2573. Alleged violation of injunction. U. S. v. Dean Rubber Co* et al. Defend-
ant judged not guilty.   (Inj. No. 3.)
INFORMATION FILED : On June 7,1946, Western District of Missouri, against the
Dean Rubber Co., a corporation, North Kansas City, Mo., and against Wilbur J.
Dean, Charles H. Fry, Beulah V. Dean, Ralph A. Briant, Carl Wormington,
Morris J. Pollock, Justine Woodard, Ruth Marie Symons, W. R. Adelsperger,
Claiborne Dean, Alpha Dean, Archie Dean, Viola Bausin, and Harry Custer,
copartners, doing business as the Dean Rubber Co.; amended informations filed
August 6 and October 28,1946, and March 11,1947.
ALLEGED VIOLATION : The first information alleged that on September 11, 1940,
a permanent injunction, as reported in notices of judgment on drugs and
devices, No. 409, had been entered enjoining the Dean Rubber Co., its officers,
agents, and all persons then or thereafter acting by or through them, from dis-
tributing in interstate commerce any prophylactics containing holes or which
might subsequently acquire holes; that at that time, one Wilbur J. Dean, was
and continued to be president and acting manager of the Dean Rubber Co.,
a corporation; that on or about October 21,1944, the assets and business of the
corporation were transferred to Wilbur J. Dean, Beulah V. Dean, Charles H.
Fry, Ralph A. Briant, Carl Wormington, Morris J. Pollock, Justine Woodard,
Ruth Marie Symons, W. R. Adelsperger, Claiborne Dean, Alpha Dean, Archie
Dean, Viola Bausin, and Harry Custer, who since that time had operated as
copartners under the name of Dean Rubber Co.; that the corporation, Wilbur
J. Dean, and each of the other defendants had actual knowledge of the contents
of the decree for permanent injunction; that in willful violation of the injunc-
tion and in contempt of the court, the defendants had on or about September
30, October 25, and December 14, 1944, and on or about January 9 and 30,
February .2, 6, 14, and 17, June 4 and 9, and July 6 and 29, 1945, willfully, un-
lawfully, contumaciously, and contemptuously caused to be shipped in inter-
state commerce various quantities of prophylactics which were adulterated
under Section 501 (c) and misbranded under Section 502 (a), by the reason of
containing holes.
DISPOSITION: Upon the filing of the original information on June 7, 1946, an
order to show cause why defendants should not be held in contempt of court
was issued. Thereafter, the first amended information was filed to include
additional violative shipments which were caused to be made by the defendant
on or about April 14 and 18 and July 13,1944, October 17 and December 6 and
7,1945, and January 22 and 23, February 6, and March 15,1946. A motion for
dismissal of this amended information was then filed on behalf or the de-
fendants, and on October 7,1946, the court handed down the following opinion
in regard to such motion:
RIDGE, District Judge: "The amended information filed herein alleges that on
September 11, 1940, a permanent injunction was entered against the Dean
836002-49?3
Rubber Company, a Corporation, by which said defendant, its officers and
agents and all persons then or thereafter acting by, through or under it or
them, were perpetually enjoined and restrained from distributing, in interstate
commerce, 'any of the stock of defective rubber prophylactics which it had
on hand at Kansas City, Missouri, or at any other point, or any other quantity /
of defective rubber prophylactics it might subsequently acquire.'
"In Paragraph 2 of the information it is alleged that W. J. Dean was
the President and Acting Manager of said Dean Rubber Company, a Corpora-
tion ; that on or about the 21st day of October, 1944, the assets and business
of said Corporation were transferred to certain individuals who, since that
time, have been and are now operating as co-partners under the style and
trade name of Dean Rubber Company; that at the time of such transfer
'each of the within-named individual defendants had actual knowledge of the
contents of said injunction order.'
"Rule 65 (d) F. R. C. P. provides that an order granting an injunction 'is
binding only upon the parties to the action, and officers, agents, servants,
employees, and attorneys, and upon those persons in active concert or par-
ticipation with them who receive actual notice of the order by personal service
or otherwise.' Under said rule mere knowledge, in and of itself, of the issuance
of an injunction would not make a person, not a party to an injunction suit,
liable to contempt proceedings for committing an independent act not done
in 'active concert or participation with' a party bound by the injunction.
