tively, if the suit of a non-direct-purchaser plaintiff was dismissed after June 9 on the authority of Hanover Shoe and Illinois Brick, the plaintiff could reopen his case under the retroactivity provision of the pending bill. Both results would be contrary to settled notions of res judicata and due process of law.

Even where a case pending when Illinois Brick was decided has not been resolved in the interim, fundamental concerns of due process forbid changing the applicable substantive law in midstream. Whether or not this Congress approves of the law as it has been, conduct that is already the subject of litigation should remain governed by the rules of law in effect when the parties acted and the suit instituted. The obvious unfairness in changing the rules is what the Due Process Clause protects litigants against.

S. 1874 CONFUSES THE JUDICIAL AND LEGISLATIVE FUNCTIONS IN VIOLATION OF THE SEPARATION OF POWERS PRINCIPLE

Most retroactivity cases have arisen in a relatively neutral context: deciding whether a new piece of legislation should have an effect on prior conduct or pending litigation in the absence of any expressed congressional intent. The bill before this Committee, however, poses the issue in a constitutionally more vulnerable setting, because it manifests an explicit attempt to overturn the substantive rules of law applicable to pending cases under specific holdings of the Supreme Court in Illinois Brick and Hanover Shoe.4

The unequivocal intent of the pending bill-to compel the federal judiciary to disregard the holdings of the Supreme Court in those cases for actions that were pending when Illinois Brick was decided-raises an additional serious constitutional question under the separation of powers doctrine.

In deciding Illinois Brick and Hanover Shoe, the Supreme Court was interpreting the Clayton Act in the course of exercising "the province and duty of the judicial department to say what the law is." (Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803).) Congress is, of course, free to change what the law will be in actions based on future conduct. That is the nature of the lawmaking function—to say what the law will be. The effect of the proposed legislation, however, is to replace the Supreme Court's statement of what the law has been and is for pending actions under the 1914 Clayton Act and to substitute the views of a subsequent Congress as to what it feels the law should have been under that statute.5

As Marbury v. Madison settled, however, it is the judicial function to decide, finally and authoritatively, what the law has been and is in pending cases. (See also Koshkonong v. Burton, 104 U.S. 668, 678-79 (1882); Ogden v. Blackledge, 6 U.S. (2 Cranch) 272, 277 (1804).) Accordingly, by enacting this proposed amendment, Congress would be encroaching upon the essential function of the judiciary under the doctrine of separation of powers.

Over a century ago, the Supreme Court forcefully enunciated and applied the separation of powers doctrine to condemn an act of Congress that attempted to overrule a Supreme Court decision by prescribing a different rule of law to be followed in pending cases. In United States v. Klein, 80 U.S. (13 Wall.) 128 (1872), plaintiff's decedent had been the owner of property sold by agents of the Federal Government during the Civil War. Plaintiff sued for the proceeds of the sale in the Court of Claims and recovered under legislation according such a right of action to noncombatant owners upon proof of loyalty, which the Supreme Court had previously held could be proved by a presidential pardon. While the case was on appeal in the Supreme Court, Congress passed an act crucially altering the rights of people in the rebellious states. The act provided that in all pending cases no pardon would be admissible to show loyalty and that, to the contrary, a recital in a pardon of participation in the Civil War would constitute conclusive proof of disloyalty.

The Court decided it could not properly give force to the legislative directives. The Court asked rhetorically: "Can we do so without allowing that the Legislature may prescribe rules of decision to the Judicial Department of the Government in cases pending before it?" The Court's answer was an emphatic "no." It held the statute

• Although there has never been any doubt about the judicial targets of S. 1874 and its House counterpart, H.R. 8359, the primary sponsors of the two bills, Senator Kennedy and Representative Rodino, made it explicit that the legislation is designed to "overrule the recent Supreme Court decision in the Illinois Brick case" (letter from Rep. Rodino to all House Members, July 15, 1977) and to "change [the] result" of that decision (123 Cong. Rec. S12039-40; daily ed., July 15, 1977; remarks of Sen. Kennedy).

The general principle is firmly established that a subsequent congressional enactment declaring the intent of an earlier one is "not entitled to control judicial action." United States v. Stafoff, 260 U.S. 477, 480 (1923) (refusing to give retroactive effect to a later statute interpreting the National Prohibition Act). See also Mattz v. Arnett, 412 U.S. 481, 505 n.25 (1973); Federal Housing Administration v. Darlington, Inc., 358 U.S. 84, 90 (1958).

unconstitutional on the ground that by prescribing a rule of decision for pending cases, "Congress has inadvertently passed the limit which separates the legislative from the judicial power." (Id. at 145-146.)

