U.S. - I.B.M. Trust Talks Suspended

By Edward Cowan
Special to the New York Times

Washington -- Oct 21, 1980 -- Quietly and informally, the Justice Department and the International Business Machines Corporation have suspended indefinitely negotiations to settle out of court the Government's 11-year-old civil antitrust suit to break up I.B.M.

Neither side would say officially that the talks to convert the corporation into several independent, competing computer companies had broken down. Senior officials in both camps acknowledged in interviews, however, that no meeting had been held since June 7 and that none was scheduled.

Completion of trial of the suit in Federal District Court in New York, now in its sixth year, is at least nine months away. Considering the time needed for Judge David N. Edelstein to decide the case, and for appeals, the case - if not settled - is likely to grind on for five years or more, draining the resources of both the Justice Department and the company and creating continued uncertainty for I.B.M.'s competitors and customers.

Justice Department Signals

The suspension, if not termination, of settlement talks is considered curious because there have been weak but clear signals that the Justice Department might be willing to settle the huge case without requiring split-up of I.B.M., the world's largest computer manufacturer.

Sanford M. Litvack, who inherited the case a year ago when he left private practice in New York to be assistant attorney general for antitrust, is understood to be open-minded on the possibility of a settlement without divestiture.

Before he could recommend such a settlement to the Attorney General, Benjamin R. Civiletti, Mr. Litvack would have to be persuaded that divestiture was not necessary or appropriate and that prolongation of the litigation was a waste of his agency's human and financial resources. Mr. Litvack's private estimate was said to be that such a settlement was conceivable but not likely.

Nicholas deB. Katzenbach, I.B.M.'s general counsel, left the door to a settlement open just a crack. Noting that Mr. Litvack was a highly experienced trial lawyer, Mr. Katzenbach, a former deputy attorney general, said ''most people who have litigated have also settled.''

Asked by telephone yesterday if he were optimistic, he replied, ''If I were optimistic about a settlement I'd be out drunk, not in my office.''

The antitrust division calculates that from the filing of the Sherman Act antimonopoly suit on Jan. 17, 1969 - the last business day of the Lyndon Johnson Administration - to last Sept. 30, the department had spent $14.8 million on the suit.

As a matter of policy, the company refuses to provide an estimate of its cost. Someone with inside knowledge of I.B.M.'s affairs says the bill exceeds $50 million and could approach $100 million. Antitrust lawyers say the higher figure is plausible.

A Heated Argument

The rancor between the lawyers that has punctuated the case expressed itself again yesterday in a conference with Judge Edelstein in the Federal Court House at Foley Square, Manhattan. Thomas D. Barr of Cravath Swaine & Moore, lead counsel for I.B.M., and Robert J. Staal, the Government's trial chief, engaged in a heated argument that ended only when an irritated Judge Edelstein commanded, ''Suspend this conversation.''

''This matter of the two of you constantly squaring off is most annoying,'' the judge said moments later. He said both lawyers had expressed ''personal animosity.''

This atmosphere is said to be one obstruction to a settlement, at least for the Government. ''I don't know how you crack the degree of animosity and distrust at the trench level,'' said a former antitrust division supervisor, ''and come up with a settlement Metzenbaum won't chase them on.'' Senator Howard M. Metzenbaum, Democrat of Ohio, chairman of the Senate antitrust subcommittee, has generally taken the view that the antitrust division should be tougher with business.

Neither side would state explicitly that the settlement talks had ended, apparently because neither wanted to open itself to an accusation of having broken off the talks. They were begun in November 1979 at the behest of a Federal Court of Appeals judge.

''The talks technically are still on,'' said Edward Nanas, an I.B.M. spokesman. Similarly, neither Mr. Litvack nor Mr. Katzenbach would say that the talks were ended, although both confirmed that there was no momentum.

Asked if the talks were in suspense, Mr. Katzenbach replied, ''If that's the inference you draw from those facts, that's right.''

Only 'Procedural' Issues Covered

Mr. Litvack said the negotiations had dealt only in ''procedural'' issues. ''We did not resolve all the procedural questions,'' he said. As for discussion of the terms of a settlement, Mr. Litvack said there had been none.

An alternative to breaking up I.B.M. into competing companies might be agreement that I.B.M. would refrain from certain practices that the Government contends tend to entrench its position as the largest single computer company. However, such a proposed settlement, which would be open to public comment before Judge Edelstein accepted or rejected it, would draw criticism that the restraints inhibited I.B.M. as a competitor.

Some former antitrust division officials believe that the I.B.M. case has become a millstone around Mr. Litvack's neck, in part because of its very age. The company has contended that the computer business has grown and changed significantly since the Goverment accused I.B.M. Of monopolizing the business in 1969.

According to Chris Mines, an analyst with The Yankee Group, a Boston consulting house, the emergence of minicomputer companies such as Wang Laboratories, Prime Inc. and the Digital Equipment Corporation, plus worry about competition from Japan, has turned business community opinion against the Federal suit.