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Houck v. Folding Carton Administration Committee

decided: August 9, 1989.

PAUL HOUCK, ON BEHALF OF THE UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT,
v.
FOLDING CARTON ADMINISTRATION COMMITTEE, ET AL., DEFENDANTS-APPELLEES. IN RE FOLDING CARTON ANTITRUST LITIGATION; APPEAL OF: UNITED STATES OF AMERICA



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 87 C 1253-Charles R. Norgle, Judge. Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. MDL 250-Hubert L. Will, Judge.

Wood, Jr., Cudahy, and Kanne, Circuit Judges.

Author: Wood

WOOD, JR., Circuit Judge

Two related cases, but cases with different issues, were consolidated for this appeal, and heard on November 8, 1988. Subsequently, two members of the original panel disqualified themselves and a new panel was constituted to rehear the arguments.

I.

IN RE: FOLDING CARTON ANTITRUST LITIGATION APPEAL OF: UNITED STATES OF AMERICA.

A. MOTION TO CHANGE TITLE AND DESIGNATION

As a preliminary matter, we address a Motion to Change Title and Designation filed by the Folding Carton Administration Committee ("Administration Committee"). On November 10, 1988, after the original oral argument in this case, the Administration Committee filed a motion that included the following:

At the direction of the District Court, the members of the Administration Committee appointed by Judges Robson and Will to assist them in the processing of this complex antitrust case (MDL 250) and to represent them in this Court and in the United States Supreme Court respectfully move that the title of this case be changed to United States, Petitioner, v. Judge Hubert L. Will, Respondent, and the case be correctly designated as a mandamus proceeding by the United States against Judge Will, seeking an order from this Court commanding him to vacate the settlement agreement which Judge Robson and he approved on March 28, 1985 and to recover the funds distributed thereafter and pursuant thereto to some 2500 class members and two law schools.

No change, however, was made in the designation or title of this case while it remained in the district court. The United States responded, in effect, that the mandamus was at least one way this court could enforce its 1984 mandate. Arguably this matter could be regarded as a mandamus action. It had been requested that Judge Will be permitted an opportunity to respond if this matter is to be treated as one calling for a writ of mandamus. Even if this case now be labelled a mandamus, or left as it is, the basic issues remain the same. Those issues have been thoroughly briefed, and fully argued twice. There is nothing further to be said on either side. Therefore, the motion is denied.

B. BACKGROUND SUMMARY

This appeal, the second, grows out of efforts to conclude the settlement of record-breaking civil antitrust litigation involving an alleged nationwide price-fixing conspiracy among manufacturers of folding cartons in violation of the Sherman Act (15 U.S.C. §§ 1-7).*fn1 Those efforts generated problems. The problem still remaining, although usually not considered a problem, arises because the original anti-trust settlement of about $200,000,000 produced approximately $6,000,000 in excess of known claims and costs. This extra money was designated as the Reserve Fund. The Administration Committee was appointed to make fee recommendations and to assist in handling claims. Later the Administration Committee was used to explore solutions for disposition of the funds remaining in the Reserve Fund. The Reserve Fund was to be held for potential late claims and other contingencies in accordance with the district court's order of March 6, 1980. In 1982, after a few additional late claims and expenses had been paid, the Administration Committee recommended to the district court that the balance of the Reserve Fund, still approximately $6,000,000 because of favorable interest, be used to establish a private "Antitrust Development and Research Foundation" to promote the study of complex litigation and various substantive and procedural aspects of antitrust law. Various class members and defendants objected to this idea. The objecting motions were denied, and the first appeal to this court followed.

The opinion resulting from that first appeal, In Re Folding Carton Antitrust Litigation, 744 F.2d 1252 (7th Cir. 1984) (Folding Carton I), precipitated the subsequent events. Judge Cummings, then the Chief Judge, wrote the majority opinion joined by Judge Eschbach, with Judge Flaum concurring in part and dissenting in part. It is necessary to see exactly what that opinion held in order to understand this subsequent appeal.