Alemite Mfg. Co. v. Staff, 42 F. (2d) 832; Harvey v. Bettis, 35 F. (2d) 349.
The amended information does not allege how or in what manner the alleged
individual contemnors, named therein, acted in concert or participation with
the corporate defendant in violating the injunctive decree. All that is alleged
in the 3rd and subsequent paragraphs of the information is that 'said de-
fendants did wilfully, unlawfully, contumaciously and contemptuously ship
and cause to be shipped in interstate commerce' certain defective rubber
prophylactics. There was only one defendant in the original action, namely,
the Dean Rubber Manufacturing Company, a Corporation. If the individuals
named in the amended information are guilty of violating the injunction
decree of this Court, then they are 'contemnors' and not defendants, and the
information must allege a 'privity' between defendant and said individuals.
"In its suggestions in opposition to the motion to dismiss the Government
states 'the corporation, for some reason, did transfer its assets but, at the
same time retained its legal entity and continued in active operation of its
business.' If such be a fact, then the amended information should be amended
and the facts set out concerning such matters. As the information now stands
no such issue is presented. All that is alleged, in the instant information,
is a succession to the assets of the business of the corporation by the individ-
uals named as alleged contemnors therein. It is doubtful whether an assign-
ment alone is sufficient to make the assignee bound by an injunction decree.
The facts showing the privity between the original parties to the suit and the
assignee, or stranger to the action should be alleged so that the information,
upon its face, shows a mutual or successive relationship of such parties to the
subject matter of the injunction decree.
"It is noted that the injunction decree in part is in personam and in part
in rem, i. e., the injunction decree enjoins the corporation from distributing,
in interstate commerce, 'any of the stock of defective rubber prophylactics
which it now has on hand.' That portion of said decree is in rem. The
prohibition of the decree which enjoins distributing in interstate commerce,
'any other quantity of defective rubber prophylactics which it may subse-
quently acquire,' is in personam. It is only injunctions, acting in rem, that
bind successive ownerships of the rem. Rivera v. Lawton, 42 F. (2d) 832.
28 Am. Jur. p. 505, etc. Only persons who are parties to an injunction decree,
or in privity with those whose rights have been adjudicated thereby, are
bound by a personam decree.   Chase Nat'l. Bank v. Norwalk, 291 U. S. 431.
"In view of the statement contained in plaintiffs suggestions that 'the
evidence on behalf of the plaintiff will disclose that the individual defendants
were employees or officers of the corporation at the time judgment was
entered against it' and it appears that plaintiff contends that the individual
contemnors are 'acting by, through or under' Dean Rubber Manufacturing
Company, or that perhaps said individuals were the sole owners of the stock
of said corporation at the time the injunction was granted, plaintiff will be
given leave to amend its amended information so as to state the facts con-
cerning the privity existing between said corporation and the individual con-
temnors. If plaintiff does not file an amended information within ten days,
defendant's motion to dismiss will be sustained.
"IT Is So ORDERED."
As a result of the foregoing opinion, the second amended information was
filed, following which a motion for a bill of particulars was filed on behalf of
the defendants. The motion requested information as to (1, a) whether the
prophylactics so shipped were those which the defendant, the Dean Rubber
Co., a corporation, had on hand on September 11, 1940; or had subsequently
acquired; (1, b) whether the prophylactics at the time of the shipment were
owned and shipped by the individual defendants as partners; (2) what part
of the assets of the defendant, the Dean Rubber Co., a corporation, were trans-
ferred to the individual defendants, what was the date of transfer, and whether
or not the corporation had since the transfer continued to ship prophylactics in
interstate commerce and operated the business; (3) whether or not the indi-
vidual defendants or any of them at the time of the shipments were "acting
by, through or under" the corporation, as set forth in the last paragraph of
the court opinion of October 7, 1946; (4, a) whether or not the individual
defendants or any of them were at the times of the shipments in "active concert
or participation with" the corporation as set forth in the court's opinion of
October 7,1946; and (4, b) how and in what manner the individual defendants
or any of them were in "active concert of participation with" the corporation, as
set forth in the court's opinion of October 7, 1946. On January 30, 1947, the
court handed down the following opinion on the motion for a bill of particulars:
RIDGE, District Judge: "From a perusal of the Government's Second Amended
Information, it appears that this criminal contempt proceeding against de-
fendant and the individual contemnors is premised upon the proposition that
said parties are acting in concert or participation with each other to violate
the injunctive decree of this Court. Such being the predicate of this proceed-
ing, it is not necessary that the information set forth whether the prophylactics
shipped were those which defendant Dean Rubber Manufacturing Company had
on hand on September 11, 1940, as requested in specification 1 (a) of defend-
ants' 'Motion for Bill of Particulars.' Such facts would only be material if
the information was premised upon a 'successive' relationship between said
parties concerning the 'rem' of the injunctive decree. If the latter is a premise
' of the contempt proceeding, then the information sought in the above specifica-
tion should be alleged in the information.
