Just before Christmas in 1978, Stephen Susman sat in his "little bitty dippy old law office" in Houston needing a bank loan to pay the rent, when the nation's top antitrust defense lawyers began "knocking my door down" with offers of enormous sums of money to settle a price-fixing suit he had brought against manufacturers of cardboard boxes.
By the time the stampede was over, 36 of the 37 industry defendants had paid $321 million to buy peace with Susman and his 200,000 class-action plaintiffs. It was the largest pretrial settlement in the history of antitrust litigation.
"I was handing out multimillion-dollar settlements like they were car rental forms," recalled Susman, 40, at the time a neophyte in the high-rolling world of antitrust litigation. "Never saw anything like it in my life."
Neither had the nation's business community, not on that scale, anyway, and it decided some changes were in order.
The changes the businessmen had in mind have brought them to Congress, along with an all-star cast of lobbyists that includes former attorneys general Griffin B. Bell and Benjamin R. Civiletti; former U.S. senators Birch Bayh, Sam Ervin and Robert Griffin; former solicitor general Robert H. Bork; former assistant Treasury secretary Charls Walker and former presidential adviser Stuart Eizenstat.
Estimates of legal fees, in the antitrust cases and in the lobbying blitz they have spawned, exceed $50 million.
Industry is seeking corrective amendments to the 1914 Clayton Antitrust Act, something to protect it from the "whipsaw tactics" and "economic terrorism" Susman had used to "mulct" defendants who "could not afford to gamble the company to prove their innocence," to quote from a few of the scores of briefs on the subject.
Now the tale gets tangled. While all of these lobbying superstars are representing industry, not all are singing the same tune.
Changes they are pushing would prevent an individual member of a price-fixing conspiracy from being exposed to the risk of a damage award based on the wrongdoing of all of its co-conspirators.
The question that has the business community squabbling bitterly within corporate boardrooms involves when the proposed changes should take effect. It is no trifling issue. Billions of dollars in potential antitrust damage awards hang in the balance.
At the center of the fight is the Mead Corp., a feisty, Ohio-based paper products company and the lone holdout from settlement among the 37 defendants in Susman's Corrugated Container litigation.
Mead chose to play a high-risk game and lost. It asked for a day in court and was found guilty. A civil court jury found in September, 1980, that Mead and 18 other companies that had settled out of court had conspired to fix prices on cardboard boxes for 12 years, resulting in overcharges of at least 5 percent.
Now, as a result of what Mead lawyers call a quirk in the law, a company that has a 2.5 percent share of the cardboard box market faces a potential damage judgment computed on the basis of the industry-wide price-fixing scheme. Its potential liability runs to $750 million, an amount almost equal to shareholders' equity in Mead last year.
Mead is indignant. It complains that International Paper, another defendant in the Corrugated case, was able to settle early with Susman for $8.3 million. IP's market share is more than three times that of Mead, making the difference in degree of punishment about 300 to 1. "Intolerable," say Mead lawyers.
Worse, from Mead's vantage point, IP was the more culpable of the two companies. It pleaded nolo contendere to criminal charges, while Mead went ahead with its criminal trial and was acquitted, only to be found guilty later in the civil trial, where the standard of proof is "preponderance of evidence" rather than "beyond a reasonable doubt."
Mead, along with some other companies in similar straits in other antitrust litigation, including Georgia-Pacific Corp., Weyerhaeuser Co., Willamette Industries and Milliken & Co. Inc., want changes in the antitrust law to apply to their pending cases. They are facing more than $2 billion in potential judgments from various courts.
"It would be a cruel irony," write Bork and Bell, who along with Civiletti, Bayh, Ervin and Walker are lobbying on behalf of those companies, "to promise a cure for the future while leaving current vicitms of injustice to suffer the very fate which called forth the cure."
Other companies, led by IP, do not cotton to the idea of retroactive justice.
"You can't go through a trial, lose and then come to Congress to get your judgments overturned," protests Eizenstat, who along with Griffin and a small army of other lawyers and constitutional scholars is representing their side of the matter.
Morever, IP is convinced that Mead, for all its lobbying on the matter, is not particularly interested in the legislation. Its real gambit, IP says, is to use the possibility that such retroactive legislation might be enacted to strengthen its position in its on-going settlement talks with Susman.
"They're trifling with Congress, using it as a ploy in the settlement negotiations," says Henry King, another of IP's army of lawyers.
