trade Cas. ¶ 68,244, at 71,114. Indeed, the Supreme Court in dictum stated that "[i]n a Government case [under Clayton Act, section 15] the proof of the violation of law may itself establish sufficient public injury to warrant relief." California v. American Stores Co., 495 U.S. 271, 295 (1990).(6)
United States v. Ingersoll-Rand Co., 320 F.2d at 524 (citation omitted). This doctrine is sometimes characterized as dispensing with the need for the government to prove irreparable injury, but it is perhaps more accurate to say that the necessary element of irremediable harm is implied as a matter of law from the threatened violation of the statute.
United States v. Ingersoll-Rand Co., 218 F. Supp. 530, 544-45 (W.D. Pa.), aff'd, 320 F.2d 509 (3d Cir. 1963); see also United States v. Crocker-Anglo Nat'l Bank, 223 F. Supp. at 850. Several persuasive arguments can be made for not requiring a showing of irreparable harm in government cases. First, the "harm" or "injury" at issue must be defined in terms of threats to legally protected rights and interests of the parties. The government as plaintiff, at least in section 7 cases, has no private business or property interest at stake. It sues instead as sovereign to vindicate the public interest in a competitive, free-market economy; and that interest is violated and harm inflicted by definition whenever the statutory prohibition is violated. A potential violation, therefore, necessarily threatens impairment of protected interests.
United States v. Chrysler Corp., 232 F. Supp. 651, at 657 (D.N.J. 1964). That such injury is sufficiently irreparable to satisfy the traditional standard may be presumed from the intangible nature of the threatened harm; the uncertainty that the anti-competitive impact of even a temporary joinder of previously independent companies can ever, after the fact, be fully eliminated; the congressional mandate to prevent competitive injury; and the overriding importance of that policy.
United States v. Crocker-Anglo Nat'l Bank, 223 F. Supp. at 850-51.
United States v. Brown Shoe Co., 1956 Trade Cas. (CCH) ¶ 68,244, at 71,114 (E.D. Mo. 1956). And the government can show that the alternative to interim injunctive relief--that is, "unscrambling" a merger or acquisition after it has occurred--is generally not adequate to serve the public interest. The primary alternative to preliminarily enjoining consummation of the proposed acquisition is reliance on subsequent divestiture of illegally acquired stock or assets. However, even when aided by the entry of a preliminary hold-separate order, divestiture has proven to be an inadequate remedy.(7) First, in most cases the illegally acquired company cannot be (or at least is not) re-established as a viable, independent competitor. Its assets may have been scrambled or sold by the acquiring company and its key managers may have left. Second, even in apparently successful divestiture cases, there may be considerable permanent damage to the market structure due to the temporary disappearance of competition, the delay in innovation or research and development, or the transfer of trade secrets or other confidential information.(8) In addition, competition will be adversely affected during the pendency of the case, and this harm cannot be redressed post-trial. Many courts have recognized the substantial problems involved in unscrambling an accomplished merger and reconstituting the acquired company as a viable competitive entity.
United States v. Ingersoll-Rand Co., 218 F. Supp. 530, 542 (W.D. Pa.), aff'd, 320 F.2d 509 (3d Cir. 1963).
Id. at 543. In practice, it is virtually impossible to predict all potential anticompetitive effects with precision. Injury to the competitive process (as opposed to injury to particular competitors, customers, or suppliers, which may not be the same) is likely to be subtle, gradual, and often unquantifiable even after the fact. "[T]he fact that no concrete anticompetitive symptoms have occurred does not itself imply that competition has not already been affected, 'for once the two companies are united no one knows what the fate of the acquired company and its competitors would have been but for the merger.'" United States v. General Dynamics Corp., 415 U.S. 486, 505 (1974) (quoting FTC v. Consolidated Foods Corp., 380 U.S. 592, 598 (1965)). Remedial adequacy is almost entirely a matter of speculation. The essential issue is who should be forced to bear the risk of this uncertainty; the case law supports the conclusion that it should not be the public. In sum, "divestiture does not always turn out to be a feasible remedy and is never a painless one." Elco Corp. v. Microdot, Inc., 360 F. Supp. 741, 755 (D. Del. 1973). It "is usually fraught with difficulties and presents a whole range of problems which should be avoided if possible." United States v. Atlantic Richfield Co., 297 F. Supp. 1061, 1074 (S.D.N.Y. 1969), aff'd mem. sub nom. Bartlett v. United States, 401 U.S. 986 (1971);. see also FTC v. University Health, Inc., 938 F.2d 1206, 1217 n.23 (11th Cir. 1991). It is important to note that the presumption of irreparable injury is not a doctrinal innovation peculiar to the antitrust laws. The same rule is commonly applied where other important statutorily declared public policies are involved. See, e.g., Government of the Virgin Islands v. Virgin Islands Paving, Inc., 714 F.2d 283, 286 (3d Cir. 1983) (Virgin Islands statutes); United States v. Spectro Foods Corp., 544 F.2d 1175, 1181 (3d Cir. 1976) (Federal Food, Drug & Cosmetic Act); SEC v. Globus Int'l, Ltd., 320 F. Supp. 158, 160 (S.D.N.Y. 1970) (Securities Act of 1933 and Securities Exchange Act of 1934); 11A Wright § 2948.4, at 209 n.9 (collecting cases). Significant support for the presumption of irreparable injury in section 7 cases is found in the legislative history of 15 U.S.C. § 53(b), which specifically authorizes the FTC to obtain preliminary relief in merger cases. Until the 1973 amendment, the FTC had no statutory authority to obtain preliminary relief except against false or misleading food, drug, or cosmetic advertising, using 15 U.S.C. § 53(a). The only way it could gain an injunction in merger cases was by applying to the Court of Appeals pursuant to the All Writs Act (28 U.S.C. § 1651(a)) and showing that "an effective remedial order, once the merger was implemented, would otherwise be virtually impossible, thus rendering the enforcement of any final decree of divestiture futile." FTC v. Dean Foods Co., 384 U.S. 597, 605 (1966). The amended FTC statute provides that a preliminary injunction may be granted by a district court "[u]pon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest." This amendment was intended to establish essentially the "presumed irreparable injury" standard applied by the courts in section 7 cases brought by the Department of Justice.