"The 'ownership' of the prophylactics shipped is immaterial in determining
the guilt or innocence of the individual contemnors. If said parties acted
in concert with defendant Dean Rubber Manufacturing Company, in violation
of the injunctive decree, then regardless of the ownership of such goods, or
how such parties became possessed thereof, is not pertinent, except perhaps
from a defensive standpoint. Defendants' specification 1 (b) of Motion for f
Bill of Particulars is overruled.
"The information sought in specification 2 of said motion is evidentiary
and need not be stated in the information. The present allegations of the
information allege that Dean Rubber Company shipped or caused to be shipped
in interstate commerce the prophylactics in question. Specification 2, of said
motion is overruled.
"Specifications 3, 4 (a) and (b) of said motion are sustained. The informa-
tion, or other formal statement, by which the prosecution of a contempt pro-
ceeding is initiated, should state completely the necessary facts constituting
the offense so that the parties charged may be clearly apprised of the nature
of the charge against them and the acts complained of. Technical accuracy,
however, is not required. In the original injunction proceeding the defendant
was the Dean Rubber Manufacturing Company, a corporation, not Dean Rubber
Company, a corporation. The original defendant in the injunction case has
not been made a party in this contempt proceeding. Perhaps this is an over-
sight but it should be clarified now before any other action is taken herein.
"As above stated, it appears that this contempt proceeding is based on 'con-
cert of action' between the parties named in the information as defendants.
I do not believe 'concert of action' alleged to be the cause of the violation of
an injunction, can be premised on an assignment of assets alone, unless the
injunction decree is directly concerned with the assets transferred, or the as-
signment is made for the purpose of evading the terms of the injunction decree.
Le Tourneau Co. etc. v. N. L. R. B., 150 Fed. (2d) 1012; Eolcomb & Co. v. U. S.
180 Fed. 794; Hoover Co. v. Exchange Vacuum Cleaner Co., 1 F. Supp. 997.
However, where a successor in interest takes over the entire business of one
bound by an injunction decree and the conduct of that business is the basis
for the injunction, he would probably be liable for a violation of the injunc-
tion if the successor in interest conducted such business in the same manner
as his assignor had conducted it. Schumacher v. Shawhan Dis. Co. (Mo. App.)
165 8. W. 1142; Riviera v. Lawton, 35 Fed. (2d) 828. I make the above observa-
tions because I do not believe that the Second Amended Information alleges
sufficient facts to establish 'active concert or participation' by the individual
contemnors in a violation of the decree in question. The Government must
allege facts in its information, so showing, before a cause for action by this
Court can be taken in the premises. Edwards v. U. 8., 123 Fed. (2d) 465. If
the individuals are the 'alter egos' of the Dean Rubber Manufacturing Company,
facts establishing that relation should be stated in the information. If they
are 'successors in interest' under such circumstances as to make them bound
by an injunction issued against their assignor, then the facts creating such
environment should be alleged. From the allegations of the present informa-
tion the Court cannot determine which relationship the individuals are sought
to be charged. Under such circumstance, the instant Information does not
comport with the requirements of proper pleading in a Criminal Contempt
Proceeding.
"This is such a contempt proceeding. Bullock Elec. <& Mfg. Co. v. Westing-
house, etc., 129 Fed. 105; Nye v. U. S. SIS U. 8. S3; Qompers v. Bucks Stove,
etc. 221 U. S. 4*8-   The action is brought in the name of the United States and
the punishment, if assessed, would be punitive. Phillips, etc. v. Amalgamated,
etc., 208 Fed. 335.
"The Government is given twenty (20) days in which to file an Amended
Information in conformance to this order.
