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United States v. GAF Corp.

decided: February 9, 1979.


Appeal from an order of the District Court for the Southern District of New York, Richard Owen, Judge, denying a petition by the United States for enforcement of an antitrust civil investigative demand ("CID") against the GAF Corporation for documents GAF had obtained in litigation from Eastman Kodak Company, the target of antitrust investigation, on the ground that the statute does not authorize such enforcement. The Court of Appeals held that the District Court has power under the amended Antitrust Civil Process Act to enforce issuance of a CID for documents obtained in prior discovery and for memoranda based thereupon, but that such documents are, nevertheless, subject to protective orders by the District Judge to whom the civil litigation has been assigned. The District Judge should entertain an application to modify existing protective orders in conformity with the opinion. Reversed and remanded.

Before Mulligan and Gurfein, Circuit Judges, and Weinstein, District Judge.*fn*

Author: Gurfein

This is an appeal by the United States from an order of the District Court for the Southern District of New York (Hon. Richard Owen) denying a petition by the United States for enforcement of a civil investigative demand ("CID") upon GAF Corporation ("GAF"). United States v. GAF Corp., 449 F. Supp. 351 (1978). The amended Antitrust Civil Process Act, 15 U.S.C. § 1311 Et seq., authorizes the Department of Justice to issue civil investigative demands to obtain from third parties documents relevant to suspected antitrust violations committed by the target of investigation. The target here is intervenor, the Eastman Kodak Company ("Kodak").

The central issue is whether the Department of Justice may, by issuing a CID, obtain from a private antitrust plaintiff (GAF) documents which the latter has received through discovery proceedings in a private action against the target of the antitrust investigation (Kodak), together with work memoranda prepared on the basis of those documents. Resolution of that issue involves construction of the 1976 Amendments to the Antitrust Civil Process Act, 15 U.S.C. § 1311 Et seq., and their effect upon a protective order in the original private suit that restricts the Government's access to the product of that litigation's discovery.*fn1

On January 29, 1976, before the enactment of the Amendments mentioned,*fn2 GAF Corporation, plaintiff in an antitrust action brought against Kodak in the Southern District of New York (Hon. Marvin E. Frankel), sought permission from the trial judge to transmit to the Justice Department some fifty-two documents that had been secured through discovery, together with a memorandum of analysis of the documents. Although only two of the documents remained classified under a prior order, then Judge Frankel, on May 18, forbade GAF to turn over any of the fifty-two documents (and by implication the memorandum based upon them). GAF Corp. v. Eastman Kodak Co., 415 F. Supp. 129.*fn3 The District Judge reasoned that the initial discovery process had been aided by a cooperative relinquishment on Kodak's part pursuant to an explicit understanding that discovery was being given solely for use in the case. It is interesting to note, however, that there was no clearcut understanding, as my dissenting brother Mulligan seems to assume, that the parties deliberately excluded the Government in their "explicit agreement." For Judge Frankel put it this way:

There is no need to conjecture whether either side construed or considered this understanding with particular reference to the Government as a prospective recipient of discovered papers.

415 F. Supp. at 131.

The Judge declared that the Government's interest was "in use of these materials for potential "law enforcement' purposes not clearly specified or specifiable in advance." 415 F. Supp. at 130. Moreover, recognizing that the real value of GAF's "gift" to the Government lay in the legal labors expended in the selection and analysis of relevant documents, Judge Frankel expressed concern about the potential for oppression in an alliance between private and Government resources directed against Kodak, particularly in "the use of private discovery as a possible supplement to federal grand jury proceedings." 415 F. Supp. at 133.

Almost on the heels of this decision, but without taking note of it, Congress passed the Hart-Scott-Rodino Antitrust Improvements Act of 1976, P.L. 94-435 (Sept. 30, 1976), which, among other things, expanded the Justice Department's authority to issue CIDs for information relevant to the investigation of possible antitrust violations. Whereas previously CIDs could be issued only against the target of an investigation, the Amendments conferred authority to issue a demand against "any person" possessed or in custody of "documentary material" or "information" (E. g., oral testimony) relating to a civil antitrust investigation, 15 U.S.C. § 1312(a). Equipped with this enlarged grant of power, the Justice Department began a fresh effort to obtain GAF's Kodak materials. It issued two CIDs: (1) against GAF for the materials originally sought before Judge Frankel, including the analyses of discovered documents, as well as the other documents GAF received in discovery from Kodak Plus indices and (2) against Kodak for relevant papers not given to GAF. Kodak offered to supply all the requested documents to the Government itself, presumably in the hope that the Government would make its own De novo evaluation of whether there is a tenable claim against Kodak, free from GAF influence. The Antitrust Division, though it was anxious to obtain the documents, declined Kodak's offer because it preferred to receive the documents "as screened and analyzed by GAF's antitrust counsel." See United States v. GAF Corp., supra, 449 F. Supp. at 352-53. The Government then petitioned for enforcement of its CID against GAF in the District Court below, 15 U.S.C. § 1314. United States v. GAF Corp., supra (Hon. Richard Owen).

Judge Owen denied the petition based upon his interpretation of the amended Antitrust Civil Process Act as Precluding a demand for documents of a target company that are temporarily in the custody of a litigation adversary, obtained through discovery. The court recognized that a literal reading of amended § 1312(a) favored the Government's position. It reasoned that if the statute were to be read literally, however, the provision in § 1313(c)(3) must also be read literally. That subsection provides that no material obtained by CID may be made available for examination by anyone other than the Department of Justice "without the consent of the person Who produced such material, etc." (emphasis added).

The court thought that, interpreted literally, this would mean that GAF, as "the person who Produced such material," could consent to its further examination by strangers without the permission of Kodak. That result, of course, would place Kodak's interest in the privacy of its business documents at the mercy of its adversary and competitor. The Judge held accordingly that since Congress did not specifically authorize CIDs for documents obtained from the target in the course of litigation nor provide explicit protection for the target's interest in their confidentiality, the authority granted to the Department of Justice with respect to third parties should be limited to materials obtained by such third parties in the regular course of their business, excluding materials obtained by discovery in litigation. Finally, the Judge concluded that it would be unfair to Kodak for the Government to have its investigative course suggested, at least partially, by a private adversary litigant. At the same time, the judge acknowledged the "potentially enormous saving of time and expense to Antitrust Division personnel who would otherwise have to review the same plethora of initial material . . . ." 449 F. Supp. at 355.


Though we think the reasoning of the court below is not without some appeal, we have concluded that we can find no manifestation of congressional intent to place materials obtained in discovery or analyses based thereupon outside the grant of power for enforcement of CIDs.

The fundamental dispute here is whether the Justice Department may with GAF's consent and even encouragement seek the product of GAF's Legal analysis of Kodak papers. Both the language of § 1312*fn4 ("any person") and the legislative history evince a congressional intent to provide the Department of Justice through the Amendments with broad civil antitrust investigatory powers, subject only to important and particular safeguards against abuse of privacy or other interests. Congress recognized that CIDs would be used to collect basic information on the behavior of the market and its actors data such as are found in Kodak's original documents. See H.Rep.94-1343, 94th Cong., 2d Sess. 7, 23 (1976); S.Rep.94-803, 94th Cong., 2d Sess. 15-16 (1976), U.S.Code Cong. & Admin.News 1976, p. 2572. But the CID power was not to be limited to acquisition of factual data. The legislative history shows that Congress contemplated that the Government would use its power to issue demands for the purpose of gaining "expert opinion" from customers, trade associations, suppliers and competitors. S.Rep.94-803 at 19. Thus, CIDs were made available for use ...

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