H.R. Rep. No. 93-624, at 31 (1973), reprinted in 1973 U.S.C.C.A.N. 2417, 2533 (emphasis in original). The courts, in applying the FTC's statutory standard, have given it the liberal interpretation intended by Congress. See, e.g., FTC v. University Health, Inc., 938 F.2d 1206, 1217 (11th Cir. 1991); FTC v. Exxon Corp., 636 F.2d 1336, 1343 (D.C. Cir. 1980). In light of the concurrent jurisdiction of the Department of Justice and the FTC to enforce section 7 of the Clayton Act, the Division can make a powerful argument that the authority of the Department of Justice to seek preliminary relief under section 15 of the Clayton Act (15 U.S.C. § 25) should be interpreted in a manner consistent with 15 U.S.C. § 53(b). The distinction between the burdens of the government and private plaintiffs is also consistent with the very different language employed by Congress in those sections of the statute respectively authorizing preliminary relief for private plaintiffs and the government. Section 16 of the Clayton Act, 15 U.S.C. § 26, provides that a private plaintiff may obtain a preliminary injunction "when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity," including "a showing that the danger of irreparable loss or damage is immediate." By contrast, section 15 of the Clayton Act, 15 U.S.C. § 25, contains no standards for granting preliminary relief other than what is "deemed just in the premises."
United States v. Atlantic Richfield Co., 297 F. Supp. 1061, 1074 n.21 (S.D.N.Y. 1969), aff'd mem. sub. nom. Bartlett v. United States, 401 U.S. 986 (1971). In sum, if the Division establishes probable success on the merits, there is, by definition, a reasonable probability that the transaction will at some point in the future substantially impair competition. Having proved this much, the government should not be assigned the unrealistic burden of proving the time, manner, and irreparable nature of the harm with the precision assumed by the traditional test. Public policy considerations dictate that the probable injury be irreparable.
Even though the government has shown likelihood of success on the merits when seeking a preliminary injunction in a section 7 case, and has satisfied the "threat of irreparable injury" requirement (by virtue of the legal presumptions applicable in section 7 cases), "a court of equity [must still] balance hardships, i.e., determine whether the harm to the defendants outweighs the likelihood that adequate relief will be available to the Government if the merger is consummated." United States v. Siemens Corp., 621 F.2d 499, 506 (2d. Cir. 1980).
Id.; see also, e.g., United States v. Ingersoll-Rand Co., 320 F.2d 509, 525 (3d Cir. 1963) (stating that trial court must weigh the possibility of injury to the defendants, the effect of divestiture as opposed to injunctive relief, and the respective positions of the parties); United States v. ITT Corp., 306 F. Supp. 766, 797 n.95 (D. Conn. 1969) (holding that under Clayton Act § 15, balancing of equities "in terms of injury to the public interest if an injunction were denied, as against injury to the defendants if it were granted" becomes relevant once the government has shown probability of success). The governmental interest being weighed here is the government's interest in avoiding irreparable harm that is likely to result if the injunction is not granted. Although this harm is established by a presumption in section 7 cases, courts nonetheless need to think about the harm in concrete terms in order to weigh the equities. Certainly, the relevant harm includes the harm that will result if a divestiture needs to be carried out after a merger has been consummated. The harm also includes injury to competition caused by the merger, in the interim, before divestiture is ordered. See United States v. Siemens, 621 F.2d at 506. Courts generally give the government's interest far more weight than private claims when balancing equities in government section 7 cases. See, e.g., United States v. Siemens, 621 F.2d at 506 (private interests must be subordinated to public ones); United States v. Columbia Pictures, 507 F. Supp. 412, 434 (S.D.N.Y. 1980) (public interest in enforcement of the antitrust laws and in the preservation of competition "is not easily outweighed by private interests"); United States v. White Consol. Indus., Inc., 323 F. Supp. 1397, 1399-1400 (N.D. Ohio 1971) (balancing possible harm to the defendants against probable antitrust violations; finding "no question that national interest must take precedence"); United States v. Atlantic Richfield Co., 297 F. Supp. at 1073 (stating that defendants' claims of financial harm were "entitled to serious consideration" but "[n]evertheless, they cannot outweigh the public interest in preventing this merger from taking effect pending trial" and that "[t]he public interest with which Congress was concerned in enacting Section 7 is paramount"); United States v. Pennzoil Co., 252 F. Supp. at 986 (a showing of injury to the defendant "must be so proportionately persuasive as to submerge the principle that '[t]he status of public interest and not the requirements of private litigation measure the propriety and need for relief'") (citation omitted). But see United States v. FMC Corp., 218 F. Supp. 817, 823 (N.D. Cal.) (denying preliminary injunction because of harm to defendants), appeal dismissed, 321 F.2d 534 (9th Cir. 1963); United States v. Brown Shoe Co., 1956 Trade Cas. (CCH) ¶ 68,244, at 71,116-17 (finding government case to be weak; denying preliminary injunction because of harm to defendants; and issuing hold-separate order). Although the case law gives the government's interests far more weight in balancing equities, individual courts may nonetheless be troubled by equities urged by defendants. Injuries to persons associated with the transaction, if it is delayed, tend to be concrete, immediate, and intuitively easy for the court to appreciate. By comparison, injuries to competition are remote and abstract. The Division accordingly should attempt to "personalize" the transaction's potential anticompetitive impact, and the undesirability of divestiture or hold-separate orders. Assuming a substantial probability of success on the merits has been established, it may also be helpful to point out that the private benefits delayed or foregone flow from a transaction that is likely to be found illegal, and therefore claims of private injury should be discounted.