Mead, in response, claims that the only reason IP does not want the proposed law to apply in the Corrugated case is its bloodthirsty desire to drive a competitor to the edge of bankrupcy.
"Can you see a better way of doing in a competitor in than using the umbrella of Congress?" asks Alan Wiseman, a Mead attorney.
IP, however, contends that it has a direct financial interest in making sure the law does not apply in Corrugated. A retroactive law, IP argues, might endganger its settlement which, at $8.3 million, is looking shrewder by the hour.
IP fears that plaintiffs would go scurrying back into court to void agreements they struck with IP and others -- agreements based on the expectation that they would be able to squeeze larger settlements from other defendants later in the game.
That is precisely what he would do, said Susman, who expresses little sympathy for those who fret over disproportionate punishment.
"I call this the Fairness to Felons Act," he says. "If two people robbed a bank, and if they had an agreement that they were going to split the proceeds 50-50, but one took 90 percent of the loot instead, can you imagine Congress passing a law to take care of the poor fellow who only got 10 percent?"
He also makes no apologies about tactics he used to extract his settlements.
"People say I coerced 'em; people say I blackmailed 'em; people say I extorted 'em. Makes me laugh. Hell, they couldn't get into my office fast enough. They were calling day and night. One lawyer insisted on talking Christmas Eve. I was afraid the whole case was going to settle out so fast that I wouldn't have enough billable hours in," Susman said.
As his account suggests, Susman had little need to resort to high-pressure tactics. The rules of the game did his handiwork for him. They typically work like this:
The plaintiffs' attorney makes an attractive settlement offer to one or more defendants in a large price-fixing case, usually the most culpable ones, who have the most to fear from a trial. The offers are invariably accepted. Susman calls them "loss leaders -- you don't make a lot of money, but you sure get a lot of folks into the store."
That is because whenever one company settles, it increases the exposure to risk of the remaining defendants under the doctrine of joint and several liability. As the risk grows, the price of settling is upped accordingly by plaintiffs' attorney.
Even companies that believe they can demonstrate their innocence sometimes decide they cannot take the risk.
Mead held out against such pressure. Its civil trial began in the summer of 1980 and lasted three months. The day before the case went to jury, Susman wrote Mead a letter offering to settle for $36.5 million.
"You must have misplaced your decimal point," Mead lawyer Harold Baker told him. Then the guilty verdict came in. Now Mead faced potential damages 20 times that amount.
A federal judge in Houston, where the case was tried, has since appointed a special master to determine the size of the judgment against Mead. Meanwhile, Susman has bumped the settlement price to $75 million, although he says he will "consider" any offer above $50 million. Mead's latest offer is $28 million.
In the midst of these negotiations, Congress enters. If the proposed law is applied to its case, Mead's potential liability would plummet from $750 million to about $50 million.
So far, the net effect of the lobbyists' full-court press has been two delays in consideration of a bill in the Senate Judiciary Committee, whose chairman, Strom Thurmond (R-S.C.), has corporate and lobbying friends on both sides and has made it clear that he does not intend to be caught in the crossfire.
Thurmond asked Bell to fashion a compromise, and the former attorney general chaired a midsummer meeting here of 40 lawyers involved in the case.
Bell's efforts went nowhere. Nor did those of the Chamber of Commerce and the Business Roundtable, both of which, after hearing elaborate legal presentations on the dispute, tried to coax a compromise.
Meanwhile, all but forgotten in the industry squabble are the plaintiffs, the 200,000 companies, ranging from mom-and-pop stores to multinational corporations, that were overcharged 5 percent on their cardboard boxes.
They would be the clearest losers if the law were applied to pending cases. Yet their lawyers have mounted only a modest lobbying effort in the case.
"With the way we're knocking each other off, they don't have to say much," Bell said.
The plaintiffs' antitrust bar, however, has been watching the corporate star wars with growing indignation.
Harold Kohn of Philadelphia, considered the dean of the plaintiffs' bar, said, "It is an absolute disgrace for former high public officials to be monopolizing the time of senators over what is essentially a special-interest issue."
Susman, whose only previous experience in Washington was clerking for Supreme Court Justice Hugo Black, says snidely that he would be willing "to give up the whole fee I'm going to make on this case for 50 percent of what Mead's been paying its lawyers. And if you throw in their lobbying costs, I'll make it 25 percent."
That is no mean offer from a man who expects the total fees for the 40 plaintiffs' attorneys in the Corrugated case to be $40 million, with his own slice as lead attorney coming in at $7.5 million.