Attorney General PALMER. Well, certainly that was the practical thing to do. We submitted what we would insist upon as the decree, and when they finally came to us and said they would go along with our proposed form of decree, then we filed the bill, and they filed their answer, and the decree was presented to the court.

Mr. ANDERSON. I assume it is a generally accepted principle of law that an injunction must be based upon a violation of some law of the country. The court specifically recites that the defendants

Has consented and do consent to the making and entry of the decree about to be entered without any findings of fact, upon condition that their consents to the entry of said decree shall not constitute or be considered an admission, and the rendition or entry of said decree, or the decree itself, shall not constitute or be considered an adjudication that the defendants or any of them have in fact violated any law of the United States.

That seems to be a denial of the existence of the jurisdictional fact in the case, which is the violation of a law of the United States.

Attorney General PALMER. Oh, no, sir; you may enjoin the future violation of a law without any violation of the law having been committed before the injunction is issued. I will not stop to argue that with you.

Mr. ANDERSON. But there does not appear to be any finding of present violation of law.

Attorney General PALMER. It does not matter. They are enjoined from violating it.

Mr. ANDERSON. Is there any precedent for the filing of a decree of this kind, a consent decree, under the Sherman Antitrust Law, which recites on its face that there has been no violation of the law?

Attorney General PALMER. Yes, sir; there is precedent for that. Mr. ANDERSON. Would you be good enough to have some of your assistants file the precedents with the committee?

Attorney General PALMER. I can do that; yes, sir. There is plenty of precedent for it.

(The matter referred to follows:)

PRECEDENT FOR CONSENT DECREE.

There are many antitrust cases in which consent decrees have been entered and many of them did not contain a finding of the facts. To attempt to enumerate all of them would be quite a difficult job and would serve no useful purpose. However, attention may be called to the following cases in which consent decrees were entered under the antitrust laws and in most of which there were no finding of facts:

United States v. Central-West Publishing Co., in the District Court for the Northern District of Illinois, on August 3, 1912.

United States v. American Thread Co., in the District Court of the United States for the District of New Jersey, on June 2, 1914.

United States v. General Electric Co., in the Circuit Court of the United States for the Northern District of Ohio, eastern division, on October 12, 1911.

United States v. American Coal Products Co., in the District Court of the United States for the Southern District of New York, on March 4, 1913.

United States v. Aluminum Co. of America, in the United States District Court, Western District of Pennsylvania, on June 7, 1912.

United States v. Burroughs Adding Machine Co., in the District Court of the United States for the Eastern District of Michigan, southern division, on March 3, 1913.

United States v. Southern Wholesale Grocers' Association, in the Circuit Court of the United States for the Northern District of Alabama, on October 17, 1911, which decree was subsequently involved in the contempt proceedings which are reported in 207 Fed. at 434.

United States v. Pacific Coast Plumbing Supply Association, in the Circuit Court of the United States for the Southern District of California, southern division, on January 6, 1912.

United States v. Philadelphia Jobbing Confectioners' Association, in the Eastern District of Pennsylvania, on February 26, 1913.

It is general law that parties to an action or suit may adjust matters between themselves and have a judgment or decree entered by consent which is valid and binding as between them and their privies, and not to be impeached in the absence of fraud in obtaining it.

Thus, in Pacific Railroad Co. v. Ketchum (101 U. S., 289–297), the court laid down the proposition in the following manner:

"Parties to a suit have the right to agree to anything they please in reference to the subject matter of their litigation, and the court, when applied to, will ordinarily give effect to their agreement, if it comes within the general scope of the case made by the pleadings. It was within the power of the parties to this suit to agree that a decree might be entered for a sale of the mortgaged property without any specific finding of the amount due on account of the mortgage debt or without giving a deed of payment. It was also competent for them to agree that if the property was bought at the sale by or for the bondholders, payment of the purchase money might be made by a surrender of the bonds. And so of all the other provisions of the decree which are complained of. All these were matters about which the parties might properly agree; and having agreed, it does not lie with them to complain of what the court has done to give effect to their agreement. Although this appeal may have been instigated by the stockholders in opposition to the wishes of the directors, it is still the appeal of the company which was one of the parties to the agreement and must be treated accordingly." This pronouncement was followed in United States v. Babbitt (104 U. S., 767): "But the record shows that, after the decision was announced, a pro forma judgment was rendered, with the consent of the Attorney General, in favor of the claimant. This is stated in the judgment to have been done because the case was one of a class, and the claimant, if judgment should be given against him, could not appeal. In Pacific Railroad Co. v. Ketchum (101 U. S., 289) we decided that when a decree was rendered by consent no errors would be considered here on an appeal which were in law waived by such consent. In our opinion this case comes within that rule. The consent to the judgment below was in law a waiver of the error now complained of." A judgment so entered is binding upon the privies of the parties, and this rule is repeated in two of the leading cases on the subject of consent decrees and judgments. The first of these is Burges v. Seligman (107 U. S., 20), in which a judgment had been entered against a railroad corporation by consent, with a stipulation that the corporation should be entitled to a credit of the amount which had been paid by the railroad company to subcontractors of the plaintiff. No credits, however, were claimed, and the action was brought to recover the full amount of the judgment. It was contended by the defendants that this judgment does not establish any debt due to the palintiff. In commenting on this contention the court said (p. 26):

"But we think that the objection is not sound. The judgment, as against the corporation and its privies, does establish the debt named therein as due to the plaintiff, but subject to a defeasance for such an amount as might be shown to have been paid to subcontractors and laborers by the corporation. The defendants, as well as the corporation, were at liberty to show any credits which, by the stipulation, were properly applicable in reduction of the amount of the judgment. Until such credits were shown, the judgment stood valid for the whole amount. It was not for the plaintiff, but for the defendants, to show that no such credits existed."

The other leading case is Thompson v. Maxwell (95 U. S. 391), wherein it was held that the parties and privies to a consent decree can not set aside or reverse it by a bill of review. The court in commenting upon the nature of such a decree said:

"A decree for carrying out a settlement and compromise of a suit is certainly not, of itself, erroneous. When made by consent, it is presumed to be made in view of the existing facts, and that these were in the knowledge of the parties. In the absence of fraud in obtaining it, such a decree can not be impeached."

The latter case was approved in Harding v. Harding (198 U. S. 335), wherein the general rule was applied that

A decree in equity by consent and upon a compromise of parties bars a subsequent suit upon a claim set forth as among the matters settled although not in fact litigated in the suit in which the decree was rendered.

In Harding v. Harding, supra, it was held that a consent decree for separate maintenance in an Illinois suit is res adjudicata on the question of desertion, and that the wife was living apart from her husband without her fault. The court, in considering how far such a decree would be binding, reviewed several authorities which are apparent exceptions to the general rule.

"But if it be considered that in any aspect the decree under review was a consent decree, we are of the opinion that the cases relied upon by the Supreme Court of California, Wadhams v. Gay (73 Ill. 417); Farwell v. Great Western Tel. Co. (161 Ill.

522), are not authoritative upon the proposition that such decree would not in the courts of Illinois have the effect of res adjudicata. The first of the cases-considered by this court in Gay v. Parpart (106 U. S. 689 et seq)-outlined merely the right of a court of equity to refuse to lend its aid to enforce an incomplete and ineffective decree in partition proceedings because to do so would be inequitable. In the second of the cases it was but decided that a fraudulent decree might be set aside in a court of equity. "The general rule in Illinois undoubtedly is that a consent decree has the same force and effect as a decree in invitum. (Knobloch v. Mueller, 123 Ill., 554; O'Connell v. Chicago Terminal R. R., 184 Ill., 308, 325.) Thus, in Knobloch v. Mueller, the court said (123 Ill., 565):

