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United States v. General Motors Corporation.

decided: October 14, 1955.


Author: Kalodner

Before KALODNER, STALEY and HASTIE, Circuit Judges.

KALODNER, Circuit Judge.

This appeal arises out of an action brought by the United States of America against the General Motors Corporation ("GM") under paragraph 3 of section 1 of the Elkins Act, 49 U.S.C.A. ยง 41(3) which provides that any shipper who "knowingly" receives from a railroad any "valuable consideration" as a "rebate" shall "forfeit to the United States" three times the amount so received.*fn1 Judgment was entered for GM pursuant to a jury verdict in its favor.

The primary issues to be determined are whether the District Court erred (1) in ruling that certain segments of the alleged concessions were barred by limitations imposed by the Elkins Act and (2) in its instructions to the jury.

The relevant facts are as follows:

In the summer of 1944 GM decided to acquire a plant site in the Philadelphia area. To aid GM in effecting this purpose officials of the Pennsylvania Railroad Company ("Pennsylvania") and the Baltimore and Ohio Railroad Company ("Baltimore") were called to Detroit. It had apparently been decided by GM to allocate $175,000 for the purchase of the site. Pursuant to discussions with these officials Pennsylvania and Baltimore undertook to survey prospective locations for the new plant. Pennsylvania submitted a site near New Castle, Delaware and Baltimore submitted another in what is referred to as Wilsmere, located just outside Wilmington, Delaware. GM authorized each railroad to start securing options on these two sites for its ultimate use as an undisclosed principal.

The Wilsmere site was composed of two tracts totalling approximately 143 acres, one tract called the "Main Plant Site" consisting of about 131 acres, and the other called the "Homestead" tract comprising about 12 acres. The Main Plant site consisted of 16 parcels and was used primarily as home lots; the Homestead tract consisted of 70 homesteads. By September 25, 1944, Emmet Hickman, a Wilmington real estate agent engaged by Baltimore had procured options on 12 of the 16 parcels on the Main Plant site for $119,000.

At this time GM expressed dissatisfaction with the pace at which Baltimore was acquiring options on the Wilsmere site. As a result of a conference on September 25, 1944, it was decided that the former arrangement would be abandoned and Baltimore would undertake to assemble the Wilsmere tract and convey it to GM for $150,000. Baltimore agreed also to make available at the site a water main capable of supplying $1,500,000 gallons of water daily. By letter dated October 14, 1944 it made a written offer to convey the Wilsmere tract, less a portion to be retained for yard tracks, for $150,000. This offer included also the parties' understanding with respect to the water main. GM accepted this offer by letter dated December 1, 1944. The conveyance was to be made 90 days from December 1, 1944.*fn2

In August, 1945 Baltimore conveyed 120.5 acres of the Main Plant site to GM for $140,000, retaining the remaining 11 acres for its own use. This tract had been acquired by Baltimore for $171,743.27. GM retained $10,000 of the $150,000 contract price which sum was to be paid when the Homestead tract was conveyed.

Baltimore experienced difficulty in acquiring the 70 lots comprising this latter tract. Finally, on June 29, 1948, the parties entered a "new agreement" by which 8 of the 12 acres were to be conveyed for the withheld $10,000. Since Baltimore was unable to convey a good title the agreement provided for indemnity to protect GM and further provided that no substantial structures were to be erected on the land for 20 years. The Homestead tract cost Baltimore $148,704.01.

The water main was completed in 1945. Full use of the main was initiated by GM in the spring of 1947 when the plant on the Main Plant site was completed. The cost of the main to Baltimore was $36,338.

Baltimore sustained a $171,329.28 loss as a result of the foregoing transactions.*fn3 It is the government's contention that GM knew or had ample reason to know the facts as to the price to Baltimore of the conveyed property and the water main. On the basis of these facts it is contended that the amount by which Baltimore's cost exceeded the consideration paid by GM constituted a rebate within the meaning of the Elkins Act. The purpose of the transaction, it is urged, was to induce location of the plant site on Baltimore's line by the giving of a substantial financial concession to GM. Since this "concession" amounted to $171,329.28 under the triple damages rule, judgment for $513,978.84 was sought.

First as to the statutory limitations issue:

This action was instituted in 1952. Paragraph 3 of the Elkins Act allows the United States to recover for rebates only if they are "received or accepted" during the period of six years prior to the commencement of the action.*fn4 The Main Plant site was conveyed in 1945, as was the water main. On the basis of these facts the District Court instructed the jury that with respect to these properties the ...

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