LIMITING THE TIME FOR BRINGING CERTAIN ACTIONS UNDER THE LAWS OF THE UNITED STATES MONDAY, JUNE 11, 1945 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met at 10 a. m., the Honorable Michael A. Feighan, presiding. Present also: Chairman Sumners and Representative John W. Gwynne, of Iowa, author of H. R. 2788. Mr. FEIGHAN. The subcommittee will come to order. Today we will consider H. R. 2788, a bill introduced by our colleague, Mr. Gwynne, to amend title 28 of the United States Code in regard to the limitation of certain actions, and for other purposes. (The bill referred to is as follows:) [H. R. 2788, 79th Cong., 1st sess.] A BILL To amend title 28 of the United States Code in regard to the limitations of certain actions, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That title 28 of the United States Code, as amended, be further amended by adding a new section to be known as section 793, and to read as follows: "SEC. 793. Except as otherwise provided in any action creating a right of action to recover damages, actual or exemplary, no action under the laws of the United States shall be maintained unless the same is commenced within 1 year after such cause of action accrued, unless a shorter time be fixed in any applicable State statute: Provided, however, That public actions to recover money damages may be enforced if brought within two years after the cause of action accrued except when the United States is not the real party at interest: Provided further, That the person liable for such damages shall, within the same period, be found .within the United States so that proper process thereof may be instituted and served against such person." Mr. FEIGHAN. Mr. Gwynne, may we have a statement from you? Mr. GWYNNE. Mr. Chairman, before the subcommittee completes its hearings on this bill I would like to make a statement; I will not do it now, however, because of the fact that we have a number of witnesses who have expressed their desire to appear in support of the bill, and many of them are here now. I would rather the committee would proceed to hear them, and I will make a statement at a later time. Mr. FEIGHAN. Very well; the first witness, then, will be Mr. Ray Smethurst. 1 STATEMENT OF RAYMOND S. SMETHURST, REPRESENTING THE NATIONAL ASSOCIATION OF MANUFACTURERS Mr. SMETHURST. Mr. Chairman, my name is Raymond Smethurst, counsel for the National Association of Manufacturers. I am appearing here this morning on behalf of that association, an organization of about 13,500 manufacturers located throughout the United States, and I think, to reflect the interest of that group in the bill before the subcommittee, I might point out that over 70 percent of our membership is comprised of manufacturing companies of less than 500 employees. In addition to appearing for the national association I have also a number of telegrams from some 32 State manufacturing associations. I won't take the time of the subcommittee to read these telegrams into the record, but I would like to indicate the organizations which have authorized me to appear for them: Associated Industries of Alabama. Associated Industries of Massachusetts. Associated Industries of Missouri. Associated Industries of Nebraska. New Hampshire Manufacturers Association. Associated Industries of Oklahoma. Mr. CHAIRMAN. I might say at the beginning that because of the importance of this bill we have given the subject extensive study and considerable research. It is rather strange that over such a long period of time, and with so many statutes having been enacted by the Congress, that so few of them have incorporated any period of limitation during which either private or public actions can be brought. Mr. Gwynne, in presenting his bill in the House, made a statement setting forth some 17 of these public statutes in which either private or public rights of action were permitted and in which no statute of limitations was provided, with the result that in most cases the only period of limitation could be found by resort to the available State law, and I think, as I can develop later, you will see a variety and discrepancy in those State laws which have been held applicable to these various Federal causes of action. I would like first to discuss the need for this legislation; then I I would like to comment on H. R. 2788, as it appears to be a partial corrective of the situation which has developed, and then I would like to make a few suggestions for possible changes in H. R. 2788. As Mr. Gwynee pointed out, there are 17 of these statutes. I am not sure, but there may be additional ones not contained in the statement made by Mr. Gwynne on the floor. For our purpose, and the purpose of our membership, there are a number of these which are of major importance. I refer particularly to the Sherman Act, the Clayton Act, with particular reference to the Robinson-Patman amendments to the price discrimination provisions of the Clayton Act, the Fair Labor Standards Act, the Walsh Healey Act, and the Wage Stabilization Act of 1942. Over a period of time, by judicial decision, it has been quite apparent that these laws were not as clear or as definite as we might have wished. We have recently experienced a number of new interpretations which have imposed new legal duties, and more serious than the mere change and uncertainty in the law has been the retroactive nature of these interpretations. When private individuals are given the right of action to recover substantial penalties or damages for acts which, when committed, were not unlawful, but which have become so by administrative or judicial decision, then we think the matter calls for correction. I think we have much the same situation as though Congress were to pass a law to become effective in 1935, with all private individuals injured by these retroactive violations, or violations which have been made such by the retroactive operation of the law, being given the right of action to recover these fines, damages, and penalties. Because that is the situation resulting from some of these administrative and judicial decisions. Let me give a few outstanding examples-and I understand there are witnesses here from specific trades, business, or industry groups, who have experienced some specific form of liability resulting from administrative or judicial decisions, so I don't want to make this too extended, although there are an almost unlimited number of cases. Under the antitrust laws (and we must bear in mind the treble damage provision in the antitrust law) under which any person injured by any act forbidden can recover treble the amount of damages he can show. Recently the Supreme Court, in June 1944, held that the business of insurance was interstate commerce, and therefore subject to the Sherman Act. I don't need to expand on that point. I understand this committee itself originated legislation to postpone the effect of that decision for a period of 3 years to permit the insurance industry and State governments to adjust their activities and