Courts often do not make a separate finding on public interest in government section 7 cases, since the finding is implicit in the presumption of irreparable harm, and in balancing the equities as they affect the governmental plaintiff. But see United States v. Gillette Co., 828 F. Supp. 78, 86 (D.D.C. 1993) (interests of the public are not necessarily "coextensive with the irreparable injury criterion"; where merger is not reversible, public interests favor injunction). Generally, "[a] federal statute prohibiting the threatened acts that are the subject matter of the litigation has been considered a strong factor in favor of granting a preliminary injunction." 11A Wright § 2948.4, at 207; see also United States v. First Nat'l City Bank, 379 U.S. 378, 383 (1965). Thus, a showing by the government that a merger is likely to violate section 7 should satisfy the public interest test.
Despite the widespread recognition that a government request for preliminary relief is subject to different rules than those that apply in purely private litigation, such a request remains an equity proceeding. Among the equity issues which Division attorneys should be prepared to address are the following:
The goal of preliminary relief is often described as maintenance of the status quo, to preserve the situation so that the court can exercise its jurisdiction. Courts will therefore issue preliminary injunctions to preserve the status quo. In addition, if a defendant with notice in an injunction proceeding completes the acts sought to be enjoined, the court may by mandatory injunction restore the status quo. See 11A Wright § 2948, at 133-35. Courts are sometimes reluctant to issue mandatory injunctions, requiring the defendant to take certain action, if the injunction changes the status quo, even if the injunction is necessary to preserve the court's ability to render a meaningful decision. See id. at 137-38. This reluctance has been criticized as failing to recognize that preservation of the court's ability to grant relief is the cornerstone of preliminary relief. See id. at 138 & n.17 (collecting cases where court has acted to change status quo); 11A Wright § 2948.2, at 178-84; Canal Auth. v. Callaway, 489 F.2d 567, 576 (5th Cir. 1974). In a merger case, where an order is sought prospectively to enjoin consummation, the status quo is maintained. However, if relief is sought following completion of a merger, or against continuation of a practice alleged to be illegal under the Sherman Act, it may be opposed as a mandatory injunction and a disruption of the status quo. These objections can be rebutted by showing that preliminary relief is necessary to preserve the court's power to render a meaningful decision on the merits. It may also be pointed out that the government could have phrased the request for relief as a prohibition rather a mandatory injunction, and that the form of phrasing should not control. See 11A Wright § 2948.2, at 183. It may also be possible to argue that the court is merely being asked to restore the status quo as of the "last peaceable uncontested status." 11A Wright § 2948, at 136.
Defendants sometimes argue that a preliminary injunction should be denied because the injunction would give the plaintiff all the relief it could expect after a trial on the merits. A court's reluctance to do more than is absolutely necessary at a preliminary stage is understandable. However, the fact that the plaintiff may "temporarily . . . taste the fruits of victory" should not distract the court from applying the relevant criteria; rather, the court should apply the usual analysis--that is, harm to the defendant that will result from preliminary relief, balanced against the harm to the plaintiff if the injunction is denied. 11A Wright § 2948.2, at 180-81; Developments in the Law -- Injunctions, 78 Harv. L. Rev. 994, 1058 (1965). In merger cases, this principle is often cited by defendants where an injunction might lead to abandonment of the transaction, thus giving the government a victory by default. See, e.g., United States v. Atlantic Richfield Co., 297 F. Supp. 1061, 1073 (S.D.N.Y. 1969), aff'd mem sub. nom. Bartlett v. United States, 401 U.S. 986 (1971). In addition to citing the above argument, the government in response should point out that the balance of the equities is in the government's favor because the claimed private injury is being weighed against public interests. See id. at 1073-74. In addition, it may be possible to argue that the claimed injury is within the control of the defendants, and thus not a legitimate consideration for the court. See FTC v. Rhinechem Corp., 459 F. Supp. 785, 791 (N.D. Ill. 1978).