The Court's denunciation of congressional intrusion on judicial power has particular force in relation to S. 1874. Like the statute condemned in Klein, this bill would purposefully overrule two prior Supreme Court decisions and prescribe different rules of substantive law to be followed in pending cases. Thus, like the statue in Klein, it would unconstitutionally encroach upon the exclusive authority of the federal judiciary.

Congressional response to the controversial decisions under the Portal-to-Portal Act is also instructive in this regard. The Fair Labor Standards Act of 1938 guarantees overtime pay for work in excess of 40 hours per week. It also creates liability for unpaid overtime together with an additional, equal amount as liquidated damages. In a series of cases, Tennessee Coal Co. v. Muscoda Local, 321 U.S. 590 (1944); Jewell Ridge Corp. v. Local No. 6167, 325 U.S. 161 (1945); Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), the Supreme Court held that "work week," which was undefined in the act, included underground travel in mines and similar incidental activities in connection with work. The holdings, which were surprising and contrary to the shared views of employees, unions, and employers instantly created prodigious employer liability: in a seven-month period in 1946-47, actions were filed by employees claiming damages in excess of $5 billion.

Congress acted swiftly. Sections 2(a) and 2(b) of the Portal-to-Portal Act, passed in 1947, were designed to extinguish the wholly unforeseen liabilities created by the Supreme Court. (29 U.S.C. section 252(a), (b).) Despite the exceptional nature of the liability, which it was commonly agreed had never been intended when the Fair Labor Standards Act was passed, Congress had deep reservations about the validity of an attempt to change the rules of decision applicable in pending cases. In light of the substantial doubt about the constitutionality of retroactively destroying vested rights being asserted in pending cases, Congress took the extraordinary step of actually denying to the courts jurisdiction over actions to enforce the claims previously validated by the Supreme Court. That ultimate exercise of constitutional power over judicial jurisdiction is explicitly conferred on Congress by Article III of the Constitution. (See Ex parte McCardle, 74 U.S. (7 Wall.) 506 (1869).)

No similar device, however, is available to Congress to safeguard the validity of the retroactive overruling of Illinois Brick and Hanover Shoe. The object of S. 1874 is the creation of new claims and classes of claimants (by overruling Illinois Brick) and the establishment of a new partial defense in antitrust cases (by overruling Hanover Shoe). The continued assertion of judicial jurisdiction is, therefore, essential. Hence the fundamental vice identified in Klein will inevitably afflict S. 1874 as well: the effort to change the rules of substantive law in midstream and to direct the courts to decide pending cases in ways contrary to the mandate of the law as the Supreme Court has declared it to have been and to be.

RETROACTIVE APPLICATION OF S. 1874 WOULD BE AN UNWISE EXERCISE OF LEGISLATIVE POWER

This analysis of the leading cases dealing with retroactive legislation casts substantial doubt upon the constitutional validity of the proposal to apply S. 1874 to pending cases. Apart from these fundamental constitutional objectives, there is the broader question of public policy: retroactivity here is an inappropriate exercise of legislative power. In harmony with the traditional aversion to retroactive laws, Congress has wisely chosen to make all other changes in the antitrust laws prospective only. The procedural entanglements and judicial waste that retroactivity of S. 1874 would cause cannot be justified by any conceivable benefits.

As presently drafted, S. 1874 would apply to any action that was pending on June 9, 1977. In the over 10 months that have elapsed since then, dozens of the antitrust cases that were pending on that date have been dismissed or settled in reliance upon Hanover Shoe and Illinois Brick. Each of those resolved cases will be subject to reopening on the authority of S. 1874 if it is enacted. Moreover, the validity of retroactivity itself will likely be challenged in virtually every case in which an indirect-purchaser seeks to reopen a case resolved on the authority of Hanover Shoe and Illinois Brick.

The modern vitality of the holding in Klein was emphasized in Glidden Co. v. Zdanok, 370 U.S. 530, 568 (1962). The Klein principle was also reaffirmed in Pope v. United States, 323 U.S. 1, 9 (1944), where the Court held that an intervening act should not be interpreted as requiring the courts "to set aside the judgment in a case already decided or as changing the rules of decision for the determination of a pending case.'

7Section 2(d), 29 U.S.C. section 252(d). See generally, P. Bator, P. Miskin, D. Shapiro & H. Wechsler, Hart & Wechsler's The Federal Courts and the Federal System 322, 324 (1973).

