II. The Butte Copper Wars

For the first two decades of the twentieth century, disputes over land and mining claims, particularly in Alaska, composed a large segment of the court's docket. Many of these lawsuits meant financial riches or ruin for the individuals and small companies who appealed to the Ninth Circuit. But during this same period, the court was addressing legal issues involving much larger companies. Toward the end of the nineteenth century, as technology became more sophisticated and minerals more difficult to extract, the need for large infusions of capital led to the concentration of mining properties into fewer hands and to the development of mining companies. This consolidation occurred throughout the mining West, from Alaska to Arizona. The court played a particularly prominent role in the struggle to gain control over Montana's copper, a struggle that eventually resulted in the agglomeration of the Anaconda Copper Company. While historians acknowledge the federal courts' key role in the Butte copper wars and the successful development of Anaconda, they shy away from explaining the contextual importance of key

judicial decisions.^[12] The consolidation of this great copper behemoth occurred amidst Ross and Gilbert's ongoing jurisprudential disagreement on natural resources issues.

The idea of creating a great copper company originated with Henry H. Rogers, who, as one of John D. Rockefeller's powerful associates, had helped to raise the Standard Oil Company to a position of preeminence. Rockefeller apparently disapproved of Roger's plan and refused to invest Standard Oil funds in the copper venture. Rogers's opponents nevertheless persistently, if incorrectly, attacked his copper dealings as an outgrowth of the oil company, a demagogic claim with great popular appeal among Montana miners. During the 1890s, when Rogers launched these efforts, Montana's most powerful copper concerns included the Anaconda, the Boston and Montana Consolidated Copper and Silver Mining Company, the Butte and Boston Consolidated Mining Company, and the Montana Ore Purchasing Company.^[13] Fritz Augustus Heinze, a young entrepreneur who controlled Montana Ore Purchasing, resisted Rogers's bid to control Montana's copper properties. Heinze instituted massive litigation against the Boston companies, which prevented Rogers from implementing his initial strategy of purchasing them before acquiring the Anaconda. Heinze's battle against the other copper giants required a lot of gumption, particularly in light of Rogers's clear capacity and intent to crush anyone who stood in his way. Unfazed, Heinze used his keen understanding of state and local politics to ensure that his efforts were backed by widespread public support and a compliant state bench composed of elected judges. His success in these endeavors frustrated the Boston and New York controllers of the other copper companies. To establish the basis for diversity jurisdiction to avail themselves of a federal forum, the other copper companies attempted to reincorporate in New York. Heinze partially obstructed even that stratagem. After having associates purchase stock in the rival companies, Heinze financed their minority shareholder lawsuits to challenge the reincorporations when the directors attempted to act without obtaining consent through a shareholders' meeting. The minority shareholders won victories in state and federal courts that required the companies to restart the reincorporation process from scratch.^[14]

When the Butte and Boston and Boston and Montana companies finally established federal diversity jurisdiction through legitimate reincorporation, they found an audience more receptive than the Montana state courts. One of the earliest federal cases, Morse v. Montana Ore Purchasing Company , illustrated some of the extralegal dynamics that

shaped the outcome of the copper wars. Morse, a manager of the Boston companies, sued Heinze's Montana Ore Purchasing, claiming that the latter's mine intruded into one of Butte and Boston's mines. Although the jury found for Heinze, U.S. District Judge Hiram Knowles set aside the verdict and ordered a new trial, on the ground that the pro-Heinze newspapers in Butte had improperly influenced the jury. The case illustrated Heinze's wide support among the people of Butte, who viewed him as the underdog in his struggle against the great copper companies. It also demonstrated why the Boston companies clearly preferred federal court.^[15] Led by Gilbert over Ross's dissent, the Ninth Circuit favored the forces of consolidation that attempted to put the upstart Heinze out of business.

In one such case, Heinze v. Butte and Boston Consolidated Mining Company , Butte and Boston alleged that it owned a one-half interest in one claim and a two-thirds interest in another. Heinze intervened to protect his own rights in the remaining divided interests in the claims. Butte and Boston asserted that Heinze was operating the mines illegally, extracting thousands of dollars' worth of ore each month and preventing a receiver from operating the mine properly. Heinze challenged Butte and Boston's underlying claim of ownership by contending that the company had purchased its interests from a man who was insane and therefore could not legally make a sale. The case raised only issues of state law, but the Boston company had by this time succeeded in transferring its corporate citizenship to New York, thus enabling it to invoke the federal courts' diversity jurisdiction. On appeal, the Ninth Circuit considered whether the circuit court in Montana had acted correctly in appointing the receiver and in its rulings on the possession issues. Barely two years after the Ninth Circuit had sharply rebuked the use of receivers in the Nome gold scandal, Gilbert wrote for the majority in upholding the appointment of the receiver. He conceded that the Nome cases stood for the proposition that extraction of ore from a mine "by a receiver is not to be permitted, except upon convincing proof of the necessity of such mining operations." Gilbert confessed that his deferential approach to trial proceedings contributed to the decision; he felt that the "record does not show that under all the circumstances" the trial court "so abused its discretion as to entitle the appellants to a reversal of its orders."^[16]