A defendant cannot assert laches as a defense to an antitrust suit brought by the government; the Supreme Court has consistently adhered to the principle that laches is not a defense against the government acting as sovereign. See, e.g., California v. American Stores Co., 495 U.S. 271, 296 (1990)(dictum); Nevada v. United States, 463 U.S. 110, 141 (1983) (quoting Utah Power & Light Co. v. United States, 243 U.S. 389, 409 (1917)); Costello v. United States, 365 U.S. 265, 281 (1961). However, this doctrine does not extend to government delay in requesting preliminary relief. Generally, if a plaintiff delays in requesting preliminary relief, the court can consider this delay in deciding whether to afford such relief, and in choosing the type of preliminary relief to be granted. See 11A Wright § 2946, at 113-20. This rule has been applied in antitrust cases where the party requesting preliminary relief is the government. See, e.g., United States v. Acorn Eng'g Co., 1981-2 Trade Cas. (CCH) ¶ 64,197, at 73,713 n.4 (N.D. Cal. 1981); United States v. Aluminum Co. of America, 247 F. Supp. 308, 314 (E.D. Mo. 1962) (considering, but giving "little weight" to, seven month delay), aff'd, 382 U.S. 12 (1965); United States v. Columbia Pictures Corp., 169 F. Supp. 888, 896-97 (S.D.N.Y. 1959); United States v. Inter-Island Steam Nav. Co., 87 F. Supp. 1010, 1022 (D. Haw. 1950). Delay is considered relevant in balancing the equities, e.g., Alcoa, Columbia Pictures--in particular, hardship to the defendant, e.g., Acorn Engineering. Generally, explainable delays will not be held against the government. The decision to sue, and the marshaling of sufficient evidence to make a prima facie case, require more time on the part of the government than for private plaintiffs. Private plaintiffs can react to a threatened takeover immediately, without considering the merits of the case as a matter of public policy. The government is expected to, and should, make a more careful and objective determination of the desirability of challenging a merger. Moreover, unlike the usual private plaintiff, the government does not begin with an intimate knowledge of the industry and the facts surrounding the acquisition. Information gathering is essential, and while it can be done expeditiously, it cannot be done instantaneously. The desirability of allowing the government sufficient time to obtain information necessary to analyze properly the competitive effects of a transaction and adequately prepare for trial was explicitly recognized by Congress when it enacted the premerger notification and waiting period provisions of 15 U.S.C. § 18a. In fact, it was the clear congressional intent that the Antitrust Division would use the 20-day period after receipt of Second Request information "in order to analyze it and prepare a possible case based upon it." H.R. Rep. No. 94-1373, at 6 (1976). Since most actions for preliminary relief will be filed before the expiration of the Hart-Scott-Rodino waiting periods, staff can rely on the statutory framework to rebut any allegation of delay. Moreover, a policy that penalizes the government for seeking relief at the eleventh hour, without considering whether it would be realistic or desirable as a matter of policy to require an earlier decision, is itself inequitable. It would encourage the premature filing of ill-considered cases on insufficient facts -- a result justifying more significant objections from defendants and courts alike. Furthermore, given the relatively short time span between filing and the preliminary injunction hearing, and the fact that such hearings are effectively, and often formally, the ultimate trial on the merits, a contrary policy would place the government in the dilemma of choosing between inadequate discovery and preparation (as the price for seeking preliminary relief) and inadequate relief following a plenary trial on the merits. The dilemma intensifies as the legal and factual issues involved become more complex. Of course, these considerations do not justify unnecessary delay by the government, and as a matter of both policy and tactics, the staff should prepare its case as expeditiously as practicable. Whether warranted or not, many courts view with disfavor requests for emergency relief made only days before a scheduled closing when the government was aware of the merger or acquisition weeks or months in advance. Prudence and responsible prosecutorial policy dictate that if a case can be filed and a motion for preliminary relief argued well in advance of the merger, it should be done; however, given the timing of mergers under the premerger notification rules, this is rarely possible. The staff should take pains to inform the court that it has exercised due diligence and proceeded with all possible dispatch in those situations.
Speed of preparation is essential in applying for preliminary relief. When faced with an impending merger or acquisition, most efforts will, of necessity, be directed at fact gathering. Even so, staff should be fully familiar with the case law for the relevant circuit and district, with the local rules of court, and with the opinions of judges that staff will likely draw when a case is filed. Pleadings should be drafted at the earliest possible time and staff is encouraged to review previously filed briefs and pleadings relating to TROs and preliminary injunctions. These may be obtained from the FOIA unit, the Division's Work Product Document Bank, or the appropriate Special Assistant. The legal analysis set forth in this section should also be helpful in developing a quick and usable analysis of the applicable standards.