"IT IS SO OEDEEED."
In accordance with the foregoing opinion, the third amended information
was filed to name correctly the corporate defendant and to recite more pre-
cisely the privity between the corporation and the individuals. A motion to
dismiss this information was filed on April 4,1947, and on August 1,1947, the
following opinion was handed down by the court, denying the .motion:
RIDGE, District Judge: "Oontemnors herein have moved to dismiss the 'Third
Amended Information' on the ground that the several alleged criminal viola-
tions of the injunctive decree charged therein, having occurred more than one
year before the filing of said information, are barred by limitations provided
in28U.S. C. A. 390 (Section 25 of the Clayton Act).
"The final injunction decree upon which said information is premised was
entered on September 11,1940, in an action instituted by the United States for
that purpose, perpetually enjoining and restraining the Dean Kubber Manu-
facturing Company, a corporation, its officers and agents, and persons then
or thereafter acting by, through or under it, or them, from distributing in inter-
state commerce any of the stock of defective rubber prophylactics which it
then had on hand at North Kansas City, Missouri, or at any other point, or
any other quantity of defective rubber prophylactics which it might subse-
quently acquire, 'defective,' within the meaning of the order; except in com-
pliance with Section 381 (d), U. S. C. A., Title 21 (The Federal Food, Drug
and Cosmetic Act) (52 Stat. 1041, etc.).
"Section 302 (b) of the Federal Food, Drug and Cosmetic Act (52 Stat.
1048; Title 21, Section 332 (o), U. S. C. A.), provides that 'in case of violation
of an injunction * * * issued under (the act), which also constitutes a
violation of (the act) * * *' the trial for such violation may be before
the Court, or a jury if requested, and 'shall be conducted in accordance with
the practice and procedure applicable in the case of proceedings subject to the
provisions of Section 387 of Title 28, as amended.'
"Section 381 of Title 28, in Section 22 of the Clayton Act. The Clayton Act
governs the procedure in criminal contempts which consist of 'criminal offenses'
under any statute of the United States or of any State, except insofar as certain
contempts are expressly excluded from its terms. The Clayton Act is neither
a grant nor a limitation on the powers of the Federal Courts to punish for con-
tempts, but only prescribes and limits the procedure as to punishment for con-
tempts within the purview thereof. After enumerating the contempts as to
which the procedure of the Clayton Act is to be followed, Section 24 of said Act
(Title 28, Section 391, U. S. C. A.) expressly excludes from its operations, (1)
contempts committed in, or near to, the presence of the Court as to obstruct the
administration of justice, and (2) 'contempts committed in, disobedience of
any lawful writ, process, order, rule, decree, or command entered in any suit
or action brought or prosecuted in the name of, or on behalf of, the United
States.' As to the latter excluded criminal contempts from the provisions of
the Clayton Act, it is held that they fall under the general three-year statute
of limitation (Title 18, Section 582, U. S. C. A.) V. S. v. Goldman, 277 17. S.
229; Hill v. U. S. ex rel. Weiner, 300 V. S. 105; and that as provided in Section
24 of said Act (Title 28, Section 389, V. S. C. A.), punishment therefor may be
assessed 'in conformity to the usages at law and in equity prevailing on October
15,1914'.   If the instant action was prosecuted by the United States under the
Anti-Trust Act, or similar Act of Congress, there could be no doubt but that
the alleged criminal contempts here sought to be prosecuted would not be
barred by the one-year period of limitation provided in Section 25 of the Clay-       ,
ton Act (Title 28, 77. S. C. A., S90), 77. 8. v. Goldman and Hill v. 77. 8., supra.?f
"Contemnors maintain, however, that Section 802 (6) of the Federal Food,
Drug, and Cosmetic Act, supra., by expressly subjecting proceedings for viola-
tions of injunctions under that Act to the same rules as proceedings under
Section 22 of the Clayton Act, supra., made an 'exception to the exception' con-
tained in. the Clayton Act as to criminal contempts prosecuted by the United
States, because all proceedings instituted for the enforcement, or to restrain
violations of the Federal Food, Drug and Cosmetic Act, are brought in the name
of the United States. (21 77. 8. C. A. 581). They say, 'what a futile thing would
Congress have done if * * * all injunction violations under the Food and
Drug Act are governed the same as proceedings under Section 887, but since
Section 889 (Title28 77. S. C. A., Sections 887, 889) exempts all such proceedings,
Congress merely put such proceedings within the Clayton Act and by the same
words took them out from under the Clayton Act.'