"Decrees of courts of chancery in respect to matters within their jurisdiction are as binding and conclusive upon the parties and their privies as are judgments at law; and a decree by consent in an amicable suit has been held to have an additional claim to be considered final. (Allesen v. Stark, 9 Adol. & E., 255.) Decrees so entered by consent can not be reversed, set aside, or impeached by bill of review or bill in the nature of a bill of review except for fraud, unless it be shown that the consent was not, in fact, given or something was inserted as by consent that was not consented to. (2 Daniell Ch. Pr.. 1576; Webb v. Webb, 3 Swanst, 658; Thompson v. Maxwell, 95 U. S., 391; Armstrong . Cooper, 11 Ill., 540; Cronk . Traubbe, 66 Ill., 432; Haas v. Chicago Building Society, 80 Ìl!., 248; Atkinson v. Mauks, 1 Cow., 693; Winchester v. Winchester, 121 Mass., 127; Allesen v. Stark, 9 Adol. & E., 225; Earl of Hopetoun 7. Ramsay, 5 Bell's App. Cas., 69.) See also note to Duchess of Kingston's case (2 Smith Lead. Cas.. 826, et seq.). It is the general doctrine that such a decree is not reversible upon an appeal or writ of error or by bill of review for error. strong v. Cooper, 11 Ill., 540.)"

(Arm

The strongest case on the subject is Nashville R. R. Co. v. United States (113 U. S., 261), wherein it was squarely decided that a decree in equity by consent of parties is a bar to a subsequent suit upon a claim included therein although in fact not litigated.

But the insurmountable difficulty is that the former decree appears upon its face to have been rendered by consent of the parties, and can not therefore be reversed even on appeal. Courts of chancery generally held that from a decree by consent no appeal lies. (2 Den. Ch. Proct., ch. 32, sec. 1; French v. Shotwell, 5 Johns, ch. 555; Winchester v. Winchester, 121 Mass.. 127. Although that rule does not prevail in this court under the terms of the act of Congress regulating its jurisdiction, yet a decree which appears by the record to have been rendered by consent is always affirmed without considering the merits of the cause. A fortiori neither party can deny its effect as a bar of a subsequent suit on any claim included in the decree." Mr. MCLAUGHLIN of Michigan. Mr. Anderson, may I ask a question right along that line?

Mr. ANDERSON. Certainly.

Mr. MCLAUGHLIN of Michigan. Is not a decree usually based on the determination of the court that the law has been violated or that there is a threat and therefore danger that the law may be violated? As a general proposition, that is right, is it not?

Attorney General PALMER. Stated generally, possibly that is right.

Mr. MCLAUGHLIN of Michigan. But this decree forbids the doing of things which are entirely lawful.

Attorney General PALMER. No.

Mr. MCLAUGHLIN of Michigan. I beg your pardon; I think you will find that.

Attorney General PALMER. This forbids the doing of a great many things which are unlawful.

Mr. MCLAUGHLIN of Michigan. That is true, but it includes also acts which are entirely lawful.

Attorney General PALMER. There may be things in it which in our opinion we could not have succeeded in getting if there had been a contest, but that will not make the decree any the less enforceable, Mr. McLaughlin, if that is what you are getting at.

Mr. MCLAUGHLIN of Michigan. Yes, sir; that is just what I wanted to get at. In my judgment, if the suit related to a matter that was concededly not a violation of the law you could not have lived for a minute, you could hardly have gotten into court, either on the criminal side or on the equity side, respecting those matters. But the court makes a decree forbidding the doing of so-and-so, which is entirely lawful. Can such a decree be enforced?

Attorney General PALMER. Absolutely, without the slightest question. The question can never be raised as to what it was founded upon. À consent decree is better than a decree in any adverse proceeding, because a consent decree is absolutely final. It can not be appealed from, it can not be reversed, it can not be taken into a higher court and set aside. It is a consent decree, and the very questions which you refer to would have to be raised by these defendants as a basis for their declaration that they need not obey this decree. They could only do that by an appeal from the decree itself in some form or other, and they can not do that, under every decision of every court in the country.

Mr. MCLAUGHLIN of Michigan. One of your statements a moment ago was that the decree would have to be based on the pleadings in the case, and the pleadings in the case say that these acts were not unlawful.

Attorney General PALMER. Oh, no; they do not show that. The record in the case, consisting of the petition and the answers, shows the allegations of the Government as to the unlawful acts and the threat of further unlawful acts. The petition is the complaint of the Government, on which the decree is finally based by consent. What I say is, that whatever may be the basis of the decree is immaterial when a consent decree is entered.