When it first appears that a request for preliminary relief may be necessary, a member of the staff should be assigned to complete any unfinished legal research and prepare pleadings and other papers. The following will commonly be required: (1) summons and verified complaint; (2) application or petition for a temporary restraining order and preliminary injunction; (3) notice of hearing; (4) a proposed restraining order; (5) brief in support; (6) supporting declarations; and (7) a certificate of service. If parties or potential witnesses cannot be served within the district or within 100 miles of the court, applications and proposed orders for service of summons or subpoenas pursuant to section 15 of the Clayton Act, 15 U.S.C. § 25, must also be prepared. Depending on the time available, staff should consider drafting additional pleadings, such as statements of issues and contentions, proposed stipulations, requests for admissions, motions in limine, and proposed findings of fact and conclusions of law. The application for a temporary restraining order and preliminary injunction can be drafted as a single document or as two separate petitions. The latter is common practice in the Division. The application(s) should state: (1) the statutory authority relied on; (2) relevant background information about the proposed transaction; (3) that the proposed transaction will occur on a given date unless restrained; (4) that a verified complaint has been filed alleging that the proposed transaction violates the relevant statute (usually section 7 of the Clayton Act); (5) that a TRO is necessary because immediate and irreparable injury, loss, and/or damage will result to the public interest before a hearing on the request for a preliminary injunction can be held; and/or that a preliminary injunction is necessary to prevent a violation of the statute and to protect the public interest; (6) that a brief and declarations have been filed in support of the motion; (7) that the defendants have been notified of the filing of the application for a temporary restraining order, and the method of notification; and (8) the nature of the relief sought. The notice of hearing on the motion for a preliminary injunction should be prepared with the dates left blank, to be filled in when a date is set down by the court after ruling on the TRO. A blank copy may be filed with the other pleadings, or the hearing may originally be noticed for a date certain, based on the local rules concerning motion practice (and the judge's motion calendar if the judge to whom the case will be or has been assigned is known). This may be done with the expectation that the judge, in issuing the TRO, will provide for an expedited hearing. A notice is unnecessary if the preliminary injunction hearing is brought on by order to show cause rather than as a motion. The staff must submit a proposed TRO. A proposed preliminary injunction will generally also be offered for filing at the same time. The proposed TRO should conform to the requirements of Rule 65(b) and (d) and, equally important, local rules and practice. It should recite: (1) the court's authority to issue the order; (2) the fact that a complaint has been filed alleging a violation of section 7 or other statute, and a preliminary injunction has been sought; (3) that the transaction, if not restrained, will occur before a hearing can be held; (4) the materials relied on to support the order (brief, declarations, etc.); (5) the facts and conclusions justifying issuance of the order, defining the injury and stating why it is immediate and irreparable (and, if granted without notice, stating why the order was granted without notice);(9) and (6) the operative terms of the proposed order, describing in reasonable detail the act(s) sought to be restrained. The order should contain a place for indorsement of the date and hour of issuance, as well as the place of issuance. It should be directed at the defendants and, tracking the language of Rule 65, "their officers, agents, servants, employees, and attorneys" and "persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise." It should specify the date of the preliminary injunction hearing, and the duration of the order, with provision for renewal. The lead attorney's declaration in support of the TRO should verify the complaint, identify and authenticate important documents (which should be attached to the declaration) and other exhibits (such as declarations and depositions), detail the notice given to the defendants of the application for a restraining order, and comply with any other procedural requirements (e.g., a statement that no similar relief has been previously requested). The declaration should also explain the sequence of events leading up to the filing of the case in order to demonstrate due diligence and lack of unnecessary delay in seeking relief. See supra Chapter IV, Section B.2.e(iii). An economist should be prepared to testify at the initial hearing. Staff should carefully consider whether the testifying economist should prepare a declaration setting forth the economic analysis of the proposed transaction. In each case, it is necessary to weigh the advantages and disadvantages of supplying an economist's declaration. Every effort should be made to obtain supporting declarations from third parties (unless witnesses will testify at a hearing, in which case staff should consider whether declarations are appropriate). Some courts require a great deal of evidence before granting a TRO. Other courts will hear TROs and PIs on the original papers filed and will not ordinarily conduct an evidentiary hearing. It is better to err on the side of too much evidence rather than too little at this stage. If there is time during the investigation, the taking of CID depositions is useful since their evidentiary value usually is superior to that of declarations. They are virtually the only means of getting admissions from the defendants at this stage, and they help to bind the defendants to their testimony. Before beginning to draft the necessary papers, the staff should closely examine the local rules of the district where the action will be filed. It is good practice to provide a copy of the local rules to every member of the staff. Second, the staff should contact the local Division field office and U.S. Attorney's office(10) and arrange to have a liaison person assigned to the case, who should be consulted on all questions of form and procedure. This person can give advice on district customs and practices, which can greatly affect the manner in which the papers are drawn and the matter presented for hearing. The local attorney will be familiar with how the hearing will be conducted and can help the staff tailor its case to the concerns and style of the court. It is often helpful for the liaison person to accompany the staff to court. Finally, a local attorney (e.g., the liaison attorney) should be designated for service of papers. Although most defendants will serve their papers on the trial staff, this cannot always be assured. In addition, delays may result if the district court serves orders and notices directed to the United States only on the local U.S. Attorney's office. The staff should make arrangements for speedy notification and transmission of papers served on a local office, preferably by having them routed directly to the designated local attorney, rather than to the U.S. Attorney. The logistical problems involved are significant when the case is filed in a distant forum. Someone in the staff's section, task force, or field office should arrange for travel and hotel reservations. Procedures should also be worked out for temporary offices and document storage, computer support including connections to the LAN, telephone lines, and duplicating machines (preferably exclusively for staff use) at all hours, and for local secretaries on an emergency basis. See Division Directive ATR-2510.4, "Administrative Support for Remote Trial Staffs" (describing procedures); see also Antitrust Division, Civil Litigation Manual (1996) (Tab G, Exhibit 4) (providing additional procedures and tips). If the U.S. Attorney's office or Division field office has an office manager or administrative assistant, it will be important to develop a good working relationship with that person. The staff should also keep the field office Chief or U.S. Attorney informed of the progress of the case.