Even those cases that were pending on last June 9, but have not been settled prior to passage of S. 1874 would be disrupted by retroactive application of the act. Initially, of course, motions challenging the constitutionality of retroactivity will have to be filed and acted upon. Lawyers for plaintiffs and defendants have already conducted antitrust procedure in accordance with the principles of Hanover Shoe and Illinois Brick. Decisions relating to the scope of discovery, which may, of course, last months and even years in antitrust litigation, would have to be reconsidered. Retroactive application of the "passing on" defense to cases pending on June 9 would require, for example, the reopening of pleadings and discovery to take account of the newly created defense. The planned course of trials would also have to be altered to account for the claims brought by the newly authorized nondirectpurchaser plaintiffs.

In his statement submitted to this subcommittee on April 7, Professor Handler described an empirical study supporting his conclusion that "almost 2,000 of the 3,000 antitrust cases now in the Federal courts could be torpedoed" by the application of S. 1874. I submit that the chaos that would result from the ill-advised retroactivity provision and the burdens it would place on the courts and parties are simply not worth the speculative gain in effective antitrust law enforcement that retroactivity might yield.

Because retroactive statutes are, by definition, unsettling, Congress has traditionally shown great reluctance to enact such legislation, just as the courts have been reluctant to construe legislation to apply retroactively. (See, e.g., Greene v. United States, 376 U.S. 149, 160 (1964); Union Pacific Railroad v. Laramie Stock Yards Co., 231 U.S. 190, 199 (1913).) Congress has acted to alter substantive rights retroactively only when some transcending emergency has admitted of no other solution. Thus, it is no coincidence that much of the case law dealing with retroactive legislation was developed during the Great Depression when chaos threatened to destroy the American economic system.

An examination of prior antitrust legislation, moreover, demonstrates the unprecedented nature of the proposal to alter substantive rights retroactively. For example, Section 304 of the parens patriae Title of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which, like S. 1874, expanded the number of plaintiffs who could sue antitrust defendants, rendered that title inapplicable "to any injury sustained prior to the date of enactment" of the Act. (Pub. L. No. 94-435, 90 Stat. 1396.) Indeed, Congress rejected an earlier draft of the legislation, S. 1284, 94th Cong., 1st sess., which would have authorized the retroactive application of the Title to actions "pending on the date of enactment" of that bill. In objecting to that provision, which was not even as far-reaching as the retroactivity provision of S. 1874, the minority report pointed out that “such retroactive reach-back for punitive impositions offends elementary constitutional requirements of fairness and due process." (S. Rept. 94-803, part II, 94th Cong., 2d sess. 187 (1976).)

As it did with the Hart-Scott-Rodino parents patriae legislation, when Congress added section 4A to the Clayton Act authorizing the United States to sue for damages in its proprietary capacity, it gave the new law only prospective effect. Section 4 of the amending legislation, ch. 283, 69 Stat. 282 (1955), provided that it was to become effective "six months after its enactment."

Congress's historic disinclination to amend antitrust legislation retroactively is rooted in considerations of fairness and a sound regard for the disruption that retroactivity causes. This historic course of prudent legislation ought not to be abandoned now.

Accordingly, if S. 1874 is to be reported out favorably by the Committee, the bill should be amended to repace the present retroactivity provision with the following language:

"The amendments made by this act shall apply only to actions involving a violation of Section 1 of the Sherman Act occurring after the enactment of this act." This type of provision would be faithful to constitutional precepts and wise public policy. The retroactivity provision now in S. 1874 is not.

Senator ALLEN. We welcome Mr. Gillam, now. We appreciate your coming to give us the benefit of your views and your recommendations. We will be delighted to hear from you at this time.

STATEMENT OF MAX L. GILLAM, ATTORNEY, LATHAM &
WATKINS, LOS ANGELES, CALIF.

Mr. GILLAM. Thank you very much, Senator Allen.

I appreciate the opportunity to express these views. As I have indicated in my prepared statement, which I have given to the committee, and I hope it will be entered into the record.

Senator ALLEN. Without objection, your written statement, in its entirety, will be inserted into the record.

Mr. GILLAM. I am not here on behalf of any client. I am here as a trial lawyer who has been involved in the practical arena with these cases for some 20 years. I am delighted to have an opportunity to testify because, as near as I can determine from reading the record of these hearings, the preceding hearings, and the hearings in the House, one point has not been made that should be made. That point relates to the impact of Illinois Brick on the litigants, and, in particular, on the States attorneys general.

At the time Illinois Brick was decided in June 1977, a great hue and cry went forth, emanating mainly from the attorneys general to the effect that they were going to be deprived of their just rights in court. We have now had 10 months experience under Illinois Brick. Admittedly, that is a short period of time. But we have already seen that the States Attorneys General were underestimating their own fleet-footedness and ingenuity. I am currently involved in numbers of lawsuits, some of which I have the pleasure of being against Mr. Kenneth Reed, who has testified before this subcommittee.