Mr. MCLAUGHLIN of Michigan. It seems to me the decree must stand on the complaint and answer.

Attorney General PALMER. The consent decree stands on its own legs. This is what the Supreme Court of the United States says about it:

Decrees of courts of chancery in respect to matters within their jurisdiction are as binding and conclusive upon the parties and their privies as are judgments at law; and、 a decree by consent in an amicable suit has been held to have an additional claim to be considered final. (Allesen v. Stark, 9 Adol. & E., 255.) Decrees so entered by consent can not be reversed, set aside, or impeached by bill of review or bill in the nature of a bill of review except for fraud, unless it be shown that the consent was not, in fact, given, or something was inserted as by consent that was not consented to. (Harding v. Harding, 198 U. S., at p. 335.)

There are two things they may do; they may may show that the thing was not consented to. of either of those things being done in this case.

show fraud or they There is no danger

Mr. MCLAUGHLIN of Michigan. In the very first lines of the decision you read the court says, "Respecting matters of which the court has jurisdiction." The court has no jurisdiction of anything that is not within the ciminal law or within the equity law, and it has no jurisdiction of these inatters that were in no sense offensive to either the criminal law or the equity law.

Attorney General PALMER. The Government alleged them in its bill as constituting in themselves a proposed violation of the statute, and the court took jurisdiction of the case, and the defendants agreed to this decree, and there is not any court in Christendom that will ever

impeach that decree to the extent of a single word, Mr. McLaughlin. Do not worry about that.

Was there something else, Mr. Anderson?

Mr. ANDERSON. Yes. In paragraph second of the decree, and in several other paragraphs also, you use the words "directly or indirectly" with reference, for instance, to the ownership of stock in the stockyards or ownership of stock in a company engaged in one of the prohibited lines. Do those words "directly or indirectly" include stock ownership in a holding company, for instance?

Attorney General PALMER. I should think so.

Mr. ANDERSON. You think so?

Attorney General PALMER. Certainly.

Mr. ANDERSON. There seems to have been some doubt about that in the minds of some gentlemen.

Attorney General PALMER. I should think that would be pretty plain.

Mr. ANDERSON. Is there anything in this decree that prohibits the device known as the bearer warrant?

Attorney General PALMER. If it be an unlawful practice, it should be enjoined upon a proper showing.

Mr. ANDERSON. Well, I assume it is not an unlawful practice now. What I am getting at is this: If there is nothing in this decree that prohibits the use of a bearer warrant as evidence of the ownership of stock, then how can you possibly enforce the provisions of this decree which prohibits stock ownership in prohibited companies?

Attorney General PALMER. Of course, we would have to prove actually who was the owner of it. We would have to prove the facts, Mr. Anderson. You would have to do that anywhere. When you say you can not enforce the decree because you can not find what the facts are, why, you confess that you can not meet this question in any forum. If we have the facts to show that the bearer warrant belongs directly or indirectly to any of these defendants, that his money purchased it, or anything else that indicates a direct or indirect ownership, we can take action in this case. But if we can not prove it, we can not; that is it.

Mr. ANDERSON. It has been contended by many of the witnesses who have appeared before this committee that this decree obviates the necessity for legislation prohibiting the use of the bearer warrant or to provide a method for registration of stock ownership.

Attorney General PALMER. Of course, there is this further thing to be said in answer to that, Mr. Anderson. The sale by these defendants of all their interests in these stockyards and terminal railroads, etc., must be made under very close supervision by the court which has made this decree. The plan which will be followed in the sale of these properties must be first submitted by the defendants, and if that is not approved by the court, the court may finally make a plan of its own. A matter of the kind that you refer to, which would be a covering up of the indirect ownership of any of these properties by some of the defendants, could easily be provided for in the court's order approving the plan of sale, probably more effectively, I think, than could be done by legislation, although I have nothing to say as to whether you should pass a law of that kind or not. I should think it would be a pretty good general law to have, that all stocks should carry the name of the owner on the face of the certificate itself.