In a very lengthy dissent, Ross disagreed with much of Gilbert's analysis. He first challenged the majority's unwillingness to remand for a legal proceeding to determine the sufficiency of Butte and Boston's title. He favored more fact-finding on Heinze's allegation that the company

had purchased its interest from an insane person. Ross next disputed the court's conclusion on the receivership issue: he held that few situations justified appointment of a receiver with power to operate a mine, and this case was not one of them. If an injunction was insufficient to keep the property in its prior state, as the majority apparently believed, Ross asserted that the court could have appointed a receiver without conferring power to extract ore from the mine. The receiver's role should have been limited to enforcing the injunction. The Nome episode hung eerily over Ross's opinion and fueled his hostility to the notion of appointing receivers to work mines. Demonstrating his willingness to correct perceived errors by closely scrutinizing district court proceedings, Ross would have rejected this claim, which was important in protecting the Anaconda's growing empire.^[17]

While Heinze struggled with the Boston companies in state and federal courts, Rogers and his colleagues began to buy shares in Montana's major copper companies, in an attempt to corner the market. After purchasing the Anaconda company outright in 1899, the Rogers group formed the Amalgamated Copper Company as a holding company to control Anaconda and the companies they planned to add to the stable, which included the Washoe Copper Company, the Parrot Silver and Copper Mining Company, the Colorado Smelting and Mining Company, the Boston and Montana Consolidated Copper and Silver Mining Company, and the Butte and Boston Consolidated Mining Company. By November, 1900, Amalgamated had indeed acquired a majority of the Parrot stock and all of the Washoe and Colorado companies' stock; by 1901, they also held a majority in the Boston and Montana and Butte and Boston. Heinze's Montana Ore Purchasing Company remained the largest Montana mining company outside Amalgamated's control.^[18]

By 1903, after losing another series of state court proceedings to Heinze, Amalgamated ordered its own mines shut down. Amalgamated's management, recognizing that its workers were enamored of their charismatic opponent, evidently hoped that closing the mines, ostensibly because of the litigation, would turn its 15,000 miners against Heinze. The gambit nearly worked. Only a dramatic public oration by Heinze soothed the restless workers. This small rhetorical victory, however, could not compensate for the financial drain on Heinze caused by the protracted litigation war. In a desperate bid in 1904, he flouted a federal injunction by secretly mining a disputed passageway. Heinze attempted to intimidate local U.S. District Judge Knowles, but Ninth Circuit Judge Morrow speedily dispatched Idaho District Judge James H. Beatty to sit

in the Montana district court by designation and reestablish the court's authority. Beatty held Heinze in contempt of court and the Ninth Circuit refused to review the order, thereby upholding the fine of $20,000. Had the federal courts protected Heinze's interests with the same vigor as the Montana state courts, the upstart copper magnate might well have succeeded in unjustly taking ores and mining claims from his competitors. Instead, Heinze's defeat in federal court effectively forced him to sell out to Amalgamated in 1906 for an estimated $10.5 million. He also agreed to dismiss 110 lawsuits that were tying up property worth $70–100 million.^[19]

The man who succeeded in bringing the pugnacious Heinze to the negotiating table was John D. Ryan, who went on to lead the Anaconda Copper Mining Company into its final stages of consolidation and through a long period as one of America's largest corporations. Throughout his long and successful business career, Ryan had a penchant for consolidation and won recognition as the leader of both the copper and brass industries. He also headed Montana's largest power company. While negotiating with Heinze, Ryan had bought a majority of the stock in the Alice Gold and Silver Mining Company, one of the last of the independent Montana mining companies. Nearly a decade later, this acquisition sparked major litigation. Minority shareholders, taking a page from Heinze's book, challenged the sale of Alice's assets to the Anaconda.

On Ninth Circuit review, Ross saw the facts as a classic squeeze-out. The Alice majority shareholders, controlled by Ryan, had voted to sell the company's assets to Anaconda at a bargain-basement price in exchange for Anaconda stock. A recent decision of the Supreme Court prevented the minority stockholders from invoking antitrust laws.^[20] Accordingly, Ross wrote an opinion annulling the sale on the ground that it had fetched an inadequate price and that the directors had failed to protect the interests of all the stockholders. In a highly unusual disposition, Ross's opinion was reported first, with the notation, "Ross, Circuit Judge, dissenting in part," followed by a short opinion of Gilbert's that District Judge Charles Wolverton of Oregon joined. Ross had evidently lost his support on the panel for annulling the sale to Anaconda. With his customary deference to the district court, Gilbert maintained that the trial judge correctly followed a Supreme Court decision requiring corporate property to be sold to the highest bidder upon dissolution. Just as he had in the earlier Heinze suit, Gilbert was able to pull another member of the court to his side, thus permitting the consolidation of the Anaconda over Ross's dissent.^[21]

Anaconda's eventual victory was expedited by Heinze's miscalculation in violating the injunction. Nevertheless, Heinze's combative litigation strategy, which at times required the services of a veritable army of thirty-five lawyers, did tie up Anaconda for so long that it never achieved its goal of controlling the national copper market. By the time the Montana copper wars ended in 1906–1907, Arizona's mines were booming, and Heinze's litigation efforts had helped to prevent Anaconda from buying up the copper mines of the Southwest. In this sense, the Butte battle may well have impeded the national consolidation of copper interests.^[22] Moreover, even if Ross's opinions in these crucial cases had prevailed, the Montana copper war might have had the same outcome, given Anaconda's vast financial resources. The controlling influence of Gilbert's position, however, helped to facilitate Anaconda's victory in Montana.