their statutes to this new rule of law. But, in the report of this committee which reported out that legislation, attention was called to the confusion and uncertainty resulting from that decision of the Court. Another recent decision by the Court under the antitrust law involved the question of the legality of basing points. For some twentyodd years, the question of basing points, both from an economic and legal standpoint, has been debated in a number of sessions of the Con gress. Extensive hearings have been held before various committees of Congress to determine what should be done about this basing-point system of pricing. When the Robinson-Patman Act was before this committee, it contained a provision defining price to mean the f. o. b. price, the mill price, ignoring any allowance or charge for transportation. That provision was interpreted as outlawing all basing-point and delivered-price methods. That section was stricken from the bill, and, when it was discussed on the floor, on the basis of the conference report, Mr. Patman, who was the sponsor of the bill, indicated that he was perfectly satisfied that that definition go out, and that basing points and delivered-price systems be permitted. Now, along come cases before the Supreme Court this term (Corn Products Refining Co., and Staley Manufacturing Co.), and in the first of these cases the Court held that the basing-point system as developed in that case was outlawed by the Robinson-Patman Act. The Federal Trade Commission, which instituted the suit, maintained throughout that the Robinson-Patman Act outlawed all forms of delivered prices, not merely basing points. The Supreme Court did not go that far, but it did indicate that the legality of any one of these methods depended upon the facts of each case. So that today any form of basing-point or delivered-price system is subject to being questioned under the Robinson-Patman Act. That opens a realm of uncertainty and potential liability. While the basing-point system may be more closely identified with the steel industry, delivered-price systems are utilized by a wide variety of industries throughout the country, either a Nation-wide delivered price, or a zoning price method. It is conceivable that any company using any variety of that pricing system will at some future date be subject to these treble damage suits, and the only limitation period will be found in the applicable State law. Another case came up before the Supreme Court, and I mention it merely because it illustrates the point-that was the Hartford-Empire case, where the Department of Justice endeavored to establish the principle that the nonuse of a patent was a violation of the Sherman Act, and where they got a decree from the lower court in effect incorporating the idea of compulsory licensing of patents. That, again, is a matter that has been before the Congress for years. In almost every session there has been at least one bill to require compulsory licensing of patents. So far that is not the law, and the Supreme Court rejected that doctrine. But, on the other hand, if it had been sustained, there would have been multiple suits presumably throughout the country, wherever it could be demonstrated that a patent had not been used immediately upon issuance. What are some of the consequences of these decisions? In the insurance case, I think the committee recognized them in passing the Insurance Act. Under the basing-point cases, as I have mentioned, you have the possibility of heavy damage suits in any case where a court may find that the delivered price method resulted in some injury to a competitor or to some customer. In addition to providing treble damages, the Sherman Act also provides that successful prosecution by the Government in any antitrust suit constitutes prima facie evidence in any private action, so that in addition to a showing of damage, all you have to show is successful prosecution by the Government and a prima facie case is established. I should point out, too, that this liability does not result because the act is unlawful when committed. As in the case of insurance, the basing point system, and even this patent licensing, at the time the conduct was done, it was not unlawful; it became unlawful merely because of a decision of the Supreme Court, and in becoming unlawful the illegality attached retroactively. May I just refer for a moment to the variety in State laws affecting private antitrust cases. In Virginia, for example, a 5-year statute of limitations governs actions for tort. That has been applied in antitrust cases. In Maryland the courts have applied a 3-year statute governing "actions on the case." In Texas 4-year statute has been applied which governs "all causes of action not otherwise specifically provided for." Just a blanket, basket-type statute of limitation. In Massachusetts a 6-year statute has been applied, and in Tennessee a 10-year statute governing "all other cases not expressly provided for." In regard to the Tennessee statute, the Court held that while there was a 1-year statute governing statute penalties, and a 3-year statute covering injury to real or personal property, it preferred to apply this broad statute covering "all other cases not expressly provided for." The courts have applied a 3-year statute in the State of Washington, governing an action upon a statute for a penalty or forfeiture. One result of this variety in State statutes was revealed in the case of Bluefield Steamship Company v. United Fruit Company, where the defendant first sued in the District Court for Louisiana, and discovering that the 1-year statute would be applied, asked for leave to remove the case to Pennsylvania, because Pennsylvania had a 5-year statute of limitations. That case is reported in 243 Federal 1. Mr. FEIGHAN. What is the page? Mr. SMETHURST. Page 1. Another important and widely applicable Federal statute is the Fair Labor Standards Act of 1938. Section 16 (b), in addition to permitting employee suits to recover any underpayment of wages, permits recovery of double that amount in the form of liquidated damages, plus a reasonable attorney's fee. Let me cite just two or three startling examples: In 1942, in June, the Supreme Court held that the operators of a building in which goods were produced for interstate commerce were subject to the act with respect to their service employees, on the theory that they were engaged in an operation necessary to the production of goods for interstate commerce. In September 1942, the Brooklyn Savings Bank computed the amount due its employees engaged in servicing its buildings, and paid an adjustment in wages which they would have been entitled to had the Brooklyn Savings Bank considered itself under the law from 1938 on. They made that payment in wages and I presume it was done either upon the instigation, or certainly with the approval, of the Administrator of the Fair Labor Standards Act. Their employees signed a waiver accepting this payment in settlement of their claim. Later |