"Section 302 (b) of the Federal Food, Drug, and Cosmetic Act (Title 21,
77. S. C. A. 882 (b)) did not place criminal contempt proceedings for violations
of injunctions procured by the United States, under the Food and Drug Act
within the purview of all the provisions of the Clayton Act. All that is accomp-
lished by the provisions of Section 302 (b) supra., is to incorporate into the
Federal Food, Drug, and Cosmetic Act one section of the Clayton Act (Section
22) which section sets up a procedure to be followed in the trial and punishment
of contempts for violations of an injunction procured under the Federal Food,
Drug and Cosmetic Act. Notice the language used in Section 802 (b), supra.,
is that 'trials' for contempt in case of violation of an injunction procured under
the Federal Food, Drug and Cosmetic Act are to 'be conducted in accordance
with the practice and procedure applicable in the case of proceedings subject
to the provisions of Section 387 of Title 28, as amended.' The only 'proceed-
ings' that are 'subject to the provisions of Section 387,' supra.; are criminal con-
tempt proceedings arising in litigations where the 'order * * * decree or
command entered is not in a suit or action brought or prosecuted in the name
of, or on behalf of, the United States.' In other words, in litigation of a private
nature, and such criminal contempts as are committed and prosecuted under
miscellaneous Federal statutes authorizing punishment for contempt without
designating the particular contempt as civil or criminal and generally contain-
ing no provisions as to procedure, as in the Federal Rules of Civil Procedure.
(See Rules 37 (b) (1) ; J,5 (f) ; 56 (g) and 70.) In providing that Section 22
of the Clayton Act shall be the procedure to be followed in prosecution of alleged
contempts for violation of injunctions procured under the Federal Food, Drug
and Cosmetic Act, Congress established a limited special procedure to be fol-
lowed in such cases and took such contempt actions out of the procedure gen-
erally followed 'at law and in equity' in cases wherein the United States was the
party procuring an injunction decree or order. Without such limitation con-
tained in Section 802 (b) of the Federal Food, Drug and Cosmetic Act, the alleged
contumacious conduct here charged against contemnors would be prosecuted
under Section 268 of the Judicial Code (Title 28, 77. S. C. A. 885). In changing
the procedure previously established as to criminal contempts prosecuted in the
name of the United States so far as such contempts may arise under the Federal
Food, Drug, and Cosmetic Act, Congress did not provide that other sections of
the Clayton Act (other than Section 22 thereof), be made applicable to con-
tempt proceedings arising under the Federal Food, Drug and Cosmetic Act, as
asserted by contemnors. To sustain such contention would work the anomalous
situation which contemnors state, namely, that Congress 'put such proceedings
within the Clayton Act and by the same words took them out from the Clayton
Act.' Section 24 of the Clayton Act {Title 28 77. 8. C. A. 389) would produce
such a paradoxical result. Under contemnors' position, all the sections of the
Clayton Act relating to contempt proceedings must be presumed to have been
intended by Congress to apply to criminal contempt proceedings instituted under
the Federal Food, Drug and Cosmetic Act, and not only Sections 22 and 25
thereof (Title 28, U. S. C. A. 890). To make such assumption is to charge Con-
gress with being a paradoxer. Congress cannot be so charged with such self-
annulling action as asserted by contemnors.
"Section 24 of the Clayton Act, supra, is not specifically made to apply to
contempt proceedings instituted under the Federal Food, Drug and Cosmetic
Act as is Section 22 of said Act. Section 2Jf of the Clayton Act establishes a
limitation of action. A statute creating a limitation against the bringing of an
action is never assumed to be effective as against actions instituted by the
Federal Government and is only effective against such actions when specifically
made so. Exemption from statutes of limitation ordinarily is implied in favor
of the State and Federal Governments (34 Am. Jur. 303, etc.).
"From what has been heretofore said, it is not necessary to discuss other
points raised by contemnors in their briefs.
ORDER
"Contemnors' motion to dismiss this action is by the Court overruled."
On October 26, 1948, after further consideration of the entire matter, the
court found the corporation and the individuals not guilty of contempt.