In Folding Carton I this court affirmed the district courts 1983 opinion holding that neither the plaintiff class nor the settling defendants had any further claim to the Reserve Fund. Further, this court affirmed that it was appropriate for the district court to consider use of the cy pres doctrine to achieve an equitable disposition of the Reserve Fund. This court, however, made it clear, very clear, that it was inappropriate for the district court to utilize the Reserve Fund to establish the proposed "Antitrust Development and Research Foundation." That proposal was described as "carrying coals to Newcastle." Numerous other organizations, governmental and nongovernmental, had already preempted the antitrust area for continuing research and study. Creation of the antitrust foundation was also found to be "a miscarriage of justice and an abuse of discretion." In lieu thereof this court "directed" that the remainder of the Reserve Fund escheat to the United States under 28 U.S.C. §§ 2041 and 2042.*fn2 Those sections were analyzed and it was held that the statutory terms for federal escheat had been sufficiently satisfied, at least in "spirit." It was provided, however, that any entitled late claimant could still recover from the United States after the escheat.

Judge Flaum, concurring in part and dissenting in part, fully agreed that the unclaimed portion of the Reserve Fund should not be used to fund the proposed antitrust foundation, but he disagreed that the unclaimed fund could "escheat" to the United States as provided by the majority, 744 F.2d at 1256. In his view it was traditional for unclaimed property to escheat to the states, not the United States. 744 F.2d at 1258. A petition for rehearing was denied, but an additional order was entered supplementing the opinion and reaffirming the majority's direction that the balance of the Reserve Fund escheat to the United States under 28 U.S.C. §§ 2041 and 2042. 744 F.2d at 1260. The question of whether or not "title" to the Reserve Fund by reason of the escheat would vest in the United States was specifically noted as being left unresolved lest it be considered "advisory." It was held in the supplemental order, however, that escheat in this statutory context was not used in the same sense as escheat to the states. 744 F.2d at 1260. There was no remand. Judge Flaum joined in the denial of the petition for rehearing but did not subscribe to the reasoning of the supplemental order. This court showed no interest in the ensuing en banc petition and denied a motion to stay the issuance of its mandate.

Thereafter some parties, including the two district judges themselves, Judges Robson and Will, filed their own certiorari petitions in the Supreme Court as well as a petition for a writ of mandamus. The grounds stated for the issuance of the mandamus writ were that the action of the appellate court contravened the sound exercise of appellate jurisdiction when this court substituted it findings and discretion for that of the district court, and further, that the interpretation of the escheat was a serious error of law. That is where this new litigation chapter begins.

C. THE NEW SETTLEMENT

While those petitions were pending in the Supreme Court the parties began working out a settlement to dispose of the excess funds that was not in keeping with the mandate of this court. After providing for late claims, that settlement proposal provided that the funds remaining after the expiration of the deadline for late claims would be divided equally between (1) a pro rata distribution to all previously paid class members, and (2) two or more Chicago-area law schools for the purpose of funding research projects involving enforcement of the antitrust laws, management of complex litigation, and assistance to needy students. The new settlement proposal provided for the solicitation and receipt of law school application for a share of the funds.

Before that proposed settlement was constructed in final form, however, and recognizing that this court had given the Reserve Fund to the United States by statutory escheat, a directive unpopular with the district judge and the parties, the Administration Committee endeavored to determine the position of the United States Attorney's office in Chicago in regard to that interest. That office was contacted by telephone on December 17, 1984, by a member of the Committee and advised of the Committee's desire to discuss with the government some possible resolution of the litigation. This was followed the next day by a letter confirming the prior telephone conversation and enclosing copies of the opinions of this court and the district court. Later, in February 1985, the United States Attorney's office was again advised that a stipulated settlement was being discussed. Another telephone contact was made with the Chief of the Civil Division of the United States Attorney's office by another attorney for plaintiff class. That attorney forwarded to the United States Attorney's office a copy of the proposed stipulated settlement and gave notice that it would be presented to the court at a hearing set in March 1985. At that March hearing no one appeared on behalf of the United States, and consequently the hearing was continued by Judge Will. Thereafter, a plaintiff class attorney met personally with the Chief of the United States Attorney's Civil Division. The proposed settlement was discussed. It was thereafter reported by the class attorney to Judge Will that the government had no objection to the ...


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