Illinois Brick has not slowed Mr. Reed down one bit. He is in the Petroleum Products cases MDL-150, where he has just won an Illinois Brick victory on behalf of the State of Arizona. In the Fine Paper cases, MDL-323, the State of Arizona is presently in full bloom, and is not hindered one bit by Illinois Brick.

The whole point is that the principles articulated in Brick and Hanover do not deprive or unjustly enrich anybody when argued in an American court of law before judges who are enormously reluctant to reach inequitable results. Meritorious claims have just not been ruled out. It was theoretically possible, and is theoretically possible under Illinois Brick, but, it has not occurred and I cannot believe that it will occur. The one opinion we have really had on an appellate level that relates to this is the Amstart case in the third circuit. While I take violent exception to the logic involved in that case, it certainly goes a long way to assuage the doubts and claims of the plaintiff bar. I was particularly interested, Senator, in your questions, of Hanover Shoe and Illinois Brick. Hanover Shoe, which is the other side of the Illinois Brick coin, was greeted as an enormous victory for the public and for the plaintiff's sector because no longer could lawyers, such as myself, insert a defense of passing on and prolong a proceeding indefinitely and indeterminatly and deprive an injured purchaser of his recovery.

It was greeted as a marvelous victory, and it dictated Illinois Brick. The case that preceded Illinois Brick, which the Supreme Court did not accept certiorari, on was the Western Liquid Asphalt cases. I was very actively involved in that. Judge Russell Smith, from Missoula, Mont., was the judge in that case. He made the same ruling that the Supreme Court made in the Illinois Brick. He said: "Were it left to me to fashion an original rule as a tablet handed down from the hills, I might reach a different result." But he felt compelled by Hanover Shoe to reach the result he did reach.

I was one of the lawyers who was stunned by the opinion of the three-judge panel in the ninth circuit which reversed him in the Liquid Asphalt case. Mr. Francis Kirkham, who will be testifying here on Monday, did the application for certiorari in the Asphalt cases. We were saddened to have the Supreme Court decline to dance with the Asphalt issue because we felt certain that the Supreme Court would reverse the ninth circuit Asphalt decision. Subsequently, they took the Brick decision, accepted the same issue, and rendered their Brick decision.

Senator ALLEN. Was that not really inconsistent that they did not accept certiorari in the Asphalt case and ruled it in the Brick case?

Mr. GILLAM. I have given up speculating as to why the Supreme Court declines certiorari. I think I have probably been wrong in 9 of my 10 guesses on what cases they would take. It is not suprising, if you have ever analyzed the time chart of the Justices. I think every Justice on the Supreme Court needs a 36-hour day to do what he does. In any event, the first point that I want to make is that there is not any immediate need for this legislation.

They had a symposium recently of plaintiffs' antitrust lawyers at which Mr. David Berger pointed out 17 ways to get around Illinois Brick. There are not 17 ways to get around Illinois Brick. There are an infinite number of ways for a plaintiff with a meritorious claim to avoid the impact of Illinois Brick. I think our courts are demonstrating that every day. I believe that if the Congress is patient, the necessity, or the perceived necessity for this legislation, will evaporate. I can understand the hurt feelings and pride on the part of numbers of Members of this august body who had read into the legislative history their belief that Illinois Brick could not occur and their belief under parens patriae that indirect purchasers would be allowed to recover. To have the Supreme Court come down with language in Illinois Brick appeared to some Members of this body to be a slap in the face, and I can certainly understand their feelings. You can understand the immediate reaction to that. But this is a body known for its due deliberation. It is famous for it and is held in esteem for it. I respectfully suggest that instead of reacting quickly to words of the Supreme Court which seem somewhat cavalier of the intent of Congress, it befits this body to step back, wait a little while, and see what that decision means, really, before it steps in with what I deem to be a hasty, ill-considered attempt to say to the Supreme Court: "You cannot tell us what to legislate." That is ture for a variety of reasons, which gets me, sir, to the second point that I would like to make. The last 5 years have witnessed more legislative changes in the Sherman Act than the prior 75 years have witnessed. These changes were both on the criminal side and on the civil side. The fact that this legislation is designed to perform particular functions impacts both criminally and civilly. You do have a cost/benefit relationship involving these matters. It is a social cost and social benefit relationship.

But this body has passed parens patriae. We have increased the penalties to felonies. We have increased the jail sentence to 3 years. There is currently pending a criminal code revision, one of the provisions of which would require disgorgement by the criminal defendant of any ill-gotten gain that he may have acquired.