The usual procedure where a TRO is sought begins with filing the complaint and accompanying papers in the Clerk's office, with service on the defendants. The application for a temporary restraining order will then be presented to the judge assigned to the case. The court may or may not wish to receive copies of pleadings filed with the Clerk's office. Defendants commonly appear in opposition to TRO's sought by the Division. The proceedings may be conducted in open court or in chambers. The parties have the right to insist that proceedings be on the record. If the judge to whom the case is assigned is unavailable, the application can be presented to the miscellaneous or emergency judge. The procedure will obviously be different if the case is filed sufficiently far in advance of the proposed transaction to permit the application for a preliminary injunction to be brought on as a regular motion. Given the usual time constraints, however, this is rarely possible unless the defendants voluntarily agree to postpone the transaction pending the outcome of a preliminary injunction hearing. Another variation (primarily in the paperwork, not the procedure) will occur if the preferred practice in the district is for the TRO to include an order to show cause why a preliminary injunction should not be issued. Whether this is the practice should be determined well in advance. Given the heavy dockets of most courts, the court usually will urge the parties to agree to a date, often four to six weeks in the future, for a PI hearing, and will urge them to agree to a discovery plan. In other cases, the court will put the matter down for hearing within a matter of days. Staff cannot rely on any significant period of time between the granting of a TRO and the beginning of a PI hearing. Further, trial on the merits may be consolidated with the preliminary injunction hearing; although such a hearing will almost always be after a period of discovery it may be more abbreviated than discovery in a normal civil case. In short, staff should pursue intensive pre-filing discovery aimed at meeting a preliminary injunction standard and should be prepared to move aggressively after filing to obtain full discovery for a trial on the merits. On occasion, courts have scheduled the trial on the merits only a few weeks after the complaint was filed. Any such proposed schedule should be vigorously contested when it would likely prejudice the ability of the United States to obtain necessary discovery or fairly present its case at trial. Staff should impress upon reluctant affiants or deponents, for example, that if they do not come forward at this stage, there may be no second chance. Note also that the importance of the pre-filing investigation makes document control, as well as adequate staffing, exceedingly important. One person should be assigned the task of document control, and should be responsible for organizing and transporting documents for use at the hearing. One attorney should be assigned early to work with the testifying economist to prepare for a hearing. There are strong pressures on all parties, including the judge, to complete the hearing as quickly as possible. Many judges will set strict limits on how much time each party has to present its case. Even when time limits have not been set, the staff should not test the limits of either the permissible duration of a TRO hearing or the judge's patience, and in view of the fact that the government is insisting by the very act of seeking preliminary relief that the matter is urgent, it is incumbent on the trial staff to pare and streamline its case ruthlessly. Indulging the usual luxury of putting into evidence every scrap of possibly relevant evidence will quickly alienate most judges. Having substantially interfered with the proposed transaction at our behest, the judge will expect, as a minimum quid pro quo, an expeditious presentation of the government's case. The court will likely insist that the parties stipulate to as many facts as possible, and if the court does not do so, the trial staff should consider taking the initiative and offering proposed stipulations or filing requests for admission. The original declarations presented with the TRO application can be considered by the court in deciding whether to issue a preliminary injunction. Under extreme time pressures, to expedite the presentation of evidence, it may be possible at the outset of their testimony for witnesses to adopt their declarations, either those given previously and submitted with the TRO application or those prepared especially for the preliminary injunction hearing (and served on the defendants in advance of the hearing). This still permits cross-examination on the subject matter of the declarations, but it economizes on trial time. The same practice may be followed for depositions. The sometimes awesome speed of the procedure, at least as measured in antitrust terms, can be both advantageous and disadvantageous to the government. On the one hand, the fast pace helps the plaintiff maintain the initiative. On the other hand, where essential data has been difficult to obtain and areas of the case require additional discovery, the fast pace works to the defendants' advantage. Where the needed information has been withheld by the defendants, there is a strong case for conditioning a speedy hearing on an equally speedy disclosure by defendants of the information. A similar case may be made where the government has proceeded with all due diligence but has been unable to discover essential facts. Where appropriate, a motion to compel discovery or compliance with the premerger notification rules (where the response has been inadequate and the Division maintains that the parties are not in substantial compliance) on an expedited basis might accompany the request for a TRO. In deciding whether to recommend that the Division seek preliminary relief, the staff should consider: (1) the strength and complexity of our case on the merits; (2) the magnitude of the probable injury to competition from the merger or acquisition, how quickly it is likely to occur, and the extent to which, absent preliminary relief, it can be reversed or forestalled after a trial on the merits (including the practicability and efficacy of divestiture); (3) the amount of harm to public and private interests that the defendants will be able to claim; (4) how far advanced preparation of the case will be at the time of filing; and (5) any special problems or advantages (logistical considerations, the necessity for an unusual form of relief, such as a mandatory injunction upsetting the current status quo, etc.). As a general rule in section 7 cases, the presumption will be in favor of seeking preliminary relief, given the fact that, in its absence, final relief is almost certain to be less effective than if some form of interlocutory injunction had been entered. Preliminary relief also provides the defendants and the court with a powerful incentive to try the case expeditiously, while, without it, the incentives, at least for defendants, will favor delay.
A more difficult decision concerns the type of preliminary relief to be requested. In the usual section 7 case the choices are essentially three: to seek a complete prohibition of the merger or acquisition, contending that a hold-separate order would be inadequate; to seek a complete prohibition but also, in the alternative, a hold-separate order; or to recognize that a total prohibition is unnecessary or unlikely to be obtained and request only some form of hold-separate order. Although hold-separate orders are often distinguished from preliminary injunctions, i.e., absolute prohibitions on consummation of the acquisition or merger, they are in fact merely a species of preliminary injunction. Tactically, the decision as to the type of relief requested is extremely important because the courts tend to seek a middle ground. If the government implies that a hold-separate order may be adequate, the chances of obtaining a complete prohibition on consummation of the transaction are greatly reduced. On the other hand, if the government refuses to admit that a hold-separate order could be adequate relief when this is true, even as a less desirable alternative, it may be faced with an inadequate order drawn by a judge who has been given little help in its formulation, or the complete denial of relief by a judge who might have been willing to issue a hold-separate order. Nonetheless, where preliminary relief is sought in section 7 cases, the Division generally seeks to prohibit consummation of the proposed merger or acquisition. The Division generally opposes hold-separate orders for the following reasons: (1) divestiture, which will be necessary if the Division prevails on the merits after a hold-separate order is entered, is often difficult to accomplish; (2) under a hold-separate order, there will often be an interim loss of competition because the two firms have limited incentives to compete against each other while under common ownership; (3) even under a hold-separate order, it is difficult to prevent the acquiring firm from obtaining confidential information from the acquired firm; and (4) under a hold-separate order, acquired firms typically become progressively weaker as time passes, making it less likely that competition will be fully restored even if the Division ultimately prevails on the merits. The case law supports the Division's position that hold-separate orders are usually inadequate. FTC v. PPG Indus., Inc., 798 F.2d 1500, 1506-09 (D.C. Cir. 1986) (Bork, J.); United States v. Wilson Sporting Goods Co., 288 F. Supp. 543, 569 (N.D. Ill. 1968). But see FTC v. Weyerhaeuser Co., 665 F.2d 1072 (D.C. Cir. 1981) (upholding order in circumstances). If the government decides that it must seek a prohibition of the proposed transaction rather than a hold-separate order, the staff can argue, by analogy to cases interpreting section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b), that a hold-separate order is appropriate in lieu of enjoining the acquisition only if "significant equities favor the transaction and the less drastic restraint of a hold separate order realistically can be expected (a) to safeguard adequate eventual relief if the merger is ultimately found unlawful, and (b) to check interim anticompetitive harm." FTC v. Weyerhaeuser Co., 665 F.2d at 1085 (emphasis in original). In making this determination, the district court should recognize that a showing by the government that it is likely to succeed on the merits creates a presumption that the acquisition should be enjoined. See FTC v. PPG Indus., 798 F.2d at 1506-1508. Finally, while private equities can be considered, private equities alone are insufficient to justify entry of a hold-separate order. See id. at 1506. * * * This section on obtaining preliminary relief should aid the staff in determining the legal requirements for obtaining a TRO or preliminary injunction. The practical suggestions advanced are intended to provide a checklist of necessary items at the time of filing the papers and arguing the matter. Because time is short, preparation of all materials prior to the proceeding is essential. C. Discovery Under the Federal Rules of Civil Procedure After the filing of the complaint, discovery should begin at the earliest time possible. Pretrial discovery will typically proceed at a faster pace in a merger case than it will in a non-merger civil case. With the investigatory powers available to the Antitrust Division under the amendments to the Antitrust Civil Process Act and the premerger notification procedures established by the Antitrust Improvements Act of 1976, the Division has substantial pre-filing investigatory tools to develop its case during the investigation.(11) While these tools are of great assistance in developing the case, discovery is still a necessary element in case development. To expedite the case, Antitrust Division staffs should use the pre-trial discovery procedures chiefly to isolate and narrow the issues of the litigation. This does not limit the use of pre-trial discovery tools in civil litigation, but it will focus their use. Consulting the language of the most recent cases can help staff better formulate requests for admissions, interrogatories, and deposition questions. The discovery provisions of the Federal Rules of Civil Procedure were substantially revised in 1993. For example, the revisions imposed limits on the number of depositions and interrogatories and established a procedure for parties to meet and prepare a discovery plan for presentation to the court. Each federal district court has the option to accept all, part or none of the new rules. It is essential that the staff consult with the local U.S. Attorney's office regarding the extent to which the court in the district in which the case is filed has adopted the 1993 amendments. The staff should obtain a copy of the local rules prior to filing the case and inquire of the U.S. Attorney's office if there are accepted practices and procedures in the district that may not be reflected in the local rules or in general orders issued by the court.
Absent agreement, court order, or local rule, no discovery may be commenced until the parties meet to develop a discovery plan. See Fed. R. Civ. P. 26(d), (f). The meeting must be held at least 14 days prior to the first scheduling conference or due date specified in the court's scheduling order. See Fed. R. Civ. P. 16(b).(12) Form 35 is provided for the proposed discovery plan. The subjects to be addressed in the discovery plan include subjects of discovery; changes in the timing, form, or requirement for Rule 26(a) disclosures; timing of discovery; limits on interrogatories, requests for admissions, and depositions; limits on the duration of depositions; the schedule for disclosure of expert witnesses; time intervals for supplementation of discovery; whether parties need a conference with the court before entry of a scheduling order; proposed dates for pretrial conferences; proposed dates for filing dispositive motions; and prospects for settlement. See Fed. R. Civ. P. 26(f); Form 35. The proposed discovery plan must be submitted to the court within 10 days after the meeting. In formulating the initial scheduling order, the court is to consider the proposed discovery plan. The Federal Rules of Civil Procedure also provide that within 10 days after the parties meet to develop a discovery plan, and without waiting for a discovery request, each party must disclose certain information "relevant to disputed facts alleged with particularity in the pleadings." Fed. R. Civ. P. 26(a)(1). This requirement may be suspended by stipulation, court order, or local rule. The required disclosures include the name, address, and telephone numbers of individuals likely to have the information and copies or descriptions by category of documents containing such information. The initial disclosure must be based on information "reasonably available" to the disclosing party, and a party "is not excused from making the disclosures because it has not fully completed its investigation of the case." Fed. R. Civ. P. 26(a)(1). It is anticipated that supplementation of disclosure information may be required. Rule 29 provides that the parties may by written stipulation modify any of the discovery limits imposed by the rules without leave of the court, unless the court orders otherwise. However, any stipulations extending time for discovery responses cannot interfere with the times set by the court for completion of discovery, hearing of motions, or trial. Consistent with the scheduling order the staff may obtain, or be asked to provide, discovery through the use of interrogatories, requests to produce documentary materials, requests for admissions, and depositions. The following is a brief description of some practical considerations that might arise during the discovery period.
Depositions are often the most useful means of conducting pre-trial discovery. If properly employed, depositions can narrow the issues of the case, expedite agreements and stipulations between the parties, authenticate documents, and shorten the amount of trial time required for the case. This section is not intended as a comprehensive review of the legal principles applicable to, or techniques for, conducting depositions, because there are many valuable texts on these subjects. See 8 Charles Alan Wright et al., Federal Practice & Procedure: Civil 2d §§ 2001 et seq. (2d ed. 1994) ("Wright"); 6 James Wm. Moore, Moore's Federal Practice (3d ed. 1997) ("Moore's"). This section is intended only to suggest general methods and practices that have been used successfully by Division attorneys in the past.
During the preparation for and taking of depositions, staff should be familiar with Rules 26 to 32 of the Federal Rules of Civil Procedure, as well as the sanctions provisions of Rule 37 and the evidentiary and subpoena provisions of Rules 43 and 45, respectively. Staff should consult the relevant sections of such texts as Wright and Moore's in determining how to prepare and conduct depositions. Absent leave of the court, agreement of the parties, or a differing local rule, no more than 10 depositions per side may be noticed. See Fed. R. Civ. P. 30(a)(2)(A), 31(a)(2)(A).(13) No person may be deposed more than once without leave of the court or agreement of the parties. See Fed. R. Civ. P. 30(a)(2)(B), 31(a)(2)(B). No deposition may be taken before the initial discovery meeting unless the deponent is expected to leave the country and be unavailable for examination. See Fed. R. Civ. P. 30(a)(2)(C).
Under Rule 26, depositions may be taken for use as evidence at trial or for discovery. As a discovery tool, a deposition may be used to find facts that relate to the claim or a defense of a party taking the deposition. Depositions of party opponents, and in some circumstances, of non-party witnesses, may be admissible as substantive evidence at trial. See Fed. R. Evid. 801(d)(2), 804(b)(1). Under certain circumstances, it may be advisable to take the depositions of witnesses who reside more than 100 miles from the place of the trial because the court, in its discretion, may refuse to issue trial subpoenas to witnesses residing that distance from the place of trial.(14) The staff should ascertain whether there is any possibility that the court might refuse to issue trial subpoenas for distant witnesses and may, out of an abundance of caution, find the deposition procedure to be the best available means of obtaining and preserving the testimony for possible trial use. While a witness may be more effective presenting his or her testimony live at trial, circumstances peculiar to the witness may make it necessary or advisable to obtain the witness's testimony through deposition even if the court would issue a subpoena. The deposition of any witness may be used for impeachment purposes at trial. See infra Chapter IV, Section C.2.k (describing other procedures involving the use of depositions as evidence at trial). Under Rule 26, any party may take the testimony of any person, including a party, by deposition. This includes corporations, partnerships, and other associations, as well as individuals. Rule 30(b) provides that reasonable notice of the taking of the deposition be given to every other party. The notice must set forth the time and place of the taking of the deposition, the name and address of each person to be examined, if known, or, if the name is not known, a general description to identify the particular class or group of persons to which he or she belongs. A notice and accompanying subpoena may name as a deponent a corporation, partnership, association or government agency and describe with reasonable particularity the matters upon which examination is requested. The organization must then designate one or more of its officers, directors, or managing agents or other persons to testify on its behalf about the matters stated in the notice and subpoena. A subpoena to a non-party corporation, partnership, association or governmental entity must advise that party of a duty to make such a delegation. See Fed. R. Civ. P. 30(b)(6). Under § 13 of the Clayton Act, the court may grant a motion for nationwide service of process in antitrust cases brought by |